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UFOOD RESTAURANT GROUP S 1 A Filing

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UFOOD RESTAURANT GROUP S 1 A Filing Powered By Docstoc
					                                  As filed with the Securities and Exchange Co mmission on November 18, 2008
                                                                                                                           Registration No. 333-152006
                                                            UNITED S TATES
                                                SECURITIES AND EXCHANGE COMMISSION
                                                         Washington, D.C. 20549




                                                  AMENDMENT NO. 4 TO
                                                      FORM S-1
                                REGISTRATION STATEMENT UNDER THE S ECURITIES ACT OF 1933




                                                  UFOOD RESTAURANT GROUP, INC.
                                                 (Exact name of reg istrant as specified in its charter)

                      Nevada                                              5812                                            20-4463582
          (State or other jurisdiction of                    (Primary Standard Industrial                              (I.R.S. Employer
         incorporation or organization)                      Classification Code Nu mber)                             Identificat ion No.)

                                                          255 Washington Street, Suite 100
                                                                 Newton, MA 02458
                                                                   (617) 787-6000
                                     (Address, including zip code, and telephone number, including area code,
                                                     of registrant’s principal executive offices)

                                                     George Naddaff, Chief Executive Officer
                                                          UFood Restaurant Group, Inc.
                                                        255 Washington Street, Suite 100
                                                               Newton, MA 02458
                                                                 (617) 787-6000
                                                      (Name, address including zip code, and
                                            telephone number, including area code, of agent for service)

                                                                        Copy to:

                                                               Adam S. Gottbetter, Esq.
                                                             Gottbetter & Partners, LLP
                                                           488 Mad ison Avenue, 12th Floor
                                                                New York, NY 10022
                                                                  (212) 400-6900

Approximate date of co mmencement of proposed sale to the public: From time to time after this registration statement becomes effecti ve.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 41 5 under the
Securities Act of 1933 check the following box. 

If this Form is filed to reg ister additional securit ies for an o ffering pursuant to Rule 462(b) under the Securities Act, p lease check the fo llo wing
box and list the Securit ies Act registration statement number of the earlier effective reg istration statement for the same offering. 

If this Form is a post-effective amend ment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering. 

If this Form is a post-effective amend ment filed pursuant to Rule 462(d) under the Securit ies Act, check the following box and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering. 

Indicate by check mark whether the reg istrant is a large accelerated filer, an accelerated filer, a non -accelerated filer, or a smaller reporting
company. See the definit ions of ―large accelerated filer,‖ ―accelerated filer‖ and ―smaller reporting co mpany‖ in Ru le 12b-2 of the Exchange
Act.
Large accelerated filer                                                                               Accelerated filer 
Non-accelerated filer            (Do not check if a smaller reporting company)                        Smaller reporting co mpany 

                                                     CALCULATION OF REGIS TRATION FEE

                                                                                                Proposed Maximum         Proposed Maximum
      Title of Each Class of Securities to                   Amount to be                          Offering Price           Aggregate            Amount of
                 be Registered                              Registered(1)(2)                        Per Unit(3)          Offering Price(3)     Registration Fee
Common stock, par value $0.001 per share                                   26,035,260 shares   $                  1.35 $          35,147,601 $            1,381.30 (4)


(1) Consists of (i) 15,659,059 issued and outstanding shares of common stock and (ii) 10,376,201 shares of common stock issuable upon
    exercise of warrants.

(2) Pursuant to Rule 416 under the Securities Act of 1933, as amended, the nu mber of shares of common stock registered hereby is subject to
    adjustment to prevent dilution resulting fro m stock splits, stock dividends or similar transactions.

(3) Estimated solely for the purpose of determining the amount of the registration fee, based on the average of the high and low sale prices of
    the common stock as reported by the OTC Bulletin Board on June 26, 2008, in accordance with Ru le 457(c) under the Securities Act of
    1933.

(4) Paid in connection with the init ial filing of th is registration statement.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective dat e until the reg istrant
shall file a further amend ment which specifically states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Sec urities and Exchange
Co mmission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not comp lete and may be changed . The selling stockholders may not sell these securities until the
registration statement filed with the Securit ies and Exchange Co mmission is effect ive. This prospectus is not an offer to sell these securities and
the selling stockholders are not solicit ing an offer to buy these securities in any state where the offer or sale is not permitted.

                                                 Subject to complet ion, dated November 18, 2008




                                                    UFOOD RES TAURANT GROUP, INC.

                                                                     Prospectus

                                                        26,035,260 shares of common stock

This prospectus relates to the offering by the selling stockholders of UFood Restaurant Group, Inc., of up to 26,035,260 shar es of our co mmon
stock, par value $0.001 per share. These shares include (i) 15,659,059 issued and outstanding shares of common sto ck and (ii) 10,376,201
shares of our common stock issuable upon exercise of warrants. We are registering the offer and sale of the common stock to s atisfy
registration rights we have granted to the selling stockholders. We will not receive any proceeds fro m the sale of the co mmon stock by the
selling stockholders.

The selling stockholders have advised us that they will sell the shares of our common stock from time to time in the open mar ket, in privately
negotiated transactions or a co mbination of these methods, at market prices prevailing at the time of sale, at prices related t o the prevailing
market prices or at negotiated prices.

Our co mmon stock is traded on the OTC Bulletin Board under the symbol ―UFFC.OB‖. On November 17, 2008, the closing price of our
common stock was $0.36 per share.

Investing in our common stock invol ves risks. Before making any investment in our securities, you shoul d read and carefully c onsider
risks described in the “Risk Factors” section beginning on page 5 of this prospectus .

You should rely only on the informat ion contained in this prospectus or any prospectus supplement or amend ment thereto. We ha ve not
authorized anyone to provide you with different informat ion. This prospectus may only be used where it is legal to sell t hese securities. The
informat ion in this prospectus is only accurate on the date of this prospectus, regardless of the time of any sale of securit ies.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities
or determined i f this pros pectus is truthful or complete. Any representation to the contrary is a criminal offense.

                                                        This prospectus is dated     , 2008.
                                           TABLE OF CONTENTS

                                                                                            PAGE

SUMMARY                                                                                            3

NOTE REGA RDING FORWARD-LOOKING STATEM ENTS                                                        5

RISK FA CTORS                                                                                      5

SELLING STOCKHOLDERS                                                                           17

USE OF PROCEEDS                                                                                28

DETERMINATION OF OFFERING PRICE                                                                29

MARKET FOR COMM ON EQUITY AND RELATED STOCKHOLDER MATTERS                                      29

MANAGEM ENT’S DISCUSSION A ND ANA LYSIS OF FINANCIA L CONDITION AND RESULTS OF OPERATIONS      30

DESCRIPTION OF BUSINESS                                                                        49

PROPERTIES                                                                                     55

LEGA L PROCEEDINGS                                                                             56

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS A ND CONTROL PERSONS                                  57

SECURITY OWNERSHIP OF CERTAIN BENEFICIA L OWNERS AND MANA GEM ENT                              59

EXECUTIVE COMPENSATION                                                                         61

CERTAIN RELATIONSHIPS A ND RELATED TRANSACTIONS                                                64

PLAN OF DISTRIBUTION                                                                           65

DESCRIPTION OF SECURITIES                                                                      67

LEGA L MATTERS                                                                                 70

EXPERTS                                                                                        70

WHERE YOU CAN FIND MORE INFORMATION                                                            70

DISCLOSURE OF COMMISSION POSITION ON INDEM NIFICATION FOR SECURITIES ACT LIA BILITIES          71

CHANGES IN AND DISA GREEM ENTS W ITH ACCOUNTANTS ON ACCOUNTING A ND FINANCIA L DISCLOSURE      71

FINA NCIA L STATEM ENTS                                                                        F-1
                                                                  SUMMARY

The following summary highlights informati on contained elsewhere in this pros pectus . Potenti al investors shoul d read the entire
pros pectus carefully, includi ng the more detailed information regarding our business provi ded below in the “ Descripti on of Business”
section, the risks of purchasing our common stock discussed under the “Risk Factors” section, and our financial statements and the
accompanyi ng notes.

As used in this prospectus, ―UFood,‖ ―the Co mpany,‖ ―we,‖ ―us‖ and ―our‖ refer to UFood Restaurant Group, Inc., a Nevada corporation, and
its wholly-owned subsidiaries taken as a whole, unless otherwise stated or the context clearly indicates otherwise. ―KnowFat‖ refers to the
operations of KnowFat Franchise Co mpany, Inc., a Delaware co mpany, prior to the December 18, 2007, merger, discussed below, which
resulted in KnowFat Franchise Co mpany, Inc., beco ming a wholly -owned subsidiary of ours.

                                                                 Our Company

We are a franchisor and operator of fast-casual food service restaurants that capitalize on what we believe are t he developin g trends toward
healthier liv ing and eating and the increasing consumer demands for restaurant fare that offers appetizing food with healthy attributes. We
believe our menu items are made with higher quality ingredients and healthier cooking te chniques than ordinary quick serve food.
Consequently, we believe our menu provides customers with a delicious and healthy alternative to typical fast food options. Guests order at a
counter and wait three to five minutes for their meals to be prepared. At UFood Grill, we bake, grill or steam our menu offerin gs; we never fry
our food. All of the meat we serve is all-natural and hormone-free. Our sauces, cheeses and salad dressings are reduced-fat. We serve
whole-grain breads and side dishes and, where we can do so while still charg ing our customers a reasonable price, organic meats and
vegetables (meeting U.S. Food and Drug Ad min istration standards for ―organic‖). The food is served on ceramic plates with metal utensils and
is either taken to the table by each guest or delivered to the table by a UFood server. Delivering great taste and an overall pleasing din ing
experience for an individual customer is the focus of UFood ’s mission and concept.

We were incorporated in the State of Nevada on February 8, 20 06, as Axxent Media Corporation. Prior to December 18, 2007, we were a
development stage company as defined by Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by
Development Stage Enterprises. As Axxent Media Co rporation, our business was to obtain reproduction and distribution rights to foreign films
within North America and also to obtain the foreign rights to North American films for reproduction and distribution to foreign countries.
Following the merger described belo w, we abandoned our plans to obtain reproduction and distribution rights to films. On August 8, 2007, we
changed our name to UFood Franchise Co mpany, and on September 25, 2007, we changed our name to UFood Restaurant Group, Inc.

On December 18, 2007, a wholly-owned subsidiary of our Co mpany merged with and into KnowFat Franchise Company, Inc., with KnowFat
surviving the merger as our wholly -owned subsidiary. Fo llowing the merger, we continued KnowFat ’s business operations. KnowFat was
founded in 2004 to capitalize on the popularity of a chain of fast -casual concept restaurants operating under the trade name ―Lo Fat Know Fat‖
in the greater Boston area, as well as the trend we believe is developing in the United States towards healthier liv ing and eating. After
operating for three years as KnowFat! Lifestyle Grille, wh ile continuously modifying and improv ing the concept, management de cided that
future locations will operate under the name UFood Grill. During the third quarter of 20 08, the four remain ing KnowFat! Lifestyle Grille
locations were converted to UFood Grill outlets. All of our co mpany -owned restaurants and franchise-owned locations now operate, and all
future locations will operate, under the name UFood Grill.

Three of our four Co mpany-owned restaurants that were orig inally KnowFat ! Lifestyle Grilles included an integrated convenience -style retail
store that carried a variety of health-oriented nutritional products, such as supplements, vitamins, nutrition bars, energy drinks and healthy
snacks. As part of the process of conversion to UFood Grill outlets, floor space formerly devoted to the sale of nutritional products in two of
these stores was reconfigured to accommodate the sale of smoothie drinks and fro zen yogurt, bec ause we believe that these products will
generate higher revenues in these locations. None of our franchise locations currently carries nutrition products. We will co ntinue to evaluate
the placement of nutrition products in our existing and future location s based on our assessment of demand in the particu lar location and, in the
case of franchise locations, the franchisee’s preferences.

Our operations currently consist of eight restaurants in the Boston area, Naples, FL, Chicago, IL and Sacramento, CA, comprising four
Co mpany-owned restaurants and four franchise-owned locations. We currently operate one of the franchise-owned locations pursuant to a
management services agreement. We have entered into a total of six area develop ment agreements covering 68 fr anchise units in nine states
(Californ ia, Colo rado, Florida, Illinois, Idaho, Montana, Texas, Utah and Wyoming), including three of the four franchise loc ations currently
open and operating, and requiring the construction by franchisees of 65 future UFood Grill outlets. In addition, we have entered into one
individual franchise agreement in Massachusetts, which is currently open and operating.

The follo wing table shows, for each area development agreement and single -unit franchise agreement, as well as for Co mpany-owned stores,
the numbers of units that are covered by the agreement (if applicable), currently operating, under construction and in lease negotiations.
                                                                                                                                Restaurants
                                                    Units Covered by          Restaurants             Restaurants                In Lease
                    Location                          Agreement                Operating           Under Construction           Negotiations
Area Develop ment Agreements
  Chicago, Illinois                                                  5                      1                         2                        —
  Five State Region (MT, ID, W Y, UT, CO)                           38                      —                         1                        2
  Naples, FL                                                         5                      1                         —                        —
  Sacramento, CA                                                    10                      1                         1                        —
  San Jose, CA                                                       7                      —                         1                        —
  Texas airports                                                     3                      —                         1                        —
                                                                    68                       3                         6                        2

Single Unit Franchise Agreements
  Bedford, Massachusetts                                             1                       1                        —                        —

Co mpany-owned Restaurants
  Boston, Massachusetts                                            n/a                       4                        —                        —

Total                                                               69                       8                         6                        2


An area development agreement grants the area developer the right to acquire franchises to develop, own and operate a specified number of
UFood outlets at locations approved by us within a defined geographic area. Area develop ment agreements include a development schedule
that lists the total number of outlets the area developer must develop, the area(s) in wh ich they must be developed and the required opening
date for each outlet. In general, the area developer is required to pay a fee equal to $35,000 for each restaurant covered by the area development
agreement.

The development schedule and the payment schedule are negotiated by the parties and vary from one transaction to the next . Generally, a
portion of the fee is payable by the area developer at the time the agreement is signed, in some cases portions are payable o n agreed milestone
dates, and the balance of the $35,000 per restaurant is payable when the restaurant opens. The fees are not refundable under any circu mstances
and are not subject to offset, even (in the case of the fees payable prio r to a restaurant opening) if the area developer doe s not develop any
restaurants.We may also enter into individual franchise agreements not covered by an area develop ment agreement, which typically also
require a fee of $35,000 per restaurant, payable at the time the agreement is signed.

In addition to the above fees, area developers and single franchisees are required to pay royalties of 5.0% of gross sales and contribute 1.5% o f
gross sales to a system-wide advertising fund. The area developer or franchisee is also required to spend 1.5% of gross sales on local
market ing. Each franchise agreement generally provides for a term of 15 years and gives the franchisee two, five-year renewal options.

Individual franchisees and area developers are required to pay for store construction costs, preopening costs and the costs o f operating the store.
We estimate it costs between $560,000 and $760,000 for a franchisee to open one of our outlets. Typically, franchisees are required t o open
their first outlet within nine months after they sign their franchise or area development agreement.If a franchisee or area developer fails to
develop stores on schedule, we have the right to terminate the agreement, retain up -front franchise fees and develop co mpany-owned locations
or develop locations through new area developers in that market. We may exercise one or more alternative remed ies to address defaults by area
developers and franchisees of the terms of their franchise agreements including the failure to open locations on time and non -compliance with
our operating and brand requirements and other covenants under the franchise agreement.

Of the six area development agreements described above, three were entered into during 2008. The three area develop ment agree ments we have
entered into this year cover 46 UFood Grill outlets (45 future and one operating), co mprising five UFood Grill units in the Ch icago
metropolitan area (including one unit that opened in July 2008), 38 UFood Grill units in a five-state area composed of Colorado, Utah,
Montana, Idaho and Wyoming and three units at airports in Texas. The three area development agreements we entered into prior to 2008 cover
22 UFood Grill outlets including two UFood Grill outlets currently open and operating and 20 UFood Grill outlets to be constr ucted in the
future in Naples, FL, Sacramento, CA, and San Jose, CA.

Of the 65 franchise locations to be constructed under existing area development agreements, three locations are expected to o pen before
December 31, 2008, th irteen locations are expected to open in 2009, five locations in 2010, 13 locations in 2011 and 31 locatio ns thereafter.
The rate at which current and future area developers and franchisees open locations will depend upon several factors, including the
identification of suitable store sites, the negotiation of long-term leases, the permitting process, the construction of the stores, the ability to
attract, train and retain emp loyees and the ability to secure financing on acceptable terms.For the six area develop ment agre ements and the one
single-franchising agreement that the Company has entered into, the non -refundable fees paid totaled $647,500. The balance of fees to be
received if all restaurants are opened (excluding the $175,000 referred to below) is $1,575,000. With respect to the three area development
agreements entered into prior to 2008, each of the area developers has failed to meet h is agreed opening schedule for an aggr egate of eight
restaurants. However, construction has begun on two of these eight restaurants. Management believes thes e and all the other restaurants
covered by these agreements will u ltimately be comp leted. Two o f these three area developers have also failed to pay a milest one fee each was
required to make under the terms of h is area develop ment agreement fo llowing the o pening of his first several restaurants. The Co mpany has
not accrued these payments, which aggregate $175,000. Management believes these amounts are not material, but also believes t hese amounts
and the remainder of the development fees due under these and the other area development agreements will ult imately be collected.

In October 2008, we terminated the franchise agreement covering a KnowFat! Lifestyle Grill in Waltham, Massachusetts, that we had been
operating pursuant to a management services agreement because the franchisee failed to pay royalties due under the franch ise agreement and
the restaurant was unprofitable. The management services agreement was also terminated and the store has been closed. In May 2008, we
terminated a 2005 franchise agreement with our franchisee operator in Dade and Broward Counties, Florida , covering 24 franchise locations,
because the franchisee did not meet the opening timeline specified in the agreement, and we have reclaimed the franchise terr itory. We have
previously terminated four other agreements covering two operating and 16 unopene d locations for similar reasons.

We believe the sale of franchises allows us to expand the UFood Grill brand faster than the construction and operation of company-owned
outlets due to the Company’s limited human and financial resources, while allo wing us to collect franchise fees and royalties. Under our area
development and franchise agreements, we receive royalties on gross franchise sales as described above, and we do not pay any of the
construction, opening, operating or marketing costs (other than certain de min imis train ing costs). We do not provide or arrange financing to
franchisees or area developers.

We intend to supplement the opening of franchisee-owned locations with addit ional Co mpany-owned locations. While we have not set a
specific target or t imetable for Co mpany-owned stores, we expect Co mpany-owned locations will be concentrated in the New England area and
could represent approximately 10% of total system-wide locations over the longer term. The rate at which we open Co mpany -owned locations
will depend on the same factors that impact the development and opening of franchisee -owned locations as well as the financial resources
available to us.

Prior to the merger with KnowFat, our headquarters were located in Vancouver, Brit ish Colu mb ia, Ca nada. Following the merger, our
headquarters were relocated to 255 Washington Street, Suite 100, Newton, Massachusetts 02458. Our telephone number is (617) 7 87-6000.

                                                                        3
For the three months ended September 28, 2008, our revenues were $1.547 million, with a net loss of $1.891 million. For the nine months
ended September 28, 2008, 2008, our revenues were $4.508 million, with a net loss of $6.770 million. For the year ended December 30, 2007,
our revenues were $4.905 million, with a net loss of $5.451 million.

                                                             Corporate Informati on

Our principal executive offices are located at 255 Washington Street, Su ite 100, Newton, Massachusetts 02458. Ou r telephone n umber is (617)
787-6000. Ou r website address is www.ufoodgrill.co m . Informat ion contained on our website is not deemed part of this prospectus.

                                                                 The Offering

                                                                                              (1)
Co mmon stock currently outstanding                                       34,818,490 shares

Co mmon stock offered by the Co mpany                                     None

                                                                                              (2)
Co mmon stock offered by the selling stockholders                         26,035,260 shares

                                                                                              (3)
Co mmon stock outstanding after the offering                              45,194,691 shares

Use of proceeds                                                           We will not receive any of the proceeds fro m the sales of our
                                                                          common stock offered by this prospectus.

OTC Bulletin Board sy mbol                                                UFFC.OB

Risk Factors                                                              You should carefully consider the informat ion set forth in this
                                                                          prospectus and, in particular, the specific factors set forth in the ―Risk
                                                                          Factors‖ section beginning on page 5 of this prospectus before
                                                                          deciding whether or not to invest in shares of our common stock.




(1) As of November 17, 2008.
(2) Includes 10,376,201 shares of common stock issuable upon exercise of warrants held by the selling stockholders.
(3) Assumes the full exercises of the warrants held by the selling stockholders to acquire 10,376,201 shares of co mmon stock and assumes all
    our other outstanding options and warrants are not exercised.

                                                       Summary Financial Informati on

The following tables summarizes historical financial data regarding our business and should be read together with the informa t ion in the section
titled ―Management’s Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements
and the related notes included in this prospectus.

                                                         Year Ended                                 Three Months Ended (unaudited)
                                                         December 30,          December 31,         Sept. 28,            Sept. 30,
                                                         2007                  2006                 2008                 2007
Statement of Operations Data

Revenues                                                 $        4,904,883 $          3,691,694 $            1,546,825      $         1,226,628
Total costs and expenses                                          9,912,012            7,710,553              3,246,671                2,237,586
Net loss                                                 $       (5,451,414 ) $       (4,125,613 ) $         (1,891,139 )    $        (1,104,288 )
Weighted average shares outstanding, basic and fully
diluted                                                          9,433,081             7,919,388             34,813,669                9,290,545
Net loss per common share, basic and fully diluted       $           (0.68 ) $             (0.60 ) $              (0.05 )    $             (0.15 )

Statement of Cash Flo ws Data

Net cash used in operating activities                    $       3,134,984     $       3,539,743    $         4,300,413      $         2,030,582
Cash and cash equivalents (end of period)                        3,352,201             1,840,090              1,973,222                  439,088
4
                                                             At                                         At (unaudited)
                                                             December 30,          December 31,         Sept. 28,               Sept. 30,
Balance Sheet Data                                           2007                  2006                 2008                    2007

Current assets                                               $       4,762,989     $       2,172,801 $             2,745,564    $      1,145,771
Total assets                                                         8,583,546             6,067,522               6,890,586           4,879,424
Current liab ilit ies                                                3,597,594             3,387,458               2,832,115           5,902,753
Total liabilities                                                    4,563,448             7,777,241               3,596,043          10,313,717
Total stockholders’ equity (deficit)                                 4,020,098            (1,709,719 )             3,294,543          (5,434,293 )

                                       NOTE REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this prospectus and in our public disclosures, whether written or oral, relating to future events or our future performance,
including any discussion, exp ress or implied, of our annual growth, operat ing results, future earnings, plans and objectives, contain
forward-looking statements. In some cases, you can identify such forward -looking statements by words such as ―estimate,‖ ―project,‖ ―intend,‖
―forecast,‖ ―future,‖ ―anticipate,‖ ―plan,‖ ―anticipates,‖ ―target,‖ ―planning,‖ ―positioned,‖ ―continue,‖ ―expect,‖ ―believe,‖ ―will,‖ ―will
likely,‖ ―should,‖ ―could,‖ ―would,‖ ―may‖ o r the negative of such terms and other comparable terminology that are not statements of historical
fact. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are d ifficu lt to
predict. Our actual results and timing of certain events could differ materially fro m those anticipated in these forward -looking statements as a
result of certain factors, including, but not limited to, those set forth under ―Risk Factors‖ and elsewhere in this prospectus and in our other
public filings with the Securit ies and Exchange Co mmission. It is routine for internal pro jections and expectations to change as the year or each
quarter of the year progresses, and therefore it should be clearly understood that all forward -looking statements and the internal projections and
beliefs upon which we base our expectations included in this prospectus or other periodic reports are made only as of the date made and may
change. We do not undertake any obligation to update or publicly release the result of any revision to these forward -looking statements to
reflect events or circu mstances occurring after the date they are made or to reflect the occurrence of unanticipated events.

                                                                 RIS K FACTORS

An investment in shares of our co mmon stock is highly speculative and involves a high degree of risk. We face a variety of ri sks that may affect
our operations or financial results and many of those risks are driven by factors that we cannot control or predict. Before investing in our
common stock you should carefully consider the following risks, together with the financial and other information contained i n this prospectus.
If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be materially
adversely affected. In that case, the trading price of our common stock would likely decline and you may lose all or a part o f your investment .
Only those investors who can bear the risk of loss of their entire investment should participate in this offering.

Risks Related to Our Company and Our Business

We have a limited operating history and are subject to all of the risks inherent in t he expansion of an early-stage business.

KnowFat was formed appro ximately four years ago, and we have a short operating history upon which an investor can evaluate ou r
performance. Our proposed operations are subject to all of the risks inherent in the expansion of an early-stage business enterprise, including
higher-than-expected expenses and uncertain revenues. The likelihood of our success must be considered in light of the problems, expenses ,
difficult ies, comp licat ions and delays frequently encountered in connection with the expansion of an early -stage business and the competitive
environment in which we operate. We have had no profits to date, and there can be no assurance of future profits. As a result of the
expansion-stage nature of our business and the fact that we will incur significant expenses in connection with our activ ities, we can b e expected
to sustain operating losses for the foreseeable future.

                                                                         5
We have not been profitable to date and expect our operating losses to continue for the foreseeable future; we may never be p rofitable.

We have incurred annual operating losses and generated negative cash flows since our inception and have financed our operatio ns principally
through equity investments and borrowings. At this time, our ability to generate sufficient revenues to fund operations is uncertain. Fo r the
fiscal year ended December 30, 2007, we had revenue of $4,904,883 and incurred an operating loss of $5,007,129. For the fisca l year ended
December 31, 2006, we had revenue of $3,691,694 and incurred an operating loss of $4,018,859. Our total accu mulated deficit through
December 30, 2007, was $14,842,239. For the three months ended September 28, 2008, we had revenue of $1,546,825 and in curred a net loss
of $1,891,139. For the three months ended September 30, 2007, we had revenue of $1,226,628 and incurred a net loss of $1,104,288. Our total
accumulated deficit through September 28, 2008 was $21,612,535.

As a result of our brief operating history, revenue is difficult to predict with certainty. Current and projected expense lev els are based largely on
estimates of future revenue. We expect expenses to increase in the future as we expand our sales, market ing and administrativ e activities and
incur the expenses of being a public co mpany. As a result, we expect to incur additional losses for at least the next 18 mo nths. We cannot
assure you that we will be profitable in the future or generate future revenues. Accordingly, the extent of our future losses and the time required
to achieve profitability, if ever, is uncertain. Failure to achieve profitability could materially and adversely affect the value of our Co mpany and
our ability to effect additional financings. The success of the business depends on our ability to increase revenues to offset expenses. If our
revenues fall short of projections, our business, financial condition and operating results will be materially adversely affected. If we are unable
to generate positive cash flow fro m our co mpany-owned restaurants or if the market price of our common stock declines, we may be required
to recognize an impairment loss with respect to the assets of our company -owned restaurants or our goodwill.

There are risks inherent in expansion of operations, including our ability to sell franchises, generate profits from new rest aurants, find
suitable sites and develop and construct stores in a timely and cost-effective way.

We cannot project with certainty, nor do we make any representations regarding, the number of franchises we will be able to s ell or the nu mber
of new restaurants we and our franchisees will open in accordance with our present plans and within the timeline or the budgets that we
currently project. While our business plan focuses primarily on the sale of franchises rather than building and operating add itional
Co mpany-owned stores, sales at Co mpany-owned stores represented over 92% of our total revenues for the year ended December 30,
2007. Our failu re to sell the projected number of franchises would adversely affect our ability to execute our business plan by, among other
things, reducing our revenues and profits and preventing us fro m realizing our strategy of being the first major franchiser o f retail outlets
offering a co mb ination of food service featuring lo w-fat, low-carbohydrate and low-calorie food items, selected beverages to the general
public. Furthermore, we cannot assure you that our new restaurants will generate revenues or profit margins consistent with those cur rently
operated by us and our franchisees or that our restaurants will be operated profitably.

During the year ended December 30, 2007, our store operations business segment generated revenues of $4,543,194 and an operating loss of
$999,385. The store segment operating loss for the year ended December 30, 2007 included a loss on disposal of $666,838 resulting from the
closure of one Company-owned store and the sale of another Co mpany-owned store. During the year ended December 31, 2006, our store
operations segment generated revenues of $3,273,103 and an operating loss of $401,840. For the nine month period ended September 28, 2008,
our store operations segment generated revenues of $4,278,008 and an operating loss of $481,719. For the nine months ended Se ptember 28,
2007, our store operations generated revenues of $3,622,661 and an operating loss of $812,518. The operating loss for the nine months ended
September 28, 2008 included $236,758 o f legal and other costs associated with the subcontractor liens described in Note 6 of the Notes to
Consolidated Financial Statements for the three months and nine months ended September 28, 2008. The operating loss for the nine months
ended September 30, 2007 included a loss on disposal of $688,948 resulting fro m the closure of one Co mpany -owned store and the sale of
another Company-owned store.

We will rely primarily upon area developers to open and operate franchise units. The number of openings and the performan ce of new stores
will depend on various factors, including:

        the availability of suitable sites for new stores;

        our and our franchisees ’ ability to negotiate acceptable lease or purchase terms for new locations, obtain adequate financing, on
         favorable terms, required to construct, build-out and operate new stores and meet construction schedules, and hire and train and retain
         qualified store managers and personnel;

        managing construction and development costs of new stores at affordable levels;

        the establishment of brand awareness in new markets; and

        the ability of our Co mpany and our area developers to manage this anticipated expansion.
While the impact varies with the location and the qualificat ions of the franchisee, tight credit markets are generally making financing for
construction and operation of restaurants more difficult to obtain on favorable terms.

Co mpetition for suitable store sites in target markets is intense, and lease costs are increasing (part icularly for urban loc ations). Not all of these
factors are within our control or the control of our franchisees, and there can be no assurance that we will be able to accelerate our growth or
that we will be ab le to manage the anticipated expansion of our operations effectively.

                                                                           6
We will depend on contractors and real estate developers to construct our stores. Many factors may adversely affect the cost and time
associated with the development and construction of our stores, including:

        labor disputes;

        shortages of materials or skilled labor;

        requirements to use union labor;

        energy prices.

        adverse weather;

        unforeseen engineering problems;

        environmental prob lems;

        construction or zoning problems;

        local govern ment regulations;

        modifications in design; and

        other unanticipated increases in costs.

Any of these factors could give rise to delays or cost overruns, which may prevent us from developing additional stores within our anticipated
budgets or time periods or at all. Any such failure could cause our business, results of operations and financial condition t o suffer. The recent
volatility in certain co mmodity markets, such as those for energy, grains and dairy products, which have experienced significant increases in
prices, may be generally causing franchisees in our industry to delay construction of new restaurants and/or causing potentia l new franchisees
to reconsider entering into franchise agreements.

Our business plan is dependent on the franchising model; therefore, our success will generally depend on the success o f our franchisees.

Because royalties fro m franchisees ’ sales are a principal co mponent of our revenue base, our success is dependent upon our ability to attract
highly qualified franchisees and the ability of our franchisees to promote and capitalize upon UFood ’s concept. Our franchisees generally
depend upon financing fro m banks and other f inancial institutions to finance the cost of opening a new restaurant. If franchisees cannot obtain
reasonable financing and restaurants do not open, our royalties fro m those restaurants will not exist. Even if we are success ful in selling
franchise units, the contemplated expansion may entail d ifficulty in maintain ing quality standards, operating controls and communicat ions, and
in attracting qualified restaurant operators. Locations for units will be based on theoretical project ions of market demand w ith no assurance that
such locations will prove successful. As a result, franchise units may not attain desired levels of revenues or may attain th em more slowly than
projected, and this would adversely affect our results of operations. Since we are dependent on franchisee royalties, we are also at risk for the
non-performance by our franchisees of their payment and other ob ligations under our franchise agreements. For examp le, in May 200 8, we
terminated a 2005 franchise agreement with our franchisee operator in Dade and Bro ward Counties, Florida, covering 24 un opened franchise
locations because the franchisee did not meet the opening timeline specified in the agreement, and we have reclaimed the fran chise territory. In
2007, t wo agreements covering two operating and four unopened locations were terminated after the stores ceased operations. Two other
agreements covering twelve unopened locations were also terminated when the area developers did not meet the opening timeline set forth in
their agreements. Currently, three area developers in San Jose, Sacramento and Naples, whose agreements require them to develop an
aggregate of 22 restaurants, have failed to meet their agreed opening timelines for an aggregate of eight restaurants; howeve r, construction has
begun on two of the eight restaurants. Management believes these and all the other restaurants covered by these agreements will ult imately be
completed. Similar defaults or failu res by other franchisees could materially adversely affect our growth plans and our business, financial
condition and operating results.

Our past and future operating losses may make it more difficult for us to attract new franchisees.

Potential new franchisees may be reluctant to commit to develop new UFood Grill restaurants as long as we are not profitable. As stated above,
we have not been profitable to date and expect our operating losses to continue for at least the next 18 months. Until we hav e demonstrated the
ability to be profitable, we may find it difficult to attract new franchisees, who are required to expend substantial sums to develop, construct
and operate new restaurants, if they perceive that there is a risk that we will not continue in business or that our lack of profitability will impair
their ability to make a p rofit.

We may be subject to general risk factors affecting the restaurant industry, including current economic climate, costs of lab or and food
prices.

If we gro w as anticipated, our Co mpany and our franchisees may be affected by risks inherent in the restaurant industry, including:

        adverse changes in national, regional or local econo mic or market conditions;

        increased costs of labor (including increases in the minimu m wage);

                                                                          7
        increased costs of food products;

        availability of, and ability to obtain, adequate supplies of ingredients that meet our quality standards;

        increased energy costs;

        management problems;

        increases in the number and density of competitors;

        limited alternative uses for properties and equipment;

        changing consumer tastes, habits and spending priorities;

        changing demographics;

        the cost and availability of insurance coverage;

        uninsured losses;

        changes in government regulation;

        changing traffic patterns;

        weather conditions; and

        local, regional or national health and safety matters.

Our Co mpany and our franchisees may be the subject of litigation based on discrimination, personal injury or other claims. We can be
adversely affected by publicity resulting fro m food quality, illness, injury or other health concerns or operating issues r esulting fro m one
restaurant or a limited number of restaurants in our system. None of these factors can be predicted with any degree o f certainty, and any one or
more of these factors could have a material adverse effect on our Co mpany.

There is intensive competition in our industry, a nd we will be competing with national and regional chains a nd independent restaurant
operators.

The restaurant industry is intensely competitive. There are several healthy -food themed restaurants, most of which have fewer than six units.
Moreover, the retail food industry in general, which is highly co mpetitive and includes highly sophisticated national and reg ional chains, has
begun to offer ―health ier‖ alternatives to its typical menu offerings. We operate in the fast -casual sector of the retail food industry. This sector
is highly co mpetitive with respect to, among other things, taste, price, food quality and presentation, service, location and the amb iance and
condition of each restaurant. Some of the restaurants and fran chises have substantial financial resources, name recognition and reputations.
While we strive to differentiate ourselves fro m major restaurants and food -service establishments through the nutritional attrib utes of the items
we offer on our menu (all-natural and hormone-free meat, reduced fat sauces, cheeses and salad dressings, whole grain bread s, and whenever
possible, organic vegetables), the manner in which those items are p repared (baked, steamed or grilled) and the environ ment i n which they are
offered, we will, nonetheless, be required to co mpete with national and regional chains and with independent operators for market s hare, access
to desirable locations and recruit ment of personnel. Many of our co mpetitors have existed longer and have a more estab lished market presence
with substantially greater financial, market ing, personnel and other resources than us. No assurances can be given that we will have the
financial resources, distribution ability, depth of key personnel or marketing expert ise to comp ete successfully in these markets.

Our business has been adversely affected by declines in discretionary spending and may be affected by changes in consumer
preferences.

Our success depends, in part, upon the popularity of our food products and our ability to develop new menu items that appeal to consumers.
Shifts in consumer preferences away fro m our restaurants or cuisine, our inability to develop new menu items that app eal to consumers or
changes in our menu that eliminate items popular with some consumers could harm our business. Also, our success depends to a significant
extent on discretionary consumer spending, which is in fluenced by general economic conditions and t he availability of discretio nary income.
Accordingly, we may experience declines in sales during economic downturns or during periods of uncertainty like that which f ollowed the
2001 terrorist attacks on the United States and the possibility of further ter rorist attacks. A continuing decline in the amount of discretionary
spending could have a material adverse effect on our sales, results of operations, business and financial condition. Accordin g to a recent survey
by the National Restaurant Association, restaurant operators reported negative comparable store sales in four of the first six mo nths of 2008.
For the nine months ended September 28, 2008, co mparab le store sales for our Co mpany -owned stores decreased by 8.5% and our system-wide
comparable store sales decreased by 13.0%. Three of our four Co mpany-owned stores were comparab le store locations and two of our four
franchisee-owned locations were co mparable store locations. We believe h igher gasoline prices, inflat ionary pressures on groceries and
utilit ies, increased unemploy ment, ho me fo reclosures and tightening credit conditions have all reduced consumer d iscretionary spend ing which
in turn has adversely impacted our revenues and may continue to do so.

                                                                        8
Increases in costs, including food, labor and energy prices, will adversely affect our results of operations .

Our profitability is dependent on our ability to anticipate and react to changes in our operating c osts, including food, labor, occupancy
(including utilit ies and energy), insurance and supplies costs. Various factors beyond our control, including climatic change s and government
regulations, may affect food costs. Specifically, our dependence on frequen t, timely deliveries of fresh meat and produce subject us to the risks
of possible shortages or interruptions in supply caused by adverse weather or other conditions wh ich could adversely affect t he availability and
cost of any such items. In the past, we have been able to recover some of our h igher operating costs through increased menu prices. There have
been, and there may be in the future, delays in implementing such menu price increases, and competit ive pressures may limit o ur ability to
recover such cost increases in their entirety. The recent volatility in certain commod ity markets, such as those for energy, grains and dairy
products, which have experienced significant increases in prices, may have an adverse effect on us in the latter half of fisc al 2008 and beyond
and may be generally causing franchisees in our industry to delay construction of new restaurants and/or causing potential ne w franchisees to
reconsider entering into franchise agreements. The extent of the impact may depend on our ability to increase our menu prices and the timing
thereof. Overall, through the first nine months of 2008, the volatility in food and energy prices has not had a significant i mpact on our costs or
availability of ingredients or supplies. However, we believe the v olat ility in food and energy prices has contributed to a slowdown in consumer
spending in the first nine months of 2008, which in turn has adversely affected our revenues.

Our stores are concentrated in a small geographic area.

Five of our stores are located in the greater Boston area. A downturn in the regional economy or other significant adverse events in the greater
Boston area could have a material adverse effect on our financial condition and results of operations.

The growth of our Company is dependent on the skills and expertise of management and key personnel.

During the upcoming stages of our Company’s growth, we will be entirely dependent upon the management skills and expertise of our
management and key personnel, including George Naddaff, our current Chairman and Chief Executive Officer, and Charles A. Coco tas, our
current President and Chief Operat ing Officer. We would be materially adversely affe cted in the event that the services of these individuals or
other management or key personnel for any reason ceased to be available and adequate replacement personnel were not found. We have
obtained key-man insurance on the life of George Naddaff. Such insurance may be cancelled if premiu ms are not paid when d ue. If the current
policy is cancelled and when it exp ires, similar insurance may not be availab le in the future on terms acceptable to us, and there can be no
assurance we will be able to secure such insurance.

Our food service business and the restaurant i ndustry are subject to extensive government regulation.

We are subject to extensive and varied federal, state and local govern ment regulation, including regulat ions relating to publ ic health and safety
and zoning codes. We operate each of our stores in accordance with standards and procedures designed to comply with applicabl e codes and
regulations. However, if we could not obtain or retain food or other licenses, it would adversely affect our operations. Although we have not
experienced, and do not anticipate, any significant difficult ies, delays or failures in obtaining required licenses, permits or approvals, any such
problem could delay or p revent the opening of, or adversely impact the viab ility of, a particular store or group of stores.

Massachusetts, California and most other states and local jurisdictions have enacted laws, ru les, regulations and ordinances which may apply to
the operation of a UFood store, including those which:

        establish general standards, specifications and requirements for the construction, design and maintenance of the store premises ;

        regulate matters affecting the health, safety and welfare o f our customers, such as general health and sanitation requirements for
         restaurants, employee practices concerning the storage, handling, cooking and preparation of food, special health, food servi ce and
         licensing requirements, restrictions on smoking, exposure to tobacco smoke or other carcinogens or reproductive toxicants and
         saccharin and availability of and requirements for public acco mmodations, including restrooms;

        set standards pertaining to emp loyee health and safety;

        set standards and requirements for fire safety and general emergency preparedness;

                                                                         9
        regulate the proper use, storage and disposal of waste, insecticides, and other hazardous materials;

        establish general requirements or restrictions on advertising containing false or misleading claims, o r health and nutrient c laims on
         menus or otherwise, such as ―low calorie‖ or ―fat free‖; and

        establish requirements concerning withholdings and employee reporting of taxes on tips.

In addition, some jurisdictions now require menu or other in -store disclosure of calorie and other nutritional informat ion for each menu item.

In order to develop and construct more stores, we need to co mply with applic able zoning, land use and environmental regulat ions. Federal and
state environmental regulations have not had a material effect on our operations to date, but more stringent and varied requi rements of local
governmental bodies with respect to zoning, land use and environmental factors could delay or even prevent construction and increase
development costs for new stores. We are also required to comply with the accessibility standards mandated by the U.S. Americ ans with
Disabilit ies Act, wh ich generally prohibit discrimination in acco mmodation o r emp loy ment based on disability. We may, in the future, have to
modify stores, for example, by adding access ramps or redesigning certain architectural fixtures, to provide service to or ma ke reasonable
accommodations for disabled persons. While these expenses could be material, our current expectation is that any such action will not requir e
us to expend substantial funds.

We are subject to the U.S. Fair Labor Standards Act, the U.S. Immig ration Refo rm and Control Ac t of 1986 and various federal and state laws
governing various matters including minimu m wages, overtime and other working conditions. We pay a significant nu mber of our hourly staff
at rates consistent with but higher than the applicable federal or state minimu m wage. Accordingly, increases in the min imum wage wou ld
increase our labor cost. We are also subject to various laws and regulations relating to our current and any future franchise operations.

We are also subject to various federal and state laws that regulate the offer and sale of franchises and aspects of the licensor-licensee
relationships. Many state franchise laws impose restrictions on the franchise agreement, including the duration and scope of non-competition
provisions, the ability of a franchisor to terminate or refuse to renew and the ability of a franchisor to designate sources of supply. The Federal
Trade Co mmission, or the FTC, and some state laws also require that the franchisor furnish to prospective franchisees a franc hise offering
circular that contains prescribed informat ion and, in some instances, require the franchisor to register the franchise offering.

We have not conducted a comprehensive review of all the potential environmental liabilities at our properties.

We are subject to federal, state and local environmental laws and regulations concerning the discharge, storage, handling, re lease and disposal
of hazardous or to xic substances. These environmental laws provide for significant fines, penalties and liab ilit ies, sometimes without regard to
whether the owner or operator of the property knew of, o r was responsible for, the release or presence of the hazardous or to xic substances.
Third part ies may also make claims against owners or operators of properties for p ersonal inju ries and property damage associated with
releases of, or actual or alleged exposure to, such substances. We cannot predict what environ mental laws will be enacted in the future, how
existing or future environ mental laws will be ad ministered or interpreted or the amount of future expenditures that we may need to make to
comply with, or to satisfy claims relat ing to, environ mental laws. While, during the period of their o wnership, lease or oper ation, our stores
have not been subject to any material environmental matters, we have not conducted a comprehensive environmental rev iew of our properties
or operations. We have not conducted investigations of our properties to identify contamination caused by third -party operations; in such
instances, our landlords would be required to address the contamination. If the relevant landlord does not the identified contamination prope rly
or comp letely, then under certain environ mental laws, we could be held liab le as an owner and operator to address any remain i ng
contamination. Any such liability could be material.

Our success and competitive position depends on our ability to protect our proprietary intellectual property.

We own certain common law trademark rights and a number of federal t rademark and serv ice mark registrations. We believe that our
trademarks and other proprietary rights are important to our success and our competitive position. We therefore devote what w e believe to be
appropriate resources to the protection of our trademarks and proprietary rights. The protective actions that we take, however, may not be
enough to prevent unauthorized usage or imitation by others, which may cause us to incur significant lit igation costs and cou ld harm our image
or our brand or competit ive position. To date, we have not been notified that our trademarks or menu offerings infringe upon the proprietary
rights of third parties, but we cannot assure you that third parties will not claim in fringement by us. Any such claim, wheth er or not it has merit,
could be time-consuming, result in costly litigation, cause product delays or require us to enter into royalty or licensing agreements. As a result,
any such claim could have a material adverse effect on our business, results of operations and financial condition. As a franchisor, we will grant
our franchisees a limited license to use our trademarks and service marks. The general public could incorrectly identify our franchisees as
controlled by us. In the event that a court determines the franchisee is not adequately identified as a franchisee, we could be held liab le for the
misidentified franchisee’s debts, obligations and liabilities.

                                                                         10
Our plan to rapidly increase the number of stores may make future results unpredictable, as our success will depend on acceptance of our
products in new markets.

We plan to significantly increase the number of our stores in the next three years. This growth strategy and the substantial investment
associated with the development of each new store may cause operating results to fluctuate and be unpredictable or adversely affect profits. Ou r
future results depend on various factors, including successful selection of new markets and store locations, market acceptanc e of the UFood
experience, consumer recognition of the quality of our food and willingness to pay our prices (which in some instances reflec t higher ingredient
costs), the quality of operations and general econo mic conditions. In addition, as has happened wh en other fast-casual restaurant concepts have
tried to expand nationally, we may find that the UFood concept has limited or no appeal to customers in new markets or we may experience a
decline in the popularity of UFood restaurants. Newly opened stores may not succeed, future markets and stores may not be successful and,
even if we are successful, our average store sales may not increase at historical rates.

New stores, once opened, may not be profitable, and the increases in average store sales and company store sales that we have experienced
in the past may not be indicative of future results.

Our ab ility to operate new stores profitably and increase averag e store sales and company store sales will depend on many factors, some of
which are beyond our control, including:

        initial sales performance of new stores;

        competition, either fro m co mpetitors in the restaurant industry or our own stores;

        changes in consumer preferences and discretionary spending;

        consumer understanding and acceptance of UFood stores;

        road construction and other factors limiting access to new stores;

        general economic conditions, which can affect store traffic, local labor costs and prices we pay for ingredients and other supplies; and

        changes in government regulation.

If we fail to open stores as quickly as planned, or if new stores do not perform as planned, our business and future prospects could be harmed.
In addition, changes in the average store sales or company store sales could cause operating results to vary adv ersely fro m expectations.

Expansion into new markets may present increased risks due to our unfamiliarity with those areas.

Some of the new stores are planned for markets where we have little or no operating experience. Those markets may have differ ent competit ive
conditions, consumer tastes and discretionary spending patterns than our existing markets. As a result, those new stores may b e less successful
than stores in existing markets. Consumers in a new market may not be familiar with the UFood brand, and we may need to build brand
awareness in that market through greater investments in advertising and p ro motional act ivity than we orig inally planned. We may find it mo re
difficult in new markets to hire, motivate and keep qualified employees who can pro ject the UFood vision, passion and culture. Stores opened
in new markets may also have lower average store sales than stores opened in existing markets, and may have higher construction, occupancy
or operating costs than stores in existing markets. Sales at stores opened in new markets may take longer to ramp up and reach expected sales
and profit levels, and may never do so, thereby affecting overall profitability.

                                                                        11
We may not persuade customers o f the benefits of paying higher prices for higher-q uality food.

Due to what we believe are our h igher quality standards, our food prices may be substantially higher than those of many of our competitors,
particularly those in the fast food sector. Our success depends in large part on our ability to persuade customers that food and beverages made
with h igher-quality ingredients are wo rth the higher prices they will pay at our stores relative to prices offered by these competit ors. That could
require us to change our pricing, advertising or promotional strategies, which could materially and adversely affect its resu lts or the brand
identity we have tried to create.

Additional instances of avian flu or “mad cow” disease or other food-borne illnesses could adversely affect the price and availability of
chicken, beef or other meat, cause the temporary closure o f some stores and result in negative publicity, thereby resulting i n a decline in
sales.

In 2004 and 2005, Asian and European countries experienced outbreaks of avian flu. Incidents of ―mad cow‖ disease have occurred in
Canadian and U.S. cattle herds. These problems, other food -borne illnesses (such as E. coli, hepatitis A, trichinosis or salmonella) and illnesses
and injuries caused by food tampering have in the past, and could in the future, adversely affect the price and availability of affecte d
ingredients and cause customers to shift their preferences, particularly if we choose to pass any higher ingredient costs alo ng to consumers. As
a result, our sales may decline. Instances of food-borne illnesses, real or perceived, whether at our restaurants or those of our competitors,
could also result in negative publicity about us or the restaurant industry, which could advers ely affect sales. If we react to negative publicity
by changing our menu or other key aspects of our restaurants, we may lose customers who do not accept those changes, and may not be able to
attract enough new customers to produce the revenue needed to make our stores profitable. If customers become ill fro m food -borne illnesses,
we could face substantial liab ility and be forced to temporarily close restaurants.

Our franchisees could take actions that harm our reputation and reduce our royalty revenues.

We do not exercise control over the day-to-day operations of our franchised stores. While we try to ensure that franchised stores meet the same
operating standards demanded of our co mpany-operated stores, one or mo re franchised stores may not do so. Any op erational shortcomings of
our franchised stores are likely to be attributed by the public and/or regulators to our system-wide operations and could adversely affect our
reputation and have a direct negative impact on the royalty revenues received fro m thos e stores.

We could be party to litigation that could adversely affect us by distracting management, increasing expenses or subjecting u s to material
money damages and other remedies.

Customers may occasionally file comp laints or lawsuits against us alleging that we are responsible for some illness or injury th ey suffered at or
after a v isit to a restaurant, or that we have problems with food quality or operations. We could also become subject to a va riet y of other claims
arising in the ordinary course of business, including personal injury claims, contract claims and claims alleging vio lations of federal and state
law regard ing workp lace and emp loyment matters, discrimination and similar matters, and could become subject to class action or other
lawsuits related to these or different matters in the future. In addition, the restaurant industry has been subject to a growing number of claims
based on the nutritional content of food products they sell and disclosure and advertising pract ices. We may also be su bject to this type of
proceeding in the future and, even if not, publicity about these matters (particularly directed at the fast food and fast -casual sectors of the
industry) may harm our reputation or prospects and adversely affect our results.

Unfavorable publicity or consumer perception of our nutritional products and any similar products distributed by other companies coul d
cause fluctuations in our operating results and could have a material adverse effect on o ur reputation, the demand for o ur pr oducts and
our ability to generate revenues.

Consumer perception of products can be significantly influenced by scientific research or find ings, national media attention and other publicity
about product use. A product may be received favorably, resulting in h igh sales associated with that product that may not b e sustainable as
consumer preferences change. Future scientific research or publicity could be unfavorable to the nutritional products market or any of our
particular products and may not be consistent with earlier favorable research or publicity. A future research report or publicity that is perceived
by our consumers as less favorable or that questions such earlier research or publicity could have a material adverse effect on our ability to
generate revenues from nutritional products. For examp le, our sales were adversely affected when the Food and Drug Administration ’s rule
banning the sale of dietary supplements containing ephedra went into effect in 2004. As a result of the above factors, our re venues from
nutritional products may fluctuate significantly fro m quarter to quarter, wh ich may impair our overall revenues and profitabi lity. Adverse
publicity in the form of published scientific research or otherwise, whether or not accurate, that associate s consumption of our nutritional
products or any other similar products with illness or other adverse effects, that questions the benefits of our or similar p roducts or that claims
that any such products are ineffective could have a material adverse effect on our reputation, the demand for our nutritional products and our
ability to generate revenues.

                                                                         12
We may incur material product liability claims, which could increase our costs and adversely affect our reputation, revenues and operating
income.

As a retailer of nutritional products designed for hu man consumption, we are subject to product liability claims if the use of our products is
alleged to have resulted in in jury. Our products include vitamins, minerals, herbs and other ingredients that are classified as foods or dietary
supplements and are not subject to pre-market regulatory approval in the United States. Our products could contain contamin ated substances,
and some of our products contain innovative ingredients that do not have long histories of human consumption. Prev iously unkn own adverse
reactions resulting fro m hu man consumption of these ing redients could occur. All o f the nutritional products we sell are produced by
third-party manufacturers. Even though we are only a retailer of nutritional products manufactured by third parties, we may neverth eless be
liab le for various product liability claims. We may be subject to various product liab ility claims, including, among others, that our products
include inadequate instructions for use or inadequate warnings concerning possible side effects and interactions with other s ubstances. A
product liability claim against us could result in increased costs and could adversely affect our reputation with our customers, which in turn
could adversely affect our revenues and operating inco me. Any claims would be tendered to the third -party manufacturer o r to our insurer;
however, there can be no assurance that the manufacturer would have sufficient financial resources to satisfy any claim or th at a claim would
be covered by or would not exceed the limits of our insurance.

It is highly likely that we will need to raise additional capital to meet our business requirements in the future, and such cap ital raising may
be costly or difficult to obtain and could dilute current stockholders’ ownership interests.

As of September 28, 2008, the end of our third quarter, we estimated we will need to raise approximately $10.9 million to fund our operating
plan through September 30, 2010. See ―Management’s Discussion and Analysis of Financial Condition and Results of Operat ions —Liquid ity,
Funding and Capital Resources ‖ below. Additional capital in the future may not be availab le on reasonable terms or at all. Our income fro m
operations is unlikely to be sufficient to fund our business plan. We may need to raise additional funds through borrowings or public or private
debt or equity financings to meet various objectives including, but not limited to:

        pursuing growth opportunities, including more rapid expansion;

        acquiring co mplementary businesses;

        making capital improvements to improve our infrastructure;

        hiring qualified management and key employees;

        research and development of new products;

        increased advertising and market ing expenses;

        responding to competitive pressures;

        comply ing with regulatory requirements such as licensing and registration; and

        maintaining co mpliance with applicable laws.

Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages. See ―You may
experience dilution of your ownership interests because of other future issuance of additional shares of common stock‖ below.

Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable
to obtain required additional capital, we may have to curtail our growth p lans or cut back on existing business and, further, we may not be able
to continue operating if we do not generate sufficient revenues from operations needed to stay in business.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accountin g fees, securities
law co mpliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection
with certain securities we may issue, such as convertible notes, restricted stock, stock options and warrants, which may adve rsely impact our
financial condition.

                                                                       13
The failure of our subsidiary to satisfy its obligations under an existing credit facility could result in a foreclosure on o ur assets.

KFLG Watertown, Inc. (KFLG), our wholly -owned subsidiary, is a party to an appro ximately $870,000 credit facility with TD Ban knorth ,
N.A. (the Bank), which is secured by a lien on the assets of KFLG. The obligations of KFLG under the credit facility are g uaranteed by
KnowFat of Downtown Crossing, Inc., KnowFat of Land mark Center, Inc., and our Chief Executive Officer, and are secured by lie ns on the
assets of each. In the event that KFLG fails to satisfy its obligations under the Bank cred it facility, the Bank may attempt to foreclose on the
assets of KFLG, KnowFat of Downtown Crossing, Inc., KnowFat of Landmark Center, Inc., and our Chief Executive Officer. Any su ch
foreclosure could be costly and time consuming to us and our subsidiaries and could result in the forfeiture of the assets subject to the Bank’s
liens. In addit ion, the Bank’s liens could make it more difficult fo r us to obtain additional debt or equity financing in the future.

Compliance with the reporting requirements of federal securities laws can be expensive.

We are a public reporting company in the United States, and accordingly, are subject to the information and reporting require ments of the
Securities Exchange Act of 1934 (the Exchange Act) and other federal securities laws, and the compliance obligations of the Sarbanes -Oxley
Act. The costs of preparing and filing annual and quarterly reports and other informat ion with the SEC and furn ishing audited reports to
stockholders will cause our expenses to be higher than they would be if we had remained privately-held.

Applicable regulatory requirements, including those contained in and issued under the Sarbanes -Oxley Act, may make it difficult for us to
retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or
retain listing of our common stock.

We may be unable to attract and retain those qualified officers, directors and members of board co mmittees required to provid e for effect ive
management because of the ru les and regulat ions that govern publicly held co mpanies, including, but not limited to, certifications by principal
executive and financial officers. The enactment of the Sarbanes -Oxley Act has resulted in the issuance of a series of rules and regulations and
the strengthening of existing ru les and regulations by the SEC, as well as the adoption of new and more stringent rules by th e stock exchanges.
The perceived increased personal risk associated with these changes may deter qualified indiv iduals fro m accepting roles as directors and
executive officers.

Further, some of these changes heighten the requirements for board or committee membership, part icularly with respect to an individual’s
independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining
directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the man agemen t of our business
and our ability to obtain or retain listing of our co mmon stock on any stock exchange (assuming we elect to seek and are successful in
obtaining such listing) could be adversely affected.

We are a holding company that depends on cash flow from our subsidiaries to meet our obligations and pay dividends; our subsi diary is
restricted from making distributions to us.

We are a holding co mpany with no material assets other than the stock of our wholly-owned subsidiaries. Accordingly, all o f our operations
will be conducted by KnowFat, our wholly-owned subsidiary (and the wholly-owned subsidiaries of KnowFat). We currently expect that the
earnings and cash flo w of our subsidiaries will primarily be retained and used by them in their operations, including servicing any debt
obligations they may have now or in the future. Therefore, our subsidiaries may not be able to generate sufficient cash flo w to distribute funds
to us in order to allow us to pay the obligations of UFood Restaurant Group, Inc., as they become due or, although we do not anticipate paying
any dividends in the foreseeable future, pay future d ividends on, or make any distributions with respect to, our co mmon or ot her stock.
Additionally, our ability to participate as an equity holder in any distribution of assets of any subsidiary upon liquidation is gener ally
subordinate to the claims of creditors of the subsidiary. Under the terms o f the credit facility with TD Banknorth, KFLG is p rohibited, without
the prior written consent of TD Banknorth, fro m declaring, making or paying any distribution of any kind or dividend (other t han dividends
payable solely in co mmon stock) except that any of KFLG’s subsidiaries may make a distribution to KFLG.

                                                                         14
We have reported a material weakness in our internal control over financial reporting as of December 30, 2007. If we fail to maintain an
effective system of internal controls, including internal controls over financial reporting, we may not be able to accu rately report our
financial results or detect fraud. Consequently, investors could lose confidence i n our financial reporting and this may decr ease the trading
price of our stock.

Pursuant to Section 404 of the Sarbanes -Oxley Act of 2002, beginning with the Annual Report on Form 10-KSB for the fiscal year ended
December 30, 2007, we are required to furn ish a report by management on our internal controls over financial reporting. Such report contains,
among other matters, an assessment of the effectiveness of our internal control over financial reporting. Our management ’s assessment of the
effectiveness of our internal control over financial reporting as of December 30, 2007, resulted in a determination that we h ad a material
weakness related to our control environ ment because we did not have sufficient personnel or time to co mplete the assessment of our internal
controls following the merger on December 18, 2007.

We must maintain effective internal controls to provide reliable financial reports on a timely basis and detect fraud. We have been assessing
our internal controls to identify areas that need imp rovement. We are in the process of imp lementing changes to internal cont rols, but have not
yet completed implementing these changes. Failure to imp lement these changes to our internal controls or any others that we identify as
necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose c onfidence in our
reported financial in formation. Any such loss of confidence would have a negative effect on the trading price of our stock.

We may be exposed to potential risks resulting from new requirements under Section 404 of the Sarbanes -Oxley Act.

In addition to the report by management on our internal control over financial reporting described above, for our fiscal year ending December
27, 2009, and thereafter, such report must also contain a statement that our auditors have issued an attestation r eport on our management’s
assessment of such internal control. If our auditors are unable to attest that our management ’s report is fairly stated (or they are unable to
express an opinion on the effectiveness of our internal control when such attestation is required), we could lose investor confidence in the
accuracy and completeness of our financial reports which could have a material adverse effect on our stock price.

While we intend to expend resources to prepare the documentation required by Section 4 04 of the Sarbanes-Oxley Act (Sect ion 404), and to
perform the required testing procedures, there is a risk that we will not co mply with all of the requirements imposed by Sect ion 404.
Accordingly, there can be no assurance that our independent registered public accounting firm will be able to issue the attestation required by
Section 404. In the event we identify significant deficiencies or additional material weaknesses in our internal controls tha t we cannot
remediate in a t imely manner or we are unable to receive an attestation from our independent registered public accounting firm with respect to
our internal controls, investors and others may lose confidence in the reliability of our financial statements and our abilit y to obtain equity or
debt financing could be adversely affected.

Risks Related to Our Securities

There is not now, and there may not ever be, an active market for our common stock.

There currently is a limited public market for our co mmon stock. Further, although the common stock is currently quoted on the OTC Bulletin
Board, trad ing of our co mmon stock may be extremely sporadic. For examp le, several days may pass before any shares may be tra ded. As a
result, an investor may find it difficult to dispose of, or to obtain accurate quot ations of the price of, the common stock. There can be no
assurance that a more active market fo r the co mmon stock will develop, or if one should develop, there is no assurance that it will be sustained.
This severely limits the liquidity of the co mmon sto ck, and would likely have a material adverse effect on the market price of the co mmon
stock and on our ability to raise additional capital.

We cannot assure you that our common stock will become liquid or that it will be listed on a securities exchange.

Until our co mmon stock is listed on an exchange, we expect the co mmon stock to remain eligible for quotation on the OTC Bulle tin Board, o r
on another over-the-counter quotation system, or in the ―pink sheets.‖ In those venues, however, an investor may find it difficult to obtain
accurate quotations as to the market value of the co mmon stock. In addit ion, if we fail to meet the criteria set forth in SEC reg ulations, various
requirements would be imposed by law on broker -dealers who sell our securities to persons other than established customers and accredited
investors. Consequently, such regulations may deter broker-dealers fro m reco mmending or selling the co mmon stock, which may further affect
the liquidity of the common stock. Th is would also make it more d ifficu lt for us to raise additional capital in the future.

                                                                         15
Applicable SEC rules governing the trading of “penny stocks” limits the trading and liquidity of our common stock, which may affect the
trading price of the common stock.

Our co mmon stock is currently quoted on the OTC Bulletin Board, and trades below $5.00 per share; therefore, the common stock is
considered a ―penny stock‖ and subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be
publicly traded. These regulations require the delivery, prior to any transaction involving a penny stock, of a d isclosure sc hedule explaining the
penny stock market and the associated risks. Under these regulations, certain bro kers who reco mmend such securities to person s other than
established customers or certain accredited investors must make a special written suitability determination regard ing such a purchaser and
receive such purchaser’s written agreement to a transaction prior to sale. These regulations have the effect of limit ing the trading activity of the
common stock and reducing the liquid ity of an investment in the co mmon st ock.

The price of our common stock may become volatile due to our operating results, products offered by our competitors and stock market
conditions, which could lead to losses by investors and costly securities litigation.

The trading price of our co mmon stock is likely to be highly volat ile and could fluctuate in response to factors such as:

         actual or anticipated variat ions in our operating results;

         announcements of developments by us or our competitors;

         announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital co mmit ments;

         adoption of new accounting standards affecting our industry;

         additions or departures of key personnel;

         introduction of new products by us or our competitors;

         sales of our common stock or other securities in the open market; and

         other events or factors, many of which are beyond our control.

The stock market in general, and in particular the penny stock market, is subject to significant price and volume fluctuations. In the past,
following periods of volatility in the market p rice of a co mpany ’s securities, securities class action litigation has often been initiated against the
company. Lit igation initiated against us, whether or not successful, could result in substantial costs and diversion of our management ’s
attention and resources, which could harm our business and financial condition.

We do not anticipate dividends to be paid on the common stock, and investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on our co mmon stock, and we do not anticipate such a declaration or payment f or the
foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent
a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that
stockholders will not lose the entire amount of their investment.

Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact on i ts market
price.

The trading market for our co mmon stock will depend on the research and reports that securities analysts publish about our busines s and our
Co mpany. We do not have any control over these analysts. There is no guarantee that securities analysts will cover our co mmon stock. If
securities analysts do not cover our common stock, the lack of research coverage may adversely affect its market price. If we are covered by
securities analysts, and our stock is the subject of an unfavorable report, our stock price would li kely decline. If one or more of these analysts
ceases to cover our Co mpany or fails to publish regular reports on us, we could lose visibility in the financial markets, which could cause our
stock price or trading vo lu me to decline. In addition, because Kn owFat became public through a ―reverse triangular merger,‖ we may have
further difficulty attracting the coverage of securities analysts.

                                                                           16
You may experience dilution of your ownership interests because of the future issuance of additional shares of common stock.

Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result
in a decrease in the fair ma rket value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As
stated above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities
that are convertible into or exercisable for our co mmon or preferred stock. We may also issue such securities in connection w ith hiring or
retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and
services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time autho rize the issuance
of additional co mmon or preferred stock without common stockholder approval, subject only to the total number of authorized common and
preferred shares set forth in our articles of incorporation. We are currently authorized to issue an aggregate of 310,000,000 shares of capital
stock, consisting of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock with preferences and rights to be
determined by our Board of Directors. As of November 17, 2008, there were 34,818,490 shares of common stock outstanding and 1 8,516,089
shares of common stock subject to outstanding options and warrants. The terms of equity securities issued by us in future transactions may be
more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issu ance of warrants
or other derivative securities, wh ich may have a further dilutive effect. Also, the future issuance of any such additional shares of common or
preferred stock or other securities may create down ward pressure on the trading price of the common stock. There can be no as surance that any
such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are the n traded on the OTC
Bulletin Board or other then-applicable over-the-counter quotation system or exchange.

                                                          SELLING STOCKHOLDERS

This prospectus covers the resale fro m time to time by the selling stockholders identified in the table below of:

         Up to 15,659,059 issued and outstanding shares of our common stock, co mprising:

              o    10,941,000 shares sold in a private placement co mpleted on March 31, 2008;

              o    3,978,059 shares issued upon conversion of convertible notes upon the closing of the merger on December 18, 2007; and

              o    740,000 shares issued     to certain of our vendors in partial pay ment for their services; and

         Up to 10,376,201 shares of our common stock issuable upon exercis e of warrants, comprising:

              o    5,470,500 shares underlying warrants sold in the private placement comp leted on March 31, 2008;

              o    1,989,035 shares underlying warrants issued upon conversion of convertible notes upon the closing of the merger; and

              o    2,916,666 shares underlying warrants issued to certain of our vendors in partial pay ment for their services.

Pursuant to registration rights agreements executed in connection with the closing of the merger and the private placement co mpleted on March
31, 2008, we have filed with the SEC a registration statement on Form S-1, of which this prospectus forms a part, under the Securities Act to
register these resales. The selling stockholders identified in the table belo w may fro m time to time o ffer and sell under this prospectus any or all
of the shares of common stock described under the column ―Shares of Co mmon Stock Being Offered in the Offering‖ in the table belo w.

                                                                          17
Certain selling stockholders may be deemed to be ―underwriters‖ as defined in the Securities Act. Any profits realized by such selling
stockholder may be deemed to be underwrit ing commissions.

The table below has been prepared based upon the information furn ished to us by the selling stockholders as of the date of t his prospectus. The
selling stockholders identified below may have sold, transferred or otherwise disposed of some or all of their shares since t he date on which the
informat ion in the following table is presented in transactions exempt fro m or not subject to the registration requirements of the Securities Act.
Information concerning the selling stockholders may change fro m time to t ime and, if necessary, we will amend or supplemen t t his prospectus
accordingly. We cannot give an estimate as to the number of shares of common stock that will actually be held by the selling stockholders upon
termination of this offering because the selling stockholders may offer some or all of their co mmon stock under the offering contemplated by
this prospectus or acquire additional shares of common stock. The total number of shares that may be sold hereunder will not exceed the
number of shares offered hereby. Please read the section entitled ―Plan of Distribution‖ in this prospectus.

We have been advised, as noted below in the footnotes to the table, that none of the selling stockholders are broker-dealers and 19 of the selling
stockholders are affiliates of broker-dealers. We have been advised that each such broker-dealer and affiliate of a broker-dealer purchased our
common stock and warrants in the ord inary course of business, not for resale, and at the t ime of purchase, did not have any a greements or
understandings, directly or indirectly, with any person to distribute the related common stock.

The following table sets forth the name of each selling stockholder, the nature of any position, office or other material rel ationship, if any,
which the selling stockholder has had, within the past three years, with us or with any of our predecessors or affiliates (in a footnote), the
number of shares of our common stock beneficially owned by such stockholder before this offering, the nu mber of shares to be offered for
such stockholder’s account and the number and (if one percent or more) the percentage of the class to be beneficially owned by such
stockholder after co mplet ion of the offering. The nu mber of shares owned are those beneficially owned, as determined under th e rules of the
SEC, and such informat ion is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial o wnership
includes any shares of our common stock as to wh ich a person has sole or shared voting power or investment power and any shar es of common
stock which the person has the right to acquire within 60 days after the date of this prospectus through the exercise of any option, warrant or
right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a tru st, discretionary
account or similar arrangement, and such shares are deemed to be beneficially owned and outstanding for computing the share o wnership and
percentage of the person holding such options, warrants or other rights, but are not deemed outstanding for co mputing the percentage of any
other person. Beneficial ownership percentages are calculated based on 34,818,490 shares of our common stock outstanding as o f November
17, 2008. Unless otherwise set forth below, based upon the informat ion furnished to us, the persons and entities named in the table have sole
voting and sole investment power with respect to the shares set forth opposite the selling stockholder’s name, subject to community property
laws, where applicable.

                                                                Shares of
                                               Shares of        Common                                                        Percentage of
                                              Common              Stock                                   Shares of          Common Stock
                                                Stock          Underl ying                               Common               Outstandi ng
                                             Bene ficiall      Warrants                               Stock Bene               Beneficially
                                                  y           Bene ficially        Shares of          ficially Owned          Owned upon
                                               Owned             Owned             Common                   upon            Completion of the
                                             Before the        Before the         Stock Being         Completion of
Selling Stockhol der                           Offering         Offering            Offered          the Offering(a)              Offering
Abdou, Mark ‡                                       10,000              5,000             15,000                      —                        —
Abrams, Jason §                                     32,017             10,188             30,563                  11,642                       *
Abrams, Jennifer §                                  32,017             10,188             30,563                  11,642                       *
Abrams, Mark §                                     315,995            101,875            305,625                 112,245                       *
Alderman, Norman Fred ‡                             25,000             12,500             37,500                      —                        —
Anasazi Partners II, LLC‡ † 1                       50,000             25,000             75,000                      —                        —
Arcade Investments LTD ‡ 2                          25,000             12,500             37,500                      —                        —
Arie Leibovitz Trust Agreement ‡ 3                  50,000             25,000             75,000                      —                        —
Arthur P Remley Revocable Trust ‡ 4                100,000             50,000            150,000                      —                        —
Askinas, Mitchel ‡                                  25,000             12,500             37,500                      —                        —
Augusty, Leon M. ‡                                  25,000             12,500             37,500                      —                        —
Aviatech 5                                          15,000                  0             15,000                      —                        —
Avent, Thomas Webb, Jr. ‡                          100,000             50,000            150,000                      —                        —
Azran, David ‡                                      20,000             10,000             30,000                      —                        —
Azrilant, Evan B. §                                 20,375             10,188             30,563                      —                        —
Baisley, William ‡                                   5,000              2,500              7,500                      —                        —
Baker, Adrienne † ‡                                100,000             50,000            150,000                      —                        —
Baker, Ch ristopher M. ‡                            25,000             12,500             37,500                      —                        —
Baker, Ch ristopher P. ‡                           100,000             50,000            150,000                      —                        —
Baldwin, Byron S., Jr. §               60,938   30,469    91,407   —   —
Baldwin, Helen N. ‡                    10,000    5,000    15,000   —   —
Balsam, Gila ‡                         25,000   12,500    37,500   —   —
Barnett, Donald ‡                      25,000   12,500    37,500   —   —
Basile, Tho mas P. ‡ §                 10,188    5,094    15,282   —   —
Baskin, James K. ‡                     10,000    5,000    15,000   —   —
Bean, Jero me B. Jr. and Diana Kay ‡   25,000   12,500    37,500   —   —
Beaton, Mark Derek ‡                   25,000   12,500    37,500   —   —
Beglin, Francois ‡                      8,000    4,000    12,000   —   —
Behrman, Theodore M. ‡                 25,000   12,500    37,500   —   —
Benham, David R. ‡                     10,000    5,000    15,000   —   —
Benichou, Frederic ‡                   25,000   12,500    37,500   —   —
Berger, Andrew M ichael §              10,212    5,106    15,318   —   —
Berger, Stanley §                      91,913   45,957   137,870   —   —

                                                18
                                                       Shares of
                                          Shares of    Common                              Shares of
                                         Common          Stock                        Common Stock        Percentage of
                                           Stock      Underl ying                           Bene         Common Stock
                                        Bene ficiall  Warrants                        ficially Owned      Outstandi ng
                                             y       Bene ficially      Shares of           upon          Beneficially
                                          Owned         Owned           Common         Completion of      Owned upon
                                        Before the    Before the      Stock Being            the         Completion of
Selling Stockhol der                      Offering     Offering          Offered         Offering(a)      the Offering
Beth-Pearlson Family Living Trust dtd
     1/13/2004 ‡ 6                            25,000         12,500          37,500                —                      —
Blosser, James §                              20,425         10,213          30,638                —                      —
Bodnar Capital Management, LLC ‡ 7            25,000         12,500          37,500                —                      —
Bollen, Jan W illem ‡                         10,000          5,000          15,000                —                      —
Bonanno Family Partnership LLP ‡ 8           100,000         50,000         150,000                —                      —
Bonanno, Ray mond J. & Joan E. JTWROS
     ‡                                       100,000         50,000         150,000                —                      —
Borino, Carl ‡                                20,000         10,000          30,000                —                      —
Bro wn, Fredrick William IV ‡                 40,000         20,000          60,000                —                      —
Buckley, James E. ‡                           25,000         12,500          37,500                —                      —
Burns, Michael R. & Robin Fisher
     JTWROS ‡                                 50,000         25,000          75,000                 —                     —
Cannetti, Frank D. ‡                          25,000         12,500          37,500                 —                     —
Cases, Hector ‡                               25,000         12,500          37,500                 —                     —
Castlerigg Master Investment Ltd. ‡ 9      1,000,000        500,000       1,500,000                 —                     —
Cimaro lo Partners, LLC‡ † 10                118,500         50,000         150,000             18,500                    *
Clavin, Brian ‡                               25,000         12,500          37,500                 —                     —
Cohen, Eric J. ‡                              25,000         12,500          37,500                 —                     —
Cohen, Michael §                              61,275         30,638          91,913                 —                     —
Cohen, Norman H. ‡                            10,000          5,000          15,000                 —                     —
Conti, Douglas T.‡ §                          20,375         10,188          30,563                 —                     —
Correa, Frances M. ‡                          15,000          7,500          22,500                 —                     —
Courtland Investments, Inc. ‡ 11             145,440         37,500         112,500             70,440                    *
Crouth, Jeffrey M ichael ‡                   100,000         50,000         150,000                 —                     —
D&H Pinnacle Partners LLC ‡ 12                50,000         25,000          75,000                 —                     —
Daniel B. Stern Revocable Trust § 13          51,063         25,531          76,594                 —                     —
Defries, Graham ‡                             65,000         32,500          97,500                 —                     —
Design Hardware Co mpany § 14                151,875         75,938         227,813                 —                     —
Destin, James A.C. §                          20,425         10,213          30,638                 —                     —
Deutsch, Steven H. ‡                          50,000         25,000          75,000                 —                     —
Dissette, Carl A. ‡                          200,000        100,000         300,000                 —                     —
Doeve, Gudo ‡                                 25,000         12,500          37,500                 —                     —
Do mino, Carl J. §                           203,750        101,875         305,625                 —                     —
Donato, Nicholas Jr. ‡ †                       8,638          2,500           7,500              3,638                    *
Donohue, James C. IV ‡                        75,000         37,500         112,500                 —                     —
Dukach, Semyon §                              62,477         25,000          75,000             12,477                    *
Edvinsson, Mats ‡                             25,000         12,500          37,500                 —                     —
Edwards, W. Mark ‡                            50,000         25,000          75,000                 —                     —
Eller, Ronald ‡                               20,000         10,000          30,000                 —                     —
Felder, Gregory ‡ 15                         830,000        415,000       1,245,000                 —                     —

                                                           19
                                                         Shares of
                                           Shares of     Common                               Shares of
                                          Common           Stock                             Common             Percentage of
                                            Stock       Underl ying                       Stock Bene           Common Stock
                                         Bene ficiall   Warrants                          ficially Owned        Outstandi ng
                                              y        Bene ficially        Shares of           upon            Beneficially
                                           Owned          Owned            Common         Completion of         Owned upon
                                         Before the     Before the       Stock Being             the           Completion of
Selling Stockhol der                       Offering      Offering           Offered          Offering(a)        the Offering
Fellman, Sten-Anders ‡                          90,000         45,000           135,000                 —                       —
Ferrer, John-John ‡                             10,000           5,000           15,000                 —                       —
FMC Group, Inc. ‡ 16                            25,000         12,500            37,500                 —                       —
Fowers, Pamela ‡                                25,000         12,500            37,500                 —                       —
Fowler, Donald L. Jr. ‡                         25,000         12,500            37,500                 —                       —
Friedland, Michael ‡                            40,000         20,000            60,000                 —                       —
Frieze, M ichael §                              74,908         12,500            37,500             49,908                      *
Go ldberg, Mark & Joanna B. JTW ROS ‡           30,000         15,000            45,000                 —                       —
Gou ld, Peter C. §                              51,063         25,531            76,594                 —                       —
Gou lston, Noel H. and Mary T. JTW ROS
     §                                         51,063          25,531           76,594                     —                    —
Grabill, Robert and Julie JTWROS ‡             20,000          10,000           30,000                     —                    —
Gut ierrez, Hector ‡                           50,000          25,000           75,000                     —                    —
Halle, Sharon E. ‡                             50,000          25,000           75,000                     —                    —
Harrison, Peter ‡                              50,000          25,000           75,000                     —                    —
Hartley, A. Tho mas & M.L. Kaufman
     JTWROS ‡                                  25,000          12,500           37,500                  —                       —
Haylett, Dean H. ‡                             25,000          12,500           37,500                  —                       —
Henry S. Smith Revocable Trust ‡ 17            37,419           5,000           15,000              27,419                      *
Hill, James ‡                                  10,000           5,000           15,000                  —                       —
Hill, John C. ‡                                15,000           7,500           22,500                  —                       —
Hin kle, Donald E. ‡                           25,000          12,500           37,500                  —                       —
Hu mber, James Terry and Manda W. ‡            50,000          25,000           75,000                  —                       —
Icon Capital Partners, LP § † 18              203,188         101,594          304,782                  —                       —
IRA Timothy C Dreyer Pershing LLC as
     Custodian Rollover Account ‡ 19           50,000          25,000           75,000                  —                       —
Isaksson, Jon ‡                                25,000          12,500           37,500                  —                       —
Isen, Lawrence § 20                           152,125          76,063          228,188                  —                       —
Isenberg, Michael ‡                            60,200          25,000           75,000              10,200                      *
Janzen, Engelbertus Johannes ‡                 20,000          10,000           30,000                  —                       —
Jaret, Alec §                                  30,638          15,319           45,957                  —                       —
Jensen, Bryan & Caro l JTW ROS ‡               20,000          10,000           30,000                  —                       —
Joan K. Warnke Revocable Trust §               25,531          12,766           38,297                  —                       —
John Thomas Bridge and Opportunity
     Fund, LP § 21                            668,625         334,313        1,002,938                     —                    —
Johnson, Ben‡ †                               100,000          50,000          150,000                     —                    —
Kalmbach, Dohn L. ‡                            50,000          25,000           75,000                     —                    —
Kanuit, Gary ‡                                 20,000          10,000           30,000                     —                    —
Katf, Ramez ‡                                  35,000          17,500           52,500                     —                    —

                                                               20
                                                            Shares of
                                             Shares of      Common                            Shares of
                                            Common            Stock                          Common             Percentage of
                                              Stock        Underl ying                    Stock Bene           Common Stock
                                           Bene ficiall    Warrants                       ficially Owned        Outstandi ng
                                                y         Bene ficially     Shares of           upon            Beneficially
                                             Owned           Owned          Common        Completion of         Owned upon
                                           Before the      Before the     Stock Being            the           Completion of
Selling Stockhol der                         Offering       Offering         Offered         Offering(a)        the Offering
Kirk D. & Donna M. Scattergood
     Revocable Trust ‡ 22                        25,000          12,500          37,500                    —                    —
Klein, Robert §                                 102,125          51,063         153,188                    —                    —
Klingenstein, William P. §                      203,750         101,875         305,625                    —                    —
Kohli, Chander ‡                                 25,000          12,500          37,500                    —                    —
Krzewina, Al ‡                                   25,000          12,500          37,500                    —                    —
Kurvinen, Matti ‡                                10,000           5,000          15,000                    —                    —
Lang made, Mark G. ‡                             50,000          25,000          75,000                    —                    —
Laurence E. White Revocable Trust ‡ 23           50,000          25,000          75,000                    —                    —
Lavery, Paul ‡                                   75,000          37,500         112,500                    —                    —
Lee B. Stern Delta Trust U/A/D 11/28/ 95
     ‡ 24                                        50,000          25,000          75,000                  —                      —
Lee, Clarence G. ‡                               25,000          12,500          37,500                  —                      —
Lee, Gregory Joseph ‡                            10,000           5,000          15,000                  —                      —
Leininger, Eric ‡                                50,000          25,000          75,000                  —                      —
Leopard, Chad ‡                                  20,000          10,000          30,000                  —                      —
Levine, Seth M. ‡                                25,000          12,500          37,500                  —                      —
Lichter, Larry ‡                                 50,000          25,000          75,000                  —                      —
Lin, Frank ‡                                     25,000          12,500          37,500                  —                      —
Liu, Sylvia Fan §                               203,750         101,875         305,625                  —                      —
Loo mis, Roy S. and Claudia J. JT Ten ‡          50,000          25,000          75,000                  —                      —
Loss, James W. ‡                                 50,000          25,000          75,000                  —                      —
Lucey, James J. ‡                                50,000          25,000          75,000                  —                      —
Lynch, Tho mas IV‡ †                             15,000           7,500          22,500                  —                      —
Maas, Barry ‡                                    15,000           7,500          22,500                  —                      —
Manderson, Ray mond & Jan ‡                      25,000          12,500          37,500                  —                      —
Marine, Warren ‡                                 32,000          12,500          37,500               7,000                     *
MarketByte LLC ± 25                             200,000          83,333         283,333                  —                      —
Maximous, Signe and France §                     30,638          15,319          45,957                  —                      —
McGo wan, Pau l ‡                                25,000          12,500          37,500                  —                      —
McKean, Stephen ‡                                25,000          12,500          37,500                  —                      —
Meagher, Chris ‡                                 25,000          12,500          37,500                  —                      —
Medfam Ho ldings Ltd. ‡ 26                       50,000          25,000          75,000                  —                      —
Mehallick, Jeff ‡                                25,000          12,500          37,500                  —                      —
Melroy, Theresa A. ‡                             25,000          12,500          37,500                  —                      —
Messina, Stephen ‡                               15,590           5,000          15,000               5,590                     *
Metzger, David‡ †                                25,000          12,500          37,500                  —                      —
Mezzina, Louis J. ‡                              25,000          12,500          37,500                  —                      —
Miller, Craig §                                  10,213           5,107          15,320                  —                      —
Minard, Joseph M. §                              10,188           5,094          15,282                  —                      —
Mitchell, Graham ‡                              100,000          50,000         150,000                  —                      —
Monaco, Gene ‡                                  450,000         225,000         675,000                  —                      —

                                                                 21
                                                              Shares of
                                                              Common
                                              Shares of        Stock                                            Percentage of
                                              Common         Underl ying                        Shares of          Common
                                                Stock        Warrants                           Common              Stock
                                             Bene ficiall   Bene ficiall                         Stock           Outstandi ng
                                                   y              y           Shares of        Beneficially      Beneficially
                                               Owned           Owned          Common           Owned upon        Owned upon
                                              Before the     Before the      Stock Being      Completion of    Completion of
Selling Stockhol der                           Offering       Offering         Offered       the Offering(a)    the Offering
Morgan, Alfred §                                   20,425         10,213            30,638                 —                —
Morganthaler, George ‡                             25,000         12,500            37,500                 —                —
Mulrooney, Chris ‡                                 25,000         12,500            37,500                 —                —
Murphy, Brian ‡                                   100,000         50,000           150,000                 —                —
Najor, Daniel ‡                                    50,000         25,000            75,000                 —                —
Neptune Media, LLC ± 27                            75,000              0            75,000                 —                —
New Century Capital Consultants, Inc. ± 28        250,000      2,750,000         3,000,000                 —                —
Newton, Keith O. ‡                                 25,000         12,500            37,500                 —                —
Nicholson, Keith ‡                                 25,000         12,500            37,500                 —                —
Niehage, Udo ‡                                     25,000         12,500            37,500                 —                —
Niggeman, David ‡                                  10,000          5,000            15,000                 —                —
Niggeman, John P. ‡                                10,000          5,000            15,000                 —                —
O.T. Finance, SA § 29                             204,250        102,125           306,375                 —                —
O'Connor, Gerald ‡                                 10,000          5,000            15,000                 —                —
Olafsson, Thorir ‡                                 15,000          7,500            22,500                 —                —
O'Malley, David ‡                                  25,000         12,500            37,500                 —                —
Otter, Robert E. ‡                                 25,000         12,500            37,500                 —                —
Owens, Kenneth ‡                                   25,000         12,500            37,500                 —                —
Papi, Paul § ‡                                     51,063         25,531            76,594                 —                —
Paradise Wire & Cable Defined Benefit
     Pension Plan ‡ 30                             25,000           12,500         37,500                  —                —
Parsoff, Marv in & Carole §                        50,938           25,469         76,407                  —                —
Pash, Robert ‡                                    100,000           50,000        150,000                  —                —
Pasquale, John ‡                                   25,000           12,500         37,500                  —                —
Petrassi, Albert and Paula JTW ROS §              141,875           70,938        212,813                  —                —
Petrillo, Ray mond/Ann ‡                           50,000           25,000         75,000                  —                —
Polo, Jay E. ‡                                     25,000           12,500         37,500                  —                —
Pomatto Investments Family Limited
     Partnership ‡ 31                              25,000           12,500         37,500                  —                —
Pontefract, Ian ‡                                  50,000           25,000         75,000                  —                —
Price, James A. ‡                                  50,000           25,000         75,000                  —                —
Rapoport, John and Joan JTWROS ‡                   25,000           12,500         37,500                  —                —
Rapoport, Michael § ‡                              51,063           25,531         76,594                  —                —
Rathjen, Steven L. ‡                               75,000           37,500        112,500                  —                —
Ratledge, Jerry T. ‡                               25,000           12,500         37,500                  —                —
RBC Dain Rauscher Cust FBO Kim Felder
     Roth IRA ‡ 32                                170,000           85,000        255,000                  —                —
Rednum Investments LP ‡ 33                         50,000           25,000         75,000                  —                —
Refurbco Inc. ‡ 34                                100,000           50,000        150,000                  —                —
Reinhart, James M. ‡                               25,000           12,500         37,500                  —                —
Reinhart, John J. ‡                                75,000           37,500        112,500                  —                —

                                                               22
                                                                 Shares of
                                                                 Common
                                                 Shares of        Stock                            Shares of      Percentage of
                                                 Common         Underl ying                        Common            Common
                                                   Stock        Warrants                            Stock             Stock
                                                Bene ficiall   Bene ficiall                       Beneficially     Outstandi ng
                                                      y              y            Shares of       Owned upon       Beneficially
                                                  Owned           Owned           Common        Completion of      Owned upon
                                                 Before the     Before the       Stock Being    the Offering(a   Completion of
Selling Stockhol der                              Offering       Offering          Offered             )          the Offering
Reinhart, Karen‡                                      25,000            12,500         37,500               —                 —
Reinken, To m‡                                        25,000            12,500         37,500               —                 —
Rich, Kenneth M. ‡                                    10,000             5,000         15,000               —                 —
Richards, Donald J. ‡                                200,000           100,000        300,000               —                 —
Robin L. Stern Revocable Trust ‡ 35                   25,000            12,500         37,500               —                 —
Robyn Schreiber Irrevocable Trust, Warren
    Schreiber Trustee ‡ 36                            50,938           25,469          76,407               —                 —
Ross, Jeffrey P. ‡ 37                                 25,000           12,500          37,500               —                 —
Rosten, Peter † ‡                                     50,000           25,000          75,000               —                 —
Rotchford L. Barker Revocable Liv ing Trust §
    38
                                                     101,063            50,531        151,594               —                 —
Rudolph, Doug M. §‡                                  254,250           127,125        381,375               —                 —
Ruff, Steven O. ‡                                     25,000            12,500         37,500               —                 —
Russell, Robert J. ‡                                  25,000            12,500         37,500               —                 —
SA Alternative Opportunity Fund LLC Series
     E ‡ 39                                          250,000           125,000        375,000               —                 —
Sagoo, Anoop‡                                         30,000            15,000         45,000               —                 —
Sangster, Fran k Brian‡                               25,000            12,500         37,500               —                 —
Schubert Robert W. Jr. ‡                              25,000            12,500         37,500               —                 —
Self, M ichael R. ‡                                   50,000            25,000         75,000               —                 —
Sensus LLC § 40                                      512,875           255,188        765,563            2,500                *
Shah, Dipak‡                                          25,000            12,500         37,500               —                 —
Shea, Ch ristopher B. ‡                               25,000            12,500         37,500               —                 —
Sheldon, Alan J. ‡                                   100,000            50,000        150,000               —                 —
Skaletsky, Marc S. ‡                                  25,000            12,500         37,500               —                 —
Smee, Richard Anthony‡                               100,000            50,000        150,000               —                 —
Smelgus, Jim‡                                         50,000            25,000         75,000               —                 —
Smith, Dennis‡                                        20,000            10,000         30,000               —                 —
Smith, Lawrence A. ‡                                   5,000             2,500          7,500               —                 —
Solledar Family Limited Partnership ‡ 41              13,369             5,000         15,000            3,369                *
Somelofske, Martin ‡                                  50,000            25,000         75,000               —                 —
Spangler, Arnold E. ‡                                 25,000            12,500         37,500               —                 —
Sperling, Seena and Gerald ‡                          50,000            25,000         75,000               —                 —
Spitalny, Richard M‡                                  10,000             5,000         15,000               —                 —
Stallone, Do minick‡                                  50,000            25,000         75,000               —                 —
Stark, Jimmie T. ‡                                    25,000            12,500         37,500               —                 —
Steiner, Lou is J. ‡                                 250,000           125,000        375,000               —                 —
Stern, Kenneth‡                                       40,000            20,000         60,000               —                 —
Stern, Linda S. ‡                                     25,000            12,500         37,500               —                 —
Stockwire Research Group, Inc. § 42                  102,125            51,063        153,188               —                 —

                                                                  23
                                                                      Shares of
                                                                      Common
                                                    Shares of          Stock                                                Percentage of
                                                    Common           Underl ying                        Shares of              Common
                                                      Stock          Warrants                           Common                  Stock
                                                   Bene ficiall     Bene ficiall                         Stock               Outstandi ng
                                                         y                y         Shares of          Beneficially          Beneficially
                                                     Owned             Owned        Common            Owned upon             Owned upon
                                                    Before the       Before the    Stock Being       Completion of         Completion of
Selling Stockhol der                                 Offering         Offering       Offered        the Offering(a)         the Offering
Stone David P. & A rlene R. JTWROS‡                        25,000         12,500           37,500                    —                     —
Strawbridge, William N. ‡                                  16,000          8,000           24,000                    —                     —
TGR Group LLC ± 43                                        200,000         83,333          283,333                    —                     —
Thorwid, Carl-Peter‡                                       25,000         12,500           37,500                    —                     —
Till, Martyn Gerald ‡                                      15,000          7,500           22,500                    —                     —
Timothy M. Ho lmes Trust § ‡ 44                            71,313         35,656          106,969                    —                     —
Todd, Stephen W. G. ‡                                      15,000          7,500           22,500                    —                     —
Totten, Ann S. §                                           25,531         12,766           38,297                    —                     —
Tricarich i, Anthony‡                                      25,000         12,500           37,500                    —                     —
Turner, Alan and Cindy‡                                     7,000          3,500           10,500                    —                     —
Tutino, Victor‡                                            25,000         12,500           37,500                    —                     —
Uelner, Scott M. ‡                                         10,000          5,000           15,000                    —                     —
Vander Broek, Dav id‡                                      25,000         12,500           37,500                    —                     —
Vandevelde, Jean‡                                          25,000         12,500           37,500                    —                     —
Vellon, William D. ‡ §                                     50,938         25,469           76,407                    —                     —
Wagner, L. Reginald § ‡                                    51,063         25,531           76,594                    —                     —
Wayness, Andrew W. ‡                                       25,000         12,500           37,500                    —                     —
Weisel, John T. ‡                                         200,000        100,000          300,000                    —                     —
Were, Hugo‡                                                30,000         15,000           45,000                    —                     —
Wheeler, Richard T. ‡                                      25,000         12,500           37,500                    —                     —
White Bertozzi Family Trust ‡ 45                           25,000         12,500           37,500                    —                     —
White, Jeffrey‡                                            25,000         12,500           37,500                    —                     —
Whitehurst, Steven L. ‡                                    25,000         12,500           37,500                    —                     —
Whittaker, James R. Jr. ‡                                  20,000         10,000           30,000                    —                     —
Wiggins, Robert‡                                           10,000          5,000           15,000                    —                     —
Wilkinson, Dr. Charles‡                                    10,000          5,000           15,000                    —                     —
Winter, Antonia §                                          30,638         15,319           45,957                    —                     —
Wittkemper, Gerd ‡                                        200,000        100,000          300,000                    —                     —
Wolf, Douglas R. ‡ 46                                      10,000          5,000           15,000                    —                     —
Wolmark, Diana ‡                                           50,000         25,000           75,000                    —                     —
Zimmerman, Michael‡                                        20,000         10,000           30,000                    —                     —

* Less than 1%

† The selling stockholder is an affiliate of a bro ker-dealer.

‡    Acquired the shares of common stock being registered and the warrants, the shares of common stock underlying which are being
     registered, in a private placement offering between December 2007 through March 2008. Concurrently with the closing of the me rger in
     December 2007, and in contemp lation of the merger, we consummated a private offering of 6,160,000 units of our securit ies, at a price of
     $1.00 per unit. Each unit consists of one share of our common stock and a warrant to purchase one -half, or 50%, of a share of o ur common
     stock. The investors collectively purchased the units for total cash consideration of $6,160,000. In January 2008 we sold 863 ,000
     additional units, in February 2008 we sold 1,927,000 addit ional units and in March 2008 we sold 1,991,000 additional units, all at a price
     of $1.00 per unit. The investors collectively purchased these units for aggregate cash consideration of $4,781,000. The units were sold to
     accredited investors, as defined under Regulation D under the Securities Act, and non-U.S. persons, as defined under Regulation S under
     the Securities Act and otherwise in accordance with the provisions of Regulation D and/or Regulation S.

§    Acquired the share of co mmon stock being registered and the warrants, the shares of common stoc k underlying wh ich are being registered,
     pursuant to a conversion of convertible notes upon the closing of the merger in December 2007; the convertible notes were pur chased in a
     private placement offering in September and October 2007. We sold $2,000,000 p rincipal amount of convertible p ro missory notes for total
     cash consideration of $2,000,000. A ll of the gross proceeds from the note offering were used to provide a bridge loan to Know Fat to meet
    KnowFat’s capital needs prior to the closing of the merger and the private placement. The convertible notes bore interest at the rate of 9%
    per annum and were for a term of 180 days, and automatically converted into 4,080,175 shares of our common stock and warrants to
    purchase 2,040,088 shares of our co mmon stock upon the closing of the merger. The convertible notes were sold to accredit ed investors
    as defined under Regulation D and non-U.S. persons as defined under Regulation S, and otherwise in accordance with the provisions of
    Regulation D and/or Regulation S.

±   Acquired the shares of common stock in consideration for services pursuant to a consulting or other services agreement with t he
    Co mpany. In May 2008, we co mmenced a corporate awareness campaign in the investment commun ity. The campaign encompasses
    investor relations and public relations services, including traditional med ia outlets like television, radio, and print, and the i nternet. The
    corporate awareness campaign enco mpasses the following activ ities: (i) written articles and television coverage of the Company via
    traditional media outlets; (ii) arranging meet ings with investment professionals and prospective investors in various cities in the United
    States; (iii) introductions to potential financing sources; (iv) preparation, printing and distribution of profile reports about the Co mpany to
    various proprietary databases; and (v) distribution of press releases, news releases and research on the Co mpany and its act ivities. The
    campaign aims to build awareness for our brand with shareholders, franchisees a nd customers. In connection with this campaign, we
    entered into service agreements with a number of investor relations and public relations firms, in connection with which we i ssued to the
    service providers an aggregate of 740,000 shares of our common stock and warrants to purchase an aggregate of 2,916,666 shares of our
    common stock in partial payment for their services. No dollar value was assigned to these services in the agreements. The tra nsactions
    described above were exempt fro m registration under Section 4(2) o f the Securities Act.

(a) Assumes that all of the shares of co mmon stock beneficially owned by each selling stockholder being o ffered pursuant to this prospectus,
    including all shares of common stock underlying warrants, are sold in the offering, and that shares of common stock beneficially owned by
    such selling stockholder but not being registered by this prospectus are not sold.

                                                                        24
1
     Christopher P. Baker has the power to vote and dispose of the shares being registered on behalf of Anasazi Partners II, LLC.
2
     E. Isaac Co llie has the power to vote and dispose of the shares being registered on behalf of Arcade Investments LTD.
3
     Arie Leibovitz has the power to vote and dispose of the shares being registered on behalf of Arie Leibovitz Trust Agreement.
4
     Arthur P. Remley, successor, has the power to vote and dispose of the shares being registered on behalf of Arthur P Remley Revocable
     Trust.
5
     Greg Anton has the power to vote and dispose of the shares being registered on behalf of Aviatech.
6
     Gil Beth has the power to vote and dispose of the shares being registered on behalf of Beth -Pearlson Family Living Trust dtd 1/13/ 2004.
7
     Steven J. Bodnar has the power to vote and dispose of the shares being registered on behalf of Bodnar Cap ital Ma nagement, LLC.
8
     Ray mond J. Bonanno has the power to vote and dispose of the shares being registered on behalf of Bonanno Family Partnership L LP.
9
     Sandell Asset Management Corp. (―SAMC‖), is the investment manager of Castlerigg Master Investment Ltd. (―Master‖). Tho mas
     Sandell is the controlling person of SAMC and may be deemed to share beneficial ownership of the shares beneficially o wned by Master.
     Casterigg International Ltd. (―Casterigg International‖) is the controlling shareholder of Casterigg International Ho ldin gs Limited
     (―Hold ings‖). Ho ldings is the controlling shareholder of Master. Each of Ho ldings and Casterigg International may be deemed to share
     beneficial ownership of the shares beneficially owned by Casterigg Master Investements.
10
     Christopher P. Baker has the power to vote and dispose of the shares being registered on behalf of Cimarolo Partners, LLC.
11
     Larry Rothstein has the power to vote and dispose of the shares being registered on behalf of Courtland Investments, Inc.
12
     David Holfoth has the power to vote and dispose of the shares being registered on behalf of D&H Pinnacle Partners LLC.
13
     Daniel B. Stern has the power to vote and dispose of the shares being registered on behalf of Daniel B. Stern Revocable Trust . Mr. Dan iel
     B. Stern is married to Mrs. Robin Stern, and each may be deemed to beneficially own shares held by each other.

                                                                       25
14
     Avi Balsam and Nathan Abramson have the power to vote and dispose of the shares being registered on behalf of Desig n Hardware
     Co mpany.
15
     This number consists of 148,000 shares and 74,000 warrants to purchase shares that are registered of behalf of RBC Dain Rauscher Cust
     FBO Gregory Felder IRA. Gregory Felder has the power to vote and dispose of the shares being registered on behalf of RBC D ain
     Rauscher Cust FBO Gregory Felder IRA. M r. Gregory Felder is married to Mrs. Kim Felder, and each may be deemed to beneficially own
     shares held by each other.
16
     Paul E. Michelin and Louisa P. Michelin have the power to vote and dispose of the sha res being registered on behalf of FM C Group, Inc.
17
     Henry Smith has the power to vote and dispose of the shares being registered on behalf of Henry S. Smith Revocable Trust U/A 3/26/05.
18
     Adam Cabib i has the power to vote and dispose of the shares being registered on behalf of Icon Capital Partners, LP.
19
     Timothy C. Dreyer has the power to vote and dispose of the shares being registered on behalf of IRA Timothy C Dreyer Pershing LLC as
     Custodian Rollover Account.
20
     Lawrence D. Isen may also be deemed to beneficially own shares being registered on behalf of Market Byte LLC and TGR Group LLC.
21
     George R. Jarkesy, Jr. has the power to vote and dispose of the shares being registered on behalf of John Thomas Brid ge and Opportunity
     Fund, LP.
22
     Danny Dawidowski and Tho mas Remley of Capital North Ltd., the holder’s Registered Investment Advisor, has the power to vote and
     dispose of the shares being registered on behalf of Scattergood Revocable Trust dtd 3/21/1997.
23
     Laurence E. White has the power to vote and dispose of the shares being registered on behalf of Laurence E. White Revocable Trust.
24
     Alvin Go ldberg has the power to vote and dispose of the shares being registered on behalf of Lee B. Stern Delta Trust U/A/D 1 1/28/95.
25
     Lawrence D. Isen has the power to vote and dispose of the shares b eing registered on behalf of Market Byte LLC. MarketByte LLC acts as
     a consultant to the Co mpany. Lawrence D. Isen may also be deemed to beneficially own shares being registered on behalf of Law rence D.
     Isen and TGR Group LLC.
26
     Ray mond C. Medeiros has the power to vote and dispose of the shares being registered on behalf of Medfam Ho ldings Ltd.

                                                                       26
27
     Snezana Radovanovic- Estevez has the power to vote and dispose of the shares being registered on behalf of Neptune Media, LLC.
28
     Stephen Schaeffer has the power to vote and dispose of the shares being registered on behalf of New Century Cap ital Consultants, Inc.
29
     Lucien I. Levy, the US Rep resentative, has the power to vote and dispose of the shares being registered on behalf of O.T. Finan ce, S A.
30
     Ira Gaines has the power to vote and dispose of the shares being registered on behalf of Paradise Wire & Cab le Defined Ben efit Pension
     Plan.
31
     David Rubis has the power to vote and dispose of the shares being registered on behalf of Po matto Investme nts Family Limited
     Partnership.
32
     Kim Felder has the power to vote and dispose of the shares being registered on behalf o f RBC Dain Rauscher Cust FBO Kim Felde r Roth
     IRA. Mrs. Kim Felder is married to Gregory Felder and each may be deemed to benefic ially own shares held by each other.
33
     Lee Munder the power to vote and dispose of the shares being registered on behalf of Rednu m Investments LP
34
     Michael Esposito, President and Donna Maldorado, Secretary has the power to vote and dispose of the shares being registered o n behalf of
     Refurbco Inc.
35
     Robin L. Stern has the power to vote and dispose of the shares being registered on behalf of Rob in L. Stern Revocable Trust. Mrs. Robin
     L. Stern is married to Mr. Daniel B. Stern, and each may be deemed to beneficially own shares held by each other.
36
     Warren Schreiber, Trustee has the power to vote and dispose of the shares being registered on behalf of Robyn Schreiber Irrevocable
     Trust.
37
     Jeffrey Ross is a director of the Co mpany. Includes 122,646 shares of common stock beneficially owned by Mr. Ross. Also inclu des
     50,434 shares of common stock issuable upon exercise of options or warrants currently exercisable or exercisable within 60 da y s. Does
     not include an additional 77,731 shares of common stock issuable upon exercise of options granted to Mr. Ross pursuant to the
     Co mpany’s Non-Emp loyee Director Co mpensation Plan which will not be exercisable within 60 days. See ―Directors, Executiv e Officers,
     Pro moters and Control Persons ‖ and ―Security Ownership of Certain Beneficial Owners and Management.‖
38
     Rotchford L. Barker has the power to vote and dispose of the shares being registered on behalf of Rotchford L. Barker Revocab le Living
     Trust.
39
     Vernon C. Su micht has the power to vote and dispose of the shares being registered on behalf of SA Alternative Opportunity Fu nd LLC
     Series E.
40
     James V. Pizzo has the power to vote and dispose of the shares being registered on behalf of Sensus LLC.
41
     John Solleder has the power to vote and dispose of the shares being registered on behalf of Solledar Family Limited Partnersh ip.

                                                                        27
42
     Adrian James, President and CEO, has the power to vote and dispose of the shares being registered on behalf of Stockwire Rese arch
     Group, Inc.
43
     Arthur Kang has the power to vote and dispose of the shares being registered on behalf of TGR Group LLC. TGR Group LLC acts a s a
     consultant to the Company. Lawrence D. Isen may also be deemed to beneficially own these shares in addition to shares being r egistered
     on behalf of Lawrence D. Isen and Market Byte LLC.
44
     Timothy Michael Holmes has the power to vote and dispose of the shares being registered on behalf of Timothy M. Ho lmes Trust.
45
     Fredrick Austin White, Trustee has the power to vote and dispose of the shares being registered on behalf of White Bertozzi F amily Trust.
46
     Douglas R. Wolf serves as outside intellectual property counsel for the Co mpany.

                                                              US E OF PROCEEDS

We will not receive proceeds fro m the sale of co mmon stock under this prospectus. We could, however, receive proceeds fro m the selling
stockholders if and when they exercise warrants the common stock underlying wh ich is covered by th is prospectus. The 5,470,500 shares
underlying warrants sold in the private placement completed on March 31, 2008 and the 1,989,035 shares underlying warrants issued upon
conversion of convertible notes upon the closing of the merger may be exercised in wh ole or in part by cashless exercise any time after dates
ranging between December 18, 2008 through March 2009 if a registration statement covering the resale of the shares is not ava ilable. If the
maximu m amount of cashless exercises were to occur, we would receive proceeds of $3,645,832 fro m those selling stockholders whose
warrants do not have a cashless exercise feature if and when they exercise their warrants. If all warrants are exercised by c ash payment we
would receive proceeds of $12,970,251. We would use any proceeds received for working capital and general corporate purposes. The warrant
holders may exercise their warrants at any time until their exp iration, by cash payment of the exercise price or by ―cashless exercise,‖ as further
described below under ―Description o f Securit ies.‖ Because the warrant holders may exercise the warrants in their o wn d iscretion, if at all, we
cannot plan on specific uses of proceeds beyond application of proceeds to general corporate purposes. We have agreed to bear the expenses
(other than any underwrit ing discounts or commissions or agent’s commissions) in connection with the registration of the co mmon stock being
offered hereby by the selling stockholders.

                                                                        28
                                               DETER MINATION OF OFFERING PRICE

There currently is a limited public market for our co mmon stock. The selling stockholders will determine at what price they may sell the
offered shares, and such sales may be made at prevailing market prices or at privately negotiated prices. See ―Plan of Distrib ution‖ below for
more in formation.

                           MARKET FOR COMMON EQUIT Y AND RELATED S TOCKHOLDER MATTERS

Market Informati on and Hol ders

Our co mmon stock is quoted on the OTC Bu llet in Board under the symbol ―UFFC.OB.‖ As of November 17, 2008, there were 34,818,490
shares of our co mmon stock issued and outstanding and 18,516,089 shares issuable upon exercise of outstanding stock options and warrants.
On that date, there were appro ximately 400 holders of record of shares of our common stock.

Prior to the merger on December 18, 2007, there was a limited sales history for our common stock, because it had never been a ctively traded.
As of November 17 , 2008, the last reported sale price of our shares on the OTC Bu lletin Board was $0.36. Fo r the periods indicated , the
following table sets forth the range of high and low bid quotations for our common stock, as reported by Nasdaq in the Info Q uotes section of
its web site located at www.nasdaq.com . The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and
may not represent actual transactions.

                                          Quarter Ended                                           High                 Low

              December 30, 2007                                                             $            1.87    $            0.52
              March 30, 2008                                                                $            1.52    $            0.95
              June 29, 2008                                                                 $            2.10    $            1.15
              September 28, 2008                                                            $            1.65    $           0.625
              December 28, 2008 (through November 17, 2008)                                 $            0.67    $            0.23

Di vi dends

We have never declared or paid dividends on our equity securities. We do not intend to pay cash dividends on our common stock for the
foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The payment of
dividends, if any, on the common stock will rest solely within the discretion of our Board of Directors and will depend, amon g other things,
upon our earnings, capital requirements, financial condition, and other relevant factors. We are a holding co mpany with no material assets and
therefore are dependent on our operating subsidiaries to make distributions to us in order to have cash with wh ich to pay div idends. We
currently expect that the earnings and cash flow of our subsidiaries will pr imarily be retained and used by them in their operations, including
servicing any debt obligations they may have now or in the future. Under the terms of a cred it agreement dated as of May 27, 2005 between our
wholly-o wned subsidiary, KFLG Watertown, Inc. (KFLG) and TD Banknorth, N.A. (as amended, the Credit Agreement), KFLG is prohib ited,
without the prior written consent of TD Banknorth, fro m declaring, making or paying any distribution of any kind or dividend (other than
dividends payable solely in co mmon stock), except that any of KFLG’s subsidiaries may make a d istribution to KFLG. See ―Risk
Factors— We are a holding co mpany that depends on cash flow fro m our subsidiaries to meet our ob ligations and pay dividends; our
subsidiary is restricted fro m making d istributions to us‖ above and ―Management’s Discussion and Analysis of Financial Condit ion and
Results of Operations—Liquid ity, Funding and Cap ital Resources —Credit Agreement with TD Banknorth, N.A.‖ and Note 8, Long-Term Debt
, to our 2007 Consolidated Financial Statements below.

                                                                      29
Securities Authorized for Issuance under Equi ty Compensati on Pl ans

The Co mpany has two share-based, shareholder-approved equity compensation plans, the 2004 Stock Option Plan (2004 Plan) and the 2007
Equity Incentive Plan (2007 Plan). Descriptions of these plans, and certain information regarding options issued thereunder , are presented in
Note 4, Stock -Based Compensation , of Notes to Consolidated Financial Statements for the three months and nine months ended September 28,
2008, and September 30, 2007, below.

As of the end of fiscal year 2007, we had the following securities authorized for issuance under our equity compensation plans:

                                                                                                                  Number of securities
                                                                                                                 remaining available for
                                                                                                                  future issuance under
                                        Number of securities to                   Weighted-average                 equity compensation
                                        be issued upon exercise                    exercise price of                 pl ans (excluding
                                       of outstanding options,                   outstandi ng opti ons,           securities reflected in
         Plan Category                  warrants and rights                      warrants and rights                     column (a))
                                                   (a)                                    (b)                                (c)
Equity co mpensation plans
approved by security holders                               2,254,702         $                        0.95                          1,050,000

Equity co mpensation plans not
approved by security holders                                  87,090 (1)     $                        0.66                                   0

Total                                                      2,341,792         $                        0.94                          1,050,000

The options to purchase 87,090 shares shown in the table were not granted pursuant to a compensation plan, but instead repres ent non-qualified
stock options granted to our chief operating officer, Charles A. Cocotas by our Board of Directors on December 6, 2007. The stock options
granted to Mr. Cocotas are fully vested and expire ten years fro m the date of grant. On February 12, 2008, our Board of Direc tors approved an
increase in the number of shares of common stock reserved for issuance under the 2007 Pla n to 6,000,000 shares. The increase was approved
by shareholders at a meeting of shareholders on August 29, 2008.

                                         MANAGEMENT’S DISCUSS ION AND ANALYS IS
                                   OF FINANCIAL CONDITION AND RES ULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our Consolidated
Financial Statements and related notes included elsewhere in this prospectus. This discussion contains forward -looking statements that involve
risks, uncertainties and assumptions. See ―Note Regard ing Forward-Loo king Statements.‖ Our actual results could differ materially fro m those
anticipated in the forward-looking statements as a result of certain factors discussed in ―Risk Factors‖ and elsewhere in this pro spectus.

Overview

We were incorporated in the State of Nevada on February 8, 2006, as Axxent Media Corporation. Prior to December 18, 2007, we were a
development stage company as defined by Statement of Financial Ac counting Standards (SFAS) No. 7, Accounting and Reporting by
Development Stage Enterprises. As Axxent Media Co rporation, our business was to obtain reproduction and distribution rights to foreign films
within North America and also to obtain the foreign rights to North American films for reproduction and distribution to foreign
countries. Follo wing the merger described below, we abandoned our plans to obtain reproduction and distribution rights to films, On Augu st
8, 2007, we changed our name to UFood Franchise Co mpany, and on September 25, 2007, we changed our name to UFood Restaurant Group,
Inc.

On December 18, 2007, a wholly-owned subsidiary of ours merged with and into KnowFat Franchise Co mpany, Inc., with Kn owFat surviving
the merger as our wholly-owned subsidiary. Following the merger, we continued KnowFat’s business operations as a franchisor and operator of
fast-casual food service restaurants intended to capitalize on what we believe are consumer demands for appetizing food with healt hy attributes.
KnowFat was founded in 2004 to capitalize on the popularity of a chain of fast -casual concept restaurants operating under the trade name ―Lo
Fat Know Fat‖ in the greater Boston area, as well as the trend we believe is developing in the United States towards healthier living and eating.
After operating for three years as KnowFat! Lifestyle Grille, while continuously modify ing and imp roving the concept, management arrived at
the conclusion that the KnowFat! name sent the wrong marketing message and alienated some people within the mainstream cu stomer set. As a
result, we have decided that future locations will operate under the name UFood Grill. To date, we have opened four new orig i nal UFood Grills
and have converted four KnowFat! stores into UFood Grills. The UFood Grill locations operate with a streamlined menu co mpared with the
menus at the original KnowFat! locations. Management believes that the new brand will embrace the mainstream customer better and help
extend the concept into a nation-wide chain.
30
Our operations currently consist of eight restaurants in the Boston area, Naples, FL, Chicago, IL and Sacramento, CA, compris ing four
Co mpany-owned restaurants and four franchise-owned locations . We currently operate one of the franchise-owned locations pursuant to a
management services agreement. We have entered into a total of six area develop ment agreements covering 68 franchise units in nine states
(Californ ia, Co lorado, Florida, Illinois, Idaho, Montana, Texas, Utah and Wyoming), including three of the four franchise lo cations currently
open and operating, and requiring the construction by franchisees of 65 future UFood Grill outlets. In addition, we have ente red into one
individual franchise agreement in Massachusetts, which is currently open and op erating.

The follo wing table shows, for each area development agreement and single -unit franchise agreement, as well as for Co mpany-owned stores,
the numbers of units that are covered by the agreement (if applicable), currently operating, under construct ion and in lease negotiations.

                                                                                                      Restaurants              Restaurants
                                                      Units Covered            Restaurants              Under                   In Lease
                   Location                           by Agreement              Operating             Construction             Negotiations
Area Develop ment Agreements
  Chicago, Illinois                                                    5                     1                       2                        —
  Five State Region (MT, ID, W Y, UT, CO)                             38                     —                       1                        2
  Naples, FL                                                           5                     1                       —                        —
  Sacramento, CA                                                      10                     1                       1                        —
  San Jose, CA                                                         7                     —                       1                        —
  Texas airports                                                       3                     —                       1                        —
                                                                      68                      3                       6                        2
Single Unit Franchise Agreements
  Bedford, Massachusetts                                                1                     1                      —                        —

Co mpany-owned Restaurants
  Boston, Massachusetts                                               n/a                     4                      —                        —

Total                                                                 69                      8                       6                        2


We view ourselves primarily as a franchisor and continually review our restaurant ownership mix (that is our mix among compan y-owned,
franchised and joint venture) in an endeavor to deliver a p leasant customer experience and drive pro fitability. In most cases, franchising is the
best way to achieve both goals. In our company-owned stores, and in collaboration with our franchisees, we further develop and refine
operating standards, market ing concepts and product and pricing strategies, so that we introduc e system-wide only those that we believe are
most beneficial.

We include in this discussion information on company, franchisee, and/or system-wide co mparable sales. System-wide sales are a non-GAAP
financial measure that includes sales at all co mpany-owned and franchise-operated stores, as reported by franchisees. Management uses
system-wide sales information internally in connection with store development decisions, planning and budgeting analysis. Management
believes it is useful in assessing customer acceptance of our brand and facilitating an understanding of financial performance as our franchisees
pay royalties and contribute to marketing funds based on a percentage of their sales.

We derive revenues from three sources: (i) store sales which include sales of hot and cold prepared food in a fast casual din ing environ ment as
well as sales of health and nutrition related products; (ii) franchise royalties and fees represent amounts earn ed under franchise and area
development agreements; and (iii) other revenues derived primarily fro m the sale of marketing materials to franchisees. Store operating
expenses include the cost of goods, food and paper products sold in co mpany -owned stores as well as labor and other operatin g costs incurred
to operate company-owned stores. General and ad ministrative expenses, advertising, marketing and pro motion expenses and depreciation
expense relate to all three revenue sources.

Growth Strategy

We plan to gro w primarily through the sale of franchises and supplement the opening of franchisee -owned locations with Co mpany-owned
restaurants. Today, four out of eight, or 50%, of UFood locations are Co mpany -owned locations. Over the long term we expect
Co mpany-owned locations will be concentrated in New England and to account for approximately 10% of system-wide store locations.
Franchises are sold pursuant to the terms of an area develop ment agreement to qualified indiv iduals or entities called area d evelopers.

We are targeting the follo wing groups in our efforts to sell franchises:

        Experienced restaurant operators
        Food service and facilities management companies
        Hospitals
        Airports
        Colleges and universities

An area development agreement grants the area developer the right to acquire franchises to develop, own and operate a specifi ed nu mber of
UFood outlets at locations approved by us within a defined geographic area. Area development agreements include a deve lopment schedule
that lists the total number o f outlets the area developer must develop, the area(s) in which they must be developed and the r equired opening
date for each outlet. In general, the area developer is required to pay a fee equal to $35,000 for each restaurant covered by the area development
agreement.

The development schedule and the payment schedule are negotiated by the parties and vary from one transaction to the next . Generally, a
portion of the fee is payable by the area developer at the time the agreement is signed, in some cases portions are payable o n agreed milestone
dates, and the balance of the $35,000 per restaurant is payable when the restaurant opens. The fees are not refundable under any circu mstances
and are not subject to offset, even (in the case of the fees payable prio r to a restaurant opening) if the area developer doe s not develop any
restaurants.We may also enter into individual franchise agreement s not covered by an area develop ment agreement, which typically also
require a fee of $35,000 per restaurant, payable at the time the agreement is signed.

In addition to the above fees, area developers and single franchisees are required to pay royalties of 5.0% of gross sales and contribute 1.5% o f
gross sales to a system-wide advertising fund. The area developer or franchisee is also required to spend 1.5% of gross sales on local
market ing. Each franchise agreement generally provides for a term of 15 years and gives the franchisee two, five-year renewal options.

Individual franchisees and area developers are required to pay for store construction costs, preopening costs and the costs o f operating the store.
We estimate it costs between $560,000 and $760, 000 for a franchisee to open one of our outlets. Typically, franchisees are required to open
their first outlet within nine months after they sign their franchise or area develop ment agreement.

If a franchisee or area developer fails to develop stores on schedule, we have the right to terminate the agreement, retain up -fro nt franchise fees
and develop company-owned locations or develop locations through new area developers in that market. We may exercise one or more
alternative remed ies to address defaults by area developers and franchisees of the terms of their franchise agreements including the failure to
open locations on time and non-comp liance with our operating and brand requirements and other covenants under the franchise agreement.

Of the six area development agreements described above, three were entered into during 2008. The three area develop ment agreements we have
entered into this year cover 46 UFood Grill outlets (45 future and one operating), co mprising five UFood Grill units in the C h icago
metropolitan area (including one unit that opened in July 2008), 38 UFood Grill units in a five-state area composed of Colorado, Utah,
Montana, Idaho and Wyoming and three units at airports in Texas. The three area development agreements we entered into pri or to 2008 cover
22 UFood Grill outlets including two UFood Grill outlets currently open and operating and 20 UFood Grill outlets to be constr ucted in the
future in Naples, FL, Sacramento, CA, and San Jose, CA.

Of the 65 franchise locations to be constructed under existing area development agreements, three locations are expected to open before
December 31, 2008, thirteen locations are expected to open in 2009, five locations in 2010, 13 locations in 2011 and 31 locat ions thereafter.
The rate at which current and future area developers and franchisees open locations will depend upon several factors, including the
identification of suitable store sites, the negotiation of long -term leases, the permitting process, the construction of the stores, the ability t o
attract, train and retain emp loyees and the ability to secure financing on acceptable terms.

For the six area development agreements and the one single-franchising agreement that the Co mpany has entered into, the non -refundable fees
paid totaled $647,500. The balance of fees to be received if all restaurants are opened (excluding the $175,000 referred to below) is $1,575,000.
With respect to the three area development agreements entered into prior to 2008, each of the area developers has failed to meet h is agreed
opening schedule for an aggregate of eight restaurants. However, construction has begun on two of these eight restaurants. Ma nagement
believes these and all the other restaurants covered by these agreements will u ltimately be co mpleted. Two of th ese three area developers have
also failed to pay a milestone fee each was required to make under the terms of his area development agreement following the opening of his
first several restaurants. The Company has not accrued these payments, which aggregat e $175,000. Management believes these amounts are not
material, but also believes these amounts and the remainder of the development fees due under these and the other area develo pment
agreements will u ltimately be collected.

In October 2008, we terminated the franchise agreement covering a KnowFat! Lifestyle Grill in Waltham, Massachusetts, that we had been
operating pursuant to a management services agreement because the franchisee failed to pay royalties due under the franchise agreement and
the restaurant was unprofitable. The management services agreement was also terminated and the store has been closed. In May 2008, we
terminated a 2005 franchise agreement with our franchisee operator in Dade and Broward Counties, Florida, covering 24 franchi se locations,
because the franchisee did not meet the opening timeline specified in the agreement, and we have reclaimed the franchise terr itory. We have
previously terminated four other agreements covering two operating and 16 unopened locations for similar reaso ns.We intend to supplement
the opening of franchisee-owned locations with additional Co mpany-owned locations. While we have not set a specific target or timetable for
Co mpany-owned stores, we expect Co mpany-owned locations will be concentrated in the New England area and could represent approximately
10% of total system-wide locations over the longer term. The rate at wh ich we open Co mpany -owned locations will depend on the same factors
that impact the development and opening of franchisee-owned locations as well as the financial resources available to us. In order to open
additional Co mpany-owned stores beyond the four we currently operate, we will first need to secure additional capital to fund our business plan
through the sale of debt securities or equity securities or both. See ―Risk Factors—It is highly likely that we will need to raise additional capital
to meet our business requirements in the future, and such capital raising may be costly or difficu lt to obtain and could dilu te current
stockholders’ ownership interests.‖ Assuming we can raise the capital necessary to fund our business plan, we plan to open eight
Co mpany-owned stores by September 30, 2010. We estimate it costs between $525,000 and $725,000 to open a Co mpany -owned outlet. The
rate at wh ich we open Co mpany-owned locations will depend upon several factors including our financial resources, the identification of
suitable store sites, the negotiation of long-term leases, the local regulatory permitting process, and our ability to attract, train and retain
emp loyees.

As discussed below, we have not had positive cash flow fro m our operating activit ies for the last several years. We will need to raise additional
capital in the next six months to fund our operating plan, including the construction of Co mpany-owned stores.

Outl ook

We believe the recent volatility in food and energy prices, increases in unemploy ment and home foreclosures and tightening cr edit conditions
have all contributed to a slowdown in consumer spending which has had and, we expect will continue to have, an adverse effect on our
business during the remainder of 2008 and 2009. While the impact varies with the location and the qualificat ions of the franc hisee, the tight
credit markets are generally making financing for construction and operation of restaurants more difficu lt to obtain on favorable terms. While
we believe these factors have had a negative impact on our business, we also believe we have benefited fro m an industry wide ―trade down‖
phenomenon, as consumers elect to save money by shifting fro m casual din ing to fast food due to the narrowing in the food quality gap
between casual and fast food over the past few years, lower average checks that appeal to consumers and shorter wait times in fast casual
restaurants compared with casual din ing establishments.

Critical Accounti ng Policies & Esti mates

The discussion and analysis of our financial condition and results of operations is based upon our Consolidated Financial Sta tements for the
years ended December 30, 2007, and December 31, 2006, and the three and nine months ended September 28, 2008 and September 30, 2007
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the
Consolidated Financial Statements requires us to make estimates, judg ments and assumptions, which we believe to be reasonable, based on the
informat ion available. These estimates and assumptions affect the reported amounts of assets, liab ilities, revenues and expen ses. Variances in
the estimates or assumptions used could yield materially different accounting results. On an ongoing basis, we evaluat e the c ontinued
appropriateness of our accounting policies and resulting estimates to make adjustments we consider appropriate under the facts and
circu mstances.

We have chosen accounting policies we believe are appropriate to report accurately and fairly our operating results and finan cial position, and
we apply those accounting policies in a consistent manner.

                                                                         31
Revenue Recognition

We follow the accounting guidance of SFAS No. 45, Accounting for Franchise Fee Income . Franchisee deposits represent advances on init ial
franchise fees prior to the opening of the franchisee location. We recognize in itial franchise fee revenue when all material services we are
required to perform and all material conditions we are required to satisfy have been substantially co mp leted, which is generally the opening of
the franchised location. We defer direct costs related to franchise sales until the related revenue is recognized; however, t he deferred costs shall
not exceed anticipated revenue less estimated additional related costs. Such costs include training, facilit ies design, menu planning and
market ing. Franchise royalty revenues are recognized in the same period the relevant franchisee sales occur.

We record revenue for co mpany-owned store sales upon delivery of the related food and other products to the customer.

Valuation of Goodwill

We account for goodwill and other intangible assets under SFAS No. 141, Business Combinations , and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations init iated after June 30,
2001, and that certain intangible assets acquired in a business comb ination be recognized as assets apart fro m goodwill. Unde r SFAS No. 142,
purchased goodwill and intangible assets with indefin ite lives are not amo rtized, but instead tested for impairment at least annually or whenever
events or changes in circu mstances indicate the carrying value may not be recoverable. At Septemb er 30, 2008, the carrying amount of
goodwill was $977,135 and was comprised of $841,135 of goodwill attributable to our store operations segment and $136,000 of goodwill
attributable to our franchise operations segment. Goodwill attributable to our franchise operations segment is evaluated by comparing the
Co mpany’s fair market value, determined based upon quoted market prices of the Co mpany ’s equity securities, to the carrying amount of
goodwill. Goodwill attributable to our store operations segment is eva luated on a restaurant —by -restaurant basis by comparing the present
value of the restaurant’s future cash flows to the carrying value of the underlying net assets inclusive of goodwill. Future cash flows are
estimated based upon a restaurant’s historical operating performance and management’s estimates of future revenues and expenses over the
period of time that the Company expects to operate the restaurant, which generally coincides with the initial term of the res taurant’s lease but
which may take into account the restaurant’s first lease renewal period up to 5 years. The estimate of a restaurant ’s future cash flows also
includes an estimate of the restaurant’s terminal value, wh ich is determined by applying a capitalization rate to the restaurant ’s estimated cash
flows during the last year of the forecast period. The capitalization rate used by the Company was determined based upon the restaurant’s
location, cash flows and growth prospects. The present value of the restaurant ’s estimated future cash flows was calcu lated using a discount
rate of 8%. We estimate that a 1% decrease in total store revenues in full year 2008 would increase our net loss and reduce o ur cash flow by
approximately $20,000. The Co mpany performed its annual impairment tests as of th e first day of the fourth quarter of fiscal 2007 and 2006.
Based upon the results of the first step, the Company determined that no impairment had occurred, as the fair value of the re porting unit
exceeded the respective carrying value. The carrying amount of goodwill may be impaired in the future if our actual operating results and cash
flows fall short of our expectations.

Impairment of Long-Lived Assets

In accordance with SFA S No. 144, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of, when
impairment indicators exist, the Co mpany evaluates its long -lived assets for potential impairment. Potential impairment is assessed when there
is evidence that events or changes in circu mstances have occurred that indicate the carrying amount of an asset may not be recovered. When
events or changes in circu mstances have occurred that indicate a long -lived asset may be impaired, the Co mpany uses estimates of futu re cash
flows on a restaurant-by- restaurant basis to test the recoverability of its long-lived assets. Future cash flows are estimated based upon the
restaurant’s historical operating performance and management’s project ions of future revenues and expenses. The estimate of future cash flows
also takes into account the restaurant’s estimated terminal value. Long-lived assets may be impaired in the future if our actual operating results
and cash flows fall short of our expectations.

Rent Expense

We recognize rent expense on a straight-line basis over the reasonably assured lease term as defined in SFAS No. 98, Accounting for Leases .
The reasonably assured lease term on most of our leases is the initial non -cancelable lease term, wh ich generally equates to between five and
ten years. In addition, certain of our lease agreements provide for scheduled rent increases during the lease terms or for re ntal pay ments that
commence on a date other than the date of in itial occupancy. We include any rent escalations a nd rent holidays in its determination of
straight-line rent expense. Consequently, rent expense for new locations is charged to expense beginning with the consummation date of the
lease.

Stock -Based Compensation
We have adopted the provisions of SFAS No. 123R, Share-based Payment , which establishes accounting for equity instrumen ts exchanged for
emp loyee services. Under the provisions of SFAS 123R, shared -based compensation is measured at the grant date, based upon the fair value o f
the award, and is recognized as an expense over the emp loyee’s requisite service period (generally the vesting period of the equity grant).

We use the prospective approach as required by SFAS No. 123R and accordingly, co mpensation costs for periods prior to adoptio n were not
restated. Under this approach, co mpensation cost is recognized for all share -based payments granted after the date of adoption based on the
grant date fair value, estimated in accordance with the provisions of SFAS No. 123R. Financial statement amounts fo r prior periods have not
been revised to reflect the fair value method of expensing share-based compensation. As a result of adopting SFAS No. 123R, our net loss for
the years ended December 30, 2007, and December 31, 2006, was higher by $249,292 and $23,464, respectively, than if we had continued to
account for stock-based compensation under the previous method and our net loss for the nine month periods ended September 28, 2008 and
September 30, 2007 was higher by $2,038,032 and $315,000, respectively.

Recent Developments

In conjunction with the conversion of three of our Co mpany -owned stores fro m KnowFat! locations to UFood Grill outlets during the third
quarter of 2008, we converted the space formerly devoted to the sale of nutrit ional products in two of the stores to the sale of smoothie drin ks.
All o f our co mpany-owned restaurants and franchise-owned locations now operate, and all future locations will operate, under t he name UFood
Grill.

In August 2008, our area developer in Sacramento signed a lease for a UFood Grill location in the Westfield Galleria M all in Roseville,
California. The Westfield Mall unit is expected to open in the fourth quarter and will be our first location within a shoppin g mall and our
second location in Roseville.

In July 2008, our first location in the Chicago metropolitan area opened. This is the first of five locations expected to be developed and
operated by our Chicago-area franchisee. The franchisee has also signed a lease for a second UFood Grill location in Chicago th at is expected
to open in the fourth quarter of 2008.

Also in July 2008, our area developer in the five-state Rocky Mountain region signed a lease for a UFood Grill location in Drap er, Utah. The
developer expects to begin construction in September and open in the fourth quarter of 2008.

Subsequent to June 29, 2008, we determined that the area developer for Houston would not be able to construct or open the fiv e units specified
in his area develop ment agreement because the developer has not complied with t he agreed development schedule and, to our knowledge, has
taken no steps to identify potential store locations or otherwise develop his territory. While we have not formally terminate d this agreement, we
have not included those five units in any discussions in this prospectus.

In June 2008, we signed an agreement to open a UFood Grill in the Dallas -Fort Worth (DFW) International Airport with a area developer and
operator. The franchisee operates other restaurant concepts at DFW International A irport. The agreement also provides the franchisee the right
to open additional UFood Grill locations in other airports in Texas. The unit at DFW International A irport is expected to ope n in 2008 and will
be the second UFood Grill airport location after Logan International in Boston.

                                                                        32
In May 2008, we co mmenced a corporate awareness campaign in the investment community. The campaign encompasses investor relat ions and
public relations services, including tradit ional med ia outlets like television, radio, and print and the internet. The campaign aims to build
awareness for our brand with shareholders, franchisees and customers. In connection with this campaign, we enter ed into service agreements
with a nu mber of investor relations and public relat ions firms, under which we issued to the service providers an aggregate o f 740,000 shares of
our common stock and warrants to purchase an aggregate of 2,916,666 shares of our co mmon stock in partial pay ment for t heir services and
granted them ―piggyback‖ registration rights in connection with such shares. See ―Description of Capital Stock—Reg istration Rights‖ below.

Also in May 2008, we terminated a 2005 franchise agreement wit h our franchisee operator in Dade and Broward Counties in South Florida,
covering 24 unopened franchise locations because the franchisee did not meet the opening timeline specified in the agreement, and we have
reclaimed the franchise territory. We had anticipated our former South Florida franchisee would have had one or more locations open and
operating by May 2008 and would have been paying us royalties based upon sales generated by those locations. Additional such defaults by
franchisees could materially adversely affect our growth plans and our business, financial condition and operating results.

In April 2008, we paid $800,000 to ext inguish the note payable issued in connection with our acquisition of the business asse ts of one of our
franchisees and recorded a gain on extinguishment of debt of $68,575 . See Note 4, Acquisitions , to our 2007 Consolidated Financial
Statements below.

Also in April 2008, we settled a dispute with a former franchisee regarding potential claims against us and certain of ou r officers and directors
that sought damages in the approximate amount of $2,000,000.

                                                                        33
Three and Nine Months Ended September 28, 2008, Compared to Three and Ni ne Months Ended September 30, 2007

The follo wing table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain it ems included in our
consolidated statements of operations for the periods indicated. Percentages may not add due to rounding:

                                                                  Three Months Ended                           Nine Months Ended
                                                              Sept. 28,             Sept. 30,             Sept. 28,             Sept. 30,
                                                                2008                  2007                  2008                  2007
Revenues:
  Store sales                                                             93.7 %                90.8 %                94.9 %                92.6 %
  Franchise royalties and fees                                             6.3                   8.4                   5.0                   6.6
  Other revenue                                                             —                    0.8                   0.1                   0.8
                                                                      100.0 %                100.0 %              100.0 %                100.0 %

Costs and expenses:
Store operating expenses (1) :
  Food and paper costs                                                    35.0 %                34.0 %             34.3 %                   35.6 %
  Cost of nutritional products                                             8.7                  18.8               10.2                     20.0
  Labor                                                                   32.2                  29.7               30.7                     30.6
  Occupancy                                                               12.7                  11.1               12.0                      9.1
  Other store operating expenses                                          17.6                  14.4               17.5                     15.7
General and administrative expenses                                       94.2                  63.2              127.9                     61.2
Advertising, marketing and pro motion expenses                            11.6                   4.9               17.1                     12.1
Depreciat ion and amort ization                                            8.6                   8.7                8.2                      8.3
Loss on disposal of assets                                                  —                   16.2                0.1                     17.6
Total costs and expenses                                              209.9                  182.4                247.6                  192.2

Operating loss                                                       (109.9 )                (82.4 )             (147.6 )                (92.2 )

Other inco me (expense):
  Interest income                                                       1.3                       —                    1.6                   0.3
  Interest expense                                                     (1.1 )                   (7.6 )                (1.4 )                (6.7 )
  Other inco me (expense)                                             (12.5 )                     —                   (2.8 )                  —
Other inco me (expense), net                                          (12.4 )                   (7.6 )                (2.6 )                (6.4 )

 Loss before inco me taxes                                           (122.3 )                (90.0 )             (150.2 )                (98.6 )
Income taxes                                                             —                      —                    —                      —

                                                                                                   )                                           )
Net loss                                                             (122.3 )%               (90.0 %             (150.2 )%               (98.6 %


(1)    Food and paper costs are shown as a percentage of food sales. The cost of nutritional products, labor, occupancy and other st ore
       operating expenses are shown as a percentage of total store sales.

                                                                          34
The following table sets forth certain data relating to the number of Co mpany -owned, franchise-operated and system-wide store locations:

                                                         Three Months Ended                         Nine Months Ended
                                                     Sept. 28,               Sept. 30,          Sept. 28,            Sept. 30,
                                                       2008                    2007               2008                 2007
         Co mpany-owned locations:
         Locations at the beginning of the year                  4                        5                 4                     5
         Locations opened                                        —                       —                  —                    —
         Locations closed                                        —                       (1 )               —                    (1 )
         Locations sold                                          —                       (1 )               —                    (1 )
         Locations transferred                                   —                       —                  —                    —
         Locations at the end of the period                       4                       3                  4                    3


         Franchise-owned locations:
         Locations at the beginning of the year                   4                      4                   4                   4
         Locations opened                                         1                      1                   1                   1
         Locations closed                                        (1 )                    —                  (1 )                 —
         Locations sold                                          —                       —                  —                    —
         Locations transferred                                   —                       —                  —                    —
         Locations at the end of the period(1)                    4                       5                  4                    5


         System-wide locations
         Locations at the beginning of the year                   8                       9                  8                    9
         Locations opened                                         1                       1                  1                    1
         Locations closed                                        (1 )                    (1 )               (1 )                 (1 )
         Locations sold                                          —                       (1 )               —                    (1 )
         Locations transferred                                   —                       —                  —                    —
         Locations at the end of the period                       8                       8                  8                    8


   (1)       At September 28, 2008, we operated one franchise-owned location pursuant to the terms ofa management services agreement.

Three Months Ended September 28, 2008, Compared to Three Months Ended September 30, 2007

General

For the three months ended September 28, 2008, our co mparab le store sales for Co mpanyowned stores decreased by 9.4%. Two of o ur three
Co mpany-owned comparable stores were closed a total of five weeks during the quarter in connection with the conversion of the stores from
KnowFat! locations to UFood Grill outlets. System-wide co mparable store sales for the quarter decreased by 16.5%. One of the two
franchisee-owned comparab le store locations was closed for two weeks during the quarter in connection with the conversion of the store fr om a
KnowFat! location to a UFood Grill outlet. All of the co mparable store locations are located in the greater Boston area. As o f September 28,
2008, the two franchisee-owned comparab le store locations were operated by the Company pursuant to two separate management services
agreements. Following the end of the quarter, we terminated one of the management services agreements and clo sed the store related to the
agreement. Co mparable store sales are based on sales for stores that have been in operation for the entire period of co mparis on.
Franchisee-owned stores which we acquire are included in co mparab le store sales once they have bee n open for the entire period of
comparison. Co mparable store sales exclude closed locations..

                                                                        35
Results of Operations

Revenues

Our total revenues for the three months ended September 28, 2008 increased by $320,197, o r 26.1%, to $1,546,825 fro m $1,226,6 28 for the
three months ended September 30, 2007. The increase in total revenues for the three months ended September 28, 2008, as compared to the
prior year was primarily due to sales generated by a new Co mpany -owned restaurant that opened at Boston’s Logan International Airport in
December 2007 partially offset by a decrease in sales attributable to a Co mpany -owned restaurant in Shrewsbury, Massachusetts that was sold
in September 2007 and the decrease in comparab le store sales.

Total store sales at Company-owned stores for the three months ended September 28, 2008 increased by $335,923, or 30.2%, to $1,449, 086
fro m $1,113,163 for the three months ended September 30, 2007. As a percentage of total revenues, sales at Co mpany-owned stores increased
to 93.7% of total revenues for the three months ended September 28, 2008 fro m 90.8% of total revenues for the three months ended September
30, 2007. The increase in sales at Co mpany-owned stores for the three months ended September 28, 2008 was primarily due t o sales generated
by the Logan Airport location, partially offset by a decrease in sales due to the sale of a Co mpany-owned restaurant in Septemb er 2007.

During the three months ended September 28, 2008, franchise royalties and fees decreased by $4,908, or 4.8% to $97,739 from $ 102,647 for
the three months ended September 30, 2007 p rimarily due to a decrease in in itial franchise fees offset by an increase in royalties. The Co mpany
recognized $35,000 of revenue fro m init ial franchise fees during the three months ended September 28, 2008 co mpared with $70, 000 for the
three months ended September 30, 2007.

                                                                       36
As of September 28, 2008, our operations consisted of eight restaurants in the Boston area, Naples, FL, Chicago, IL and Sacra mento, CA,
comprising four Co mpany-owned restaurants and four franchise-owned locations. At September 28, 2008, we operated one of the
franchise-owned locations pursuant to a management services agreement. As of September 28, 2008, we had entered into a total of six are a
development agreements covering 68 franchise units in nine states (California, Co lorado, Florida, Illinois, Idaho, Montana, Texas, Utah and
Wyoming), including three of the four franchise locations that were open and operating, and requiring the construction by fra nchisees of 65
future UFood Grill outlets. In addition, we had entered in to one individual franchise agreement in Massachusetts, which was open and
operating at September 28, 2008. The six area development agreements covering 68 franchise units do not include an area devel opment
agreement covering five units in Houston, Texas. We have determined that the area developer for Houston would not be able to construct or
open the five units specified in his area develop ment agreement because the developer has not complied with the agreed develo pment schedule
and, to our knowledge, has taken no steps to identify potential store locations or otherwise develop his territory. During the three months ended
September 28, 2008, the franchise location in Waltham, Massachusetts closed and one franchise location opened in Ch icago. While we have
not formally terminated this agreement, we have not included those five units in any discussions in this prospectus.Our standard franchise and
area development agreements require franchisees and area developers to develop a specified number o f stores on or before specific dates. If a
franchisee or area developer fails to develop stores on schedule, we have the right to terminate the agreement, retain up -front franchise fees and
develop company-owned locations or develop locations through new area developers in that market. We may exercise one or more alternative
remedies to address defaults by area developers and franchisees of the terms o f their franchise agreements including the fail ure to open
locations on time and non-comp liance with our operating and brand requirements and other covenants under the franchise agreement.

Costs and Expenses

Food and paper costs for the three months ended September 28, 2008 increased by $172,338, or 63.2%, to $444,977 fro m $272,639 for the
three months ended September 30, 2007. The increase was primarily attributable to food and paper costs incurred at a new Co mpany-owned
restaurant that opened at Boston’s Logan International Airport in December 2007 and food and paper costs at two franchise -owned locations
that the Company began operating pursuant to two management services agreements in 2008. As a percentage of food sales, food and paper
costs increased to 35.0% of food sales for the three months ended September 28, 2008 fro m 34.0% of food sales for the three months ended
September 30, 2007. The increase in food and paper costs as a percentage of food sales wa s primarily attributable to the new Co mpany-owned
restaurant at Logan Airport which has a higher percentage of take-out orders and, consequently, higher paper costs compared with other
Co mpany-owned locations.

The cost of nutritional products for the three months ended September 28, 2008 decreased by $83,951, or 40.0%, to $125,753 fro m $209,704
for the three months ended September 30, 2007. As a percentage of store sales, the cost of nutritional products decreased to 8.7% of store sales
for the three months ended September 28, 2008 fro m 18.8% of store sales for the three months ended September 30, 2007. Th e decrease in the
cost of nutritional products as a percentage of store sales was primarily attributable to a change in our mix of restaurant ( i.e., food) sales and
retail sales (i.e., nutritional p roducts). Nutrit ional products represented a smaller proportion of our total store sales in during the three months
ended September 28, 2008 co mpared with the three months ended September 30, 2007. In conjunction with the conversion of three of our
Co mpany-owned stores from KnowFat! locations to UFood Grill outlets during the third quarter of 2008, we converted the space formerly
devoted to the sale of nutritional products in two of the stores to the sale of smoot hie drinks.

Store labor expense for the three months ended September 28, 2008 increased by $135,979, or 41.1%, to $466,772 fro m $330,793 for the three
months ended September 30, 2007. The increase in labor expense was primarily attributable to labor costs incurred at our newest restaurant that
opened at Logan International Airport in December 2007, labor costs at two franchise -owned locations that the Company began operating
pursuant to two management services agreements in 2008 and salary increases partia lly offset by efficiencies associated with the streamlined
UFood Grill menu at our Logan Airport location. As a percentage of store sales, labor expense increased to 32.2% of store sales for the three
months ended September 28, 2008 fro m 29.7% of store sales for the three months ended September 30, 2007.

Store occupancy costs for the three months ended September 28, 2008 increased by $60,397, or 49.0%, to $183,680 fro m $123,283 for the
three months ended September 30, 2007. The increase in occupancy costs was primarily attributable to occupancy costs at our Logan Airport
store that opened in December 2007 and occupancy costs of two franchise-owned locations that the Company began operating pursuant to two
management services agreements in 2008. As a percentage of store sales, occupancy costs increased to 12.7% o f store sales for the three
months ended September 28, 2008 fro m 11.1% of store sales for the three months ended September 30, 2007 p rimarily due to high er rent
expense at our Logan International Airport location compared with our other restaurant locations.

Other store operating expenses for the three months ended September 28, 2008 increased by $94,904, or 59.0%, to $255,684 from $160,780 fo r
the three months ended September 30, 2007. The increase was primarily due to higher ut ility costs and other store operating c osts at our Logan
Airport restaurant partially offset by savings due to improved cost control. As a perc entage of store sales, other store operating expenses
increased to 17.6% of store sales for the three months ended September 28, 2008 fro m 14.4% of store sales during the three mo nths ended
September 30, 2007.

General and ad ministrative expenses for the three months ended September 28, 2008 increased by $682,602, or 88.1%, to $1,457,673 fro m
$775,071 for the three months ended September 30, 2007. The increase in general and ad min istrative expenses was primarily due to investor
relations and public relations expenses incurred in connection with the corporate awareness campaign announced by the Company in May
2008, non-cash, stock-based compensation expense resulting fro m equity awards to emp loyees, costs of operating as a public co mpany and
higher legal costs. During the three months ended September 28, 2008, the Co mpany recognized $108,516 of non -cash, stock-based
compensation expense attributable to equity awards to employees. The Company did not recognize any stock-based compensation expense
resulting fro m equity awards to emp loyees during the three months ended September 30, 2007. As a result of the foregoing, general and
administrative expenses increased to 94.2% of total revenues during the three months ended September 28, 2008 fro m 63.2% of t otal revenues
for the three months ended September 30, 2007.

                                                                    37
Advertising, marketing and promot ion expenses for the three months ended September 28, 2008 increased by $118,820, or 197.1%, to
$179,096 fro m $60,276 fo r the three months ended September 30, 2007. The increase in advertising, marketing and pro motion exp enses was
primarily due to an increase in expenses related to the services agreement with Geo rge Foreman Ventures, LLC (GFV Services Ag reement)
that became effect ive June 12, 2007, and expenses incurred in connection with the conversion of franchise -owned and company-operated stores
operating under the KnowFat! trade name to stores operating under the UFood Grill trade name. Advertising, marketing and promotion
expenses for the three months ended September 28, 2008 and September 30, 2007 include $25,519 and $-0-, respectively, of non-cash,
stock-based compensation expense attributable to the GFV Serv ices Agreement. As a percentage of total revenues, advertising, market ing and
promotion expenses increased to 11.6% of total revenues in the three months ended Sep tember 28, 2008 fro m 4.9% of total revenues in the
three months ended September 30, 2007.

Depreciat ion and amortization expense for the three months ended September 28, 2008 increased by $26,802, or 25.2%, to $133,036 fro m
$106,234 for the three months ended September 30, 2007 primarily due to the depreciation of assets at our Logan Airport store. As a
percentage of total revenues, depreciation and amort ization expense decreased slightly to 8.6% of total revenues for the thre e months ended
September 28, 2008 fro m 8.7% of total revenues for the three months ended September 30, 2007.

Other expense for the three months ended September 28, 2008 increased by $97,963, or 105.0%, to $191,293 fro m $93,330 primari ly due to the
financial penalty resulting fro m the registration statement which has not been declared effective (see Note 3).

Our net loss for the three months ended September 28, 2008 increased by $786,851, or 71.3%, to $1,891,139, fro m $1,104,288 fo r the three
months ended September 30, 2007. Our net los s increased primarily due to the increase in general and ad ministrative expen ses, advertising,
market ing and promotion expenses and other expenses. As a percentage of total revenues, our net loss increased to 122.3% o f t otal revenues for
the three months ended September 28, 2008 fro m 90.0% of total revenues for the three months ended September 30, 2007.

                                                                       38
Nine Months Ended September 28, 2008 Compared to Nine Months Ended September 30, 200 7

General

For the nine months ended September 28, 2008, our co mparab le store sales for Co mpany owned stores decreased by 8.5%. Two of o ur three
Co mpany-owned comparab le stores were closed a total of five weeks during the nine months ended September 28, 2008 in conne ction with the
conversion of the stores from KnowFat! locations to UFood Grill outlets. System-wide co mparable store sales decreased by 13.0% during the
nine months ended September 28, 2008. One of the two franchisee-owned comparable store locations was closed for two weeks during the nine
months ended September 28, 2008 in connection with the conversion of the store fro m a KnowFat! location to a UFood Grill outlet. All of the
comparable store locations are located in the greater Boston area. As of Septembe r 28, 2008, the two franchisee-owned comparable store
locations were operated by the Co mpany pursuant to two separate management services agreements. Co mparable store sales are ba sed on sales
for stores that have been in operation for the entire period of co mparison. Franchisee-owned stores which we acquire are included in
comparable store sales once they have been open for the entire period of co mparison. Co mparable store sales exclude closed lo cations.

Results of Operations

    Revenues

Our total revenues for the nine months ended September 28, 2008 increased by $595,312, or 15.2%, to $4,507,762 fro m $3,912,450 for
the nine months ended September 30, 2007. The increase in total revenues was primarily due to sales generated by our Logan Airpor t restaurant
that opened in December 2007 partially offset by decreases in sales attributable to a Co mpany -owned restaurant in Woburn, Massachusetts that
closed in April 2007, and a Co mpany-owned restaurant in Shrewsbury, Massachusetts that was sold in September 2007 and a decrease in
comparable store sales.

Total store Sales at Co mpany-owned stores for the nine months ended September 28, 2008 increased by $655,347, o r 18.1%, to $4,278,008
fro m $3,622,661 for the nine months ended September 30, 2007. As a percentage of total revenues, sales at Company-owned stores increased
to 94.9% of total revenues for the nine months ended September 28, 2008 fro m 92.6% of total revenues for the nine months ende d September
30, 2007. The increase in sales at Co mpany-owned stores for the nine months ended September 28, 2008 was primarily due to sales generated
by our Logan Airport store, partially offset by a decrease in sales due to the closure of a Co mpany -owned restaurant in April 2007 and the sale
of a Co mpany-owned restaurant in September 2007.

During the nine months ended September 28, 2008, franchise royalties and fees decreased by $33,356, or 13.0% to $223,797 from $257,153 for
the nine months ended September 30, 2007 primarily due to a decrease in initial franchise fees. The Comp any recognized $35,000 of revenue
fro m in itial franchise fees during the n ine months ended September 28, 2008 co mpared with $70,000 fo r the nine months ended S eptember 30,
2007.

    Costs and Expenses

Food and paper costs for the nine months ended September 28, 2008 increased by $330,396, or 36.3%, to $1,241,074 fro m $910,678 for the
nine months ended September 30, 2007. The increase was primarily attributable to food and paper costs incurred at the Co mpany ’s newest
restaurant at Boston’s Logan International Airport that opened in December 2007. As a percentage of food sales, food and paper costs
decreased to 34.3% of food sales during the nine months ended September 28, 2008 fro m 35.6% of food sales during the nine mon ths ended
September 30, 2007. The decreas e in food and paper costs as a percentage of food sales was primarily attributable to lower meat prices and a
change in the sales mix of food items resulting fro m sales at our Logan Airport restaurant.

The cost of nutritional products for the nine months ended September 28, 2008 decreased by $288,639, or 39.9%, to $435,088 fro m $723,727
for the nine months ended September 30, 2007. As a percentage of store sales, the cost of nutritional products decreased to 10.2% of store sales
for the nine months ended September 28, 2008 fro m 20.0% of store sales for the nine months ended September 30, 2007. Th e decrease in the
cost of nutritional products as a percentage of store sales was primarily attributable to a change in our mix of restaurant ( i.e., food) sales and
retail sales (i.e., nutritional products). Nutrit ional products represented a smaller proportion of our total store sales dur ing the nine months
ended September 28, 2008 compared with the nine months ended September 30, 2007. In conjunction with the conve rsion of three of our
Co mpany-owned stores from KnowFat! locations to UFood Grill outlets during the third quarter of 2008, we converted the space formerly
devoted to the sale of nutritional products in two of the stores to the sale of smoothie drinks, and we currently do not expect the sale of
nutritional products to be significant to our business in the future.

Store labor expense for the nine months ended September 28, 2008 increased by $204,687, o r 18.5%, to $1,313,671 fro m $1,108,9 84 for the
nine months ended September 30, 2007. The increase in labor expense was primarily attributable to labor costs incurred at our newest
restaurant at Logan Airport. As a percentage of store sales, labor expense increased slightly to 30.7% of store sales for the nine months ended
September 28, 2008 fro m 30.6% o f store sales for the nine months ended September 30, 2007.
39
Store occupancy costs for the nine months ended September 28, 2008 increased by $185,491, or 56.6%, to $513,482 fro m $327,991 for the
nine months ended September 30, 2007. The increase in store occupancy costs was primarily attributable to occupancy costs at our Logan
Airport store that opened in December 2007 and occupancy costs of a franchise-owned location that the Co mpany began operating in February
2007 pursuant to a management services agreement. As a percentage of store sales, store occupancy costs increased to 12.0% of store sales for
the nine months ended September 28, 2008 fro m 9.1% of store sales for the nine months ended September 30, 2007 primarily d ue to higher rent
expense at our Logan Airport restaurant compared with our other restaurant locations.

Other store operating expenses for the nine months ended September 28, 2008 increased by $183,025, or 32.3%, to $750,530 fro m $567,505
for the n ine months ended September 30, 2007. The increase was primarily due to other store operating expenses at our Logan A irport
restaurant and higher utility costs. As a percentage of store sales, other store operating expenses increased to 17.5% of store sales for the nine
months ended September 28, 2008 fro m 15.7% of store sales for the nine months ended September 30, 2007, primari ly due to higher store sales
and higher utility costs.

General and ad min istrative expenses for the nine months ended September 28, 2008 increased by $3,369,556, or 140.6%, to $5,76 5,931 fro m
$2,396,375 for the nine months ended September 30, 2007. The increase in general and admin istrative expenses was primarily due to investor
relations and public relations expenses incurred in connection with the Co mpany ’s previously announced corporate awareness campaign,
non-cash, stock-based compensation expense resulting fro m equity awards to emp loyees, costs of operating as a public co mpany and legal and
other costs incurred in connection with the legal matters discussed in Note 6 of the Notes to Consolidated Financial Statemen ts included
elsewhere in this Report. During the nine months ended September 28, 2008, the Co mpany recognized $946,799 of stock-based compensation
expense attributable to equity awards to employees and $610,877 of stock-based compensation expense attributable to equity awards to
investor relations firms. The Co mpany did not recognize any stock-based compensation expense from equity awards to emp loyees during the
nine months ended September 30, 2007. As a result of the foregoing, general and administrative expenses increased to 127.9% o f total revenues
during the nine months ended September 28, 2008 fro m 61.2% of total revenues for the nine months ended September 30, 2007.

Advertising, marketing and pro motion expenses for the nine months ended September 28, 2008 increased by $297,641, or 63.1%, t o $769,667
fro m $472,026 for the nine months ended September 30, 2007. The increase in advertising, marketing and promotion expenses was primarily
due to an increase in expenses related to the services agreement with George Foreman Ventures, LLC (GFV Serv ic es Agreement) that became
effective June 12, 2007, and expenses incurred in connection with the conversion of franchise -owned and company-operated stores operating
under the KnowFat! tradename to stores operating under the UFood tradename. Advertising, market ing and promotion expenses for the nine
months ended September 28, 2008 and September 30, 2007 include $480,356 and $315,000, respectively, of non -cash, stock-based
compensation expense attributable to the GFV Services Agreement. As a percentage of tota l revenues, advertising, market ing and promotion
expenses increased to 17.1% of total revenues during the nine months ended September 28, 2008 fro m 12.1% of total revenues du ring the nine
months ended September 30, 2007.

Depreciat ion and amortizat ion expense for the nine months ended September 28, 2008 increased by $45,143, or 14.0%, to $368,016 fro m
$322,873 fo r the nine months ended September 30, 2007. As a percentage of total revenues, depreciation and amortization expen se decreased
to 8.2% of total revenues for the nine months ended September 28, 2008 fro m 8.3% of total revenues for the nine months ended September 30,
2007.

Other inco me and expense improved from $249,244 of other expense for the nine months ended September 30, 2007 to $118,089 of other
expense for the nine months ended September 28, 2008. The improvement of $131,155 was primarily attributable to lower interes t expense and
a gain of $68,575 resulting fro m the ext inguishment of debt offset by the recognition of a financial penalty resulting fro m the registration
statement not being declared effective. In April 2008, the Co mpany paid $800,000 to extinguish indebtedness incurred in conne ction with the
acquisition of a restaurant location. Interest expense for the nine months ended September 28, 2008 decreased compared with interest expense
for the nine months ended September 30, 2007 as a result of debt repayments.

Our net loss for the nine months ended September 28, 2008 increased by $2,914,394, or 75.6%, to $6,770,295, fro m $3,855,901 f or the nine
months ended September 30, 2007. Our net loss increased primarily due to the increase in general and ad min istrative exp enses. As a percentage
of total revenues, our net loss increased to 150.2% of total revenues for the nine months ended September 28, 2008 fro m 98.6% o f total
revenues for the nine months ended September 30, 2007.

                                                                       40
Fiscal Year Ended December 30, 2007, Compared to Fiscal Year Ended December 31, 2006

The follo wing table sets forth the percentage relationship to total revenues, except where otherwise indicated, of certain it ems included in our
consolidated statements of operations for the periods indicated. Percentages may not add due to rounding:

                                                                                                       Year Ended
                                                                                           December 30,           December 31,
                                                                                               2007                   2006
      Revenues:
        Store sales                                                                                     92.6 %                88.7 %
        Franchise royalties and fees                                                                     6.7                   8.7
        Other revenue                                                                                    0.7                   2.6
                                                                                                       100.0 %               100.0 %

      Costs and expenses:
        Store operating expenses (1) :
        Cost of goods sold, food and paper products                                                     44.3 %                44.9 %
        Labor                                                                                           30.9                  31.9
        Occupancy                                                                                        9.0                   9.4
        Other store operating expenses                                                                  17.5                  17.2
      General and administrative expenses                                                               71.8                  96.3
      Advertising, marketing and pro motion expenses                                                    13.7                  14.9
      Depreciat ion and amort ization                                                                    8.8                   6.0
      Loss on disposal of assets                                                                        13.6                    —
      Total costs and expenses                                                                         202.1                 208.9

      Operating loss                                                                                  (102.1 )              (108.9 )

      Other inco me (expense):
        Interest income                                                                                  0.3                    1.3
        Interest expense                                                                                (7.9 )                 (4.0 )
        Other expense, net                                                                              (1.5 )                 (0.2 )
      Other inco me (expense), net                                                                      (9.1 )                 (2.9 )

      Loss before income taxes                                                                        (111.2 )              (111.8 )
      Income taxes                                                                                        —                     —
                                                                                                             )                     )
      Net loss                                                                                        (111.2 %              (111.8 %


(1)   As a percentage of store sales.

                                                                       41
The following table sets forth certain data relating to the number of co mpany -owned, franchise-operated and system-wide store locations:

                                                                                                     Year Ended
                                                                                         December 30,            December 31
                                                                                             2007                   2006
      Co mpany-owned locations:
      Locations at the beginning of the year                                                              5                     3
      Locations opened                                                                                    1                     1
      Locations closed                                                                                   (1 )                   —
      Locations sold                                                                                     (1 )                   —
      Locations transferred                                                                              —                      1
      Locations at the end of the year                                                                    4                      5


      Franchise-operated locations:
      Locations at the beginning of the year                                                              4                      1
      Locations opened                                                                                    2                      4
      Locations closed                                                                                   (2 )                   —
      Locations sold                                                                                     —                      —
      Locations transferred                                                                              —                      (1 )
      Locations at the end of the year                                                                    4                      4


      System-wide locations
      Locations at the beginning of the year                                                              9                      4
      Locations opened                                                                                    3                      5
      Locations closed                                                                                   (3 )
      Locations sold                                                                                     (1 )
      Locations transferred                                                                              —                      —
      Locations at the end of the year                                                                    8                      9


General

For the year ended December 30, 2007, our co mparable store sales for our owned stores decreased 2.7% fro m the prior year. System-wide
comparable store sales decreased by the same percentage because there was no franchise store data to compare, since all franc hise-operated
stores had been open less than a year. Comparable store sales are based on sales for stores that have been in operation for the entire period of
comparison. Franchise-operated stores which we acquire are included in comparable store sales once they have been open for the entire period
of comparison. Co mparab le store sales exclude closed locations.

                                                                      42
Results of Operations

Revenues

Our total revenues for the year ended December 30, 2007, increased $1,213,189, or 32.9%, to $4,904,883 fro m $3,691,694 fo r th e year ended
December 31, 2006. The growth in total revenues for the year ended December 30, 2007, as compared to the prior year was primarily d ue to
the addition of one new co mpany-owned store opened during the fourth quarter of 2006 and a change in the status of one store fro m a
franchise-operated store to a company-owned store during the fourth quarter of 2006 partially offset by a decrease in sales at a company -owned
store that was closed in April 2007.

Sales at co mpany-owned stores for the year ended December 30, 2007, increased by $1,270,091, or 38.8%, to $4,543,194 fro m $3,273,103 for
the year ended December 31, 2006. As a percentage of total revenues, sales at company -owned stores increased to 92.6% of t otal revenues for
the year ended December 30, 2007, fro m 88.7% for the year ended December 31, 2006. The increase in sales at co mpany -own ed stores for the
year ended December 30, 2007, was primarily due to the opening of one new store and the acquisition of a franchise -operated store during the
fourth quarter of 2006 partially offset by a decrease in sales of a company-owned store closed in April 2007 and a co mpany-owned store sold in
September 2007.

During the year ended December 30, 2007, franchise royalties and fees increased $7,168, or 2.2% to $326,733 fro m $319,565 for the year
ended December 31, 2006. The increase in franchise royalties and fees in 2007 was primarily due to an increase in royalt ies e arned on sales at
three franchise-operated locations that opened after December 31, 2006, higher sales at the three franchise -operated lo cations open at
December 31, 2006, and higher advertising fund contributions partially o ffset by a decrease in franchise fees.

During the year ended Dece mber 30, 2007, franchise royalt ies increased $31,087, or 28.0%, to $142,233 fro m $111,146 fo r the year ended
December 31, 2006. Franchise fees for the year ended December 30, 2007, decreased by $70,000, or 50.0%, to $70,000 fro m $140, 000 for the
year ended December 31, 2006. Contributions to the advertising fund increased by $46,081, or 67.4%, to $114,500 for the year ended
December 30, 2007, fro m $68,419for the year ended December 31, 2006.

                                                                      43
At December 30, 2007, four franchise-operated stores were open and operating and commit ments to open an additional 64 franchise -operated
locations had been received. We expect the 64 additional franchise -operated locations to open according to the timetable set forth in
agreements we have with various area developers, with the majority of the locations opening in the next four or five years. O ur standard
franchise agreement requires a franchisee to develop a specified nu mber of stores on or before spe cific dates. If a franchisee or area developer
fails to develop stores on schedule, we have the right to terminate the franchise agreement and develop company -owned locations or develop
locations through new area developers in that market. We may exercise one or more alternative remed ies to address defaults by area developers
and franchisees of the terms of their franchise agreements including the failure to open locations on time and non -compliance with our
operating and brand requirements and other covenants under the franchise agreement.

Costs and Expenses

Cost of goods sold, food and paper products for the year ended December 30, 2007, increased by $541,545, or 36.8%, to $2,011, 229 fro m
$1,469,684 for the year ended December 31, 2006. The increase in cost of goods sold, food and paper products was primarily due to an
increase in the nu mber o f weeks that co mpany-owned stores operated in 2007 co mpared with 2006. As a percentage of store sales, cost of
goods sold, food and paper products decreased to 44.3% of store sales for the year ended December 30, 2007, fro m 44.9% o f store sales for the
year ended December 31, 2006. The decrease in cost of goods sold, food and paper products as a percentage of store sales was primarily due to
operational imp rovements s uch as portion control, loss prevention and reduced waste partially offset by higher meat prices.

Labor expense for the year ended December 30, 2007, increased by $362,348, or 34.7%, to $1,405,662 fro m $1,043,314 fo r the ye ar ended
December 31, 2006. The increase in labor expense was primarily attributable to costs of new emp loyees hired in connection with the opening
of new company-owned store locations and the increase in the number of weeks that company -owned stores operated in 2007 co mpared with
2006. As a percentage of store sales, labor expense decreased to 30.9% of store sales for the year ended December 30, 2007, fro m 31 .9% of
store sales for the year ended December 31, 2006. The decrease in labor expense as a percentage of store sales for the year ended December 30,
2007, was primarily due to increased labor efficiencies resulting fro m changes in our kitchen layout.

Occupancy costs for the year ended December 30, 2007, increased by $100,904, or 32.6%, to $410,061 fro m $309,157 for the year ended
December 31, 2006. The increase in occupancy costs was primarily attributable to new company -owned stores and the increase in the number
of weeks that company-owned stores operated in 2007 co mpared with 2006. As a percentage of store sales, occupancy costs decreased to 9.0%
of store sales for the year ended December 30, 2007, fro m 9.4% of store sales for the year ended December 31, 2006. The decrease in
occupancy costs as a percentage of store sales was primarily due to the decrease in occupancy costs and increase in store sales.

Other store operating expenses for the year ended December 30, 2007, increased by $235,454, or 41.9%, to $796,804 fro m $561,350 for the
year ended December 31, 2006. The increase in other store operating expenses was primarily due to the increase in the number of weeks that
company-owned stores operated in 2007 co mpared with 2006. As a percentage of sto re sales, other store operating expenses increased slightly
to 17.5% of store sales during the year ended December 30, 2007, fro m 17.2% of store sales during the year ended December 31, 2006.

General and administrative expenses for the year ended December 30, 2007, decreased by $35,582, or 1.0%, to $3,520,392 fro m $3,555,974 for
the year ended December 31, 2006. The decrease in general and admin istrative expenses for the year ended December 30, 2007, c o mpared to
the same period in the prior year is primarily due to reduced headcount and reduced professional fees offset by higher stock-based
compensation expense. General and ad ministrative expenses include $249,292 of stock-based compensation expense in 2007 co mpared with
$23,462 of stock-based compensation expense in 2006. As a percentage of total revenues, general and ad ministrative expen ses decreased to
71.8% of total revenues for the year ended December 30, 2007, fro m 96.3% of total revenues for the year ended December 31, 20 06. The
decrease in general and ad ministrative expenses as a percentage of revenues for the year ended December 30, 2007, co mpared to the same
period in the prior year is primarily due reduced headcount, lower professional fees and tighter expense control.

                                                                       44
Advertising, market ing and promotion expenses for the year ended December 30, 2007, increased by $123,110, or 22.5%, t o $671, 440 fro m
$548,330 for the year ended December 31, 2006. The increase in advertising, ma rketing and promotion expenses was primarily due to
promotion expense related to the services agreement with George Foreman Ventures, LLC (GFV Serv ices Agreement) that became ef fective
June 12, 2007, and exp ires in June 2011, partially o ffset by improved e xpense control. As a percentage of total revenues, advertising, marketing
and promotion expenses decreased to 13.7% o f total revenues in 2007 fro m 14.9% o f total revenues in 2006.

Depreciat ion and amortizat ion expense for the year ended December 30, 2007, increased by $206,842, or 92.9%, to $429,586 fro m $222,744
for the year ended December 31, 2006. Depreciation and amort ization expense increased due to new company -owned store locations and new
equipment installed in previously existing co mpany-owned store locations. As a percentage of total revenues, depreciation and amort ization
expense increased to 8.8% of total revenues for the year ended December 30, 2007, fro m 6.0% of total revenues for the year en ded December
31, 2006.

The loss on disposal of assets for the year ended December 30, 2007, represents the costs associated with the closing of one company -owned
store and the sale of one company-owned store. The costs associated with the disposition of the two stores were accounted for in accordance
with SFAS No. 146, ― Accounting for Costs Associated with Exit or Disposal Activities ‖ and are comprised of $232,073 representing the
liab ility for the remaining lease obligation, $428,191 for the write-off of goodwill and $6,574 representing a loss incurred on t he disposition of
inventory, plant and equipment.

Net interest expense for the year ended December 30, 2007, increased by $271,263, or 277.2%, to $369 ,130, fro m $97,867 fo r the year ended
December 31, 2006. As a percentage of total revenues, net interest expense increased to 7.6% o f total revenues for the year e nded December
30, 2007, fro m 2.7% o f total revenues for the year ended December 31, 2006. The increase in net interest expense was primarily due to higher
debt levels during the year ended December 30, 2007, compared to the year ended December 31, 2006, and higher interest rates. The higher
debt levels in 2007 were attributable to debt incurred in connection with the acquisition of two store locations during the fourth quarter of 2006
and $3,000,000 principal amount of pro missory notes sold during 2007.

Our net loss for the year ended December 30, 2007, increased by $1,325,801, or 32.1%, to $5,451,414, fro m $4,125,613 for the year ended
December 31, 2006. Our net loss increased primarily due to the increase in store operating expenses, higher pro motion expense s resulting fro m
the GFV Services Agreement, higher stock-based compensation expense, higher depreciation and amort ization expenses, the loss recognized in
connection with the disposition of two company-owned store locations and higher net interest expense. As a percentage of total revenues, our
net loss decreased to 111.2% o f total revenues for the year ended December 30, 2007, fro m 111.8% of total revenues for the year ended
December 31, 2006.

Li qui di ty, Fundi ng and Capital Resources

Our capital requirements, including development costs related to the opening or acquisition of additional sto res and maintenance and remodel
expenditures, have and will continue to be significant. Historically we have funded our operations, working capital requireme nts, acquisitions
and capital expenditures with proceeds fro m the issuance of debt and equity securities. Our future capital requirements and the adequacy of
available funds will depend on many factors, including the pace of expansion, real estate markets, site locations and the nat ure of the
arrangements negotiated with landlords, as well as access to the debt and/or equity capital markets. We have incurred significant operating
losses since inception and expect to incur operating losses for the foreseeable future.

Our current business plan assumes no Company-owned stores will be constructed during the remainder of fiscal 2008 and that four
Co mpany-owned stores will be constructed in each of fiscal 2009 and the first nine months of fiscal 2010. As set forth in the following table,
we will need to secure approximately $10.9 million of additional capital through the sale of debt securities or equity securities or both to fund
our current business plan through September 30, 2010. The amounts shown below may change as we execute our business plan.

                                                                                                             Estimated
                                                                                                         Capital Required
                                                                                                            to Fund the
                                                                                                            Co mpany’s
                                                                                                          Operating Plan
                                                                                                       fro m Sept. 29, 2008
                                                                                                   to Sept. 30, 2010(Millions)
       Capital Required to Fund the Co mpany’s Operating Plan (millions):
           Operating activit ies (excluding marketing & pro motion services shown
             below)                                                                      $                                             2.4
           New store construction costs                                                                                                4.7
           Other capital expenditures                                                                                                  0.1
           Conversion of franchise-owned and company-owned stores to UFood                                                             0.6
             Grill outlets
           Marketing and pro motion services                                                                                         2.2
           Debt repayment                                                                                                            0.9
                Estimated capital required through June 30, 2010                       $                                            10.9


The estimated capital required to fund our current plan is expected to come fro m the sale of debt securities, equity securities or both. None of
the capital required is expected to come fro m the exercise of warrants. Currently, we do not have a bank line of credit or other source of
additional debt financing. There can be no assurance that we will be able to secure the additional capital that our business plan requir es. See
―Risk Factors—It is highly likely that we will need to raise additional capital to meet our business requirements in the fu ture, and such capital
raising may be costly or difficu lt to obtain and could dilute current stockholders ’ ownership interests.‖

At and for the Nine Months Ended September 28, 2008

Cash and cash equivalents and restricted cash at September 28, 2008 were $2,441,832 co mpared to $4,435,813 at December 30, 2007. Cash is
primarily used to fund our (i) capital expenditures for new and remodeled co mpany -owned stores, (ii) acquisitions of franchisee-owned stores,
(iii) working capital requirements and (iv) net operating losses. At September 28, 2008, restricted cash included $77,048 o f cash proceeds
received fro m the private placement offering and deposited in an escrow account to fund qualified public relations and invest or relations
expenses.

                                                                       45
We used $4,300,413 of cash to fund our operating activities in the nine months ended September 28, 2008 co mpared with $2,030, 582 of cash
used to fund our operating activities in nine months ended September 30, 2007. The increase in cash used to fund our op erating activities was
primarily due to cash used for investor relations and public relations activities, costs of operating as a public company and legal and other costs
associated with the settlement of a dispute with a former franchisee and changes in working capital.

During the nine months ended September 28, 2008, we spent $527,660 for the acquisition of equipment, primarily in connection with the
conversion of four KnowFat! locations to UFood Grill outlets, co mpared with $699,126 spent for the acquis ition of equip ment during the nine
months ended September 30, 2007. During the three and nine month periods ended September 30, 2007 we received $150,000 of cas h proceeds
fro m the sale of a restaurant in Shrewsbury, Massachusetts.

During the nine months ended September 28, 2008, financing activ ities provided $3,449,094 of cash including $4,088,871 of n et cash proceeds
fro m the sale of 4,781,000 Un its of our securities as described above. In addition, during the nine months ended September 28 , 2008, we used
$1,209,554 of cash to repay outstanding indebtedness. Restricted cash decreased by $615,002 during the n ine months ended Sept ember 28,
2008. Restricted cash was used to pay qualified public relations and investor relations expenses. For the nine months ended September 30,
2007, financing activ ities provided $1,178,706 of cash, includ ing $1,733,217 of net cash proceeds received fro m the issuance of notes payable.

At and for the Fiscal Year Ended December 30, 2007

Cash and cash equivalents and restricted cash at December 30, 2007, were $4,435,813 co mpared to $1,840,090 at December 31, 2006. Cash is
primarily used to fund (i) capital expenditures for new and remodeled co mpany -owned stores, (ii) acquisitions of franchise-operated stores, (iii)
working capital requirements and (iv) net operating losses.

In December 2007, we consummated a private offering to accredited investors of up to 8,000,000 units of our securities at a p rice of $1.00 per
unit. Each unit consists of one share of common stock and a warrant to purchase one-half, or 50%, of a share of common stock. The investors
in the offering collectively purchased 6,160,000 units in December 2007 for total cash consideration of $6,160,000, before expenses of
$1,345,840, and 4,781,000 units in the first quarter of fiscal 2008 for total cash consideration of $4,781,000, before estimated expenses of
$600,000. Under the terms of the private offering, we were required to deposit $1,000,000 of the proceeds received in an escr ow account. The
amount placed in escrow can only be used to pay qualified public relations and investor relations expenses.

At December 30, 2007, we had working capital of $1,165,395 co mpared to a working capital deficit of $1,214,657 at December 31 , 2006. The
increase in working capital was primarily due to an increase in cash and cash equivalents. The increase in cash and cash equivalents was
primarily due to the net cash proceeds received fro m the sale of 6,160,000 units in the private offering.

We used $3,134,984 of cash to fund our operating activ ities in 2007 co mpared with $3,539,743 of cash used to fund our operating activit ies in
2006, representing an improvement of $404,759.

During 2007, we spent $842,447 of cash for investing activities co mpared with $1,066,807 spent on investing activities in 2006. The
improvement in net cash used in investing activities was primarily due to $150,000 of cash proceeds we received fro m the sale of a
company-operated store in 2007. During 2007, we spent $992, 447 for the acquisition of property and equip ment co mpared with $1,065,119
spent on the acquisition of property and equipment in 2006. In 2007 and 2006 we opened one company -operated store.

Net cash provided by financing activities increased by $819,232 t o $5,489,542 in 2007 fro m $4,670,310 in 2006. The increase was primarily
due to an increase in net cash proceeds received from the sale of debt and equity securities partially offset by an increase in restricted cash. In
2007, we received net cash proceeds of $7,351,320 fro m the sale of debt and equity securit ies co mprised of $4,814,160 received fro m the sale
of 6,160,000 units and $2,537,160 received fro m the sale of $3,000,000 principal amount of pro missory notes. Approximately $1 ,000,000 of
the proceeds received fro m the sale of units was deposited in an escrow account. The amount placed in escrow may be used by us but only fo r
the payment of qualified public relations and investor relat ions expenses. In 2006, we received net cash proceeds of $3,519,4 66 fro m the sale of
debt and equity securities co mprised of $3,069,466 received fro m the sale of 719,440 shares of series C preferred stock and $ 450,000 received
fro m debt incurred in connection with the acquisition o f a franchise-operated restaurant. In 2006, appro ximately $1,400,000 of cash which had
been restricted became unrestricted.

                                                                        46
Historically we have funded our operations, working capital requirements, acquis itions and capital expenditures with cash flow generated by
operations and proceeds from the issuance of debt and equity securities. We believe that cash flow fro m operations and procee ds from the
issuance of debt and equity securities will be sufficient to fund our operations and capital expenditures for the next six months.

Credit Agreement with TD Banknorth, N.A.

Under the terms of a credit agreement dated as of May 27, 2005 between our wholly -owned subsidiary, KFLG Watertown, Inc. and TD
Banknorth, N.A. (as amended, the Credit Agreement), KFLG is obligor on a term loan that matures in May 2010. No addit ional amounts are
available to be borrowed under the Cred it Agreement. At September 28, 2008, the outstanding balance on the term loan was $779,577. The
term loan is due in monthly installments of $29,167 through May 2010 and bears interest at the bank’s prime rate (4.0% at November 17,
2008). The term loan is secured by substantially all of the assets of KFLG and its subsidiaries. T he term loan is guaranteed by the Company’s
chief executive officer and its wholly-o wned subsidiary, KnowFat Franchise Co mpany, Inc.

Under the terms of the Credit Agreement, KFLG is prohibited, without the prior written consent of TD Banknorth, fro m declaring , making or
paying any distribution of any kind or div idend of any kind whatsoever (other than dividends payable solely in co mmon s tock) except that any
of KFLG’s subsidiaries may make a d istribution to KFLG so long as there is a loan outstanding. Such restriction has not had and is no t
expected to have any impact on our ability to meet our cash obligations.

Contractual Obligati ons and Other Commitments

In addition to our capital expenditures requirements, we have certain other contractual and committed cash obligations. Our c ontractual cash
obligations primarily consist of non-cancelable operating leases for our stores, and admin is trative offices. Lease terms fo r our stores and
administrative offices are generally fo r seven to ten years with renewal options at most locations and generally require us t o pay a proportionate
share of real estate taxes, insurance, common area, and other operating costs. So me store leases provide for contingent rental ( i.e. , percentage
rent) payments based on sales in excess of specified amount. Certain of our lease agreements provide for scheduled rent incre ases during the
lease terms or for rental pay ments commencing at a date other than the date of init ial occupancy.

The following table sets forth information as of December 30, 2007, with respect to our contractual obligations and the effec t they are expected
to have on our liquid ity and cash flows in future periods:

                                                                             Less Than               1 Year to        4 Years to       More than
                                                             Total            1 Year                  3 Years           5 Years         5 Years

                                                                                           (1)
Long-term debt                                          $    2,605,684 $       1,874,993         $        730,691 $              — $             —
Capital leases                                                 168,449            70,698                   93,830             3,921              —
Operating leases                                             4,480,000           727,000                1,234,000         1,249,000       1,270,000
Scheduled interest payments (2)                                118,205            65,386                   52,819                —               —

  (1)    During the nine months ended September 28, 2008, we repaid $1,209,554 of our long -term debt including $800,000 paid in Ap ril
         2008to extinguish the note payable issued in connection with the acquisition of the Boston Downtown Crossing restaurant and store.
         Long-term debt due in less than 1 year includes $450,000 that becomes due upon the sale of our Land mark Center restaurant and
         store. We currently have no plans to sell our Land mark Center unit.
  (2)    Interest on the term note payable to T.D. Banknorth, N.A. is payable monthly at the bank’s prime rate (7.25% per annum at December
         30, 2007). Future interest on the T.D. Banknorth note was calculated using an assumed rate of 7.25%.

Impact of Inflati on

Our profitability depends in part on our ability to anticipate and react to increases in our operating costs, including food, labor, occupancy
(including utilit ies and energy), insurance and supplies costs. In the past, we have been able to recover some of our higher operating costs
through increased menu prices. There have been, and there may be in the future, delays in imp lementing such menu price increa ses, and
competitive pressures may limit our ability to recover such cost increases in t heir entirety. Historically, the effects of inflation on our net
income have not been materially adverse. However, the recent volatility in certain co mmodity markets, such as those for energ y, grains and
dairy products, which have experienced significant increases in prices, may have an adverse effect on us in the latter half of fiscal 2008 and
beyond and may be generally causing franchisees in our industry to delay construction of new restaurants and/or causing poten tial new
franchisees to reconsider entering into franchise agreements. The extent of the impact may depend on our ability to increase our menu prices
and the timing thereof.

                                                                        47
Many of our employees are paid hourly rates related to federal and state min imu m wage laws. Although we have and will co ntinu e to attempt
to pass along any increased labor costs through food price increases, there can be no assurance that all such increase d labor costs can be
reflected in our prices or that increased prices will be absorbed by consumers without dimin ishing to some degree consumer sp ending at our
stores. However, we have not experienced to date a significant reduction in store profit marg ins as a result of changes in such laws, and
management does not anticipate any related future significant reductions in gross profit margins.

Recent Accounting Pronouncements

Adoption of New Accounting Principle

Effective January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, for all financial assets and liab ilit ies. SFAS No. 157 defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the p rincipal or most
advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157
establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other acco unting
pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption of SFAS No.
157 d id not expected to have a material impact on our consolidated financial statements.

Recent Accounting Pronouncements In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R
establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statement s the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing
and measuring the goodwill acquired in the business combination and specifies what informat ion to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued
for fiscal years beginning after December 15, 2008. Accordingly, any business combinations we engage in will be recorded and disclosed
following existing GAAP until December 28, 2008. We expect SFAS No. 141R will have an impact on our consolidated financial st atements
when effect ive, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions we
consummate after the effective date. We are still assessing the impact of this standard on our future consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB
51. SFAS No. 160 changes the accounting and reporting for minority interests. Minority interests will be re -characterized as non-controlling
interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not
result in a change in control will be accounted for as equity transactions. In addition, net inco me attributable to the non -controlling interest will
be included in consolidated net inco me on the face of the inco me statement and upon a loss of control, the interest sold, as well as any int erest
retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for financia l statements issued
for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentatio n and disclosure
requirements, wh ich will apply retrospectively. The adoption of SFAS No. 160 is not expected t o have a material impact on our future
consolidated financial statements.

In March 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB
Statement No. 133 . SFAS No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives
and strategies for using such instruments, as well as any details of cred it risk-related contingent features contained within derivatives. SFAS
No. 161 also requires entities to disclose additional informat ion about the amounts and location of derivatives included in the financial
statements, how the provisions of SFAS No. 133 have been applied, and the impact that hedges have on an entity ’s financial position, financial
performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 . The adoption
of SFAS No. 161 is not expected to have a material impact on our future consolidated financial statements. In December 2007, the Securities
and Exchange Co mmission issued Staff Accounting Bullet in (SAB) No. 110. SA B No. 110 expresses the views of the staff reg ardin g the use of
a ―simplified‖ method, as discussed in SAB No. 107, in developing an estimate of the e xpected term of ―plain vanilla‖ share options in
accordance with SFAS No. 123R. SAB No. 110 is not expected to have a significant impact on our consolidated financial stateme nts.

                                                                          48
                                                        DES CRIPTION OF B US INESS

Corporate History and Additi onal Information

We are a franchisor and operator of fast-casual food service restaurants that capitalize on what we believe are the deve lopin g trends toward
healthier liv ing and eating and the increasing consumer demands for restaurant fare that offers appetizing food with healthy attributes. We
believe our menu items are made with higher quality ingredients and healthier cooking technique s than ordinary quick serve food.
Consequently, we believe our menu provides customers with a delicious and healthy alternative to typical fast food options. Guests order at a
counter and wait three to five minutes for their meals to be prepared. At UFood Grill, we bake, grill or steam our menu offerin gs; we never fry
our food. All of the meat we serve is all-natural and hormone-free. Our sauces, cheeses and salad dressings are reduced-fat. We serve
whole-grain breads and side dishes and, where we can do s o while still charg ing our customers a reasonable price, organic meats and
vegetables (meeting U.S. Food and Drug Ad min istration standards for ―organic‖). The food is served on ceramic plates with metal utensils and
is either taken to the table by each guest or delivered to the table by a UFood server. Delivering great taste and an overall pleasing din ing
experience for an individual customer is the focus of UFood ’s mission and concept.

We were incorporated in the State of Nevada on February 8, 2006, as A xxent Media Corporation. Prior to December 18, 2007, we were a
development stage company as defined by Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by
Development Stage Enterprises. As Axxent Media Co rporation, our bus iness was to obtain reproduction and distribution rights to foreign films
within North America and also to obtain the foreign rights to North American films for reproduction and distribution to foreign countries.
Following the merger described belo w, we abandoned our plans to obtain reproduction and distribution rights to films. On August 8, 2007, we
changed our name to UFood Franchise Co mpany, and on September 25, 2007, we changed our name to UFood Restaurant Group, Inc.

On December 18, 2007, a wholly-owned subsidiary of our Co mpany merged with and into KnowFat Franchise Company, Inc., with KnowFat
surviving the merger as our wholly -owned subsidiary. Fo llowing the merger, we continued KnowFat ’s business operations. KnowFat was
founded in 2004 to capitalize on the popularity of a chain of fast-casual concept restaurants operating under the trade name ―Lo Fat Know Fat‖
in the greater Boston area, as well as the trend we believe is developing in the United States towards healthier liv ing and e ating. After operating
for three years as KnowFat! Lifestyle Grille, while continuously modify ing and improving the concept, management decided that future
locations will operate under the name UFood Grill. During the third quarter of 2008, the four remain ing KnowFat ! Life style Grille locations
were converted to UFood Grill outlets. All of our co mpany -owned restaurants and franchise-owned locations now operate, and all future
locations will operate, under the name UFood Grill.

Three of our four Co mpany-owned restaurants that were orig inally KnowFat ! Lifestyle Grilles included an integrated convenience -style retail
store that carried a variety of health-oriented nutritional products, such as supplements, vitamins, nutrition bars, energy drinks and healthy
snacks. As part of the process of conversion to UFood Grill outlets process, floor space formerly devoted to the sale of nutritional products in
two of these stores was reconfigured to accommodate the sale of s moothie drin ks and fro zen yogurt, because we believe that th ese products
will generate higher revenues in these locationsand we currently do not expect the sale of nutritional products to be significan t to our business
in the future. None of our franchise locations currently carries nutrition products. We will continue to evaluate the placement of nutrit ion
products in our existing and future locations based on our assessment of demand in the part icular location and, in the case o f franchise
locations, the franchisee’s preferences.

Our operations currently consist of eight restaurants in the Boston area, Naples, FL, Chicago, IL and Sacramento, CA, comprising four
Co mpany-owned restaurants and four franchise-owned locations. We currently operate one of the franchise-owned locations pursuant to a
management services agreement. We have entered into a total of six area develop ment agreements covering 68 franchise units in nine states
(Californ ia, Colo rado, Florida, Illinois, Idaho, Montana, Texas, Utah and Wyoming), including three of the four franchise loc ations currently
open and operating, and requiring the construction by franchisees of 65 future UFood Grill outlets. In addition, we have entere d into one
individual franchise agreement in Massachusetts, which is currently open and operating.

The follo wing table shows, for each area development agreement and single-unit franchise agreement, as well as for Co mpany-owned stores,
the numbers of units that are covered by the agreement (if applicable), currently operating, under construction and in lease negotiations.

                                                                                                       Restaurants              Restaurants
                                                     Units Covered              Restaurants              Under                   In Lease
                   Location                          by Agreement                Operating             Construction             Negotiations
Area Develop ment Agreements
  Chicago, Illinois                                                    5                      1                        2                        —
  Five State Region (MT, ID, W Y, UT, CO)                             38                      —                        1                        2
  Naples, FL                                                           5                      1                        —                        —
  Sacramento, CA                                                      10                      1                        1                        —
  San Jose, CA                                                         7                      —                        1                        —
  Texas airports                                                       3                     —                         1                       —
                                                                     68                        3                       6                        2

Single Unit Franchise Agreements
  Bedford, Massachusetts                                               1                       1                      —                        —

Co mpany-owned Restaurants
  Boston, Massachusetts                                              n/a                       4                      —                        —

Total                                                                69                        8                       6                        2


An area development agreement grants the area developer the right to acquire franchises to develop, own and operate a specified number of
UFood outlets at locations approved by us within a defined geographic area. Area develop ment agreements include a development schedule
that lists the total number of outlets the area developer must develop, the area(s) in wh ich they must be developed and the required opening
date for each outlet. In general, the area developer is required to pay a fee equal to $35,000 for each restaurant covered by the area development
agreement.

The development schedule and the payment schedule are negotiated by the parties and vary from one transaction to the next . Generally, a
portion of the fee is payable by the area developer at the time the agreement is signed, in some cases portions are payable o n agreed milestone
dates, and the balance of the $35,000 per restaurant is payable when the restaurant opens. The fees are not refundable under any circu mstances
and are not subject to offset, even (in the case of the fees payable prio r to a restaurant opening) if the area developer doe s not develop any
restaurants.We may also enter into individual franchise agreements not covered by an area develop ment agreement, which typically also
require a fee of $35,000 per restaurant, payable at the time the agreement is signed.

In addition to the above fees, area developers and single franchisees are required to pay royalties of 5.0% of gross sales and contribute 1.5% o f
gross sales to a system-wide advertising fund. The area developer or franchisee is also required to spend 1.5% of gross sales on local
market ing. Each franchise agreement generally provides for a term of 15 years and gives the franchisee two, five-year renewal options.

Individual franchisees and area developers are required to pay for store construction costs, preopening costs and the costs o f operating the store.
We estimate it costs between $560,000 and $760,000 for a franchisee to open one of our outlets. Typically, franchisees are required to open
their first outlet within nine months after they sign their franchise or area development agreement.If a franchisee or area developer fails to
develop stores on schedule, we have the right to terminate the agreement, retain up -front franchise fees and develop co mpany-owned locations
or develop locations through new area developers in that market. We may exercise one or more alternative remed ies to address defaults by area
developers and franchisees of the terms of their franchise agreements including the failure to open locations on time and non -compliance with
our operating and brand requirements and other covenants under the franchise agreement.

When a new store opens, the Company provides a three-week train ing program at its headquarters for new franchisee employ ees and ten days
of opening training and advice on site. Franchisees pay the travel and liv ing expenses of their e mployees at headquarters portion of the training,
and the franchisee and the Company share the travel and living expenses of the Company ’s personnel for the on-site portion. The Co mpany’s
expenses for this training and support are not significant.

Of the six area development agreements described above, three were entered into during 2008. The three area develop ment agreements w e have
entered into this year cover 46 UFood Grill outlets (45 future and one operating), co mprising five UFood Grill units in the Ch icago
metropolitan area (including one unit that opened in July 2008), 38 UFood Grill units in a five-state area co mposed of Colorado, Utah,
Montana, Idaho and Wyoming and three units at airports in Texas. The three area development agreements we enter ed into prior to 2008 cover
22 UFood Grill outlets including two UFood Grill outlets currently open and operating and 20 UFood Grill outlets to be constr ucted in the
future in Naples, FL, Sacramento, CA, and San Jose, CA.

Of the 65 franchise locations to be constructed under existing area development agreements, three locations are expected to o pen before
December 31, 2008, thirteen locations are expected to open in 2009, five locations in 2010, 13 locations in 2011 and 31 locations thereafter.
The rate at which current and future area developers and franchisees open locations will depend upon several factors, includi ng the
identification of suitable store sites, the negotiation of long -term leases, the permitting process, the construction of the stores, the ability to
attract, train and retain employees and the ability to secure financing on acceptable terms. We intend to supplement the open ing of
franchisee-owned locations with additional Co mpany-owned locations. While we have not set a specific target or timetable for
Co mpany-owned stores, we expect Co mpany-owned locations will be concentrated in the New England area and could represent approximately
10% of total system-wide locations over the longer term. The rate at wh ich we open Co mpany-owned locations will depend on the same factors
that impact the development and opening of franchisee-owned locations as well as the financial resources available to us.

For the six area development agreements and the one single-franchising agreement that the Co mpany has entered into, the non -refundable fees
paid totaled $647,500. The balance of fees to be received if all restaurants are opened (excluding the $175,000 referred to b elow) is $1,575,000.
With respect to the three area development agreements entered into prior to 2008, each of the area developers has failed to meet h is agreed
opening schedule for an aggregate of eight restaurants. However, construction has begun on two of these eight restaurants. Ma nagement
believes these and all the other restaurants covered by these agreements will u ltimately be co mpleted. Two of these three area developers have
also failed to pay a milestone fee each was required to make under the terms of his area development agreement following the opening of his
first several restaurants. The Company has not accrued these payments, which aggregate $175,000. Management believes these amounts are not
material, but also believes these amounts and the remainder of the development fees due under these and the other area development
agreements will u ltimately be collected.

We have determined that our area developer for Houston would not be able to construct or open the five units specified in his area development
agreement because the developer has not complied with the agreed develop ment schedule and, to our knowledge, has taken no steps to identify
potential store locations or otherwise develop his territory. While we have not formally terminated this agreement, we have n ot included those
five units in any discussions in this prospectus.

In October 2008, we terminated the franchise agreement covering a KnowFat! Lifestyle Grill in Waltham, Massachusetts, that we had been
operating pursuant to a management services agreement because the franchisee failed to pay royalties due under the franchise agreement and
the restaurant was unprofitable. The management services agreement was also terminated and the store has been closed. In May 2008, we
terminated a 2005 franchise agreement with our franchisee operator in Dade and Broward Counties, Florida, covering 24 franchise locations,
because the franchisee did not meet the opening timeline specified in the agreement, and we have reclaimed the franchise terr itory. We have
previously terminated four other agreements covering two operating and 16 unopened locations for similar reasons.

We believe the sale of franchises allows us to expand the UFood Grill brand faster than the construction and operation of company-owned
outlets due to the Company’s limited human and financial resources, while allo wing us to collect franchise fees and royalties. Under our area
development and franchise agreements, we receive royalties on gross franchise sales as described above, and we do not pay any of the
construction, opening (other than the training and advice described above), operating or marketing costs. We do not provide or arrange
financing to franchisees or area developers.

All o f our co mpany-owned restaurants and franchise-owned locations now operate, and all future locations will operate, under t he name UFood
Grill.

We operate in two business segments: Store Operat ions and Franchise Operations. The Store Operations segment comprises the op erating
activities of restaurants owned or operated by the Company. The Franchise Operations seg ment is comprised of the operating activities of the
franchise business unit that licenses qualified operators to conduct business under the Knowfat and UFood Grill t radenames an d monitors the
operations of these business units. Certain financial info rmation for each segment is set forth in Note 10, Segment Data , of
Notes to Consolidated Financial Statements for the three months and nine months ended September 28, 2008, and September 30, 2007, and in
Note 18, Segment Data , to the 2007 Consolidated Financial Statements.

Our headquarters are located at 255 Washington Street, Suite 100, Newton, Massachusetts 02458. Our telephone number is (617) 787-6000.

Concept and Strateg y

We are a franchisor and operator of fast-casual food service restaurants that capitalize on what we believe are the developing trend toward
healthier liv ing and eating and the increased consumer demands for restaurant fare that offers appetizing food with healthy a ttributes. We
believe our menu items are made using higher quality ingred ients and healthier cooking techniques than ordinary quick serve food.
Consequently, we believe our menu provides customers with a delicious and healthy alternative to typical fast food options. Guests order at a
counter and wait three to five minutes for their meals to be prepared. At UFood Grill, we bake, grill or steam our menu offerin gs; we never fry
our food. All of the meat we serve is all-natural and hormone-free. Our sauces, cheeses and salad dressings are reduced-fat. We serve
whole-grain breads and side dishes and, where we can do so while still charg ing our customers a reasonable price, organic meats and
vegetables (meeting U.S. Food and Drug Ad min istration standards for ―organic‖). The food is served on ceramic plates with metal utensils and
is either taken to the table by each guest or delivered to the table by a UFood server. Delivering great taste and an overall pl easing din ing
experience for an individual customer is the focus of UFood ’s mission and concept.

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Many customers not only want to eat well; they also want to buy products that support an overall healthy lifestyle. So me of o ur locations offer
integrated convenience-style retail stores that carry a wide variety of health-oriented nutrition products, such as supplements, vitamins,
nutrition bars, energy drinks and healthier snacks.

As part of the re-branding effort that culminated in the UFood Grill concept, we developed a market segmentation model that identified the
following five customer personas:

        Healthy life style enthusiast (eating healthier fits squarely into their way of life)
        Feel Gooder (eating at UFood makes them feel good about themselves)
        Convenience-only (convenience trumps all decision factors when selecting where to dine)
        People with restricted diets
        Magic Bu llet (people who seek to have it all at little cost and no effort)

The UFood Grill concept attempts to provide each customer segment with the features it seeks in a quick service restaurant. U nderstanding the
market seg mentation model allows us to focus on those market segments that afford the greatest sales opportunities. The UFood Grill brand has
four pillars on which it rests:

        U Love Great Food
        U Are A lways on the Go
        U Want It Your Way
        U Want to Look and Feel Great

Approximately half of all our sales are prepared for take -out, with the guest either calling ahead or ordering in the restaurant. Nearly 60% of
customers frequent our restaurants for lunch, with the remaining 40% enjoying ou r fare at d inner time. Most of Ou r restaurants are not open for
breakfast service. We are required to offer breakfast service at our UFood Grill outlet at Logan International A irport in Bos ton and are
considering the addition of breakfast service at some of our urban locations.

Some of our restaurant locations also offer an integrated convenience-style retail store that carries a wide variety of health-oriented nutrition
products, such as supplements, vitamins, nutrition bars, energy drin ks, and healthy snacks.

We believe the UFood concept has significant growth potential, wh ich we hope to realize through a comb ination of co mpany and franchisee
efforts. Franchising will be a key component of our success. There are currently a total o f eight UFood Grill restaurant locations open. Five of
the locations are in the greater Boston area, with one location each in Naples, Florida, Ch icago, Illinois, and Sacramento, California. We have
entered into six area develop ment agreements covering 68 franchise licenses in nine states (California, Colorado, Florida, Illinois, Idaho,
Montana, Texas, Utah and Wyoming).

Industry B ackground

The United States restaurant industry is benefitting fro m a long -term trend of consumers eating out more frequently. According to the National
Restaurant Association, the restaurant industry’s share of consumer food expenditures has increased from 25% in 1955 to 47.5% in 2005, and
restaurant sales are expected to reach $558 b illion in 2008, an increase of 4.4% over 2007 sales. The leading factors contrib uting to the recent
growth have been the growing population, increases in real d isposable inco me per cap ita, the trend toward busier lifestyles, greater spending on
dining and entertainment activit ies and the increased availability of high -quality dining options.

The recent emergence of the fast-casual dining sector has capitalized significantly on the industry ’s expansion. This group, led by companies
such as Chipotle Mexican Grill and Panera Bread Co mpany, caters to customers who desire the convenience of fast food , and who are willing
to pay a premiu m for h igher quality, d ifferentiated menu items. According to the National Restaurant Association, these consumer preferences
have made fast-casual one of the fastest growing sub-sectors within the restaurant industry, with sales in 2008 expected to increase 4.4% over
2007’s sales.

However, the increase in eating out has also contributed to a general deterioration in the health of Americans. Today, obesit y has reached
epidemic proportions in the United States. According to the Centers for Disease Control and Prevention (CDC), appro ximately 34% of
American adults aged 20 and over, or 72 million people, met the criterion for obesity in 2006. In addition, a CDC study indic ates that in the
past 30 years, the occurrence of obesity in children has doubled, and it is now estimated that one in five children in the United States is
overweight. According to published studies, obese children are mo re likely to be obese as adults, which leads to an increased risk for a nu mber
of diseases including stroke, cardiovascular disease, hypertension, diabetes and some cancers. Obesity also contributes to additiona l negative
health consequences, including Type 2 Diabetes, high total and LDL (bad) cholesterol and triglyceride levels in the b loo d, low HDL (good)
cholesterol levels in the blood, sleep apnea and inflammation of the liver. Poor food choices, such as diets high in calories (in cluding fats and
simp le sugars) and lower in fruits and vegetables, are linked with being overweight.
50
Many consumers are actively looking to imp rove their quality of life and prevent health p roblems. They are changing their die t, increasing
exercise and activity and consciously seeking out healthier alternatives to existing main -stream restaurants to help improve their overall
lifestyles and well-being. Moreover, today’s consumers are more knowledgeable than ever before about nutritional co mposition of foods and
supplements, and they increasingly demand information on what they are consuming, not only fro m the grocery store, but also from restaurants.

Menu

With our innovative menu, we are targeting mainstream customers as well as health conscious customers. We believe the taste a nd quality of
our food offerings will have wide market appeal.

Our menu contains a wide variety of food types, including hot entrees, burgers, salads, sandwiches, wraps, smoothies and dess erts, each of
which is united in our belief that the food is healthier than many other dining-out options. Each item is prepared with healthier alternatives in
mind, whether an ingredient or a method of p reparation, and has better nutritional qualit ies than the equivalent item a consu mer might find at a
typical quick serve establishment.

Our menu categories are:

Entrees

These include sirloin t ips, turkey tips, bison patties and chicken breast. Each entrée is served with a choice of two sides. The sides include
UnFries™ (baked French fries), steamed broccoli, mashed sweet potatoes, black beans, brown rice and steamed vegetables. Entr ees are priced
between $5.99 and $12.99.

Fired-Up Burgers

There are several choices of topping-laden burgers including the Better Bacon Cheeseburger which has reduced fat American cheese and
turkey bacon and is served on a whole-grain bun. Each burger option can be prepared with a patty made with any of 85% lean beef, turkey,
bison or vegetarian. Fired -Up Burgers are priced between $3.99 and $5.99.

UnFries™

Nearly 60% of all orders include our version of the classic french fries. Unlike regular french fries that are typically cooked by deep fry ing in
oil, UnFries™ are baked in a convection oven, resulting a crisp wholesome taste that enhances the flavor o f the potato. UnFries ™ are trans
fat-free and have fewer calo ries and lower saturated fat content than regular french fries. UnFries ™ cost $1.59 and can be bundled with a
fountain drink or bottled water and added to any meal for $2.29.

Wraps

Some of our best sellers are our Chicken Meatball Marinara and our BBQ Steak Tip and Broccoli wraps. Each is s erved in a natural
whole-grain wh ite or wheat tortilla. Wraps come in two sizes and are priced between $3.99 and $6.99.

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UBowls

The newest addition to the menu, the UBowl, has three options, each of which contains either chicken or tofu marinated wit h l ight, flavorfu l
sauces and served with steamed vegetables over whole-grain b rown rice. A small UBo wl costs $4.99 and a large UBo wl costs $6.49.

Signature Sandwiches

Our chef has developed several unique combinations served on either a ciabatta bread, a baguette or wheat berry bread. Signat ure sandwiches
are priced between $4.99 and $5.99.

Specialty Salads

Our Bistro Salad has organic field greens, grape tomatoes, feta, walnuts, cranberries and onion, and it is tossed with bluebe rry-po megranate
vinaigrette. Other specialty salads can be topped with chicken breast. Salads are priced between $4.99 and $6.9 9.

Smuuthies™ and Prolattas™

Made with freshly fro zen fru it, juice and yogurt, these items account for a significant co mponent of the menu mix. Pro lattas ™ co mbine a fruit
base with a proprietary protein blend to create a meal in a cup. Smuuthies ™ are priced at $4.29, and Pro lattas ™ are $4.99.

The nutritional values of each item are pro minently listed in a take-away nutrition guide displayed on the front counter, wh ich contains
informat ion about calories, protein, fiber, carbohydrates, good fat an d saturated fat.

Growth Strategy

We plan to further expand our franchising network as well as open other co mpany -owned stores. We have a two-part franchising strategy. We
will award franchises both on an individual basis in the Boston area and to area d evelopers outside of Boston.

Franchise sales are led by our chairman and chief executive officer, George Naddaff. In addition, we have entered into a serv ices
agreement with George Foreman, the well-known wo rld heavyweight boxing champion, businessman and celebrity, to be a spokesperson for
the brand as well as to assist in generating interest in franchising the UFood concept. Mr. Foreman has a successful track re cord as a
spokesperson for various consumer brands. Moreover, we believe that Mr. Foreman ’s name is strongly associated with healthy eating and
lifestyle in a way that is attractive to both men and women. Under the terms of an agreement, Mr. Foreman has agreed to lend his name and
likeness and assist in marketing and branding efforts of UFood restaurants. Mr. Foreman is expected initially to be involved in helping to sell
franchises. Once we have mo re than 50 stores opened, he is expected to shift his focus to generating publicity through person al appearances in
UFood restaurants and traditional media. The agreement expires in June 2011.

Pursuant to the terms of our agreement with George Foreman Ventures (GFV), we agreed to issue shares of our co mmon stock to G FV and to
pay GFV a royalty equal to 0.2% of our aggregate net sales. For mo re informat ion, see ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations —Fiscal Year Ended December 30, 2007, Co mpared to Fiscal Year Ended December 31, 2006—Results of
Operations—Costs and Expenses‖ above and ―Description of Securities—Co mmon Stock‖ and ―-Reg istration Rights‖ below.
We will allow franchisees to build single units in the Boston metro area that will co -exist alongside those of other franchisees as well as
company-owned units. The proximity to our headquarters of our Boston area restaurants will enable management to closely monitor these
single-unit franchises. In addition, the simultaneous construction of several franchises in the Boston area would allow for more rap id growth of
the Boston market. To date, two UFood franchises have been sold in the Boston area.

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Outside of the Boston area, we plan to award only mult i-unit territories to sophisticated, experienced o wner-operators. These operators will
sign area development agreements wherein they will obtain an exclusive territory in which to build UFood outlets. U pon signing these
agreements, the operators will pay an upfront fee for the rights to their territory, and they will then be bound to a timelin e over which they must
open the units. Currently we have six area developers who have committed to build ing and o perating 68 franchise locations (including 3
locations currently open and operating) in six areas:

        Dallas-Fort Worth International Airport and other airports in Texas
        Naples, FL
        Sacramento, CA
        San Jose, CA
        Chicago
        Five-State Region (MT, CO, UT, W Y, ID)

In addition to the six area develop ment agreements described above, we have one single -unit franchisee in the Boston area.

We have six area developers in the areas other than Boston. We seek to sell franchises to sophisticated, experienced restaurant operators who
already know their markets, having operated other restaurants in their territories. We believe these sophisticated operators will enable our
concept to grow rapidly and help establish the UFood brand across the country. We do not allo w sub -franchising. A ll franchise agreements are
directly with us.

We also intend to grow our store base through the building of co mpan y-owned stores. Our current plan calls fo r appro ximately 10% of our
stores to be company-owned. The primary purpose of this effort is to ensure that management understands how the stores evolve and operate
and has its own ―kitchen‖ to test new initiat ives (menu items, loyalty programs etc.) in front of real customers. We have already instituted a
loyalty program that utilizes magnetically encoded discount loyalty cards with our repeat customers. The program provides members with a 3%
return on their purchases a free b irthday meal and discount coupons. Ou r database contains the names of over 20,000 loyalty card users. The
loyalty card provides us with a direct communications channel with our customers, drives sales and allows us to track consume r behavior. To
leverage the current geographical concentration of UFood stores in the Boston area, we plan to locate the new company -owned stores in the
New England area, close to our headquarters.

We have developed three prototype stores that we believe are suitable to differing site and demographic conditions: 1) 2,000 – 2,500 sq. foot
units that feature a co mbination of a restaurant and retail store (currently one store); 2) 1,500 – 2,500 sq. feet units that feature only the
restaurant (due to close proximity to other health-oriented food stores) (currently six stores); and 3) 800 – 1,000 sq. feet units that are kiosks in
airports, bus and train stations, hospitals and other high-traffic locations (currently one store). We cannot currently estimate the proportion o f
our planned future locations that will fall in each of these categories.

Franchise Operati ons

We have pursued a broad-based franchising program since 2004. We continue to extend our franchise relationships beyond our current
franchisees. We believe we can grow more quickly through the sale of franchises than by building and operating Co mpany -owned stores.
Pursuant to federal and state regulations, we annually update our Uniform Franchise Offering Circu lar, wh ich includes a disclosure statement, a
franchise agreement and an area develop ment agreement, to facilitate sales of additional franchise and area development licenses.

An area development agreement grants the area developer the right to acquire franchises to develop, own and operate a specifi ed nu mber of
UFood outlets at locations approved by us within a defined geographic area. Area development agreements include a development schedule
which lists the total number of outlets the area developer must develop, the area(s) in which they must be deve loped and the number of units
that must be opened by specified dates for each outlet. Each unit when co mpleted beco mes subject to an individual franchise a greement in the
standard form. We may also enter into individual franchise agreements not covered by an area development agreement. If a franchisee or area
developer fails to develop stores on schedule, we have the right to terminate the agreement, retain up -front franchise fees and develop
company-owned locations or develop locations through new area dev elopers in that market. The typical UFood franchise or area development
agreement requires a $35,000 franchise fee payable for each restaurant, of which a portion is payable at contract signing and the balance at the
opening of the restaurant (the portion payable at signing versus at opening is negotiated.) The up -front portion of the franchise fee is not
refundable under any circu mstances, is not subject to offset, and is payable to the Co mpany regardless of whether the franchi see or area
developer develops any restaurants. For the one single-franchising agreement and the six area development agreements the Co mpany has
entered into, the up-front, non-refundable portion of the franchise fees paid totaled $647,500, and the balance to be paid if all restaurant s are
opened is $1,750,000. In addit ion to the franchisee fee, area developers and single franchisees are required to pay royalties of 5.0% of gross
sales and contribute 1.5% of gross sales to a system-wide advertising fund. The area developer or franchisee is also required to spend 1.5% of
gross sales on local market ing. Each franchise agreement generally provides for a term of 15 years and gives the franchisee t wo, five-year
renewal options.

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To ensure that the UFood concept is consistent across all geographic areas, we have fu lly built out the corporate support sys tem for franchisees.
New franchisees get assistance on all levels, including build -out specifications, operational guidance and menu and recipes. W e also provide a
five week train ing program for each of our new franchisees and employees prior to new store openings.

Suppliers

We strive to obtain consistent high-quality ingredients at competitive prices fro m reliable sources. To obtain operating efficiencies and to
provide fresh ingredients for our food products while obtaining the lo west possible ingredient prices for the required qualit y, we purchase over
70% o f our restaurant supplies fro m a single supplier, US Foodservice, Inc. The balance of our restaurant supplies come fro m local vegetable
and bread suppliers. Most food, produce and other products are shipped fro m US Foodservice ’s distribution facility directly t o our restaurant
locations two to three times per week. We do not maintain a central food product warehouse or commissary. We do not have any long -term
contracts with our food suppliers. In the past, we have not experienced delays in receiving our food and beverage inventories , restaurant
supplies or equip ment. The recent volatility in food prices has not significantly affected the availab ility or delivery of the food supplies we
purchase to date, but could do so in the future.

Approximately 70% o f the sports nutrition and vitamin p roducts we sell are purchased fro m t wo dis tributors, KCF Nutritio n Distributors of
Milford, Connecticut, and Dynamic Marketing of Cranston, Rhode Island.

Competiti on

The restaurant industry is intensely competit ive. There are many different sectors within the restau rant industry that are distin guished by types
of service, food types and price/value relat ionships. We position our restaurants in the h ighly co mpetit ive and frag mented fa st-casual sector of
the restaurant industry. In addit ion to co mpeting against other fast-casual restaurants, we co mpete against other sectors of the restaurant
industry, including fast-food restaurants and casual dining restaurants. The number, size and strength of competitors within each sector vary by
region. We co mpete based on a nu mber of factors including taste, product quality, speed of service, value, name recognition, restaurant
condition and ambiance, location and customer service. A lthough we believe we co mpete favorably with respect to each of these factors, many
of our d irect and indirect competitors are well-established national, regional or local chains and have substantially greater financial, market ing,
personnel and other resources.

Customers seeking a healthier meal at a foodservice establishment, have several choices available to them throughout the country.
However, we are not aware of any national chains of health-oriented quick-service restaurants that geographically cover the whole Un ited
States or even a number of states.

The following is a list of restaurants that position themselves as healthier and co mpete in the qu ick -serve environ ment, mostly on a local level.
The largest chain has six stores.

        Better Burger (New York City)
        Energy Kitchen (New York City)
        The Pu mp (New York City)
        Topz (California)
        Evo’s (California, Florida, Nevada, North Carolina)
        b. good (Boston)
        Soma Grill (Arizona)
        Healthy Bites (Florida)

Of the restaurants listed above, only b. good operates in the Boston area. A number of fast food chains and local eateries op erating in the
greater Boston area offer similar products and services as UFood Grill but without the emphasis on health. b. good o perates four locations in
the Boston area. In addit ion to b. good, there are several vegetarian and raw vegan restaurants in the Boston area as well as several health food
stores. These outlets offer healthy food but not in a quick-serve environ ment.

We also compete with these and many other retail establishments for desirable site locations. See ―Risk Factors—There is intensive
competition in our industry, and we will be co mpeting with national and regional chains and independent restaurant operators. ‖

                                                                         54
Empl oyees

As of September 28, 2008, we emp loyed approximately 50 full-time associates (defined as associates who average 35 hours or more per week),
of who m 16 were emp loyed in general or ad ministrative functions, principally at our headquarters in Newton, Massachusetts. In addition, we
emp loyed approximately 90 part-time associates in our six co mpany-operated restaurant locations in the Boston area as managers and
associates. We do not have any collective bargaining agreements with our emp loyees and consider our employee relations to be good. We place
a priority on staffing our restaurant and store operations with skilled associates and invest in training programs intended to ensure the qu ality of
our operations.

Trademarks

We have registered the following trademarks with the United States Patent and Trademark Office: ―Unfries‖, ―UFood Grill‖ (pending),
―Proccino‖, ―KnowFat! Lifestyle Grille,‖ ―KnowFat,‖ ―Prolatta,‖ and ―LoFat KnowFat‖. We believe that our trademarks and other proprietary
rights have significant value and are important to the marketing of our restau rant concept. See ―Risk Factors—Our success and competitive
position depends on our ability to protect our proprietary intellectual property.‖

Seasonality

Our business is not significantly seasonal.

Government Regulation

Our restaurants are subject to licensing and regulation by state and local health, sanitation, safety, fire and other authorities, including licensing
and permit requirements for the sale of food. To date we have not experienced an inability to obtain or maintain any necessar y licenses, permits
or approvals. In addition, the development and construction of additional units are also subject to compliance with applicab le zoning, land use
and environmental regulations. See ―Risk Factors—Our food service business and the restaurant industry are subject to extensive government
regulation.‖

Environmental Regulation

Our business is subject to federal, state and local environmental laws and regulations concerning the discharge, storage, han dling, release and
disposal of hazardous or toxic substances. These environmental laws provide for significant fines, penalties and liabilities, somet imes without
regard to whether the owner or operator of the property knew of, or was responsible for, the release or presence of the hazar dous or toxic
substances. Third parties may also make claims against owners or operators of properties for personal in juries and property damage as sociated
with releases of, or actual or alleged exposure to, such substances. To date, our stores have not been the subject of any material environ mental
matters. See ―Risk Factors—We have not conducted a comprehensive review o f all the potential environmental liabilities at our properties.‖

                                                                  PROPERTIES

Our corporate headquarters, consisting of appro ximately 3,278 square feet, are located in Newton, Massachusetts. We occupy our headquarters
under a lease that expires in 2013, with an option to extend the lease for an additional seven years. We lease each of our re staurant facilities.
Our leases expire on various dates through December 2016. The leases require us to pay our share of the operating expenses of the leased
properties, including taxes, utilit ies and insurance.

At December 30, 2007, future min imu m payments under non -cancelable leases are as follows:

                                                Year ending December 31,

                                                           2008                                                   $         727,000
                                                           2009                                                             632,000
                                                           2010                                                             602,000
                                                           2011                                                             616,000
                                                           2012                                                             633,000
                                                         Thereafter                                                       1,270,000
                                                                                                                  $       4,480,000


                                                                         55
                                                          LEGAL PROCEEDINGS

We are subject to legal p roceedings and claims which arise in the normal course of business. Although there can be no assuran ce as to the
ultimate outcome, we generally have denied, or believe we have a meritorious defense and will deny, liability in all s ignificant cases pending
against us, including the matters described below, and we intend to defend vigorously each such case. Based on informat ion cu rrently availab le,
we believe the amount, or range, of reasonably possible losses in connection with the a ctions against us, including the matters described below,
in excess of established reserves, in the aggregate, not to be material to our consolidated financial condition or cash flo ws . However, losses
may be material to our operating results for any particular future period, depending on the level of our income for such period.

BAA Boston, Inc., Default Claim

KFLG Watertown, Inc. (KFLG) d/b/a KnowFat and or KnowFat Franchise Co mpany, Inc., our wholly -owned subsidiary, received a Default
Letter and Notice of Liquidated Damages on September 28, 2007, as well as several other fo llow up notices of default (collectively, the Defau lt
Letters) fro m BAA Boston, Inc. (BAAB) claiming certain defaults under KFLG’s Sub lease Agreement with BAAB for retail premises (the
Premises) at Logan International Airport in Boston, Massachusetts (the Sublease Agreement). The Defau lt Letters claim that KF LG is in
default of its obligations under the Sublease Agreement due to, among other things, KFLG’s failure to timely open the Premises for business.
The Default Letters demand that KFLG pay $104,000 in liquidated damages to BAAB and pay legal fees and expenses of BAAB in th e amount
of $48,000. This matter is only in the claim stage and no legal proceeding has been commenced. We believe we made the subtenant
improvements on a timely basis and have denied BAAB’s allegations that we are in default of the Sublease Agreement. In t he event we are
unable to resolve this matter, BAAB has indicated it will seek to enforce any and all o f its rights and remedies available un der the Sublease
Agreement including the possible termination of the Sublease.

Subcontractors’ Claims

In connection with the build-out of the Premises, several of the subcontractors that performed work at the Premises have claimed that the
general contractor failed o r refused to pay amounts due them. Accordingly, such subcontractors asserted mechanic ’s liens totaling $253,431
(the Lien A mounts) against our leasehold interest in the Premises. In April 2008, pursuant to the te rms of the Sublease Agreement, we obtained
target lien dissolution bonds in order to dissolve the liens against our leasehold interest in the Premises. The lien bond su rety required cash
collateral in the amount of 120% of the Lien A mounts. The general con tractor on the project is responsible for the amounts claimed by the
subcontractors and was recently forced into involuntary bankruptcy. We have paid the general contractor and intend to assert claims against the
general contractor for, among other things, the amounts claimed by the subcontractors. There can be no assurance; however, that we will be
able to recover any amounts fro m the general contractor.

                                                                       56
                                                  DIRECTORS, EXEC UTIVE OFFICERS,
                                                 PROMOTERS AND CONTROL PERS ONS

Our executive officers and directors are as follows:

                 Name                Age      Position

       George Naddaff                 78      Chief Executive Officer and Chairman of the Board of Directors

       Charles Cocotas                73      President and Chief Operat ing Officer, Director

       Glenn Davis                    54      Chief Financial Officer

       Eric Spit z                    38      Executive Vice President of Business Development

       Robert C. Grayson              63      Director

       Jeffrey Ross                   63      Director

       Mark Giresi                    50      Director

Background of Officers and Directors

George Naddaff has been our Chairman and Chief Executive Officer since the merger with KnowFat on December 18, 2007. Prior to the
merger Mr. Naddaff was KnowFat ’s Co-Chief Executive Officer since February 2004, its CEO since September 2007 and its Chairman of the
Board since March 2004. Fro m February 1986 to February 2004, he was Ch ief Executive Officer o f Business Expansion Capital, Inc., an
investment firm located in Newton, Massachusetts. From 1997 to 2001, he held various management positions (including acting C hief
Executive Officer) at Ranch*1, Inc., a franchisor of quick service restaurants with its headquarters in New Yo rk, New York.

Charles A. Cocotas has been our President and Chief Operating Officer and a d irector since the merger with KnowFat on December 18, 2007.
Mr. Cocotas joined KnowFat as a consultant in May 2007. In September 2007 he was appointed as KnowFat ’s President and Chief Operat ing
Officer. Fro m 1999 to 2007, Mr. Cocotas was principal o f the Charles A. Cocotas Restaurant Consulting firm in Massachusetts. He is an
experienced executive with more than 35 years experience in the restaurant industry, which included the launch of start -up ventures as well as
turn-arounds with established corporations operating both company and franchise restaurants.

Eric Spitz has been our Executive Vice President of Business Development since the merger. He became KnowFat ’s Executiv e Vice President
of Business Development in September 2007 and was KnowFat’s Co-Chief Executive Officer and President fro m February 2004 to September
2007 and a d irector of KnowFat fro m March 2004. Mr. Sp itz held the post of CEO for Trakus, a sports technology company that h e founded in
1997, until joining the KnowFat management team in 2004. Prior to Trakus, he worked in various capacities f or Information Resources, Inc.
Mr. Sp itz holds an MBA fro m MIT ’s Sloan School o f Management and a B.A. fro m the University of Pennsylvania.

Glenn Davis jo ined KnowFat as its Ch ief Financial Officer in October 2007 and became our Ch ief Financial Officer up on the merger. Most
recently, Mr. Davis has served as CFO of several emerg ing growth co mpanies, including Multilayer Coating Technologies (from A ugust 2006
through April 2007), a former division of Polaro id Corp., Smart Bargains, Inc. (fro m July 2005 to Dec ember 2005) and North A merican
Midway Entertain ment Corp. (fro m November 2004 to July 2005), a provider of carnival rides, food and beverage services at mor e than 160
venues throughout North America. Previously, Mr. Davis was CFO of Ho meruns.com (fro m 2000 to 2002), an on-line grocery shopping and
delivery service. Bet ween his CFO positions, Mr. Davis has provided consulting services to various clients on financial and a ccounting matters.
Mr. Davis holds an MBA fro m the A mos Tuck School of Business Administ ration at Dart mouth Co llege and a BA in economics fro m DePauw
University and is a Certified Public Accountant.

                                                                        57
Robert C. Grayson has been a director of KnowFat since 2004 and a directo r of UFood since the merger. Since 1992 M r. Grayson has been
President and Chief Executive Officer o f RC Grayson and Associates, a retail -oriented consulting firm in New York City. Mr. Grayson has
many years of experience in the retail industry, and curren tly serves as a director of St. John’s Knits, Inc., Kenneth Cole an d Lillian August
Designs, Inc..

Jeffrey Ross has been a director of KnowFat since 2005 and a d irector of UFood since the merger. Since 1999 he has been Managing Partner
of RossFialkow Capital Partners, an investment advisory firm specializing in private equity and merger and acquisition transa ctions. From
January 1997 to July 1997, he was President and Ch ief Executive Officer of Hearthstone Assisted Liv ing, a chain of assisted living facilities in
Houston, Texas.

Mark Giresi has been a director of KnowFat since December 6, 2007, and a director of UFo od since the merger. Fro m February 2000 until
May 2008, Mr. Giresi wo rked for Limited Brands where, as Executive Vice President, he was responsible for the retail operatio n of Victoria’s
Secret, Bath & Body Works, Express and The Limited, as well as the Co mpany’s real estate, store design and construction and loss prevention
functions. Most recently he led the strategic growth o f Victoria’s Secret and Bath & Body Works outside of the United States. Prior to Limited
Brands, Mr. Giresi spent almost 16 years at Burger King Corporation where he held several executive positions including Senior Vice
President of U.S. Franchise Operations and Development and Worldwide General Counsel. Mr. Giresi holds a Bachelor of Sciences degree in
accounting fro m Villanova University and a Juris Doctorate of Law degree fro m Seton Hall Law School.

Section 16(a) Beneficial Ownershi p Reporting Compliance

We do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act and therefore our directors , executive officers
and significant shareholders are not subject to beneficial ownership reporting under Section 16(a) o f the Exchange Act.

Nomi nations to the Board of Directors

Stockholders may reco mmend individuals to the No minating and Corporate Govern ance Co mmittee of the Board of Directors for consideration
as potential director candidates by submitting their names, together with appropriate biographical informat ion and background materials, to the
No minating and Corporate Governance Co mmittee, c/o Co rporate Secretary, UFood Restaurant Group, Inc., 255 Washington Street, Su ite 100,
Newton, MA 02458.

Code of Ethics

We have a Code of Ethics that governs all of our emp loyees, includ ing our CEO, CFO, principal accounting officer or persons p erforming
similar functions. We will provide a copy of our Code of Ethics free o f charge to any person upon written request to us at the f ollowing
address: 255 Washington Street, Suite 100, Newton, MA 02458 Attn: Ch ief Financial Officer

Board of Directors

The Board of Directors currently consists of five members. Directors serve until their successors are duly elected or appointed. On February 12,
2008, the Board of Directors designated a Co mpensation Committee, Audit Co mmittee and No minating and Corporate Govern ance Co mmittee
of the Board. Mark Giresi, Robert Grayson and Jeffrey Ross were designated as members of the Co mpensation Committee, Mark Gir esi and
Charles Ramat (who resigned as a director on February 29, 2008) were designated as members of the Audit Committee , and Robert Grayson,
Charles Ramat and Jeffrey Ross were designated as members of the No minating and Co rporate Governance Co mmittee of the Board.

Audi t Commi ttee Fi nancial Expert

Our Board o f Directors has determined that there is no financial expert serving on our Audit Co mmittee. Since we are not a listed issuer as that
term is defined in Rule 10A-3 under the Exchange Act, we are not currently required to have a financial expert serving on our Audit
Co mmittee.

                                                                       58
                        SECURITY OWNERS HIP OF CERTAIN B EN EFICIAL OWNERS AND MANAGEMENT

Security Ownershi p of Certain Beneficial Owners and Management

The following tables set forth certain informat ion regarding t he beneficial ownership of our co mmon stock as of November 17, 2008, by (i)
each person who, to our knowledge, owns mo re than 5% of the co mmon stock; (ii) each of our directors and executive officers; and (iii) all of
our executive o fficers and directors as a group. Shares of co mmon stock subject to options or warrants currently exercisable or exercisable
within 60 days of that date are deemed outstanding for computing the share ownership and percentage of the person holding suc h options and
warrants, but are not deemed outstanding for computing the percentage of any other person. Un less otherwise indicated in the footnotes to the
following tables, each person named in the table has sole voting and investment power and that person ’s address is c/o UFood Res taurant
Group, Inc., 255 Washington Street, Suite 100, Newton, Massachusetts 02458.

                                                                                                          Amount and
                                                                                                           Nature of              Percent
                                                                                                           Beneficial                of
                              Name and Address of Beneficial Owner                                         Ownershi p           Class +

George Naddaff (1)                                                                                              3,645,659                    9.9 %
Charles A. Cocotas (2)                                                                                            450,918                    1.3 %
Eric Spit z (3)                                                                                                   945,032                    2.7 %
Robert C. Grayson (4)                                                                                             135,811                      *
Jeffrey Ross (5)                                                                                                  181,139                      *
Mark Giresi (6)                                                                                                    35,328                      *
Glenn Davis (7)                                                                                                    21,360                      *
                                              (1)-(7)
Directors and Executive Officers as a group                                                                     5,415,247                   14.4 %

Alan Antokal (8)                                                                                                2,373,029                    6.8 %
                                                    (9)
Spencer Trask Ventures, Inc., and its affiliates                                                                3,698,584                   10.5 %
  535 Mad ison Avenue
  New York, New Yo rk 10022

Kevin Kimberlin (10)                                                                                            3,698,584                   10.5 %
  Spencer Trask Ventures, Inc.
  535 Mad ison Avenue
  New York, NY 10022



*      Less than one percent
+
    Based on 34,818,490 shares of common stock issued and outstanding as of November 17, 2008.

        (1)   Includes 1,600,012 shares of common stock beneficially owned by Mr. Naddaff. Also includes 184,533 shares of common stock
              issuable upon exercise of warrants currently exercisable or exercisable within 60 days and 1,861,114 shares of common stock
              issuable upon exercise of options currently exercisable or exercisable within 60 days. Does not include 638,886 shares of co m mon
              stock issuable upon exercise of options granted to Mr. Naddaff which will not be exercisable within 60 days.
        (2)   Consists of 450,918 shares of co mmon stock issuable upon exercise of options currently exercisable or exercisable within 60 d ays.
              Does not include 254,756 shares of co mmon stock issuable upon exercise of options granted to Mr. Cocotas which will no t be
              exercisable within 60 days.
        (3)   Includes 774,888 shares of common stock beneficially owned by Mr. Spitz. A lso includes 170,144 shares of common stock
              issuable upon exercise of options currently exercisable or exercisable within 60 days. Does not include an addit ional 79,856 shares
              of common stock issuable upon exercise of options granted to Mr. Spit z which will not be exercisable within 60 days.
        (4)   Includes 74,815 shares of co mmon stock beneficially owned by M r. Grayson. Also includes 58,493 shares of common stock
              issuable upon exercise of options or warrants currently exercisable or exercisable within 60 days. Does not include an additional
              69,672 shares of common stock issuable upon exercise of options granted to Mr. Grayson pursuant to the Co mpany ’s
              Non-Employee Director Co mpensation Plan which will not be exercisable within 60 days.
        (5)   Includes 122,646 shares of common stock beneficially owned by Mr. Ross. Also includes 58,493 shares of co mmon stock issuable
              upon exercise of options or warrants currently exercisable or exercisable with in 60 days. Does not include an additional 69,6 72
              shares of common stock issuable upon exercise of options granted to Mr. Ross pursuant to the Company ’s Non-Emp loyee Director
              Co mpensation Plan which will not be exercisable with in 60 days.
59
(6)    Includes 35,328 shares of common stock issuable upon exercise of options or warrants currently exercisable or exercisable wit hin
       60 days. Does not include an additional 69,672 shares of common stock issuable upon exercise of options granted to Mr. Giresi
       pursuant to the Co mpany’s Non-Emp loyee Director Co mpensation Plan wh ich will not be exercisable within 60 days.
(7)    Includes 15,360 shares of common stock issuable upon exercise of options or warrants currently exercisable or exercisable wit hin
       60 days. Does not include an additional 34,640 shares of common stock issuable upon exercise of options granted to Mr. Davis
       which will not be exercisable within 60 days.
(8)    Includes 2,307,677 shares of common stock beneficially owned by Mr. Antokal. Also includes 65,352 shares of common stock
       issuable upon exercise of options or warrants currently exercisable or exercisable within 60 days.
(9)    Based upon information provided to us by sources we believe are reliable, this includes 2,400,000 shares of common stock held
       by Spencer Trask Investment Partners, LLC, 940,000 shares of common stock held by Spencer Trask Breakthrough Partners LLC
       and 358,584 shares of co mmon stock is suable upon exercise of warrants init ially issued to Spencer Trask Ventures Inc. as
       placement agent and currently held by Spencer Trask & Co. wh ich are currently exercisable or exercisable within 60 days. Kevin
       Kimberlin is the beneficial owner of the securities held by the forgoing Spencer Trask entit ies.
(10)   Consists of 3,698,584 shares held by the Spenser Trask entities described in footnote (9) above.

                                                               60
                                                      EXEC UTIVE COMPENS ATION

Summary Compensati on Table

The table below sets forth, for the last two fiscal years, the co mpensation earned by our Chief Executive Officer and the only other highly
compensated executive officer who received annual compensation in excess of $100,000. Each o f the named executive officers is entitled to
certain payments in connection with resignation, retirement or other termination, as described mo re fu lly under the heading ―Agreements with
Executive Officers and Consultants.‖

                                                                                          Non-Equity    Nonqualified
      Name and                                                                             Incentive      Deferred       All Othe r
      Principal                                                      Stock      Option        Plan      Compensation      Annual
      Position(s)           Ye ar                           Bonus   Awards      Awards   Compensation     Earnings     Compensation    Total
        ( a )              ( b )      Salary( c )           ( d )    ( e )       ( f )       ( g )         ( h )           ( i )       ( j )
George Naddaff,              2007 $             221,045 $       -0- $   -0- $ 136,879 $            -0- $          -0- $       22,840 $ 357,924
Chairman and CEO             2006 $             209,257 $       -0- $   -0- $      -0- $           -0- $          -0- $      125,000 $ 334,257

Eric Spitz,                  2007 $             196,391 $ 25,000 $      -0- $     34,219 $         -0- $          -0- $           0 $ 255,610
Executive Vice President
of Business Development      2006 $             200,924 $       -0- $   -0- $        -0- $         -0- $          -0- $           0 $ 200,924


(1)         The amount shown for option awards (column (f)) is based upon the estimated fair value of stock options granted to the named
            executive and represents the amount of compensation expense we recognized in our consolidated financial statements for the
            indicated fiscal year. The fair value of the stock option award(s) was determined using a Black Scholes option pricing model and the
            assumptions for expected option term, volatility of our common stock, risk-free interest rate and expected annual dividend yield
            disclosed in Note 11, Stock -Based Compensation, of the Notes to our 2007 Consolidated Financial Statements included elsewhere in
            this prospectus.

(2)         All Other Annual Co mpensation (column (i)) earned by Mr. Naddaff in 2007 represents the amount of expense we recognized in ou r
            2007 Consolidated Financial Statements for the repricing of 184,533 warrants issued to Mr. Naddaff in 2006 for his personal
            guaranty of KnowFat’s obligations to TD Banknorth, N.A. Immed iately prior to the consummat ion of the merger with KnowFat, the
            exercise price o f all outstanding KnowFat warrants was reduced to $1.00 and such exercise price was not affected by the conve rsion
            ratio in the merger.

(3)         All Other Co mpensation earned by Mr. Naddaff in 2006 represents amounts paid to him for the sale of franchise locations. (See
            Note 15, Related Party Transactions of the Notes to our 2007 Consolidated Financial Statements.)

The salaries of Mr. Naddaff and Mr. Spit z are currently $300,000 and $175,000, respectively.

Agreements with Executi ve Officers and Consultants

On May 1, 2004, KnowFat entered into a Founders ’ Agreement with each of (i) George Naddaff, our current Chairman and Chief Executive
Officer and (ii) Eric Sp itz, our current Executive Vice President of Business Development (each, a Founder). Under the Founde r’s Agreements,
all 1,000,000 shares of KnowFat co mmon stock granted to Mr. Naddaff have vested and all 500, 000 shares of KnowFat co mmon stock granted
to Mr. Spit z have vested.

                                                                        61
KnowFat entered into an emp loy ment contract on October 15, 2007, with each Founder that provides: (i) the term o f each employ ment
agreement is for three years; (ii) the base salary for Mr. Naddaff and Mr. Sp itz is $300,000 and $175,000, respectively, plus benefits; (iii) Mr.
Naddaff and Mr. Spit z were granted options to purchase 1,500,000 and 250,000 our shares, respectively, under the 2007 Plan; and (iv) if a
Founder’s employ ment is terminated by KnowFat without cause, or by the Founder as a result of a co nstructive termination by KnowFat, or as
a result of the Founder’s death or disability, then KnowFat is obligated to pay severance (consisting of salary and benefits as in effect at the
time o f termination) to the Founder (or the Founder’s legal representatives) for a period equal to the lesser of 12 months or the then -remain ing
balance of the employ ment term. The options referenced above have an exercise price of $1.00 per share, have a term of ten ye ars and vest over
a three-year period as follows: (A) Mr. Naddaff’s options to purchase (i) 500,000 shares vested upon the grant of the options and (ii) 1,000,000
shares vest in equal monthly amounts of approximately 27,778 shares over a three year period through December 17, 2010; an d ( B) M r. Spit z’s
options to purchase (i) 125,000 shares vested upon the grant of the options and (ii) 125,000 shares vest in equal monthly amounts of
approximately 3,472 shares over a three year period through December 17, 2010. If Mr. Spit z terminates his employ ment volu nta rily at a point
more than 30 days after the effective date of registration statement by which the securities sold in the Offering are reg iste red for resale, Mr.
Spitz is entitled to the same severance benefits. In addition to the foregoing, upon our consummation of the sale of any franchise restaurant, we
will pay Mr. Naddaff a fee of $10,000. To the extent any franchise transaction is a part of an Area Develop ment Agreement , th e fee will be
payable to Mr. Naddaff upon consummation of the franchise sale as follows : (i) $5,000 in cash and (ii) the remaining portio n in a number of
shares of our co mmon stock having an aggregate value of $5,000 on the date such fee is due. Both employ ment agreements provid e for
severance (consisting of base salary and benefits continuation) for a period of up to 12 months upon termination of the executiv e without cause.

The Founders and Low Fat No Fat Gourmet Café, Inc. (LFNF) are parties to a Joint Venture Agreement dated January 26, 2004. Under the JV
Agreement, LFNF granted KnowFat the exclusive right to franchise the concept of retail outlets offering food service featuring low-fat,
low-carbohydrate and low-calorie food items, selected beverages and nutritional products to the general public and agreed to contribute all its
trademarks, copyrights, know-how, trade secrets and other intellectual property to KnowFat. As consideration, KnowFat issued 545,454 shares
of its common stock to LFNF. The JV Agreement also provides that LFNF has the right to send one attendee to meetings of the Board of
directors as an observer.

On February 12, 2008, the Board of Directors approved an emp loyment agreement with Mr. Cocotas. The agreement provides: (i) f or an init ial
term of two years; (ii) for a base salary of $200,000 per year, p lus benefits; (iii) that Mr. Cocotas is entitled to receive options to purchase
200,000 shares our common stock, exercisable at $1.00 per share of common stock, which options shall vest in equal amounts on the first day
of each month for twenty-four months follo wing the date of the employ ment agreement; and (iv) that if M r. Cocotas ’ emp loyment is terminated
by him for good reason (as defined in the agreement) or by the Co mpany because of his permanent disability (as defined in the agreement), the
Co mpany is obligated to pay severance, consisting of base salary, for a six month period.

                                                Outstandi ng Equity Awards at Fiscal Year End
                                                              December 30, 2007

                                                                                                   Equity
                                                                                                  Incentive
                                                                                                Plan Awards:
                                                             No. of           No. of              Number of
                                                           Securities        Securities           Securities
                                                          Underlying        Underlying           Underlying
                                                          Unexercised       Unexercised          Unexercised            Option            Option
                                                          Options (#)       Options (#)           Unearned             Exercise          Expiration
                         Name                             Exercisable      Unexercisable           Options              Price              Date
George Naddaff                                                   500,000         1,000,000(1)                  -0- $              1.00    Dec. 17, 2017
Eric Spitz                                                       125,000           125,000(1)                  -0- $              1.00    Dec. 17, 2017

        (1)      The vesting schedule for the unexercised shares is outlined in the section titled ―Agreements with Executive Officers and
                 Consultants‖.

2004 Stock Opti on Plan

KnowFat did not grant any options or other stock awards under the 2004 Stock Option Plan to any named executive officers in 2007 or 2006.

2007 Equity Incenti ve Plan

Our Board of Directors and stockholders adopted the 2007 Equity Incentive Plan on August 17, 2007, which reserves a total of 3,000,000
shares of our co mmon stock for issuance under the 2007 Plan. If an incentive award granted under the 2007 Plan exp ires, t erminates, is
unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and
the surrendered shares will become availab le fo r further awards under the 2007 Plan.
62
Shares issued under the 2007 Plan through the settlement, assumption or substitution of outstanding awards or obligations to grant future
awards as a condition of acquiring another entity are not expected to reduce the maximu m nu mber of shares available under the 2007 Plan. I n
addition, the number of shares of common stock subject to the 2007 Plan, any number of shares subject to any numerical limit in the 2007 Plan,
and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding common
stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalizat ion, reclassification, merger, consolidation,
liquidation, business combination or exchange of shares or similar transaction.

On February 12, 2008, our Board of Directors approved an increase in the number of shares of common stock reserved for issuan ce under the
2007 Plan to 6,000,000 shares. The increase was approved by shareholders at a meeting of shareholders on August 29, 2008.

Administration

The Co mpensation Co mmittee of the Board, or the Board in the absence of such a committee, will ad minister the 2007 Plan. Subj ect to the
terms of the 2007 Plan, the Co mpensation Committee has complete authority and discretion to determine the terms of award s under the 2007
Plan.

Grants

The 2007 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock a wards, restricted
stock units, performance grants intended to comply with Section 162(m) o f the In ternal Revenue Code, as amended, and stock appreciat ion
rights, as described below:

      ●      Options granted under the 2007 Plan entitle the grantee, upon exercise, to purchase a specified nu mber of shares from us at a
             specified exercise price per share. The exercise price for shares of common stock covered by an option cannot be less than the fair
             market value of the co mmon stock on the date of grant unless agreed to otherwise at the time of the grant.

      ●      Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation
             committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement
             of one or more performance goals for restricted stock units.

      ●      The compensation committee may make performance grants, each of which will contain performance goals for the award,
             including the performance criteria, the target and maximu m amounts payable and other terms and conditions.

      ●      The 2007 Plan authorizes the granting of stock awards. The co mpensation committee will establish the number of shares of
             common stock to be awarded and the terms applicable to each award, including performance restrictions.

      ●      Stock appreciation rights (SARs) entit le the participant to receive a d istribution in an amount not to exceed the nu mber of shares of
             common stock subject to the portion of the SA R exercised mult iplied by the d ifference between the market p rice of a share of
             common stock on the date of exercise of the SA R and the market price of a share of co mmon stock on the date of grant of the
             SAR.

Duration, Amendment and Termination

The Board has the power to amend, suspend or terminate the 2007 Plan without stockholder approval or ratifica tion at any time or fro m t ime to
time. No change may be made that increases the total number of shares of co mmon stock reserved for issuance pursuant to incen tive awards or
reduces the min imu m exercise price for options or exchange of options for other inc entive awards, unless such change is authorized by our
stockholders within one year. Unless sooner terminated, the 2007 Plan would terminate ten years after it is adopted.

Other Equity Awards

In May 2008, the Board of Directors awarded Mr. Naddaff and Mr. Cocotas non -qualified options to purchase 1,000,000 and 300,000 shares,
respectively, of UFood common stock at an exercise price of $1.23. The options granted to Mr. Naddaff are fully vested a nd expire ten years
fro m the date of grant. The options granted to Mr. Cocotas vest in monthly installments over the remaining term o f h is employ ment agreement
(through January 2010) and expire ten years fro m the date of grant.

                                                                          63
Director Compensation

On February 12, 2008, our Board of Directors approved the following co mpensation for non -employee directors:

      (a)   Each non-emp loyee director shall be granted non-qualified options to purchase 100,000 shares of co mmon stock at an exercise
            price equal to the closing stock price on February 11, 2008. Such grant shall represent a tri -annual retainer for the 2008, 2009 and
            2010 fiscal years. The options granted shall vest weekly over 36 months and shall exp ire February 11, 2018.

      (b)   Each non-emp loyee director who serves as chairman of the Audit, Co mpensation or No minating and Corporate Governance
            committee shall receive an annual grant of non-qualified options to purchase 3,000 shares of co mmon stock. A ll other members of
            each committee shall receive an annual grant of non-qualified options to purchase 2,500 shares of common stock.

KnowFat d id not award stock options or other compensation to its directors in 2006. Our d irectors are reimbursed for reasonable and necessary
out-of-pocket expenses incurred in connection with their service to us, including travel expenses.

                                    CERTAIN RELATIONS HIPS AND RELATED TRANSACTIONS

Directors and Officers of UFood

In May 2006, KnowFat entered into an agreement with George Naddaff, Chairman and CEO, by which Mr. Naddaff received a warrant,
exercisable at $1.00 per share, to purchase up to 184,533 shares of KnowFat co mmon stock in exchange for Mr. Naddaff’s personal guaranty of
KnowFat’s credit obligations to T.D. Ban knorth N.A. of up to $1.75 million. (The current loan balance is $867,078.) The warrant issued to Mr.
Naddaff exp ires in May 2016.

KnowFat’s directors have received stock option grants and reimbursement of certain expenses. See the ―Director Co mpensation‖ section of this
prospectus. Two of our directors are also executive officers. Messrs. Naddaff, Cocotas and Spitz have entered into employment agreements
with us, and each receives co mpensation thereunder. See ―Executive Co mpensation—Agreements with Executive Officers and Consultants ‖
above in this prospectus.

Transacti ons with Former UFood Sharehol ders

Prior to the closing of the merger, we transferred appro ximately $5,539 o f our liabilit ies relating to A xxent Media Corp oration’s former
business to a wholly owned subsidiary, A xxent Media, Inc., and contemporaneously with the closing of the merger split -off A xxent Media,
Inc., through the sale of all of the outstanding shares of A xxent Media, Inc., to Brent Hahn, our former Chief Executive Officer. In connection
with the split-off, 16,200,000 shares of common stock held by Mr. Hahn prior to the merger were surrendered and cancelled without further
consideration.

Transacti ons with the Pl acement Agent and Its Related Parties

We retained the services of Spencer Trask Ventures, Inc., as placement agent in connection with a private offering of up to 8 ,000,000 units of
our securities, plus an over-allotment of 5,000,000 units, at a price of $1.00 per unit, to accredited investors in December 2007. Each unit
consists of one share of co mmon stock and a warrant to purchase one-half, o r 50%, of a share of co mmon stock. We paid the Placement Agent
a co mmission of 10% of the funds raised fro m the investors in the offering p lus an expense allowance of $190,000. In additio n , the placement
agent received warrants to purchase a number of shares of co mmon stock equal to 20% of the shares of common stock included in the units
sold to investors in the offering. As a result of the foregoing, the placement agent was paid co mmissions of $616,000 and rec eived warrants to
purchase 1,232,000 shares of co mmon stock in connection with the first and second clo sings of the offering in December 2007. The p lacement
agent was paid further co mmissions of approximately $478,100 and received warrants to purchase an additional 956,200 shares o f co mmon
stock in connection with the third, fourth and fifth closings of the offering.

The placement agent acted as our placement agent in connection with our sale of $2,000,000 of principal amount of convertible notes, which
was consummated in September and October 2007. We paid $200,000 to the placement agent as cash compensation for such services. In
addition, we issued a warrant to purchase 800,000 shares of common stock at an exercise price of $1.00 per share as additiona l compensation.
The warrants have a term of seven-years and are fully exercisable. We also paid to the placement agent an expense allowan ce of $75,000 in
connection with such placement.

                                                                       64
In August 2007, Spencer Trask Breakthrough Partners (STBP), a party related to the placement agent of the note offerin g, purc hased an
aggregate of 3,600,000 shares of common stock fro m various shareholders who were selling shareholders in our Form SB-2 Reg istration
Statement that was declared effective by the SEC in August 2006. The aggregate purchase price paid to such shareholders by ST BP fo r such
shares was $525,000. In addition, STBP purchased $50,000 of our convertible notes in September 2007, which co nverted to 102,125 shares of
common stock upon the consummation of the December 2007 private offering.

STBP subsequently transferred 2,400,000 shares of common stock to Spencer Trask Investment Partners, LLC, a related party to the placement
agent, and 360,000 shares to an individual employed by the placement agent.

Spencer Trask and its related entities beneficially owned more than 10% of the Co mpany ’s common stock immediately after the reverse merger
and to our knowledge continue to do so.

Board Independence

Although we are not currently subject to the listing standards of any exchange or to the SEC rules pertain ing to director in d ependence, we
believe that Messrs. Grayson and Giresi are ―independent‖ directors as that term is defined by applicable listing standards of the Nasdaq stock
market and SEC ru les, including the rules relat ing to the independence standards of an audit co mmittee and the non -emplo yee definit ion of
Rule 16b-3 pro mulgated under the Exchange Act. Jeffrey Ross, who is not an independent director, is a member of the Co mpensation
Co mmittee and the No minating and Co rporate Governance Co mmittee of the Board of Directors.

                                                         PLAN OF DIS TRIB UTION

The selling stockholders may, fro m t ime to time, sell any or all of their shares of our common stock on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. If the shares of common stock are sold through underwrite rs, the selling
stockholders will be responsible for underwrit ing discounts or co mmissions or agent ’s commissions. All selling stockholders who are
broker-dealers are deemed to be underwriters. These sales may be at fixed prices, at prevailing market prices at the time o f the sale, at varying
prices determined at the time of sale or at negotiated prices. The selling stockholders may use any one or mo re of the fo llow ing methods when
selling shares:

        any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

        ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

        block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as
         principal to facilitate the transaction;

        purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

        transactions otherwise than on these exchanges or systems or in the over-the-counter market;

        through the writ ing of options, whether such options are listed on an options exchange or otherwise;

        an exchange distribution in accordance with the rules of the applicable exchange;

        privately negotiated transactions;

        short sales;

        broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

        a comb ination of any such methods of sale; and

        any other method permitted pursuant to applicable law.

                                                                       65
The selling stockholders may also sell shares under Rule 144 under the Securit ies Act, if available, rather than under this p rospectus.

The selling stockholders may also engage in short sales against the box, puts and calls and other transactions in our securit ies or derivatives of
our securities and may sell or deliver shares in connection with these trades.

Bro ker-dealers engaged by the selling stockholders may arrange for other broker -dealers to participate in sales. Bro ker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker -dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these commissions and discounts to exceed what is customar y in the types
of transactions involved. Any profits on the resale of shares of co mmon stock by a broker-dealer act ing as principal might be deemed to be
underwrit ing discounts or commissions under the Securities Act. Discounts, concessions, commissions and similar selling expen ses, if any,
attributable to the sale of shares will be borne by a selling stockholder. The selling stockholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares if liab ilit ies are imposed on that person under the Se curities Act.

In connection with the sale of the shares of our common stock or otherwise, the selling stockholders may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they ass ume. The
selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out
short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may fro m time to time p ledge or grant a security interest in some or all of the shares of our common stock owned by
them and, if they default in the perfo rmance of their secured obligations, the pledgees or secured parties may offer and sell t he shares of our
common stock from t ime to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, t ransferee or other successors in
interest as selling stockholders under this prospectus.

The selling stockholders also may transfer the shares of co mmon stock in other circu mstan ces, in wh ich case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of commo n stock fro m time
to time under this prospectus after we have filed an amend ment to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act amending the list of selling stockholders to include the pledgees, transferees or other successors in interest as selling
stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circu mstances in
which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purpos es of this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be ―underwriters‖ within the
mean ing of the Securities Act in connection with such sales. In such event, any commissions paid, or any d iscounts or concessions allo wed to,
such broker-dealers or agents and any profit realized on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particu lar offering of the sha res of common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate amount of shares of co mmon stock being offere d and the terms of
the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting
compensation fro m the selling stockholders and any discounts, commissions or concessions allowed or reallo wed or paid t o brok er-dealers.
Under the securities laws of so me states, the shares of co mmon stock may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qu alified for sale in
such state or an exemption fro m reg istration or qualification is available and is comp lied with. There can be no assurance that any selling
stockholder will sell any or all of the shares of our common stock registered pursuant to the shelf registration statement, o f which this
prospectus forms a part.

Each selling stockholder has informed us that it does not have any agreement or understanding, directly or indirectly, wit h a ny person to
distribute our common stock. None of the selling stockholders who are affiliates of broker-dealers, other than the initial purchasers in private
transactions, purchased the shares of common stock outside of the ordinary course of business or, at the time of the purchase of the common
stock, had any agreements, plans or understandings, directly or ind irectly, with any person to distribute the securities.

                                                                        66
We are required to pay all fees and expenses incident to the registration of the shares of common stock. Except as provided f or indemnificat ion
of the selling stockholders, we are not obligated to pay any of the expenses of any attorney or other advisor en gaged by a selling stockholder.
We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilit ies, including liab ilit ies under the
Securities Act.

If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of
common stock, we will file a post-effective amendment to the registration statement. If the selling stockholders use this prospectus for any sale
of the shares of our common stock, they will be subject to the prospectus delivery requirements of the Securit ies Act.

The anti-manipulat ion rules of Regulat ion M under the Securities Exchange Act of 1934 may apply to sales of our co mmon stock and activ it ies
of the selling stockholders, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of t he shares of common
stock to engage in passive market-making activities with respect to the shares of common stock. Passive market making involves transactions
in wh ich a market maker acts as both our underwriter and as a purchaser of our common stock in the secondary market. All of the foregoing
may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market -makin g activities with
respect to the shares of common stock.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the
hands of persons other than our affiliates.

                                                        DES CRIPTION OF S ECURITIES

Authorized Capi tal Stock

Our amended and restated Articles of Incorporation provide for the issuance of 310,000,000 shares of capital stock, of which 300,000,000             are
shares of common stock, par value $0.001 per share, and 10,000,000 are b lank-check preferred stock.

Equi ty Securities Issued and Outstandi ng

As of November 17, 2008, there were issued and outstanding:

         34,818,490    shares of our common stock;

         No shares of preferred stock;

         Options to purchase 4,493,409 shares of our common s tock:

              o    2,820,527 of which options are currently vested and exercisable; and
              o    1,672,882 of which options will vest through May 2011; and

         Warrants to purchase 14,022,680 shares of our common stock, 11,793,514 o f which are cu rrently exercisable.

Descripti on of Common Stock

The holders of our co mmon stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election
of directors. Except as otherwise provided by law, the holders of co mmon stock vote as one class. Generally, all matters to b e voted on by
stockholders must be approved by a majo rity (or, in the case of elect ion of d irectors, by a p lurality) of the votes entitled to be cast by all shares
of co mmon stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any pr eferred stock.
Except as otherwise provided by law, and subject to any voting rights granted holders of any preferred stock, amendments to t he articles of
incorporation generally must be approved by a majority of the votes entitled to be cast by all outstanding shares of common stock. The
amended and restated Articles of Incorporation do not provide for cu mulative voting in the election of directors. Subject to any preferential
rights of any outstanding series of preferred stock created by the Board fro m time to time, t he common stock holders will be entitled to share
pro rata such cash dividends as may be declared fro m t ime to time by the Board fro m funds available. Subject to any preferent ial rights of any
outstanding series of preferred stock, upon liquidation, dissolution or winding up of our Co mpany, the common stock holders will be entit led to
receive pro rata all assets available for d istribution to such holders. There are no preemptive or other subscription rights, conversion rights or
redemption or scheduled installment pay ment provisions relating to shares of common stock. All of the outstanding shares of co mmon stock
are fully paid and nonassessable. Our co mmon stock is traded on the OTC Bu llet in Board under the symbol ―UFFC.OB.‖
67
Descripti on of Preferred Stock

We are authorized to issue 10,000,000 shares of ―blank check‖ preferred stock, $0.001 par value per share, none of wh ich as of the date hereof
is designated or outstanding. Our Board of Directors is vested with authority to divide the shares of preferred stock into se ries and to fix and
determine the relative rights and preferences of the shares of any such series. Once authorized, the dividend or interest rates, conversion rates,
voting rights, redemption prices, maturity dates and similar characteristics of preferred stock will be determined by our Bo a rd of Directors,
without the necessity of obtaining approval of the stockholders.

Descripti on of Options

The options to purchase shares of our common stock under the 2004 Plan were issued to former KnowFat option holders. All of t hese options
became immediately exercisable upon consummat ion of the merger, and no further options will be granted under the 2004 Plan. The options to
purchase shares of our co mmon stock under the 2007 Plan were issued to our executive officers and certain emp loyees. On Febru ary 12, 2008,
our Board of Directors approved an increase in the number of shares of co mmon stock reserved for issuance under the 2007 Plan to 6,000, 000
shares. The increase was approved by shareholders at a meeting of stockholders on August 29, 2008. We may grant options to pu rchase up to
an additional 3,192,288 shares of common stock pursuant to the 2007 Plan. See ―Market fo r Co mmon Equity and Related Stockholder
Matters—Securities Authorized for Issuance under Equity Co mpensation Plans ‖ above and Note 4, Stock -Based Compensation , of Notes
to Consolidated Financial Statements for the three months and nine months ended September 28, 2008 and September 30, 2007 below.

Descripti on of Warrants

There are currently 21,533,267 warrants outstanding representing the right to purchase 14,022,680 shares of our common stock and
include 19,304,101 warrants to purchase 11,793,514 shares that are currently exercisable, as follo ws:

                    (A)               (B)                 (C)                         (D)
                                   Warrants
                                  Included in
                                  Column (A)       Warrants Included          Number of Shares of
                Number of          That Are         in Column (A)               Common Stock                     Exercise
                 Warrants          Currently        Exercisable by              Issuable Upon                    Price per       Expiration
                Outstanding       Exercisable      Cashless Exercise          Exercise of Warrants                 Share           Date

                   10,240,175        10,240,175                 10,240,175                   5,120,088 (1)   $          1.25   December       2012
                      863,000           863,000                    863,000                     431,500 (1)   $          1.25   January        2013
                    1,927,000         1,927,000                  1,927,000                     963,500 (1)   $          1.25   February       2013
                    1,991,000         1,991,000                  1,991,000                     995,500 (1)   $          1.25   M arch         2013
                    2,916,666           687,500                         —                    2,916,666       $          1.25   April          2013
                    2,988,200         2,988,200                  2,988,200                   2,988,200       $          1.00   December       2014
                      281,483           281,483                         —                      281,483       $          1.00   November       2015
                      184,533           184,533                         —                      184,533       $          1.00   M ay           2016
                      141,210           141,210                         —                      141,210       $          1.00   December       2016
Total              21,533,267        19,304,101                 18,009,375                  14,022,680
_________________

(1)     Warrants may be exercised in a cashless exercise any time after dates ranging between December 2008 through March 2009 only if a
        registration statement covering the resale of the underlying shares is not available.

Warrants may be exercised in a cashless exercise any time after dat es ranging between December 2008 through March 2009 only if a
registration statement covering the resale of the underlying shares is not available. A ―cashless exercise‖ means that in lieu of paying the
aggregate purchase price for the shares being purchas ed upon exercise of the warrants in cash, the holder will forfeit a number o f shares
underlying the warrants with a ―fair market value‖ equal to such aggregate exercise price. We will not receive additional proceeds to the extent
that warrants are exercised by cashless exercise.

The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circu mstances
including in the event of a stock dividend, or our recap italization, reorganization, merger or consolidation. The warrants also s benefit fro m
weighted average price protection for the term of the warrants in the event that we issue additional shares of co mmon stock (or securit ies
convertible into common stock) (with certain exceptions) without consideration or for a consideration per share less than the exercise price of
the warrants then in effect.

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Registration Rights

Registration Rights Granted in Connection with the Private Placement

In connection with the closing of the private placement co mp leted on March 31, 2008, we entered into a registration rights agreement with
the investors in that offering, under the terms of which we co mmitted to file a registration statement, within 90 days fro m the final closing of
the offering, covering the resale of the common stock common stock: (i) included in the units; (ii) issuable upon exercise of the warrants
included in the units; (iii) issued upon conversion of the convertible notes issued in September and October 2007; and (iv) issuable upon
exercise of warrants issued to holders of the convertible notes in connection with the conversion of their convertible notes, and to use
commercially reasonable efforts to cause such registration statement to become effective no later than 90 days after it is fi led. Also, we agreed
to use commercially reasonable effo rts to maintain the effectiveness of such registration statement through t he second anniversary of the date it
is declared effective by the SEC, or until Rule 144(k) of the Securit ies Act is available to investors in the offering with r espect to all of their
shares, whichever is earlier.

Prior to six months after the effective date of such registration statement, we may not, without the prior written consent of holders of a majority
of the reg istrable securities, file any other reg istration statement with the SEC, and during any time subsequent to such eff ective date when the
registration statement for any reason is not available for use by any holder of the registrable securities for the resale ther eof, we may not,
without the prior written consent of holders of a majority of the reg istrable securities, file any other registrat ion statement or any amendment
thereto with the SEC or request the acceleration of the effectiveness of any other registration statement previously filed with the Commission,
with certain limited exceptions.

The holders of any shares of securities removed fro m the registration statement as a result of a comment fro m the SEC will h ave ―piggyback‖
registration rights for the shares of common stock or co mmon stock underlying their warrants with respect to any registration statement filed by
the Co mpany follo wing the effect iveness of the registration statement which would permit the inclusion of these shares.

Registration Rights Granted in Connection with the Corporate Awareness Campaign

In May 2008, we co mmenced a corporate awareness campaign in the investment community. In connection with this campaign, we en tered into
service agreements with a nu mber of investor relations and public relations firms, under wh ich we issued to the service providers an aggregate
of 740,000 shares of our common stock and warrants to purchase an aggregate of 2,916,666 shares of our co mmon stock in partia l payment for
their services and granted them ―p iggyback‖ registration rights entitling them to include their shares in the registration statement required to be
filed fo llo wing the closing of the private placement as described above.

The registration statement of wh ich this prospectus forms a part was filed pursuant to the registration rights granted in con nection with the
private placement as well as those granted in connection with the corporate awareness campaign.

Anti -Takeover Effects of Provisions of Nevada State Law

We may be or in the future we may beco me subject to Nevada’s control share laws. A co rporation is subject to Nevada’s control share law if it
has more than 200 stockholders, at least 100 of who m are stockholders of record and residents of Nevada, and if the corporati on does business
in Nevada, including through an affiliated corporation. This control share law may have the effect of discouraging corporate takeovers. We
currently have approximately 400 stockholders.

The control share law focuses on the acquisition of a ―controlling interest,‖ which means the ownership of outstanding voting shares that would
be sufficient, but for the operation of the control share law, to enable the acquiring person to exercise the following propo rtions of the voting
power of the corporation in the election of d irectors: (1) one-fifth or more but less than one-third; (2) one-third or mo re but less than a majority;
or (3) a majority or more. The ability to exercise this voting power may be direct or indirect, as well as indiv idual or in a ssociation with others.

                                                                          69
The effect of the control share law is that an acquiring person, and those acting in association with that person, will obtain only such voting
rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of
stockholders. The control share law contemp lates that voting rights will be considered only once by the other stockholders. T hus, there is no
authority to take away voting rights fro m the control shares of an acquiring person once those rights have been approved. If the stockholders do
not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non -voting shares. The
acquiring person is free to sell the shares to others. If the buyer or buyers of those shares themselves do not acquire a controlling interest, the
shares are not governed by the control share law.

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or mo r e of the voting
power, any stockholder of record, other than the acquiring person, who d id not vote in favor of approval of voting rights, is en titled to demand
fair value for such stockholder’s shares.

In addition to the control share law, Nevada has a business combination law, which prohib its certain business combinations be tween Nevada
corporations and ―interested stockholders‖ for three years after the interested stockholder first becomes an interested stockholder, unless the
corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an interested stockholder is any person who
is: (a) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the corporation , or (b)
an affiliate or associate of the corporation and at any time within the previous three years was the beneficial owner, dir ectly or ind irectly, of
10% or mo re of the voting power of the then-outstanding shares of the corporation. The definition of ―business combination‖ contained in the
statute is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation’s assets to
finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of our Co mpany fro m doing so
if it cannot obtain the approval of our board of d irectors.

Transfer Agent

The transfer agent for our co mmon stock is Continental Stock Transfer & Trust Co mpany. The transfer agent’s address is 17 Battery Place,
New York, New Yo rk 10004, and its telephone number is (212) 509 -4000.

                                                               LEGAL MATTERS

The valid ity of the co mmon stock offered hereby will be passed upon for us by Gottbetter & Partners, LLP, 488 Mad ison Aven ue , 12th Floor,
New Yo rk, New York 10022. Jackson Steinem, Inc., which is controlled by one of the part ners of Gottbetter & Partners, LLP, beneficially
owns 1,215,950 shares of our common stock.

                                                                    EXPERTS

The consolidated financial statements for the years ended December 30, 2007, and December 31, 2006, included in this prospectus and in the
registration statement have been audited by Carlin, Charron & Rosen, LLP, independent registered public accountants, to the e xtent and fo r the
periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.

                                             WHERE YOU CAN FIND MORE INFORMATION

We file annual reports, quarterly reports, current reports and other information with the SEC. You may read or obtain a copy of these reports at
the SEC’s public reference room at 100 F Street, N.E., Roo m 1580, Washington, D.C. 20549. You may obtain inform ation on the operation of
the public reference roo m and their copy charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains
registration statements, reports, proxy information statements and other information regarding regist rants that file electronically with the SEC.
The address of the website is http://www.sec.gov.

                                                                         70
We have filed with the SEC a registration statement on Form S-1 under the Securit ies Act to register the shares offered by this prospectus. The
term ―registration statement‖ means the original registration statement and any and all amendments thereto, including the schedules and
exhibits to the orig inal registration statement or any amend ment. Th is prospectus is part of that registration statement. This prospectus does not
contain all o f the in formation set forth in the registration statement or the exhib its to the registration statement. For further informat ion with
respect to us and the shares we are offering pursuant to this prospectus, you should refer to the registration statement a nd its exhibits.
Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not n ecessarily
complete, and you should refer to the copy of that contract or other documents filed as an exh ibit to t he reg istration statement. You may read or
obtain a copy of the registration statement at the SEC’s public reference facilities and Internet site referred to above.

DISCLOS URE OF COMMISSION POS ITION ON INDEMNIFICATION FOR S ECURITIES ACT LIAB ILITIES

Under the Nevada Revised Statutes, our directors and officers are not individually liable to us or our stockholders for any d amages as a result
of any act or failure to act in their capacity as an officer or director unless it is proven that:

        His act or failure to act constituted a breach of his fiduciary duty as a director or officer; and

        His breach of these duties involved intentional misconduct, fraud or a knowing vio lation of law.

Nevada law allo ws corporations to provide broad indemnification to its officers and directors. At the present time, our Artic les of Incorporation
and Bylaws also provide for broad indemnificat ion of our current and former d irectors, trustees, officers, emp loyees and other agents.

Insofar as indemnificat ion for liab ilities arising under the Securities Act may be permitted to our directors, officers and c ontrolling persons we
have been advised that in the opinion of the Securit ies and Exchange Co mmission, su ch indemn ification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.

                                     CHANGES IN AND DIS AGREEMENTS WITH ACCOUNTANTS
                                        ON ACCOUNTING AND FINANCIAL DISCLOS URE

On February 12, 2008, our board of d irectors unanimously approved the dismissal of Manning Elliot LLP as our principal accountants and
engaged Carlin, Charron & Rosen, LLP (CCR) as our new principal accountants. The audit co mmittee of the board did not separat ely approve
the dismissal, though all members of the committee were present at the board meeting.

During our two most recently co mpleted fiscal years and the subsequent interim period preceding the decision to change princi pal accountants,
there were no disagreements with Manning Elliot on any matter of accounting principles or pract ices, financial statement disclosure or auditing
scope or procedure, which, if not resolved to the satisfaction of Manning Elliot, would have caused it to make references to the subject matter
of the disagreement in connection with its report. Manning Elliot’s report to our directors and stockholders dated June 13, 2007, which is
included in our Form 10-KSB filed with the Securities and Exchange Co mmission on June 27, 2007, indicated Manning Elliot ’s ―substantial
doubt about the Company’s ability to continue as a go ing concern.‖ Manning Elliot’s reports on our financial statements for th e past two years
did not otherwise contain an adverse opinion or a disclaimer of opin ion, nor were they qualified or modified as to uncertaint y, audit scope or
accounting princip les. During our t wo most recently co mpleted fiscal years and the subsequent interim period preceding the de cision to change
principal accountants, there were no reportable events as defined in Regulation S-K Item 304(a)(v).

We provided Manning Elliot with a copy of the disclosures made by us in a current report filed with respect to their dis mis sa l (wh ich were
substantially the same as the statements made above), and at our request Manning Elliot furnished us with a letter s tating that it agrees with the
statements as they relate to Manning Elliott. A copy of this letter was filed as Exh ibit 16.1 to our Current Report on Form 8-K/A filed with the
SEC on March 11, 2008, and is incorporated herein by reference.

We engaged CCR as our principal accountants effective as of February 12, 2008. During our two most recent fiscal years and the subsequent
interim period prior to engaging CCR, neither we nor anyone on our behalf consulted with CCR regarding the applicatio n of acc ounting
principles to a specific transaction, either co mpleted or proposed, or the type of audit opinion that might be rendered on ou r financial
statements, and neither a written report nor oral advice was provided to us by CCR that was an important factor conside red by us in reaching a
decision as to any accounting, auditing or financial reporting issue; provided, however, that on December 18, 2007, a wholly -o wned subsidiary
of ours merged with and into KnowFat Franchise Co mpany, Inc., with KnowFat as the survivin g corporation in the merger, and prior to the
merger, CCR was the principal accountant of KnowFat since March 2004.

                                                                          71
                                   INDEX TO CONSOLIDATED FINANCIAL S TATEMENTS OF
                                            UFOOD RES TAURANT GROUP, INC.

Consolidated Balance Sheets as of September 28, 2008 (unaudited) and December 30, 2007                                          F-2

Consolidated Statements of Operations for the Unaudited Three and Nine Month Periods Ended September 28, 2008 and September
  30, 2007                                                                                                                      F-4

Consolidated Statements of Cash Flows fo r the Unaudited Nine Month Periods Ended September 28, 2008 and September 30, 2007     F-5

Notes to Consolidated Financial Statements                                                                                      F-6

Report of Independent Registered Public Accounting Firm                                                                         F-14

Consolidated Balance Sheets as of December 30, 2007 and December 31, 2006                                                       F-15

Consolidated Statements of Operations for the Fiscal Years Ended December 30, 2007 and December 31, 2006                        F-17

Consolidated Statements of Stockholders ’ Equity (Deficit) for the Fiscal Years Ended December 30, 2007 and December 31, 2006   F-18

Consolidated Statements of Cash Flows fo r the Fiscal Years Ended December 30, 2007 and December 31, 2006                       F-19

Notes to Consolidated Financial Statements                                                                                      F-20

                                                                   F-1
                                      UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                    Consolidated Balance Sheets
                                              September 28, 2008 and December 30, 2007

                                                               Assets

                                                                                                               December        3
                                                                                             September 28,          0,
                                                                                                  2008             2007
                                                                                              (unaudited)          (audited)

Current assets:
  Cash and cash equivalents                                                              $         1,973,222   $      3,352,201
  Restricted cash                                                                                    468,610          1,083,612
  Accounts receivable                                                                                 67,740             93,534
  Inventories                                                                                        166,580            193,359
  Prepaid expenses and other current assets                                                           69,412             40,283
                                                                                                   2,745,564          4,762,989

Property and equipment:
  Equip ment                                                                                         980,931            874,853
  Furniture and fixtures                                                                             285,025            156,207
  Leasehold improvements                                                                           2,694,260          2,301,571
  Website development costs                                                                           27,050             80,736
                                                                                                   3,987,266          3,413,367
Accumulated depreciation and amortization                                                          1,040,846            699,305
                                                                                                   2,946,420          2,714,062

Other assets:
  Goodwill                                                                                           977,135            977,135
  Other                                                                                              221,467            129,360
                                                                                                   1,198,602          1,106,495

Total assets                                                                             $         6,890,586   $      8,583,546


                                                      See accompanying notes.

                                                                F-2
                                         UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                         Consolidated Balance Sheets
                                                   September 28, 2008 and December 30, 2007

                                                       Liabilit ies and Stockholders’ Equity

                                                                                                                      December        30
                                                                                               September 28,               ,
                                                                                                    2008                  2007
                                                                                                   (unaudited)            (audited)

Current liab ilit ies:
  Current portion of long-term debt                                                            $          882,460     $      1,874,993
  Current portion of cap ital lease obligations                                                            56,369               51,582
  Accounts payable                                                                                        476,868              727,293
  Franchisee deposits                                                                                     717,500              504,500
  Accrued expenses and other current liabilities                                                          698,918              439,226
                                                                                                        2,832,115            3,597,594

Long-term liabilities:
  Long-term debt                                                                                          445,095              730,691
  Capital lease obligations                                                                               105,707               83,005
  Other noncurrent liab ilities                                                                           213,126              152,158
                                                                                                          763,928              965,854

Total liabilities                                                                                       3,596,043            4,563,448

Co mmit ments and contingencies

Stockholders’ equity:
  Preferred stock, $0.001 par value, 10,000,000 shares authorized                                                —                    —
  Co mmon stock, $0.001 par value, 300,000,000 shares authorized, 34,818,490 and 29,241,158
  shares
     issued and outstanding                                                                                34,818               29,241
  Additional paid-in capital                                                                           24,872,260           18,833,096
  Accumulated deficit                                                                                 (21,612,535 )        (14,842,239 )
Total stockholders' equity                                                                              3,294,543            4,020,098

Total liabilities and stockholders ’ equity                                                    $        6,890,586     $      8,583,546


                                                           See accompanying notes.

                                                                      F-3
                                       UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                              Consolidated Statements of Operations - Unaudited
                           For the Three and Nine Month Periods Ended September 28, 2008 and September 30, 2007

                                                               Three Months Ended                               Nine Months Ended
                                                          September 28,           September 30,           September 28,           September 30,
                                                              2008                    2007                    2008                     2007
Revenues:
  Store sales                                         $         1,449,086     $         1,113,163     $         4,278,008     $         3,622,661
  Franchise royalties and fees                                     97,739                 102,647                 223,797                 257,153
  Other revenue                                                        —                   10,818                   5,957                  32,636
                                                                1,546,825               1,226,628               4,507,762               3,912,450

Costs and expenses:
  Store operating expenses:
  Food and paper costs                                            444,977                 272,639               1,241,074                 910,678
  Cost of nutritional products                                    125,753                 209,704                 435,088                 723,727
  Labor                                                           466,772                 330,793               1,313,671               1,108,984
  Occupancy                                                       183,680                 123,283                 513,482                 327,991
  Other store operating expenses                                  255,684                 160,780                 750,530                 567,505
General and administrative expenses                             1,457,673                 775,071               5,765,931               2,396,375
Advertising, marketing and pro motion expenses                    179,096                  60,276                 769,667                 472,026
Depreciat ion and amort ization                                   133,036                 106,234                 368,016                 322,873
Loss on disposal of assets                                             —                  198,806                   2,509                 688,948
Total costs and expenses                                        3,246,671               2,237,586              11,159,968               7,519,107

Operating loss                                                 (1,699,846 )            (1,010,958 )            (6,652,206 )             (3,606,657 )

Other inco me (expense):
  Interest income                                                  20,369                      —                   70,101                  13,026
  Interest expense                                                (17,547 )               (93,330 )               (62,650 )              (262,270 )
  Other inco me (expense)                                        (194,115 )                    —                 (125,540 )                    —
Other inco me (expense), net                                     (191,293 )               (93,330 )              (118,089 )              (249,244 )

Loss before income taxes                                       (1,891,139 )            (1,104,288 )            (6,770,295 )             (3,855,901 )
Income taxes                                                           —                       —                       —                        —

Net loss                                              $        (1,891,139 ) $          (1,104,288 ) $          (6,770,295 ) $           (3,855,901 )


Basic and diluted loss per share                      $             (0.05 ) $               (0.15 ) $               (0.20 ) $                (0.54 )


                                                           See accompanying notes.

                                                                    F-4
                                         UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                              Consolidated Statements of Cash Flows - Unaudited
                                    For the Nine Months Ended September 28, 2008 and September 30, 2007

                                                                                                        Nine Months Ended
                                                                                                 September 28,              September 30,
                                                                                                      2008                       2007

Cash flows fro m operating activ ities:
Net loss                                                                                     $         (6,770,295 ) $             (3,855,901 )
Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciat ion and amort ization                                                                           368,016                 322,873
  Amort izat ion of deferred financing costs                                                                 11,903                   8,806
  Stock-based compensation                                                                                2,038,032                 315,000
  Loss on disposal of assets                                                                                  2,509                 688,948
  Gain on ext inguishment of debt                                                                           (68,575 )                    —
  Increase (decrease) in cash fro m changes in assets and liabilit ies:
     Accounts receivable                                                                                    25,794                   (8,748 )
     Inventories                                                                                            26,779                  (25,440 )
     Prepaid expenses and other current assets                                                             (29,132 )                 (1,622 )
     Other assets and noncurrent liab ilities                                                              (43,042 )                113,260
     Accounts payable                                                                                     (250,425 )                337,214
     Franchisee deposits                                                                                   213,000                  (62,000 )
     Accrued expenses and other current liabilities                                                        175,023                  137,028
Net cash used in operating activities                                                                  (4,300,413 )               (2,030,582 )

Cash flows fro m investing activities:
  Proceeds from sale of assets                                                                                  —                    150,000
Acquisition of property and equipment                                                                     (527,660 )                (699,126 )
Net cash used in investing activities                                                                     (527,660 )                (549,126 )

   Cash flows fro m financing activ ities:
   Proceeds from issuance of common stock, net                                                          4,088,871                         —
   Proceeds from the issuance of convertible notes payable                                                     —                   1,733,217
   Proceeds from option exercise                                                                               40                         —
   Payments on long-term debt                                                                          (1,209,554 )                 (435,937 )
   Payments on capital lease obligations                                                                  (45,265 )                  (14,962 )
(Increase) decrease in restricted cash, net                                                               615,002                   (103,612 )
Net cash provided by financing activities                                                                 3,449,094                1,178,706

Increase (decrease) in cash and cash equivalents                                                       (1,378,979 )               (1,401,002 )
Cash and cash equivalents – beginning of year                                                           3,352,201                  1,840,090

Cash and cash equivalents – end of period                                                    $            1,973,222     $           439,088


                                                             See accompanying notes.

                                                                        F-5
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                           Notes to Consoli dated Financi al Statements – Unaudi ted

1.       Nature of Operations and Basis of Presentati on

Nature of Operations

UFood Restaurant Group, Inc. was incorporated in the State of Nevada on February 8, 2006 as A xxent Media Corp. As Axxent Medi a Corp.,
the Co mpany’s business was to obtain reproduction and distribution rights to foreign films within North A merica and also to obtain the foreign
rights to North American films for reproduction and distribution to foreign countries. On August 8, 2007, the Co mpany changed its name to
UFood Franchise Co mpany, Inc., and on September 25, 2007, changed its name to UFood Restaurant Group, Inc. (UFood or the Co mp any).
Prior to December 18, 2007, UFood was a development stage company headquartered in Vancouver, Canada. Following the Merger described
below, the Co mpany abandoned its plans to obtain reproduction and distribution rights to films.

On December 18, 2007, (the Merger Date) pursuant to the terms of an Agreement and Plan of Merger and Reorganizat ion, a wholly -owned
subsidiary of the Co mpany merged with and into KnowFat Franchise Co mpany, Inc. (KnowFat). Fo llowing the merger (the Merger), UFood
continued KnowFat’s business operations as a franchisor and operator of fast-casual food service restaurants that capitalize on consumer
demands for appetizing food with healthy attributes. As of June 29, 2008, the Co mpany ’s operations consisted of four company-owned
restaurants and four franchisee owned restaurants, including two franchisee-owned locations operated by the Company pursuant to two separate
management services agreements. On the Merger Date, each share of KnowFat co mmon stock issued and outstanding immed iately prio r to the
Merger was exchanged for 1.52350763 shares of UFood Co mmon Stock. A ll share amounts have been adjusted to reflect the effect of the share
exchange.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting princip les generally acce pted in the
United States of America for interim financial informat ion and with the rules and regulations of the Securities and Exchange Commission.
They include the activity and balances of UFood and its subsidiaries but do not include all of the informat ion and footnotes required by
accounting principles generally accepted in the United States for complete financial statements. The interim consolidated financial statements
are unaudited; however, they include all normal recurring accruals and adjustments that, in the opinion of management, are ne cessary to present
fairly UFood’s financial position at September 28, 2008, and the results of its operations and cash flows for the three and nine month per iods
ended September 28, 2008 and September 30, 2007. The results of operations for the three and nine month periods ended Se ptember 28, 2008
are not necessarily indicat ive of the results to be expected for future quarters or the fu ll year. The interim consolidated f inancial statements
should be read in conjunction with the audited consolidated financial statements and footnotes thereto for the fiscal year ended December 30,
2007 included in the Co mpany’s Annual Report on Form 10-KSB.

2.       Summary of Significant Accounti ng Policies

Fiscal Quarters

In 2008, our fiscal quarters end on March 30 th , June 29 th , September 28 th and December 28 th . In 2007, our fiscal quarters ended on April 1 st ,
July 1 st , September 30 th and December 30 th .

Principles of Consolidation

The consolidated financial statements include the assets, liabilities and results of operations of UFood Restaurant Group, In c. and its subsidiary.
All significant intercompany balances and transactions have been eliminated.

                                                                         F-6
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                          Notes to Consoli dated Financi al Statements – Unaudi ted

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilit ies and disclosure of con tingent assets and
liab ilit ies at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual amounts
could differ fro m those estimates.

Reclassifications

Certain reclassifications have been made to conform prev iously reported data to the current presentation.

Revenue Recognition

The Co mpany records revenue for company-owned store sales upon the delivery of the related food and other products to the customer.

The Co mpany follows the accounting guidance of Statement of Financial Accounting Standard (SFAS) No. 45, Accounting for Franchise Fee
Income . Franchisee deposits represent advances on initial franchise fees prior to the opening of the franchisee location. We recogn ize init ial
franchise fee revenue when all material services we are required to perform and all material conditions we are required to satisfy have been
substantially co mpleted, wh ich is generally the opening of the franchised location. The Company defers direct costs related t o franchise sales
until the related revenue is recognized; however, the deferred costs shall not exceed anticipated revenue less estimated addit ional related costs.
Such costs include training, facilit ies design, menu planning and market ing. Franchise royalty revenues are recognized in the same period the
relevant franchisee sales occur.

Valuation of Goodwill

We account for goodwill and other intangible assets under SFAS No. 141, Business Combinations , and SFAS No. 142, Goodwill and Other
Intangible Assets. Under SFA S No. 142, purchased goodwill and intangible assets with indefinite lives are not amort ized, but instead tested for
impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. We perform
our annual impairment test on the first day of the fourth quarter. At September 28, 2008, the carrying amount of goodwill was $977,135 and
was comprised of $841,135 of goodwill attributable to our store operations segment and $136,000 of goodwill attributable to o ur franchise
operations segment. Goodwill attributable to our franchise operations segment is evaluated by co mparing the Co mpany ’s fair market value,
determined based upon quoted market prices of the Company ’s equity securities, to the carrying amount of goodwill. Goodwill attributable to
our store operations segment is evaluated on a restaurant-by-restaurant basis by comparing the present value of a restaurant’s future cash flows
to the carrying amount of goodwill. Future cash flows are estimated based upon a restaurant ’s historical operating performance and
management’s estimates of future revenues and expenses over the period of time that the Co mpany expects to operate the restaurant, which
generally co incides with the init ial term of the restaurant’s lease but which may take into account the restaurant’s first lease renewal period up
to 5 years. The estimate of a restaurant’s future cash flows takes into account the restaurant’s estimated terminal value, wh ich is determined by
applying a capitalization rate to the restaurant’s estimated cash flows during the last year o f the forecast period. The cap italization rate was
determined based upon the restaurant’s location, cash flows and growth prospects. The present value of the restaurant ’s estimated future cash
flows was calculated using a discount rate of 8%. We estimate that a 1% decrease in total store revenues in full year 2008 wo uld increase our
net loss and reduce our cash flo w by appro ximately $20,000. The carry ing amount of goodwill may be impaired in the future if our actual
operating results and cash flows fall short of our current estimates of future operating results.

Rent Expense

The Co mpany recognizes rent expense on a straight-line basis over the reasonably assured lease term as defined in SFAS No. 98, Accounting
for Leases. The reasonably assured lease term on most of the Co mpany’s leases is the initial non-cancelable lease term, which generally
equates to between 5 and 10 years. In addition, certain of the Co mpany’s lease agreements provide for scheduled rent increases during the lease
terms or for rental pay ments commencing at a date other than the date of initial occupancy. The Co mpany includes any rent escalat ions and
other rent holidays in its determination of straight-line rent expense. Therefore, rent expense for new locations is charg ed to expense upon the
commencement date of the lease.

Earnings Per Share Data

Earnings per share are based on the weighted average nu mber of shares outstanding during the period after consideration of th e dilutive effect,
if any, for co mmon stock equivalents, including stock options, restricted stock, and other stock-based compensation. Earnings per common
share are computed in accordance with SFAS No. 128, Earnings Per Share, which requires companies to present basic earnings per share and
diluted earnings per share. Basic earnings per share are computed by dividing net income allocable to co mmon stockholders by the weighted
average number of shares of co mmon stock outstanding during the year. Diluted earn ings per co mmon share are co mputed by div id ing net
income by the weighted average number of shares of co mmon stock outstanding and dilutive securities outstanding during the ye ar.

Fair Value of Financial Instruments

The carrying amounts of the Co mpany’s financial instruments, wh ich include cash and cash equivalents, accounts receivable, accounts payable
and other accrued expenses and debt obligations approximate their fair values due to the short-term maturity of these instruments.

                                                                    F-7
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                           Notes to Consoli dated Financi al Statements – Unaudi ted

Stock -Based Compensation

The Co mpany determines the fair value of stock option awards on the date of gran t using the Black-Scholes option pricing mod el in accordance
with Statement of Financial Accounting Standard (SFAS) No. 123R, Share-Based Payment . The Black-Scholes option pricin g model requires
extensive accounting judgment and financial estimates, inclu ding estimates of the expected term participants will retain their vested stock
options before exercising them and the estimated volatility of the Co mpany ’s common stock price over the expected term.

The following amounts of stock-based compensation expense are included in general and ad ministrative expenses and advertising, marketing
and promotion expenses in the accompanying consolidated statements of operations.

                                                                Three Months Ended                                Nine Months Ended

                                                        September 28,            September 30,              September 28,          September 30,
                                                            2008                      2007                       2008                  2007
Stock-based compensation expense included
in:
    General and administrative expenses             $            343,923     $                     —    $         1,557,676    $                   —
    Advertising, marketing and pro motion
        expenses                                                  25,519                           —                480,356                 315,000
              Total                                 $            369,442     $                     —    $         2,038,032    $            315,000


Adoption of New Accounting Principle

Effective January 1, 2008, the Co mpany adopted SFAS No. 157, Fair Value Measurements, for all financial assets and liabilities. SFAS No.
157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liab ility (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market part icipants on the measurement date. SFAS No.
157 establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting
pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption of SFAS No.
157 d id not have a material impact on the Co mpany’s consolidated financial statements.

Recent Accounting Pronouncements

In December 2007, the FASB is sued SFAS No. 141R, Business Combinations. SFAS No. 141R establishes princip les and requirements for
how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liab ilit ies assumed, and
any non-controlling interest in the acquiree . The statement also provides guidance for recognizing and measuring the goodwill acquire d in the
business combination and specifies what information to d isclose to enable users of the financial statements to evaluate th e nature and financial
effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning af ter December 15,
2008. The Co mpany expects SFAS No. 141R will have an impact on its consolidated financial s tatements when effective, but the nature and
magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions it consummates after the ef fective date. The
Co mpany is still assessing the impact of th is standard on its future consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB
51. SFAS No. 160 changes the accounting and reporting for minority interests. Minority interests will be re-characterized as non-controlling
interests and will be reported as a component of equity separate from the parent ’s equity, and purchases or sales of equity interests that do not
result in a change in control will be accounted for as equity transactions. In addition, net inco me attributable to the non -controlling interest will
be included in consolidated net inco me on the face of the inco me statement and upon a loss of control, the interest sold, as well as any interest
retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for financial statements iss ued
for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentatio n and disclosure
requirements, which will apply retrospectively. The adoption of SFAS No. 160 is not expected to have a material impact on the Co mpany’s
future consolidated financial statements.

In March 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133 . SFAS No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objective s
and strategies for using such instruments, as well as any details of cred it risk-related contingent features contained within derivatives. SFAS
No. 161 also requires entities to disclose additional informat ion about the amounts and location of derivatives included in t he financial
statements, how the provisions of SFAS No. 133 have been applied, and the impact that hedges have on an entity ’s financial position, financial
performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 . The adoption
of SFAS No. 161 is not expected to have a material impact on the Co mpany ’s future consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles . SFAS No. 162 is intended to
improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be us ed in preparing
financial statements that are presented in conformity with generally accepted accounting principles in the Unit ed States for non-governmental
entities. SFAS No. 162 is effective 60 days follo wing approval by the SEC o f the Public Co mpany Accounting Oversight Board ’s amend ments
to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Ac counting Principles . We do not expect SFAS
No. 162 to have a material impact on our consolidated financial statements.

In October 2008, the FASB issued Staff Position No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That
Asset is Not Active (FSP 157-3). FSP 157-3 clarifies the application of SFAS No. 157, which we adopted as of January 1, 2008, in cases where
a market is not active. We have considered the guidance provided by FSP 157-3 and determined that the impact was not material on estimated
fair values as of September 28, 2008.

                                                                     F-8
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                           Notes to Consoli dated Financi al Statements – Unaudi ted

3.       Capi tal Stock

Offering of Units

During the three and nine month periods ended September 28, 2008, the Co mpany sold -0- and 4,781,000 units (Units), respectively, of its
securities at a price of $1.00 per Unit in connection with a private placement of securities (the O ffering). Each Un it consists of one share of
common stock of the Company, par value $0.001 per share (Co mmon Stock) and a warrant to purchase one -half of one share of Co mmon
Stock (the Investor Warrants). The Investor Warrants are exercisable for a period of five years at an exercise price of $1.25 per whole share of
Co mmon Stock.

In connection with the Offering, the Co mpany retained Spencer Trask Ventures, Inc. as placement agent (Placement Agent) and p aid the
Placement Agent a commission of 10% of the funds raised in the Offering. In addition, the Placement Agent received warrants to purchase a
number of shares of Common Stock equal to 20% of the shares of Co mmon Stock included in the Units sold to investors in the Of fering. The
Placement Agent warrants are exercisable for seven years at an exercise price o f $1.00 per share. During the three and n in e month periods
ended September 28, 2008, the Placement Agent was paid commissions of $-0- and $478,100, respectively, and received warrants to purchase
-0- and 956,200 shares, respectively, of Co mmon Stock. The Co mpany estimated the fair value o f the Placement Agent warran ts using a Black
Scholes option pricing model with the assumptions noted in the following table:

                              Expected term (years)                                                                 7
                              Expected volatility                                                                  45 %
                              Risk-free interest rate                                                            4.37 %
                              Expected annual div idend                                                         None

The estimated fair value of the Placement Agent warrants issued during the three and nine month periods ended September 28, 2 008 of $-0-
and $684,464, respectively, was considered to be a cost of the Offering and, accordingly, was charged to additional paid-in cap ital.

On June 27, 2008, the Co mpany filed a registration statement, to beco me effect ive in an addit ional 90 days fro m the filing da te, reg istering for
resale all shares of Co mmon Stock issued in the Offering, including Co mmon Stock (i) included in the Units; (ii) issuable upon exercise of
warrants included in the Units; (iii) issuable upon conversion of pro missory notes (the Investor Notes) sold in anticipation of the Offering; and
(iv) issuable upon exercise of warrants issued to purchasers of the Investor Notes in connection with the conversion of the Inv estor Notes. The
Co mpany is obligated to pay monetary penalties equal to one and one -quarter percent (1.25%) of the purchase price paid b y the holders of
registrable securities for each full month that the registration statement is late in being declared effective; provided, that in no event shall the
aggregate of any such penalties exceed fifteen percent (15%) of the gross purchase price paid by the holders of registrable s ecurities. The
registration statement has not been declared effective within the time period specified in the Offering. During the three month and nine month
periods ended September 28, 2008, the Co mpany accrued $194,115 for the monetary penalty.

Other Capital Stock Transactions

During the three and nine month periods ended September 28, 2008, the Co mpany issued -0- and 50,237 shares, respectively, of Co mmon
Stock to the Company’s chief executive officer pursuant to the terms of his employ ment agreement for the sale of franchise s. General and
administrative expenses shown on the accompanying consolidated statement of operations for the three and nine mont h periods e nded
September 28, 2008 include stock-based compensation expense of $-0- and $55,000, respectively, representing the fair value of the shares on
the date they were issued.

In May 2008, the Co mpany announced the commencement of a campaign to generate awareness of the Company in the investment co mmunity.
In connection with the corporate awareness campaign, the Company en tered into agreements with several firms that provide investor relations
and market ing services. Pursuant to the terms of the agreements, the Co mpany issued 740,000 shares of its Co mmon Stock (the I R Shares) and
warrants to purchase 2,916,666 shares of Co mmon Stock (the IR Warrants). The IR Warrants are exercisable for five years at an exercise price
of $1.25 per share. The issuance of the IR Shares and the IR Warrants has been accounted for in accordance with SFAS No. 123R and EITF
96-18. Accordingly, since the agreements with the investor relations firms do not include specific performance commit ment dates, the fair
value of each award is determined as of the performance co mp letion date which coincides with the dates the shares and warrant s vest.

The fair value of the IR Shares is determined based upon the closing price of the Co mpany ’s Co mmon Stock on the date the IR Shares vest.
The IR Shares vest as follows: 15,000 IR Shares vested on June 17, 2008; 237,500 IR Shares vest no later than 45 days a fter the registration
statement described above becomes effective; 237,500 IR Shares vest in January 2009; and 250,000 IR Shares vest in equal installments over
24 months through April 2010 or upon the achievement of specified milestones, if such vesting p eriod is shorter. At September 28, 2008,
67,083 IR Shares were vested. General and administrative expenses for the three and nine month periods ended September 28, 20 08 include
$72,050 and $234,025, respectively, of stock-based compensation expense relating to the IR Shares.

The fair value of the IR Warrants is estimated on the vesting date using a Black Scholes option pricing model using the assumptions shown in
the table above except for the expected term of the IR Warrants which has been estimated to be 5 years. The IR Warrants vest over 24 months
as follo ws: (i) 83,333 IR Warrants vest no later than 45 days after the reg istration statement described above becomes effect ive, (ii) 83,333 IR
Warrants vest in January 2009, and (iii) 2,750,000 IR Warrants vest in equal installments over 24 months through April 2010 or upon the
achievement of specified milestones, if such vesting period is shorter. At September 28, 2008, 572,916 IR Warrants were veste d. General and
administrative expenses for the three and nine month periods ended September 28, 2008, include $163,357 and $376,852, respectively, of
stock-based compensation expense relating to the IR Warrants.

4.       Stock-Based Compensati on

During the three and nine month periods ended September 28, 2008, the Co mpany recognized $505,032 and $2,184,260, respectively, of
stock-based compensation expense for equity awards to employees, consultants and vendors. During the three and nine month periods e nded
September 30, 2007, the Co mpany recognized $-0- and $315,000, respectively, of stock-based compensation expense. The Company has two
share-based, shareholder approved employee compensation plans, the KnowFat 2004 Stock Opt ion Plan (the 2004 Plan) and the UFood 200 7
Equity Incentive Plan (the 2007 Plan, and together with the 2004 Plan, the Equity Plans), wh ich are described below.

The Co mpany estimates the fair value of stock options using a Black Scholes option pricing model with the assumptions noted in the follo wing
table. Key inputs used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected
volatility of the Co mpany’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the
Co mpany’s expected annual dividend yield.

The fair value of each stock option granted during the nine month period ended September 28, 2008 (there were no options gran ted during the
three month period ended September 28, 2008) was estimated on the date of grant using the following assumptions:

                             Expected term (years)                                                               6
                             Expected volatility                                                                45 %
                             Risk-free interest rate                                                          4.37 %
                             Expected annual div idend                                                       None

                                                                       F-9
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                           Notes to Consoli dated Financi al Statements – Unaudi ted

The expected term is based on the weighted average midpoint between vesting and the contractual term. Expected vo latility is based on the
historical volat ility of published common stock prices over the last six years of co mparab le publicly held co mpanies. The ris k-free interest rate
for the expected term of the stock option is based on the U.S. Treasury yield. The Co mpany believes that the valuation technique and the
approach utilized to develop the underlying assumptions are appropriate in calcu lating the fair values of stock options grant ed during the three
and nine month periods ended September 28, 2008. Estimates of fair value are not intended to predict actual future events or the value
ultimately realized by persons who receive equity awards.

The 2004 Plan

At December 30, 2007, there were 304,702 options outstanding under the 2004 Plan. No addit ional options ma y be granted under the 2004 Plan
after December 18, 2007. There were 6,095 options exercised under the 2004 Plan during the three and nine month periods ended September
28, 2008. The intrinsic value of the exercised options was $6,055. There were no option s forfeited during the three and nin e month periods
ended September 28, 2008. At September 28, 2008, there were 298,607 options outstanding under the 2004 Plan with a weighted a verage
exercise price o f $0.62. The Co mpany has not recognized any compensation expense in fiscal 2008 related to options outstanding under the
plan since all of the options currently outstanding under the 2004 Plan were fully vested as of December 30, 2007. There was no unrecognized
compensation expense related to options outstanding under the 2004 Plan at September 28, 2008.

The 2007 Plan

There were no awards under the 2007 Plan prior to December 18, 2007. Awards of ISO ’s, non-qualified stock options, stock appreciation
rights, restricted stock units, restricted stock or performance units may be made under the 2007 Plan up to a maximu m of 6,000,000 shares of
Co mmon Stock to emp loyees, directors, consultants and agents of the Company. The Co mpany believes awards under the 2007 Plan align the
interests of its employees with those of its shareholders. At September 28, 2008, there were 2,807,712 stock options outstanding under the 2007
Plan. The outstanding stock options have a weighted average exercise price of $1.07 per share, have a contractual term o f 10 years and vest
over three years. At September 28, 2008, options to purchase 1,204,664 shares of Co mmon Stock were exercisable at a weighted average
exercise price of $1.04. An additional 198,153 options will vest in fiscal 2008 and 738,697, 627,660 and 38,529 options will vest in fiscal 2009,
2010 and 2011, respectively.

Activity under the 2007 Plan fro m December 18, 2007, the Merger Date, through September 28, 2008 is presented below:

                                                                                                             Weighted
                                                                                     Weighted                Average
                                                                                     Average                Remaining                Aggregate
                                                               Nu mber of            Exercise               Contractual               Intrinsic
                                                                Options               Price                Term (Years)                Value

Outstanding at December 17, 2007                                           -0-   $                —
 Granted                                                            1,950,000                   1.00
 Exercised                                                                  —                      -                         -
 Forfeited                                                                  —                      -                         -

Outstanding at December 30, 2007                                    1,950,000 $                 1.00                      10.0   $         175,500
 Granted                                                              897,920                   1.22                      10.0
 Exercised                                                                 —                       -                         -
 Forfeited                                                            (40,208 )                (1.22 )                     9.9

Outstanding at September 28, 2008                                   2,807,712    $              1.07                       9.5   $         730,005


Exercisable at September 28, 2008                                   1,204,664    $              1.04                       9.3   $                —


                                                                        F-10
                                          UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                          Notes to Consoli dated Financi al Statements – Unaudi ted

The weighted average grant date fair value of options granted under the 2007 Plan during the three and nine month periods end ed September
28, 2008 was $-0- and $0.61.

General and ad ministrative expenses for the three and n ine month periods ended September 28, 2008 include $80,530 and $227,66 9,
respectively, of compensation expense for vested equity awards under the 2007 Plan. At September 28, 2008 there was $651, 258 of total
unrecognized compensation expense related to non -vested options granted under the 2007 Plan. Th is cost will be recognized over
approximately 2.2 years.

Other Equity Awards

In May 2008, the Board of Directors awarded our chief executive officer and our chief operating officer non-qualified stock options to purchase
1,000,000 and 300,000 shares, respectively, of Co mmon Stock at an exercise price of $1.23. The options granted to our chief e xecutive officer
are fu lly vested and exp ire ten years fro m the date of grant. The options granted to our chief operating officer vest in monthly installments
through January 2010, the termination of h is emp loyment agreement, and expire ten years fro m the date of grant. General and a dministrative
expenses for the three and nine month periods ended September 28, 2008 include $26,087 and $652,159, respectively, of compensation
expense related to these two grants. At September 28, 2008 there was $139,126 of unrecognized co mpensation expense related to the stock
options awarded to our chief operating officer that will be recognized over appro ximately 1.4 years.

Advertising, market ing and promotion expenses shown on the accompanying consolidated statement of operations for the three an d nine month
periods ended September 28, 2008, include $25,519 and $480,356, respectively, of stock-based compensation expense for shares of Co mmon
Stock issued to George Foreman Ventures LLC (GFV) for marketing and pro motion services. The amount of co mpensation expense wa s
determined based upon the fair value of the shares of Co mmon Stock on the date the shares became vested. Advertising, market ing and
promotion expenses for the three and nine month periods ended September 30, 2007 include $ -0- and $315,000 of stock-based compensation
expense for shares of Common Stock issued to GFV.

During the three and nine month periods ended September 28, 2008, the Co mpany issued -0- and 50,237 shares, respectively, of Co mmon
Stock to the Co mpany’s chief executive officer pursuant to the terms of h is emp loy ment agreement for the sale of franchises (see Note 3).

In connection with a corporate awareness campaign announced in May 2007, the Co mpany issued 740,000 shares of Co mmon Stock an d
2,916,666 warrants for the purchase of Co mmon Stock to several firms that provide investor relations and marketing services ( see Note 3).

5.       Income Taxes

On January 1, 2007, the Co mpany adopted the provisions of FIN No. 48. FIN No. 48 requires that the impact of tax positions ta ken by the
Co mpany be recognized in the financial statements if they are more likely than not of being sustained based upon the technical merits of the
position. The Co mpany has a valuation allowance against the full amount of its net deferred taxes. The Co mpany currently pro v ides a valuation
allo wance against deferred taxes when it is mo re likely than not that some portion, or all, of its deferred tax assets will not be realized. The
implementation of FIN No. 48 had no impact on the Co mpany ’s financial statements due to the valuation allowances that have historically been
provided against all deferred tax assets.

No provision for current inco me taxes has been recorded for 2008 and 2007 due to the Co mpany ’s cumulat ive net lo sses. Significant
components of deferred tax assets are net operating loss carryforwards, start -up costs and organizational costs capitalized for tax purposes, and
deferred revenue. Significant components of deferred tax liabilit ies are depreciation of p roperty and equipment.

Management has evaluated the evidence bearing upon the realization of its deferred tax assets and has determined t hat it is mo re likely than not
that the Company will not recognize the benefits of its federal and state deferred tax assets. As a result, the Company has r ecorded a full
valuation allowance against its deferred tax assets. If the Co mpany should generate sustained future taxable inco me against which these tax
attributes might be applied, so me portion or all of the valuation allowance would be reversed.

The Co mpany’s income tax returns have not been audited by the Internal Revenue Service (IRS) or any state taxing authority. The years 2005
through 2007 remain open to examination by the IRS and state taxing authority. The Co mpany believes it is not subject to any tax exposure
beyond the preceding discussion. The Co mpany’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a
component of income tax expense. As of the date FIN No. 48 was adopted, we did not have any accrued interest or penalties ass ociated with
any unrecognized tax benefits.
6.        Commi tments and Contingencies

Legal matters

In November 2007, the Co mpany received a letter fro m counsel to a former franchis ee regard ing potential claims against the Co mpany and
certain of its officers and directors. The letter stated a desire fo r the parties to reach a mutually -satisfactory negotiated resolution to the dispute.
A draft demand for arbitrat ion, which was not filed, was included with the letter and claimed that the Company and certain of its officers and
directors made false and misleading statements (and material o missions of facts) in connection with the sale of the franchise in violat ion of the
Minnesota Franchise Act. The draft demand sought damages in the approximate amount of $2,000,000. The Co mpany believed that it co mplied
with all applicab le franchise rules and regulations in its dealings with the former franchisee and sought to vigorously defen d any claims that
were b rought. This matter was settled in April 2008. The terms of the confidential settlement agreement included a monetary p ayment that was
included in general and administrative expenses for the nine months ended September 28, 2008.

                                                                          F-11
                                          UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                          Notes to Consoli dated Financi al Statements – Unaudi ted

On April 2, 2008, KFLG Watertown, Inc. (KFLG), a wholly-owned subsidiary of the Co mpany, received a defau lt letter fro m BAA Boston,
Inc. (BAAB) claiming certain defaults under KFLG’s Sublease Agreement with BAAB for retail premises (the Premises) at Lo gan
International Airport in Boston, Massachusetts (the Sublease Agreement). On July 16, 2008, KFLG received a second default let ter (the Default
Letter) alleging that KFLG is in defau lt of its obligations under the Sublease Agreement due to, among other thing s, KFLG’s failu re to open on
time and to timely make certain subtenant improvements. The Default Letter demands that KFLG pay liquidated damages of $104,0 00 BAAB,
past due rent of $20,000 and BAAB’s legal fees and expenses in the amount of appro ximately $40,000. This matter is only in th e claim stage
and no legal proceeding has been commenced. The Co mpany has denied BAAB’s allegations that it is in defau lt of the Sublease Agreement.
The Co mpany has been in contact with representatives of BAAB to try and res olve this matter. In the event the Company is unable to resolve
this matter, BAAB has indicated it will seek to enforce any and all of its rights and remed ies available under the Sublease A greement including
the possible termination of the Sublease.

In connection with the build-out of the Premises, certain subcontractors that performed work on the Premises filed liens totaling $253,431 (the
Lien A mount) against the Co mpany’s subsidiaries and their properties in connection with pay ments for services alleged ly p ast due. In April
2008, pursuant to the terms of the Sublease Agreement, the Co mpany posted a cash collateralized surety bond for 120% of th e L ien Amount.
The general contractor on the pro ject is responsible for the amounts claimed by the subcontractors but was recently forced into involuntary
bankruptcy. The Co mpany paid the general contractor for, among other things, certain amounts claimed by the subcontractor.

The Co mpany is subject to legal proceedings and claims which arise in the normal course o f business. In the opinion of management, the
ultimate liab ilities with respect to these actions will not have a material adverse effect on the Company ’s financial position, results of
operations or cash flow.

7.       Supplemental Disclosures of Cash Fl ow Information:

                                                                Three Months Ended                             Nine Months Ended
                                                    Sept. 28,                                       Sept.
                                                    2008                    Sept. 30, 2007          28, 2008            Sept. 30, 2007

       Cash paid during the period for interest     $           17,548      $            93,330     $          62,650   $            262,270


           Summary of non-cash investing
           and financing activities:
           Accrued preferred stock dividends        $                —      $           244,057     $              —    $            732,172

           Property and equipment acquired
             with capital lease                     $           54,693      $                 —     $          72,714   $                   —


8.       Loss per share

The amounts used for basic and diluted per share calculations are as follo ws:

                                                                    Three Months Ended                          Nine Months Ended
                                                                Sept. 28,             Sept. 30,          Sept. 28,              Sept. 30,
                                                                  2008                 2007                2008                   2007
       Net loss                                          $        (1,891,139 ) $       (1,104,288 ) $          (6,770,295 ) $     (3,855,901 )
       Preferred stock dividend requirements                              —              (244,057 )                    —            (732,172 )
       Net loss allocable to co mmon stockholders        $        (1,891,139 ) $       (1,348,345 ) $          (6,770,295 ) $     (4,588,073 )


       Weighted average number of shares
       outstanding – basic and diluted                            34,813,669            9,290,545          33,528,508              8,476,891

       Basic and diluted loss per common share           $               (0.05 ) $           (0.15 ) $              (0.20 ) $            (0.54 )
Our diluted loss per share is the same as our basic loss per share since the effect of the assumed exercise of options and wa rrants to purchase
common stock is anti-d ilutive. A total of 17,222,184 and 15,889,371 potential co mmon shares fro m the assumed exercise of options and
warrants were excluded fro m the calcu lation of d iluted net loss per share for the three and nine month periods ended Septembe r 28, 2008,
respectively, and a total of 4,532,357 and 4,504,866 potential co mmon shares fro m the assumed exercise of warrants, options and convertible
preferred stock were excluded fro m the calculat ion of diluted net loss per share for the three and nine month periods ended S eptember 30,
2007, respectively, because their inclusion would have been anti-dilutive.

                                                                      F-12
                                         UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                         Notes to Consoli dated Financi al Statements – Unaudi ted

9.         Other Income and Expense

In April 2008, the Co mpany paid $800,000 to ext inguish the note payable issued in connection with the Co mpany ’s acquisition of the
Downtown Crossing restaurant and store and recognized a gain fro m extinguishment of debt of $68,575. The gain is included in other income
for the nine month period ended September 28, 2008 on the accompanying consolidated statement of operations. In September 200 8, the
Co mpany recorded $194,115 for the monetary penalties due to the registration statement not being declared effec tive (see Note 3).

10.        Segment Data

The Co mpany operates two business segments; Store Operat ions and Franchise Operations. The Store Operations segment comprises the
operating activities of restaurants owned or operated by the Company. The Franchise Ope rations segment is comprised of the operating
activities of the franchise business unit which licenses qualified operators to conduct business under the Knowfat and UFood Grill tradenames
and also costs to monitor the operations of these business units. Un der the terms of the franchise agreements, the licensed operators pay
royalties and fees to the Company in return for the use of the Knowfat and UFood Grill t radenames.

The accounting policies of the segments are the same. Interest expense has been alloc ated based on operating results and total assets employed
in each segment.

Inter-segment transactions are uncommon and not material. Therefore, they have not been separately reflected in the financial table below. The
totals of the reportable segments ’ revenues and net loss agree with the co mparable amounts contained in the Co mpany ’s consolidated financial
statements.

Segment informat ion for the Co mpany’s two business segments follows:

                                                                    Three Months Ended                          Nine Months Ended
                                                              September 28,         September 30,         September 28,         September 30,
                                                                  2008                  2007                  2008                  2007
Revenues:
  Store operations                                        $         1,449,086   $         1,113,163   $         4,278,008   $         3,622,661
  Franchise operations                                                 97,739               113,465               229,754               289,789
      Total revenue                                       $         1,546,825   $         1,226,628   $         4,507,762   $         3,912,450


Segment income (loss):
  Store operations                                        $         (153,096 ) $           (225,851 ) $          (481,719 ) $         (812,518 )
  Franchise operations                                              (329,878 )             (112,572 )          (1,943,372 )           (600,795 )
      Total segment loss                                  $         (482,974 ) $           (338,423 ) $        (2,425,091 ) $        (1,413,313 )


Unallocated general and administrative expenses           $          904,740 $              506,025   $         3,089,432 $           1,398,445
Advertising, marketing and pro motion                                179,096                 60,276               769,667               472,026
Depreciat ion and amort ization                                      133,036                106,234               368,016               322,873
Interest (income) expense, net                                        (2,822 )               93,330                (7,451 )             249,244
Other (income) expense                                               194,115                     —                125,540                    —
Net loss                                                  $        (1,891,139 ) $        (1,104,288 ) $        (6,770,295 ) $        (3,855,901 )


                                                                      F-13
                               REPORT OF INDEPENDENT REGIS TERD PUB LIC ACCOUNTING FIRM

To the Shareholders of UFood Restaurant Group, Inc:

We have audited the accompanying consolidated balance sheets of UFood Restaurant Group, Inc and Subsidiary (the Co mpany) as o f
December 30, 2007 and December 31, 2006, and the related consolidated statements of operations, changes in stockholders ’ equity (deficit)
and cash flows for the fiscal years then ended. These consolidated financial statements are the responsibility of the Co mpany ’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Co mpany Accounting Oversight Board (Un ited States of A merica).
Those standards require that we p lan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. The Co mpany is not required to have, nor were we engaged to perform, an audit of its inter nal control over
financial reporting. An audit includes consideration of internal control over financial repo rt ing as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the Company ’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant es timates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of UFood
Restaurant Group, Inc and Subsidiary as of December 30, 2007 and December 31, 2006, and the results of their operations and t heir cash flows
for the years then ended in conformity with accounting principles generally accepted in the United States o f America.

/s/ Carlin, Charron & Rosen, LLP

Westborough, Massachusetts
April 14, 2008

                                                                        F-14
                                      UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                   Consolidated Balance Sheets
                                              December 30, 2007 and December 31, 2006

                                                              Assets

                                                                                            2007             2006

Current assets:
  Cash and cash equivalents                                                             $    3,352,201   $    1,840,090
  Restricted cash                                                                            1,083,612               —
  Accounts receivable                                                                           93,534           30,068
  Inventories                                                                                  193,359          244,766
  Prepaid expenses and other current assets                                                     40,283           57,877
                                                                                             4,762,989        2,172,801


Property and equipment:
  Equip ment                                                                                   874,853          878,763
  Furniture and fixtures                                                                       156,207          189,833
  Leasehold improvements                                                                     2,301,571        1,552,763
  Website development costs                                                                     80,736           27,050
                                                                                             3,413,367        2,648,409
Accumulated depreciation and amortization                                                      699,305          388,645
                                                                                             2,714,062        2,259,764

Other assets:
  Goodwill                                                                                    977,135         1,405,325
  Other                                                                                       129,360           229,632
                                                                                             1,106,495        1,634,957

Total assets                                                                            $    8,583,546   $    6,067,522


                                                      See accompanying notes.

                                                               F-15
                                          UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                             Consolidated Balance Sheets
                                                        December 30, 2007 and December 31, 2006

                                                          Liabilities and Stockholders ’ (Deficit)

                                                                                                         2007                2006

Current liab ilit ies:
  Current portion of long-term debt                                                                  $     1,874,993     $    2,045,722
  Current portion of cap ital lease obligations                                                               51,582             57,608
  Accounts payable                                                                                           727,293            565,800
  Franchisee deposits                                                                                        504,500            647,500
  Accrued expenses and other current liabilities                                                             439,226             70,828
                                                                                                           3,597,594          3,387,458

Long-term liabilities:
  Long-term debt                                                                                            730,691           1,212,340
  Capital lease obligations                                                                                  83,005             106,631
  Other noncurrent liab ilities                                                                             152,158                  —
                                                                                                            965,854           1,318,971

Series C convertible preferred stock, $0.001 par value, -0- and 719,440 shares issued and
  outstanding                                                                                                     —           3,070,812

Total liabilities                                                                                          4,563,448          7,777,241

Co mmit ments and contingencies                                                                                   —                  —

Stockholders’ equity (deficit):
  Convertible preferred stock, $0.001 par value, 10,000,000 shares authorized
    Series B convertible preferred stock, -0- and 1,407,416 shares issued and outstanding                         —            431,187
    Series A convertible preferred stock, -0- and 1,576,040 shares issued and outstanding                         —            525,439
  Co mmon stock, $0.001 par value, 300,000,000 shares authorized, 29,241,158 and 4,208,745
    shares issued and outstanding                                                                             29,241              4,209
  Additional paid-in capital                                                                              18,833,096          6,720,271
  Accumulated deficit                                                                                    (14,842,239 )       (9,390,825 )
                                                                                                           4,020,098         (1,709,719 )

Total liabilities and stockholders ’ equity (deficit)                                                $     8,583,546     $    6,067,522


                                                                See accompanying notes.

                                                                           F-16
                                       UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                    Consolidated Statements of Operations
                                    For the Fiscal Year Ended December 30, 2007 and December 31, 2006

                                                                                                        2007               2006
Revenues:
  Store sales                                                                                     $      4,543,194     $    3,273,103
  Franchise royalties and fees                                                                             326,733            319,565
  Other revenue                                                                                             34,956             99,026
                                                                                                         4,904,883          3,691,694

Costs and expenses:
  Store operating expenses:
  Cost of goods sold, food and paper products                                                            2,011,229          1,469,684
  Labor                                                                                                  1,405,662          1,043,314
  Occupancy                                                                                                410,061            309,157
  Other store operating expenses                                                                           796,804            561,350
General and administrative expenses                                                                      3,520,392          3,555,974
Advertising, marketing and pro motion expenses                                                             671,440            548,330
Depreciat ion and amort ization                                                                            429,586            222,744
Loss on disposal of assets                                                                                 666,838                 —
Total costs and expenses                                                                                 9,912,012          7,710,553

Operating loss                                                                                          (5,007,129 )       (4,018,859 )

Other inco me (expense):
  Interest income                                                                                          18,627             49,120
  Interest expense                                                                                       (387,757 )         (146,987 )
  Other expense                                                                                           (75,155 )            (8,887 )
Other inco me (expense), net                                                                             (444,285 )         (106,754 )

Loss before income taxes                                                                                (5,451,414 )       (4,125,613 )
Income taxes                                                                                                    —                  —

Net loss                                                                                          $     (5,451,414 ) $     (4,125,613 )


Basic and diluted earnings (loss) per share                                                       $            (0.68 ) $          (0.60 )


                                                         See accompanying notes.

                                                                  F-17
                                                 UFOOD RES TAURANT GROUP, INC. and S UBSIDIARY

                                           Consolidated Statements of Changes in Stockholders' Equity (Deficit)
                                             For the Year Ended December 30, 2007 and December 31, 2006

                          Series B Convertible         Series A Convertible          Common Stock               Additional Paid-in          Accumulated
                          Shares          Value        Shares          Value        Shares          Value            Capital                  Deficit           Total


Balances, January 1,
2006                        1,407,416 $     62,511       1,576,040 $    289,127       4,208,745 $     4,209 $               7,278,910 $         (5,265,212) $    2,369,545

Dividends accrued on
mandatory redeemable
preferred stock                     -             -              -             -              -             -                    (1,346 )                 -         (1,346)

Warrants exchanged
for debt gaurantee                  -             -              -             -              -             -                   24,231                    -        24,231

Accrued preferred
stock dividends                     -      368,676               -      236,312               -             -                  (604,988 )                 -              -

Stock-based
compensation                        -             -              -             -              -             -                   23,464                    -        23,464

Net loss for year ended
December 31, 2006                   -             -              -             -              -             -                          -        (4,125,613)     (4,125,613)


Balances, December
31, 2006                    1,407,416      431,187       1,576,040      525,439       4,208,745       4,209                 6,720,271           (9,390,825)     (1,709,719)

Dividends accrued on
mandatory redeemable
preferred stock                     -             -              -             -              -             -                  (244,886 )                 -      (244,886)

Accrued preferred
stock dividends                     -      395,770               -      300,709               -             -                  (696,479 )                 -              -

Conversion of
preference stock           (1,407,416)    (826,957 )    (1,576,040)    (826,148 )     3,710,642       3,710                 4,965,093                     -      3,315,698

Conversion of
promissory notes                    -             -              -             -      6,248,868       6,249                 2,650,560                     -      2,656,809

Stock issued for
marketing and
promotional services                -             -              -             -      1,371,157       1,371                    313,629                    -       315,000

Stock-based
compensation                        -             -              -             -        41,746          42                     249,250                    -       249,292

Cancellation and
re-issuance of warrants             -             -              -             -              -             -                   75,158                    -        75,158

Reverse acquisition
recapitalization
adjustment                          -             -              -             -      7,500,000       7,500                      (7,500 )                 -              -

Issuance of Units (net
of issuance costs of
$1,345,840)                         -             -              -             -      6,160,000       6,160                 4,808,000                     -      4,814,160

Net loss for year ended
December 30, 2007                   -             -              -             -              -             -                          -        (5,451,414)     (5,451,414)


Balances, December
30, 2007                            - $           -              - $           -     29,241,158 $ 29,241 $                 18,833,096 $        (14,842,239) $    4,020,098



                                                                      See accompanying notes.
F-18
                                          UFOOD RES TAURANT GROUP, INC. AND S UBS IDIARY

                                                        Consolidated Statements of Cash Flows
                                        For the Fiscal Year Ended December 30, 2007 and December 31, 2006

                                                                                                            2007               2006

Cash flows fro m operating activ ities:
  Net loss                                                                                            $     (5,451,414 ) $     (4,125,613 )
  Adjustments to reconcile net loss to net cash used in operating activities:
  Depreciat ion and amort ization                                                                             429,586             222,744
  Amort izat ion of deferred financing costs                                                                   20,001              10,538
  Provision for doubtful accounts                                                                              29,229                  —
  Warrants exchanged for debt guarantee                                                                            —               24,231
  Adjustment to warrant exercise prices                                                                        75,155                  —
    Stock-based compensation                                                                                  249,292              23,464
    Loss on disposal of assets                                                                                666,838                  —
    Non-cash promotion expenses                                                                               424,000                  —
    Non-cash interest on bridge loans                                                                         119,650                  —
    Increase (decrease) in cash fro m changes in assets and liabilit ies:
    Accounts receivable                                                                                       (56,362 )           (19,201 )
    Inventories                                                                                                 3,373            (107,344 )
    Prepaid expenses and other current assets                                                                  17,595               6,797
    Other assets and noncurrent liab ilities                                                                  232,429             (87,498 )
    Accounts payable                                                                                          224,208             195,866
    Franchisee deposits                                                                                      (143,000 )           297,500
    Accrued expenses and other current liabilities                                                             24,436              18,773
Net cash used in operating activities                                                                       (3,134,984 )       (3,539,743 )

Cash flows fro m investing activities:
  Proceeds from sale of assets                                                                                150,000                   —
  Acquisition of property and equipment                                                                      (992,447 )        (1,065,119 )
  Acquisition of intangibles                                                                                       —                (1,688 )
Net cash used in investing activities                                                                        (842,447 )        (1,066,807 )

Cash flows fro m financing activ ities:
  Proceeds from issuance of notes payable                                                                    2,537,160                 —
  Proceeds from issuance of common stock, net                                                                4,814,160                 —
  Proceeds from long-term debt                                                                                      —             450,000
  Proceeds from issuance of preferred stock                                                                                     3,069,466
  Payments on long-term debt                                                                                  (715,094 )         (222,011 )
  Payments on capital lease obligations                                                                        (63,072 )          (27,145 )
  Increase in restricted cash                                                                               (1,083,612 )               —
  Cash released fro m restrictions                                                                                  —           1,400,000
Net cash provided by financing activities                                                                    5,489,542          4,670,310

Increase in cash and cash equivalents                                                                        1,512,111             63,760
Cash and cash equivalents – beginning of year                                                                1,840,090          1,776,330

Cash and cash equivalents – end of year                                                               $      3,352,201     $    1,840,090


                                                            See accompanying notes.

                                                                       F-19
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

1.     Nature of Operations

Nature of Operations

UFood Restaurant Group, Inc. was incorporated in the State of Nevada on February 8, 2006 as A xxent Media Corp. Prior t o December 18,
2007, UFood was a development stage company headquartered in Vancouver, Canada. As Axxent Media Corp., the Co mpany ’s business was
to obtain reproduction and distribution rights to foreign films within North A merica and also to obtain the foreign rights to North A merican
films fo r reproduction and distribution to foreign countries. On August 8, 2007, the Co mpany changed its name to UFood Franchise Co mpany,
and on September 25, 2007, changed its name to UFood Restaurant Group, Inc. (UFood or the Co mpany). Fo llowing the merger desc ribed
below, we abandoned our plans both to obtain reproduction and distribution rights to foreign films.

On December 18, 2007, (Merger Date) pursuant to the terms of an Agreement and Plan of Merger and Reorganizat ion, a wholly -owned
subsidiary of the Co mpany merged with and into KnowFat Franchise Co mpany, Inc. (KnowFat). Fo llowing the merger (the Merger ), UFood
continued KnowFat’s business operations as a franchisor and operator of fast-casual food service restaurants that capitalize on consumer
demands for appetizing food with healthy attributes. As of December 30, 2007, the Co mpany ’s operations consisted of five co mpany-operated
restaurants and three franchise-operated locations. On the Merger Date, each share of KnowFat co mmon stock issued and outstanding
immed iately prior to the Merger was exchanged for 1.52350763 shares of UFood Co mmon Stock. All sha re amounts have been adjusted to
reflect the effect of the share exchange.

2.     Summary of Significant Accounti ng Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements of UFood Restaurant Group, Inc. and its subsidiaries consist of the accounts of UFood
Restaurant Group, Inc. and its wholly-owned subsidiaries. All significant interco mpany balances and transactions have been eliminated in
consolidation.

Certain reclassifications have been made to conform prev iously reported data to the current presentation.

Fiscal Year

Following the merger described in Note 3, UFood changed its fiscal year end from April 30 to a 52/ 53 week fiscal year ending on the Sunday
closest to December 31 of each year. Our 2007 and 2006 fiscal years ended on December 30, 2007 and December 31, 2006, respectively.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the Unite d States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilit ies and disclosure of contingent assets and
liab ilit ies at the date of the financial statements and the reported amount of revenues and expenses during the reporting per iod. Actual amounts
could differ fro m those estimates.

Cash Equivalents

Cash equivalents represent highly liquid instruments with orig inal maturities of three months or less when purchased. Cash equivalents consist
of money market accounts at December 31, 200 7 and 2006. At December 31, 2007 restricted cash was comprised of $83,612 used t o
collateralize a standby letter of credit and $1,000,000 received fro m the sale of equity securities and deposited in an escrow account t o pay
investor relations and public relations expenses.

Inventories

Inventories, which primarily consist of food products, paper goods and supplies and vitamins and supplements for resale, are stated at the lower
of cost or market, with cost determined by the average cost method.

                                                                      F-20
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

Deferred Financing Costs

Deferred financing costs represent costs paid to third part ies in order to obtain long -term financing and have been included in other assets.
Deferred financing costs are amort ized over the life of the related debt. A mo rtization expense related to these costs were $20,001 and $10,538
for the years ended December 30, 2007 and December 31, 2006, respectively, and is included in interest expense.
Property and Equipment

Property, equip ment and leaseholds are stated at cost. Depreciation is provided using the straight -line method over the estimated useful lives of
the assets. Leasehold improvements are amortized using the straight -line method over the shorter of their estimated useful lives or the related
reasonably assured lease term. The estimated useful lives used for financial statement purposes are:

                                 Leasehold improvements                                                5 years
                                 Equip ment                                                            5 years
                                 Furniture and fixtures                                                5 years
                                 Website development costs                                             3 years

Upon retirement or sale, the cost of assets disposed and their related accumu lated depreciation are removed fro m the accounts . Any resulting
gain or loss is credited or charged to operations. Maintenance and repairs are charged to expense when incurred, wh ile betterments are
capitalized. The total amounts expensed for maintenance and repairs were $70,182 and $47,453 for the fiscal years ended December 30, 2007
and December 31, 2006, respectively.

Goodwill and Other Intangible Assets

The Co mpany accounts for goodwill and other intangible assets under Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFA S No. 141 requires that the purchase method of accounting be
used for all business combinations init iated after June 30, 2001, and that certain intangible assets acquired in a business co mbinatio n be
recognized as assets apart from goodwill. Under SFAS No. 142, purchased goodwill and intangible assets with indefin ite lives are not
amort ized, but instead tested for impairment at least annually or whenever events or changes in circumstances indicate the ca rrying value may
not be recoverable. Intangible assets with finite lives continue to be amortized over their useful lives. At December 30, 2007, the carrying
amount of goodwill was $977,135 and was comprised of $841,135 of goodwill attributable to our store operations segment and $1 36,000 of
goodwill attributable to our franchise operations segment. Goodwill attributable to ou r franchise operations segment is evaluated at least
annually by comparing the Co mpany’s fair market value, determined based upon quoted market prices of the Co mpany ’s equity securities, to
the carrying amount of goodwill. Goodwill attributable to our store operations segment is evaluated on a restaurant-by-restaurant basis by
comparing the present value of the restaurant’s future cash flows to the carrying value of the underlying net assets inclusive of goodwill. Future
cash flows are estimated based upon a restaurant’s historical operating perfo rmance and management’s estimates of future revenues and
expenses over the period o f t ime that the Co mpany expects to operate the restaurant, which generally coincides with the initi al term of the
restaurant’s lease but which may take into account the restaurant’s first lease renewal period up to 5 years. The estimate of a restaurant’s future
cash flows also includes an estimate o f the restaurant’s terminal value, which is determined by applying a capitalization rate to the restaurant’s
estimated cash flows during the last year of the forecast period. The capitalization rate used by the Co mpany was determined based upon the
restaurant’s location, cash flows and gro wth prospects. The present value of the restaurant ’s estimated future cash flows was calculated using a
discount rate of 8%. We estimate that a 1% decrease in total store revenues would increase our net loss and reduce our cash f low by
approximately $20,000. The Co mpany performed its annual impairment tests as of the first day of the fourth quarter of fiscal years 2007 and
2006. Based upon the results of the first step, the Co mpany determined that no impairment had occurred, as the fair value of t he reporting unit
exceeded the respective carrying value. The ca rrying amount of goodwill may be impaired in the future if our actual operating results and cash
flows fall short of our expectations. At December 30, 2007, the Co mpany had no indefinite -lived intangible assets.

Intangible assets with finite lives consist of costs incurred to obtain debt financing and are being amo rtized on a straight -lin e basis over the
term of the related debt.

Impairment of Long-Lived Assets

In accordance with SFA S No. 144, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of, when
impairment indicators exist, the Co mpany evaluates its long -lived assets for potential impairment. Potential impairment is assessed when there
is evidence that events or changes in circu mstances have occurred that indica te the carrying amount of an asset may not be recovered. When
events or changes in circu mstances have occurred that indicate a long -lived asset may be impaired, the Co mpany uses estimates of future cash
flows on a restaurant-by-restaurant basis to test the recoverability of its long-lived assets. The Company identified no indications of
impairment.

Income Taxes

The provision for inco me taxes is determined in accordance with the provisions of SFAS No. 109, Accounting for Income Taxes. Under this
method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences betwee n the financial
statement carry ing amounts of existing assets and liabilit ies and their respective tax basis. Deferred t ax assets and liab ilities are measured using
enacted income tax rates expected to apply to taxable inco me in the years in wh ich those temporary differences are expected t o be recovered or
settled. Any effect on deferred tax assets and liab ilities of a chan ge in tax rates is recognized in inco me in the period t hat includes the
enactment date.

                                                                         F-21
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

In Ju ly 2006, the Financial Accounting Standards Board (FASB) issued Interpretation (FIN) No. 48, Accounting for Uncertainty in Income
Taxes. FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise ’s financial statements in accordance with
SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. This pronouncement also provides guid ance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. Effective January 1, 2007, the Company adopted
the provisions of FIN No. 48 and the provisions of FIN No. 48 have been applied to all inco me tax positions commencing from that date. The
cumulat ive effect of adopting FIN No. 48 was not material. Prior to fiscal 2007, the Co mpany determined its tax contingencies in accordance
with SFAS No. 5, Accounting for Contingencies. The Co mpany recorded estimated tax liabilities to the extent the contingencies were probable
and could be reasonably estimated.

Revenue Recognition

The Co mpany records revenue for company-owned store sales upon the delivery of the related food and other products to the customer.

The Co mpany follo ws the accounting guidance of SFAS No. 45, Accounting for Franchise Fee Income . Franchisee deposits represent
advances on initial franchise fees prior to the opening of the franchisee location. We recognize in itial franchise fee revenu e when all material
services we are required to perform and all material conditions we are required to satisfy have been subst antially co mpleted, which is generally
the opening of the franchised location. The Co mpany defers direct costs related to franchise sales until the related revenue is recognized;
however, the deferred costs shall not exceed anticipated revenue less estimat ed additional related costs. Such costs include training, facilit ies
design, menu planning and market ing. Franchise royalty revenues are recognized in the same period the relevant franchisee sales occur.

Advertising Costs

The Co mpany expenses a dvertising costs as incurred. Advertising expense amounted to $82,469 in 2007 and $68,163 in 2006.

Pre-Opening Costs

All p re-opening costs directly associated with the opening of new company -owned restaurant locations, which consist primarily of labor and
food costs incurred during in-store training and preparation for opening, but exclude manager training costs which are included in other
operating expenses, are expensed when incurred.

Rent Expense

The Co mpany recognizes rent expense on a straight-line basis over the reasonably assured lease term as defined in SFAS No. 98, Accounting
for Leases. The reasonably assured lease term on most of the Co mpany ’s leases is the initial non-cancelable lease term, which generally
equates to between 5 and 10 years. In addition, certain of the Co mpany’s lease agreements provide for scheduled rent increases during the lease
terms or for rental pay ments commencing at a date other than the date of initial occupancy. The Co mpany includes any rent esc alations and
other rent holidays in its determination of straight-line rent expense. Therefore, rent expense for new locations is charged to expense upon the
commencement date of the lease.

Earnings Per Share Data

Earnings per share are based on the weighted average nu mber of shares outstanding during the period after consideration of th e dilutive effect,
if any, for co mmon stock equivalents, including stock options, restricted stock, and other stock-based compensation. Earnings per common
share are computed in accordance with SFAS No. 128, Earnings Per Share, which requires companies to present basic earnings per share and
diluted earnings per share. Basic earnings per share are co mputed by dividing net inco me by the weighted average number of sh ares of
common stock outstanding during the year. Diluted earnings per co mmon share are co mputed by dividing net inco me by the weighted average
number of shares of common stock outstanding and dilutive securities outstanding during the year.

                                                                      F-22
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

Fair Value of Financial Instruments

The carrying amounts of the Co mpany’s financial instruments, which include accounts receivable, accounts payable and other accrued
expenses approximate their fair values due to the short-term maturity of these instruments.

Stock -Based Compensation

The Co mpany maintains two stock-based incentive plans. The Company grants options to purchase common stock at an option price equal to
the market value of the stock at the date of grant. Options generally vest over a three year period beginning on the date of grant and have a ten
year term.

The Co mpany has adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payment , which requires all stock-based
compensation, including grants of employee stock options, to be recognized in the statement of operations based on their fair values. Th e
Co mpany adopted this accounting treatment using the modified prospective transition method, as permitted under SFAS No. 123R; therefore
results for prior periods have not been restated. The Co mpany uses the Black-Scholes option pricing model which requires extensive use of
accounting judgment and financial estimates, including estimates of the expected term participants will retain their vested stock options before
exercising them, the estimated volat ility of the Co mpany’s common stock price over the expected term, and the nu mber of options that will be
forfeited prior to the co mpletion of their vesting requirements. The provisions o f SFAS No. 123R apply to new stock options and stock options
outstanding, but not yet vested, on the date the Company adopted SFAS No. 123R.

Stock-based compensation expense recognized during the fiscal year ended December 30, 2007 totaled appro ximately $218,082 for stock
options and $31,210 related to restricted stock. Stock-based compensation expense recognized during the fiscal year ended December 31, 2006
totaled approximately $23,464 for stock options. Stock-based compensation expense was included in general and administrative expenses in
the accompanying Consolidated Statements of Operations.

Prior to adoption of SFAS No. 123R, the Co mpany accounted for stock-based compensation using the intrinsic value meth od prescribed in
Accounting Principles Board (APB) 25, Accounting for Stock Issued to Employees, and related interpretations, and followed the disclosure
requirements of SFAS No. 123 as amended by SFAS No. 148, Accounting for Stock -Based Compensation - Transition and Disclosure” .
Accordingly, prior to fiscal 2006, stock-based compensation was included as pro forma disclosure in the fin ancial statement foo tnotes.

New Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - including an
amendment of FASB Statement No. 115 . Under SFAS No. 159, a co mpany may elect to measure eligib le financial assets and financial
liab ilit ies at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each
subsequent reporting date. If elected, SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements . SFAS No 157 defines fair value, establishes a framework for
measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change
existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effect ive fo r fiscal years beg inning after
November 15, 2007. The adoption of SFAS No. 157 is not expected to have a material impact on the Co mpany ’s future consolidated financial
statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. SFAS No. 141R establishes princip les and requirements for
how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liab ilit ies assumed, and
any non-controlling interest in the acquiree . The statement also provides guidance for recognizing and measuring the goodwill acquired in the
business combination and specifies what information to d isclose to enable users of the financial statements to evaluate the n ature and financial
effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15,
2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing GAAP un til
December 28, 2008. The Co mpany expects SFAS No. 141R will have an impact on its consolidated financial statements when effective, but the
nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions it consummates a fter the effective
date. The Co mpany is still assessing the impact of th is standard on its future consolidated financial statements.

                                                                      F-23
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an Amendment of ARB
51. SFAS No. 160 changes the accounting and reporting for minority interests. Minority interests will be re -characterized as non-controlling
interests and will be reported as a component of equity separate from the parent ’s equity, and purchases or sales of equity interests that do not
result in a change in control will be accounted for as equity transactions. In addition, net inco me attributable to the non-controlling interest will
be included in consolidated net inco me on the face of the inco me statement and upon a loss of control, the interest sold, as well as any interest
retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentatio n and disclosure
requirements, which will apply restrospectively. The adoption of SFAS No. 160 is not expected to have a material impact on the Co mpany ’s
future consolidated financial statements.

In December 2007, the Securities and Exchange Co mmission issued Staff Accounting Bulletin (SAB) No. 110. SA B No. 110 exp resses the
views of the staff regarding the use of a ―simp lified‖ method, as discussed in SAB No. 107, in developing an estimate of the expected term of
―plain vanilla‖ share options in accordance with SFA S No. 123R. SAB No. 110 is not expected to have a significant impact on our consolidated
financial statements.

3.     Reverse Merger

On December 18, 2007, pursuant to the terms of an Agree ment and Plan of Merger and Reorganizat ion, the Co mpany, through a wholly -owned
subsidiary, merged with and into KnowFat Franchise Co mpany, Inc. Fo llo wing the merger, UFood continued KnowFat ’s business operations
as a franchisor and operator of fast-casual food service restaurants. Concurrently with the closing of the Merger and in contemp lation of the
Merger, the Co mpany consummated a private offering (the Offering) of up to 8,000,000 units of its securities (Un its) at a price of $1.00 per
Unit. Each Unit consists of one share of Co mmon Stock and a warrant to purchase one-half, or 50%, of a share of Co mmon Stock.

Immediately prior to the Merger, UFood had 23,700,000 shares of Co mmon Stock issued and outstanding and $2,000,000 principal amount of
9% Convertible Pro missory Notes (Investor Notes) outstanding. On the Closing Date, the Investor Notes together with accrued interest of
$40,087 automatically converted into 4,080,175 Un its at a conversion rate of $0.50 per Un it. In conjunction with the Merger, 16,200,000 shares
of UFood’s Co mmon Stock issued and outstanding prior to the Merger were retired.

Immediately prior to the Merger, KnowFat had 5,621,648 shares of common stock issued and outstanding and 1,576,040 shares of Series A
Preferred Stock (Series A Preferred Shares), 1,407,416 shares of Series B Preferred Stock (Series B Preferred Shares) and 719,440 shares of
Series C Preferred Stock (Series C Preferred Shares and, co llect ively, with the Series A Preferred Shares and the Series B Preferred Shares, the
Preferred Shares) issued and outstanding. KnowFat also had a $1,000,000 convertible pro missory note outstanding (the Antokal Note).

In connection with the Merger, on the Closing Date, all of KnowFat ’s issued and outstanding Preferred Shares and the Antokal Note converted
into 3,710,642 and 2,168,693 shares, respectively, of KnowFat common stock. On the Closing Date and in connection with the Me rger, each
share of KnowFat’s issued and outstanding common stock before the merger, including the co mmon stock issued upon conversion of the
Preferred Shares and the Antokal Note, automatically converted into the right to receive 1.52350763 shares (the Conversion Ra tio) of the
Co mpany’s common stock, par value $0.001 (Co mmon Stock) per share.

In addition, on the Closing Date, all of the issued and outstanding options and warrants to purchase shares of KnowFat co mmon stock were
exchanged, respectively, for options (the New Options) and warrants (the New Warrants) to purchase shares of the Co mpany ’s Co mmon Stock.
The number of shares of Co mmon Stock issuable under, and the price per share upon exercise of, the New Options were calculated based on
the terms of the original KnowFat options, as adjusted by the Conversion Ratio. The number of shares of Co mmon Stock issuable under the
New Warrants was calculated based on the terms of the orig inal warrants, as adjusted by the Conversion Ratio. Immed iately prior to the
consummation of the Merger, the exercise price of all outstanding KnowFat warrants was adjusted to $1.00, a nd such exercise price was not
affected by the conversion ratio in the Merger.

                                                                        F-24
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

As a result of the foregoing, on the Closing Date, an aggregate of 12,500,000 shares of Common Stock were issuable to former KnowFat
stockholders and upon exercise of outstanding KnowFat options and warrants. Of these, 11,500,983 shares of Co mmon Stock wer e issued, and
an aggregate of 391,791 and 607,226 shares of Co mmon Stock were reserved for issuance upon the exercise of the New Options an d New
Warrants, respectively. UFood’s stockholders before the merger retained 7,500,000 shares of Co mmon Stock after the Merger.

The following table summarizes the effect of the reverse merger recap italizat ion adjustment on stockholders ’ equity:

                                                                           Co mmon Stock
                                                                                                                       Additional
                                                                       Shares              Par Value                 Paid-in Capital
       UFood shares outstanding immediately prio r to the
       Merger                                                           23,700,000     $        23,700     $                           (23,700 )

       UFood shares retired                                            (16,200,000 )           (16,200 )                               16,200

       Reverse acquisition recapitalization adjustment                   7,500,000     $         7,500     $                            (7,500 )


The Merger Agreement includes a post-merger adjustment to the nu mber of shares of Co mmon Stock issued to the former KnowFat
stockholders in an amount up to 2,000,000 shares of Co mmon Stock for any breach of the Me rger Agreement discovered during the two-year
period fo llo wing the Closing Date. The Merger has been treated as a recapitalization of the Co mpany fo r financial acco unting purposes.
Accordingly, the UFood’s financial statements before the merger have been replaced with the historical financial statements of KnowFat before
the merger.

4.     Acquisitions

Downtown Crossing

On October 2, 2006, the Co mpany, through a wholly -owned subsidiary, acquired the business assets of one of the Company ’s franchisees
(Downtown Crossing in Boston ). The results of Downtown Crossing ’s operations have been included in the consolidated financial statements
since the acquisition date. Although the Company views itself primarily as a franchisor of restaurants, the acquisition of Downtown Crossing
represented an opportunity to acquire a profitable location (as measured by earnings before interest, taxes, depreciation and amort ization
expenses) on favorable terms. The purchase price of $1,125,445 was co mprised of a cash payment of $25,000, a pro missory note in the amount
of $1, 075,000 and the assumption of certain current liabilities totaling $25,445. The purchase price took into account the c osts incurred by the
former owner in opening the store including preopen ing costs and reflected the profitability of the store. The purchase price was allocated as
follows:

              Inventory                                                                                          $           31,507
              Goodwill                                                                                                      402,326
              Property and equipment                                                                                        630,783
              Security deposits                                                                                              27,605
              Franchise fee                                                                                                  33,224
                                                                                                                 $        1,125,445


The asset purchase agreement also requires monthly payments equal to 10% o f gross cash revenue (a portion of which represents interest on the
promissory note) until the pro missory note is paid in full. The goodwill recorded in connection with the acquisition of the Downtown Crossing
location was allocated to the Downtown Crossing store which is part of our store operations business segment.

The following supplemental pro forma informat ion is presented showing our results of operations for the year ended De cember 31, 2006 as
though the acquisition of the Downtown Crossing store had occurred on January 1, 2006.

                                                                                                              Pro Forma
                                                                                                         Results of Operations
                                                                                                             Year Ended
                                                                                                            Dec. 31, 2006
              Revenues                                                                         $                     4,599,072


              Net loss                                                                         $                    (4,153,105 )


              Basic and diluted loss per share                                                 $                          (0.60 )


On a pro forma basis, the Downtown Crossing store generated earnings before interest, taxe s, depreciation and amort ization of $170,120 and
incurred depreciation expense of $91,170 and interest expense of $106,442, resulting in a pro forma net loss of $27,492.

Landmark Center

On September 6, 2006, the Co mpany, through a wholly -o wned subsidiary, acquired the business assets of another franchisee for a no minal
amount. The acquired assets were comprised of $450,000 of cash and the rights to construct and operate a restaurant in Landmark Center under
a long term lease. The Co mpany used the acquired cash to pay for a portion of the store ’s total construction costs. The Co mpany recognized a
liab ility at the acquisition date for the cash that was acquired. No goodwill was recognized o n this transaction. Under the terms of the asset
purchase agreement, the Co mpany agreed to pay the seller a monthly royalty equal to 5% of sales during the period the Co mp any operates the
restaurant. The asset purchase agreement further provides that upon the occurrence of a sales event, as defined the Co mpany is required to pay
the seller an amount equal to an amount ranging between 40% and 50% of the sales proceeds, or $450,000, whichever is greater . Although
the Company views itself primarily as a franchisor of restaurants, the acquisition of the Landmark Center assets represented an opportunity to
acquire a superior restaurant site on favorable terms .

                                                                     F-25
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

The asset purchase agreement requires a quarterly royalty payment to the seller equal to 5% of the store ’s gross cash revenue, as defined, and
includes a restrictive covenant requiring the Co mpany’s wholly-o wned subsidiary to maintain net equity of not less than $450,000.

5.     Disposal of Assets

During 2007, the Co mpany recorded a loss on disposal of assets of $666,838 resulting fro m the closure of one restaurant and t he sale of a
second restaurant. The disposition of the two stores was accounted for in accordance with SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities.

In April 2007, the Co mpany recorded a loss of $493,032 in connection with the closure of a restaurant in Woburn, Massachusett s. The loss
represents the net present value of the remain ing lease obligation and the write-off of goodwill and equipment.

In September 2007, the Co mpany sold its restaurant in Shrewsbury, Massachusetts, for $150,000 of cash and a note receivable o f $36,333. The
note receivable is non-interest bearing and is due in 2008. The Co mpany recorded a loss of $173,806 in connection with the sale.

6.     Goodwill

The change in the carrying amount of goodwill for the year ended December 30, 2007, is as follows:

                                                                                                              Franchise
                                                                                   Store Operations           Operations
                                                                                       Segment                Segment               Total

Balance as of January 1, 2006                                                  $              866,999     $         136,000    $      1,002,999
  Goodwill acquired during the year                                                           402,326                    —              402,326
  Goodwill written off during the year                                                             —                     —                   —
Balance as of December 31, 2006                                                             1,269,325               136,000           1,405,325
  Goodwill acquired during the year                                                                —                     —                   —
  Goodwill written off in connection with the closure of one restaurant
  and the sale of one restaurant                                                             (428,190 )                    —           (428,190 )
Balance as of December 30, 2007                                                $              841,135     $         136,000    $        977,135


7.     Notes Payable

During 2007, KnowFat secured two tranches of bridge financing as follo ws:

Antokal Note

In April 2007, prior to the Merger transaction described in Note 3, KnowFat borrowed $1,000,000 fro m Alan Antokal, a stockholder, pursuant
to the terms of a 12% Secured Convertib le Subordinated Pro missory Note (the ―Antokal Note‖). The Antokal Note, was secured by
substantially all of KnowFat’s assets and was subordinate in right of pay ment to the prior pay ment of all of KnowFat’s obligat ions to its senior
lender. The Antokal Note was due April 23, 2008 but converted into 2,168,693 shares of KnowFat co mmon stock immed iately prior to the
Merger.

Investor Notes

On September 24, 2007, in connection with the Merger and the Offering of Un its described in Note 10, UFood sold $1,035,000 pr incipal
amount of 9% Convertible Pro missory Notes and on October 4, 2007, UFood sold an additional $965,000 of Investor Notes. The proceeds from
the sale of Investor Notes, net of transaction costs of $462,840, were used to provide bridge financing to KnowFat prior to t he Merger. The
Investor Notes were due 120 days from the date of issuance. On the Closing Date, in connection with th e Merger, the Investor Notes together
with accrued interest converted into 4,080,175 Units.

The Co mpany retained a placement agent (Placement Agent) to sell the Investor Notes and paid the Placement Agent a commission of 10% of
the funds raised fro m the sale of the Investor Notes and an expense allowance of $75,000. In addit ion, the Placement Agent received a warrant
(Placement Agent Warrants) to purchase 800,000 shares of Co mmon Stock. The Placement Agent Warrants are exercisable for seven years at
an exercise price of $1.00 per share. The Co mpany determined the fair value for the Placement Ag ent Warrants to be $486,376 using the Black
Scholes option pricing model. The fair value was recorded as a deferred financing fee and amort ized on a straight -line basis over the term of
the Investor Notes. Upon completion of the Merger t ransaction and Offering of Un its, the unamortized balance of the deferred financing fee of
$272,655 was charged to additional paid-in capital as a cost of the equity financing transaction.

                                                                     F-26
                                          UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                              Notes to Consoli dated Financi al Statements

8.     Long-Term Debt

Long-term debt consists of the following at December 30, 2007 and December 31, 2006:

                                                                                                          2007             2006

Term note payable to bank in monthly principal installments of $29,167 commencing January 2007
through May 2010. Interest is payable monthly at the bank’s prime rate (7.25% at December 31,
2007). The note is secured by substantially all assets of the Company.                                $    1,042,080   $    1,392,084

Downtown Crossing acquisition note payable. Interest accrues at 6% per annum and is payable
monthly, with certain limitations as defined in the agreement. All unpaid amounts are due on or
before December 31, 2007, as defined in the agreement. The note is s ecured by the assets acquired.         880,628         1,045,628

Land mark Center acquisition pro missory note with no stated interest rate. Due upon the occurrence
of a sales event, as defined in the agreement. The note agreement includes a restrictive covenant
requiring the Co mpany’s wholly-o wned subsidiary, KnowFat of Land mark Center, Inc., to maintain
net equity of not less than $450,000.                                                                       450,000          450,000

Unsecured, non-interest bearing note payable. Due in equal monthly installments of $13,021 through
September 2008. Interest imputed on the note using a discount rate of 5% totaled $59,597, which is
being amort ized over the term of the note. The unamortized discount was $1,926 and $11,957 at
December 31, 2007 and 2006, respectively.                                                                   152,099          249,363

Indebtedness incurred in connection with the acquisition of the two franchisee locations. No stated
interest rate; payable in 36 monthly installments of $2,142 through February 2008.                           14,996           27,852

Note payable to the Watertown landlord in connection with the acquisition of the training center in
2004. The note is payable in monthly installments of $2, 566 including interest at 5% through April
2010.                                                                                                        65,881           93,135

                                                                                                           2,605,684        3,258,062

Less current portion                                                                                       1,874,993        2,045,722

Long-term debt                                                                                        $     730,691    $    1,212,340


                                                                     F-27
                                          UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                              Notes to Consoli dated Financi al Statements

Maturities of long-term debt at December 31, 2007 are as follows:

                                            Year ending December 31,

                                                       2008                              $           1,874,993
                                                       2009                                            379,760
                                                       2010                                            350,931

                                                                                         $           2,605,684


9.     Capi tal Lease Obligations

The Co mpany leases certain equipment under capital leases. The equipment has been recorded at the present value of the total lease payments
using discount rates ranging from 13.6% to 18.7%.

Future min imu m lease payments under these leases are as follows:

                                             Year ending December 31,

                                                         2008                                $          70,698
                                                         2009                                           55,989
                                                         2010                                           37,841
                                                         2011                                            3,921
                                                                                                       168,449
                            Less imputed interest                                                       33,862
                                                                                                       134,587
                            Less current portion                                                        51,582

                            Long-term port ion of capital lease obligations                  $          83,005


The recorded cost and accumulated amort izat ion of the equip ment acquired are $ 249,888 and $106,951, respectively as of December 30, 2007.
Amort izat ion expense in 2007 and 2006 was $60,972 and $26,903, respectively.

10.    Capi tal Stock

On December 18, 2007, the Co mpany, through a wholly -owned subsidiary, merged with and into KnowFat Franchise Co mpany, Inc. (see Note
3).

Share Transactions Prior to the Merger

During 2007, prior to the Merger, KnowFat issued 1,412,903 shares of common st ock comprised of 41,746 shares issued to consultants and
vendors and 1,371,157 shares issued to George Foreman Ventures LLC (GFV) pursuant to the terms of a Services Agreemen t which became
effective June 12, 2007. The 41,746 shares issued to consultants an d vendors were valued at $31,237, or $0.75 per share.

Under the terms of the Serv ices Agreement with GFV, KnowFat also agreed to (i) issue GFV an additional 152,351 shares of co mmon stock
promptly following the sale of the 600 th franchise, provided the sale of such franchise occurs by December 31, 2009 and (ii) pay GFV a royalty
equal to 0.2% of aggregate net sales, in exchange for the performance of certain services by George Foreman and a limited lic ense to use Mr.
Foreman’s name and likeness in connection with the promotion of restaurants operated by KnowFat and its franchisees. The 1,371,157 shares
of common stock issued to GFV vest over four years in accordance with the following schedule:

                                                                      F-28
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

                                                 Vesting Date                               Nu mber of Shares

                                                 June 12, 2007                                               685,578
                                                 June 13, 2008                                               304,702
                                                 June 13, 2009                                               152,351
                                                 June 13, 2010                                               152,351
                                                 June 11, 2011                                                76,175

In the event there is a change of control after December 18, 2007, as defined in the Services Agreement, GFV has the right to return 50% of the
shares of common stock received in exchange for a prospective increase in the royalty rate to 0.5%

Advertising, marketing and promotion expenses for the year ended December 30, 2007 include $315,000 representing the fair value of the
685,578 shares that vested on June 12, 2007. Fair value was determined to be equal to the fair value o f the co mmon shares inc luded in the
Offering of Un its (described below).

Shares Issued in Connection with the Merger

In connection with the Merger described in Note 3, on the Closing Date, 1,576,040 shares of Series A Preferred Stock and 719, 440 shares of
Series C Preferred Stock converted on a 1 for 1 basis into 2,295,480 shares of Kno wFat common stock and 1,407,416 shares of Series B
Preferred Stock converted on a 1.005504 for 1 basis into 1,415,162 shares of KnowFat co mmon stock. In addit ion, the Antokal N ote converted
into 2,168,693 shares of KnowFat co mmon stock.

All dividends on the Preferred Shares and accrued interest on the Antokal Note were forfeited upon conversion. The amount of cu mulat ive but
undeclared dividends on the Closing Date and at December 31, 2006 was appro ximately $1,897,000 and $956,000, respectively.

Following the conversion of the Preferred Shares and the Antokal Note, on the Closing Date, all of KnowFat ’s common stock, par value $0.001
per share, issued and outstanding before the merger were exchanged for 11,500,983 shares of UFood ’s Common Stock, par value $0.001 per
share.

On the Closing Date and in connection with the Merger, $2,000,000 of Investor Notes issued by UFood in 2007 together with acc rued interest
of $40,087 automat ically converted into 4,080,175 Un its at a conversion rate of $0.50 per Un it.

Offering of Units

Concurrently with the closing of the Merger and in contemplat ion of the Merger, the Co mpany comp leted the init ial closing of a private
offering (the Offering) of 5,720,000 units of its securities (Units), at a price of $1.00 per Unit. Ea ch Un it consists of one share of Co mmon
Stock and a warrant to purchase one-half, or 50%, of a share of Co mmon Stock. The Co mpany subsequently consummated a second closing of
440,000 Units on December 21, 2007. The warrants (Investor Warrants) are exercisa ble for a period of five years at an exercise price o f $1.25
per whole share of Co mmon Stock.

In connection with the Offering, the Co mpany retained a p lacement agent and paid the Placement Agent a co mmission of 10% of t he funds
raised fro m the investors in the Offering p lus an expense allowance of $225,000. In addit ion, the Placement Agent received warrants to
purchase a number of shares of Co mmon Stock equal to 20% of the shares of Co mmon Stock included in the Units sold to investor s in the
Offering. The Placement Agent warrants are exercisable for seven years at an exercise price of $1.00 per share. The Placement Agent was paid
commissions of $616,000 and received warrants to purchase 1,232,000 shares of Co mmon Stock in connection with the first and s econd
closings of the Offering.

Within 90 days of the final closing of the Offering, the Co mpany is expected to file a registration statement, to beco me effective in an
additional 90 days from the filing date, registering for resale all shares of Common Stock issued in the Offering, including Common Stock (i)
included in the Un its; (ii) issuable upon exercise of Investor Warrants; (iii) issuable upon conversion of the Investor Notes; and (iv) issuable
upon exercise of warrants issued to purchasers of the Investor Notes in connection with the conversion of their Investor Note s. The Co mpany is
obligated to pay monetary penalties equal to one and one-quarter percent (1.25%) of the purchase price paid by the holders of registrable
securities for each full month that (i) the Co mpany is late in filing the reg istration statement or (ii) the registration s tatement is late in being
declared effective; provided, that in no event shall the aggregate of any such penalties exceed fifteen percent (15%) of the gross purchase price
paid by the holders of registrable securities.
F-29
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

Warrants

At December 30, 2007, warrants to purchase 7,759,314 shares of UFood Co mmon Stock were issued and outstanding as follows:

                                                                             Nu mber of             Exercise
                                          Description                        Warrants                Price
                             New Warrants                                           607,226    $               1.00
                             Placement Agent warrants                             2,032,000    $               1.00
                             Investor Notes warrants                              2,040,088    $               1.25
                             Investor Warrants                                    3,080,000    $               1.25

                             Total                                                7,759,314


In connection with the Merger, all of KnowFat’s issued and outstanding warrants converted into New Warrants to purchase shares of the
Co mpany’s Co mmon Stock. The nu mber of shares of Co mmon Stock issuable under the New Warrants was calculated based on the terms of
the original KnowFat warrants, as adjusted by the Conversion Ratio. Immediately prior to the consummation of the Merger, the exercise price
of all outstanding KnowFat warrants was adjusted to $1.00, and such exercise price was not affected by the conversion ratio in t he Merger.

As a result of the foregoing, on the Closing Date, 281,482 KnowFat warrants issued in the connection with the sale of Series B preferred stock
and 141,211 KnowFat warrants issued in connection with the sale of Series C preferred stock were exchanged for 42 2,693 New Warrants with
an exercise price of $1.00. The Co mpany recognized an expense of $75,158 as a result of the change in the exercise price to $ 1.00.

In addition, the warrant issued to an officer of the Co mpany in 2006 to purchase up to 184,533 shares of KnowFat common stock for his
personal guaranty of the Co mpany’s obligations to TD Banknorth, N.A. was exchanged for a New Warrant with an exercise price of $1.00.

In connection with the Company’s sale of $2,000,000 of Investor Notes and the sale of 6,160,000 Units, the Placement Agent was issued
warrants to purchase 800,000 and 1,232,000 shares, respectively, of UFood Co mmon Stock at an exercise price of $1.00. The war rants issued
to the Placement Agent expire seven years from the date they were issu ed.

In connection with the conversion of the $2,000,000 o f Investor Notes, 2,040,088 war rants were issued to the purchasers of the Investor Notes.
The Investor Note warrants have an exercise price of $1.25 and expire in five years.

The sale of 6,160,000 Un its included the issuance of 3,080,000 warrants. The Investor Warrants have an exercise price of $1.25 and expire in
five years.

11.    Stock-Based Compensati on

At December 30, 2007, the Co mpany has two share-based, shareholder approved employee co mpensation plans, the 2004 St ock Option Plan
(2004 Plan) and the 2007 Equity Incentive Plan (20 07 Plan, and together with the 2004 Plan, the Equity Plans), which are described below.
During 2007 and 2006, the Co mpany recognized $249,292 and $23,464 o f co mpensation expense for awards under the Equity Plans.

The Co mpany estimates the fair value of stock options using a Black Scholes option pricing model with the assumptions noted in the follo wing
table. Key inputs used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected
volatility of the Co mpany’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the
Co mpany’s expected annual dividend yield.

The fair value of each stock option grant was estimated on the date of grant using the following assumptions:

                                                                      F-30
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

                                                                                   2007                  2006

                             Expected term (years)                                            6                     6
                             Expected volatility                                             45 %                  40 %
                             Risk-free interest rate                                       4.37 %                4.71 %
                             Expected annual div idend                                    None                  None

The expected term is based on the weighted average midpoint between vesting and the contractual term. Expected volatility is based on the
historical volat ility of published common stock prices over the last six years of co mparab le publicly held co mpanies. The ris k-free interest rate
for the expected term of the stock option is based on the U.S. Treasury yield. The Co mpany believes that the valuation technique and the
approach utilized to develop the underly ing assumptions are appropriate in calcu lating the fair values of stock options grant ed for the years
ended December 30, 2007 and December 31, 2006. Estimates of fair value are not intended to predict actual future events or th e value
ultimately realized by persons who receive equity awards.

The 2004 Plan

Under the terms of the 2004 Plan, the Co mpany was authorized to grant incentive stock options (ISO’s), non-qualified stock options and
restricted stock for up to 304,702 shares of co mmon stock in the aggregate, to emp loyees, officers, d irectors, consultants and agents of the
Co mpany. The Co mpany believes that such awards align the interests of its employees with those of its shareholders. In genera l, stock option
awards under the 2004 Plan are g ranted with an exercise price equal to the fair value of the Co mpany’s stock at the date of grant, vest over a
three-year period and expire ten years fro m the date of grant. As a result of the Merger, no awards will be made under the 2004 Pla n after
December 18, 2007.

A summary of option activity under the 2004 Plan during 2007 and 2006 is presented below:

                                                                                                              Weighted
                                                                                      Weighted                Average
                                                                                      Average                Remaining                Aggregate
                                                                Nu mber of            Exercise               Contractual               Intrinsic
                         Options                                 Shares                Price                   Term                     Value
Outstanding at January 1, 2006                                         163,096    $              0.45                       9.1
 Granted                                                                63,095    $              0.75                      10.0
 Exercised                                                                  —                       -
 Forfeited                                                                  —                       -

Outstanding at December 31, 2006                                       226,191 $                 0.54                       8.4   $        113,397
 Granted                                                               148,461 $                 0.66                      10.0
 Exercised                                                                  —                       -
 Forfeited                                                             (69,950 ) $               0.36                       8.4

Outstanding at December 30, 2007                                       304,702    $              0.61                       8.8   $        146,257


Exercisable at December 30, 2007                                       304,702    $              0.61                       8.8   $        146,257


At December 30, 2007, all of the options outstanding under the 2004 Plan were vested. The weighted average grant date fair va lue of options
granted during 2007 and 2006 was $0.36 and $0.20, respectively. There was no unrecognized compensation expense relat ed to options
outstanding under the 2004 Plan at December 30, 2007.

Upon consummat ion of the Merger described in Note 3, the exercise price of 26,661 options granted during 2006 was reduced fro m $4.27 per
share to $1.00 per share. In addit ion, all options outstanding under the 2004 Plan became fully vested. As a result of these modifications, the
Co mpany recognized additional co mpensation expense of $4,631 during the year ended December 30, 2007.

                                                                        F-31
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

The 2007 Plan

The 2007 Plan was approved in contemplat ion of the Merger. There were no awards under the 2007 Plan prior to Decemb er 18, 200 7, the
Closing Date of the Merger. Awards of ISO’s, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock or
performance units may be made under the 2007 Plan of up to a maximu m of 3,000,000 shares of Co mmon Stock to emp loyees, directors,
consultants and agents of the Co mpany. The Co mpany believes awards under the 2007 Plan align the interests of its employees w ith those of its
shareholders. At December 30, 2007, 1,950,000 stock options were outstanding under the 2007 Plan. The out standing stock options have an
exercise price of $1.00 per share, have a term of 10 years and vest over a three year period. Options to purchase 625,000 sha res vested on the
date of grant and 475,000, 475,000 and 375,000 options will vest in fiscal 2008, 2009 and 2010, respectively.

Activity under the 2007 Plan fro m December 18, 2007, the Merg er Date, through December 30, 2007 is presented below:

                                                                                                            Weighted
                                                                                    Weighted                Average
                                                                                    Average                Remaining                Aggregate
                                                               Nu mber of           Exercise               Contractual               Intrinsic
                                                                Options              Price                   Term                     Value

Outstanding at December 17, 2007                                          -0-   $                —
 Granted                                                           1,950,000                   1.00
 Exercised                                                                 —                      -                         -
 Forfeited                                                                 —                      -                         -

Outstanding at December 30, 2007                                   1,950,000    $              1.00                      10.0   $        175,500


Exercisable at December 30, 2007                                     625,000    $              1.00                      10.0   $         56,250


The weighted average grant date fair value of options granted during 2007 under the 2007 Plan was $0.27.

At December 30, 2007 there was $362,748 of total unrecognized co mpensation cost related to non -vested options granted under the 2007 Plan.
This cost will be recognized over appro ximately three years.

On December 6, 2007, the Co mpany’s board of directors approved the grant of 87,090 non-qualified stock options to an emplo yee. The options
have an exercise price of $0.66 per share, are exercisable for 10 years and are fully vested. The Co mpany recognized co mpensation expense of
$15,649 in connection with this option award.

On February 12, 2008, the Co mpany’s board of directors approved a 3,000,000 increase in the number of shares of Co mmon St ock reserved for
issuance under the 2007 Plan to 6,000,000 shares. The increase is subject to approval by a majority of shares represented at the Co mpany’s
annual meet ing.

12.    Income Taxes

On January 1, 2007, the Co mpany adopted the provisions of FIN No. 48. FIN No. 48 requires that the impact of tax positions taken by the
Co mpany be recognized in the financial statements if they are more likely than not of being sustained based upon the technica l merits of the
position. The Co mpany has a valuation allowance against the full amount of its net deferred taxes. The Co mpany currently pro vides a valuation
allo wance against deferred taxes when it is mo re likely than not that some portion, or all, of its deferred tax assets will n ot be realized. The
implementation of FIN No. 48 had no impact on the Co mpany’s financial statements due to the valuation allowances that have historically been
provided against all deferred tax assets.

No provision for current inco me taxes has been recorded for 2007 and 2006 due to the Co mpany ’s cumulat ive net lo sses. Significant
components of deferred tax assets are net operating loss carryforwards, start -up costs and organizational costs capitalized for tax purposes, and
deferred revenue. Significant co mponents of deferred tax liabilit ies are depreciation of property and equip ment. The net deferred tax assets are
fully reserved by a valuation allo wance due to the uncertainty of realizing the tax benefit of the deferred tax assets.
F-32
                                           UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                               Notes to Consoli dated Financi al Statements

Net deferred tax assets (liab ilities) at December 30, 2007 and December 31, 2006 are as follows:

                                                                                                                2007                  2006
Deferred tax assets
  Federal                                                                                                $         4,923,000      $    3,182,000
  State                                                                                                              905,000             876,000
Total deferred tax assets                                                                                           5,828,000          4,058,000
Valuation allo wance                                                                                               (5,828,000 )       (4,058,000 )
Net deferred tax assets                                                                                  $                   -    $             -


The components of income tax benefit (expense) are as follows:

                                                                                                                2007                  2006
Federal
  Deferred
    Net operating loss carryforward                                                                      $         1,678,000      $    1,337,000
    Other                                                                                                             61,000              57,000
                                                                                                                   1,739,000           1,394,000
State
  Deferred
     Net operating loss carryforward                                                                                 317,000            361,000
     Other                                                                                                          (286,000 )           16,000
                                                                                                                       31,000           377,000

Tax benefit befo re adjustment to valuation allowance                                                               1,770,000          1,771,000
Adjustment to valuation allowance                                                                                  (1,770,000 )       (1,771,000 )
Net tax benefit                                                                                          $                   -    $             -


The Co mpany’s effective income tax rate differs fro m the federal statutory income tax rate as follo ws for the years ended December 31, 20 07
and 2006.

                                                                              2007                  2006

                             Federal tax provision rate                                34 %                  34 %
                             State tax provision, net of federal
                             provision                                                  6%                     6%
                             Change in valuation allowance                            (40 )%                 (40 )%
                                                                                         -                     -


Management has evaluated the evidence bearing upon the realization of its deferred tax assets and has determined that it is mo re likely than not
that the Co mpany will not recognize the benefits of federal and state deferred tax assets. As a result, management has recorded a fu ll valuation
allo wance. If the Co mpany should generate sustained future taxable inco me against which these tax attributes might be applied , some portion
or all of the valuation allowance would be reversed.

The Co mpany’s income tax returns have not been audited by the Internal Revenue Service (IRS) or any state taxing authority. The years 2004
through 2007 remain open to examination by the IRS and state taxing authority. The Co mpany believes it is not subject to any tax exposure
beyond the preceding discussion. The Co mpany’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a
component of income tax expense. As of the date FIN No. 48 was adopted, we did not have any accrued interest or penalties as sociated with
any unrecognized tax benefits, nor was any significant interest expense recognized during the year ended December 30, 2007.

                                                                      F-33
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

Federal and state net operating loss carryforwards expire in 2027 and 2012, respectively. Ownership changes, as defined in Se ction 382 of the
Internal Revenue Code, may have limited the amount of net operating loss carryforwards that may be utilized annually to offset future taxab le
income. Subsequent ownership changes could further affect the limitation in future years.

13.      Concentrati on of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk include cash and cash equivalents, which
occasionally exceed current federal deposit insurance limits. Substantially all of the cash and cash equivalents are maintained in a certain large
commercial bank. Sen ior management continually rev iews the financial stability of this institution.

14.      Commi tments and Contingencies

Leases

The Co mpany rents store and office locations under non-cancelable operating leases and tenant at will arrangements. The agreements expire on
various dates through December 2016, and some include options to extend. The leases require the Co mpany to pay its share of t he operating
expenses of the leased properties, including taxes, utilities and insurance.

Future min imu m pay ments at December 30, 2007 under non -cancelable leases are as follows:

                                              Year ending December 31,

                                                        2008                                 $              727,000
                                                        2009                                                632,000
                                                        2010                                                602,000
                                                        2011                                                616,000
                                                        2012                                                633,000
                                                      Thereafter                                          1,270,000

                                                                                             $            4,480,000


Employment Agreements

On October 15, 2007, in contemplation of the Merger described in Note 3, the Co mpany entered into employ ment agreements with its chief
executive and its vice president of business development. Each agreement is for a term o f three years and provides for th e payment of a base
salary and benefits, an annual bonus to be determined by the Co mpany ’s Board of Directors, an equity award under the Co mpany ’s 2007
Equity Incentive Plan and, in the case of the Co mpany’s chief executive, a pay ment for each franchise sold.

The agreements further provide that if the executive’s emp loy ment is terminated by the Co mpany without cause, or by the executive as a result
of constructive termination by the Co mpany, or as a result of the executive ’s death or disability, the Co mpany is obligated to pay severance
(consisting of salary and benefits as in effect at the time of termination) to the executive (or the executive ’s legal representatives) for a period
equal to the lesser of 12 months or the then remain ing balance of the emplo y ment term. One of the emp loyment agreements provides that if the
executive terminates his emp loyment voluntarily at a point mo re than 30 days after the effective date of the reg istration sta tement by which the
Units sold in the Offering are reg istered for resale, the executive is entitled to the same terminat ion benefits he would be entitled to if his
emp loyment is terminated by the Co mpany without cause.

                                                                       F-34
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

Legal matters

In November 2007, the Co mpany received a letter fro m counsel to a former franchisee regard ing potential claims against the Co mpany and
certain of its officers and directors. The letter also states a desire for the parties to reach a mutually -satisfactory negotiated resolution to the
dispute. A draft demand for arb itration, which has not been filed, was included with the letter and claims that the Co mpany a nd certain of its
officers and directors made false and mislead ing statements (and material o missions o f facts) in connection with the sale of the franchise in
violation of the Minnesota Franchise Act. The draft demand seeks damages in the approximate amount of $2,000,000. Th is matter was settled
in April 2008.

KFLG Watertown, Inc. (KFLG), a wholly-owned subsidiary of the Co mpany, received a Defau lt Letter (the Default Letter) on April 2, 2008,
fro m BAA Boston, Inc. (BAAB) claiming certain defaults under KFLG’s Sublease Agreement with BAAB for retail premises (the Premises) at
Logan International Airport in Boston, Massachusetts (the Sublease Agreement). The Default Letter claims that KFLG is in default of its
obligations under the Sublease Agreement due to, among other things, KFLG’s failure to timely make certain subtenant improvements. The
Default Letter demands that KFLG pay $104,000 in liquidated damages to BAAB and pay legal fees and expenses of BAAB in the amount of
$28,822. Th is matter is only in the claim stage and no legal proceeding has been commenced. The Co mpany believes it made the subtenant
improvements on a timely basis and has denied BAA B’s allegations that it is in default o f the Sublease Agreement. The Co mpany has been in
contact with representatives of BAAB to try and resolve this matter. In the event the Co mpany is unable to resolve this matter, BAAB has
indicated it will seek to enforce any and all of its rights and remedies availab le under the Sublease Agreement including the possible
termination of the Sublease.

In connection with the build-out of the Premises at Logan International Airport, demands have been made, legal proceedings have been
commenced and liens have been filed against the Company ’s subsidiaries and their properties by certain subcontractors that performed work on
the Premises in connection with payments for services allegedly past due. The general contractor on the project is responsible for the amounts
claimed by the subcontractors. The Co mpany has paid the general contractor and intends to assert claims against the general c ontractor fo r,
among other things, the amounts claimed by the subcontractors. There can be no assurance however, that we will be able to recover any
amounts from the general contractor.

The Co mpany is subject to legal proceedings and claims which arise in the normal course of business. In the opinio n of management, the
ultimate liab ilities with respect to these actions will not have a material adverse effect on the Company ’s financial position, results of
operations or cash flow.

15.    Related Party Transacti ons

In October 2007, in contemplation o f the Merger, UFood entered into an emp loy ment agreement with its chief executive officer (Note 14).
Under the terms of the agreement, the Company agreed to pay the executive a fee of $10,000 upon the consummation by the Co mpany of the
sale of a franchise restaurant. To the extent any franchise transaction is part of an Area Development Agreement, $5,000 of t he fee is payable in
cash and the remainder is payable in shares of the Co mpany ’s Co mmon Stock. The franchise and development fee arrangement included in the
executive’s emp loyment agreement replaced a similar arrangement covering the period preceding the Merger, except that franchise and
development fees earned prior to the Merger were payable 100% in cash. During 2007 and 2006, the Co mpany recorded franchise and
development fee expenses of $-0- and $125,000, respectively.

The Co mpany retained a Placement Agent in connection with the sale of the Investor Notes (Note 7) and the Offering of Units ( Note 10). At
December 30, 2007, the Placement Agent directly and indirectly through affiliates owned 3,700,000 sh ares of Common Stock and warrants to
purchase 2,082,000 shares of Co mmon Stock.

                                                                       F-35
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements



16.    Supplemental Disclosures of Cash Fl ow Information:

                                                                                                               2007                2006

Cash paid during the year for interest                                                                  $         182,422    $         131,603


Summary of non-cash investing and financing activities
Accrued preferred stock dividends                                                                       $         941,365    $         606,334

Conversion of promissory notes into Common Stock                                                        $       2,656,809    $                —

Conversion of preferred stock into Co mmon Stock                                                        $       4,968,803    $                —

Property and equipment acquired with capital lease                                                      $          33,420    $         140,655

Goodwill acquired with long-term debt                                                                   $               —    $         402,327

Property and equipment acquired with long-term debt                                                     $               —    $         658,388

Inventory acquired with long-term debt                                                                  $               —    $            6,506

Deposits acquired in business combination                                                               $               —    $          33,224

Accounts payable assumed in business combinations                                                       $               —    $          25,445

Long-term debt assumed / incurred in business combinations                                              $               —    $       1,075,000


17.    Loss per share

The amounts used for basic and diluted per share calculations are as follo ws:

                                                                                                               2007                 2006
Net loss                                                                                                $      (5,451,414 ) $       (4,125,613 )
Preferred stock dividend requirements                                                                            (941,365 )           (606,334 )
Net loss allocable to co mmon stockholders                                                              $      (6,392,779 ) $       (4,731,947 )

Weighted average number of shares outstanding - basic and diluted                                               9,433,081            7,919,388

Basic and diluted loss per common share                                                                 $             (0.68 ) $            (0.60 )


Our diluted loss per share is the same as our basic loss per share since the effect of the assumed exercise of options and wa rrants to purchase
common stock is anti-d ilutive. A total of 4,870,186 and 3,617,821 potential co mmon shares fro m the assumed exerc ise of options and warrants
and the assumed conversion of preferred stock were excluded fro m the calculation of d iluted net loss per share for the years ended December
30, 2007 and December 31, 2006, respectively, because their inclusion would have been an ti-dilutive.

18.    Segment Data

The Co mpany operates two business segments; Store Operat ions and Franchise Operations. The Store Operations segment comprises the
operating activities of restaurants owned or operated by the Company. The Franchise Operations segment is comprised of the op erating
activities of the franchise business unit which licenses qualified operators to conduct business under the Knowfat and UFo od Grill tradenames
and also costs to monitor the operations of these business units. Under the terms of the franchise agreements, the licensed o perators pay
royalties and fees to the Company in return for the use of the Knowfat and UFood Grill t radenames.

                                                                      F-36
                                            UFOOD RES TAURANT GROUP AND S UBS IDIARY
                                                Notes to Consoli dated Financi al Statements

The accounting policies of the segments are the same as those described in Note 2. Interest expense has been allocated based on operating
results and total assets employed in each segment.

Inter-segment transactions are uncommon and not material. Therefo re, they have not been separately reflected in the financial table below. The
totals of the reportable segments ’ revenues, net loss and assets agree with the co mparable amounts contained in the Company ’s audited
financial statements.

Segment informat ion for the Co mpany’s two business segments follows:

                                                                                                         2007                 2006
        Revenues:
          Store operations                                                                         $       4,543,194    $       3,273,103
          Franchise operations                                                                               361,689              418,591
            Total revenue                                                                          $       4,904,883    $       3,691,694


        Segment loss:
          Store operations                                                                         $        (999,385 ) $         (401,840 )
          Franchise operations                                                                              (522,137 )           (618,856 )
            Total segment loss                                                                     $      (1,521,522 ) $       (1,020,696 )


        Advertising, marketing and pro motion                                                      $         671,440    $         548,330
        Depreciat ion and amort ization                                                                      429,586              222,744
        Unallocated general and administrative expenses                                                    2,384,581            2,227,089
        Interest (income) expense                                                                            369,130               97,867
        Other (income) expenses, net                                                                          75,155                8,887
        Net loss                                                                                   $      (5,451,414 ) $       (4,125,613 )


        Depreciat ion and amort ization:
          Store operations                                                                         $         372,404    $         186,818
          Franchise operations                                                                                57,181               35,926
            Total depreciation and amortization                                                    $         429,586    $         222,744


        Capital expenditures:
          Store operations                                                                         $         937,859    $         966,428
          Franchise operations                                                                                88,008               98,691
            Total capital expenditures                                                             $       1,025,867    $       1,065,119


        Segment assets:
          Store operations                                                                         $       3,834,155    $       2,587,638
          Franchise operations                                                                             4,749,391            3,479,884
            Total segment assets                                                                   $       8,583,546    $       6,067,522


18.    Subsequent Events

Subsequent to December 30, 2007, the Co mpany co mpleted three addit ional closings, including a final closing on March 31, 2008 , of a private
Offering of its securities to accredited investors (see Note 10). The Co mpany sold a total of 4,781,000 Units, at a price of $1.00 per Un it, in the
first quarter of fiscal 2008 and issued 2,950,500 Investor Warrants to the investors who purchased Units. In addition, the Co mpany paid the
Placement Agent commissions totaling $478,100 and issued the Placement Agent warrant s to purchase 956,200 shares of Co mmon Stock.

Subsequent to December 30, 2007, the Co mpany paid $800,000 to extinguish the $880,628 note payable issued in connection with the
Co mpany’s acquisition of the Boston Downtown Crossing restaurant and store (see Note 8).
F-37
26,035,260    Shares of Common Stock




   UFood Restaurant Group, Inc.

             PROSPECTUS

                      , 2008
                                                                     PART II

                                           INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

Set forth belo w is an estimate (except for registration fees, which are actual) of the appro ximate amount of the fees and exp enses payable by us
in connection with the issuance and distribution of the shares of our common stock.

EXPENS E                                                                                                                            AMOUNT

Registration Fee                                                                                                                $           1,381
Legal Fees and Expenses                                                                                                                    95,000
Accounting Fees and Expenses                                                                                                               10,000
Miscellaneous Fees and Expenses                                                                                                             5,000

Total                                                                                                                           $         111,381


Item 14. Indemni ficati on of Directors and Officers.

Nevada Revised Statutes ( NRS ) Sect ions 78.7502 and 78.751 provide us with the power to indemnify any of our directors, offi cers,
emp loyees and agents. The person entitled to indemn ification must have conducted himself in good faith, and must reasonably believe that his
conduct was in, or not opposed to, our best interests. In a criminal act ion, the director, officer, emp loyee or agent must no t have had reasonable
cause to believe that his conduct was unlawful.

Under NRS Section 78.751, advances for expenses may be made by agreement if the director or officer affirms in writing that he h as met the
standards for indemnification and will personally repay the expenses if it is determined that such officer or director d id not meet those
standards.

Our bylaws include an indemnification provision under which we have the power to indemn ify our current and former directors, trustees,
officers, emp loyees and other agents against expenses (including attorneys ’ fees), judgment, fines and amounts paid in settlement actually and
reasonably incurred by any such person, if such person acted in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal act ion or proceeding, had no reasonable cause to believe such
person’s conduct was unlawful. Our bylaws further provide for the advancement of all expenses incurred in connection with a proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amounts if it is determined that the party is not entitled to be indemn ified
under our bylaws. These indemnificat ion rights are contractual, and as such will continue as to a person who has ceased to be a director, trustee,
officer, emp loyee or other agent, and will inure to the benefit of the heirs, executors and administrators of such a person.

Item 15. Recent Sales of Unregistered Securities.

Sales by KnowFat
In August 2005, KnowFat sold units consisting of 923,800 shares of series B convertible p referred stock and warrants to p urch ase 184,760
shares of KnowFat co mmon stock to certain investors for an aggregate consideration of $4,619,000. The shares and warran ts were issued to
accredited investors as defined under Regulation D promulgated by the SEC and otherwise in accordance with the provisions of Regulation D
promu lgated by the SEC. None of the securities were sold through an underwriter and, accordingly, there were no underwrit ing discounts or
commissions involved.

In November 2006, KnowFat sold units consisting of 719,440 shares of series C convertible preferred stock and warrants to purchase 141,211
shares of KnowFat common stock to certain investors for an aggregate consideration of $3,069,466. The shares and warrants wer e issued to
accredited investors as defined under Regulation D and otherwise in accordance with the provisions of Regulation D. None of the securities
were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.

                                                                        II-1
In September 2006, KnowFat entered into agreements with George Foreman Ventures, LLC, pursuant to which KnowFat was granted t he
limited right to use George Foreman’s name and likeness in connection with the pro motion of restaurants operated by KnowFa t and its
franchisees in exchange for: (i) 900,000 shares of KnowFat co mmon stock; (ii) 100,000 addit ional shares of KnowFat co mmon sto ck following
the sale of the 600 th franchise of an outlet offering our products, provided such sale occurs by December 31, 2009; and (iii) 0.2% of the
aggregate net sales of the franchise and company owned stores during the term of the agreements. The sale was exempt from registration
under Section 4(2) of the Securities Act.

In October 2006 and September 2007, KnowFat issued an aggregate of 4,234 shares of its co mmon stock valued at $5.00 per share (fo r an
aggregate consideration of $21,170) to certain of its vendors in consideration for the marketing and consulting services provided by such
vendors to KnowFat. The issuance was exempt fro m registration under Section 4(2) of the Securities Act.

Sales by   Axxent Medi a Corporati on

In September and October 2007, A xxent Media Corporation sold $2,000,000 principal amount of its 9% convertible promissory not es to
accredited investors for total cash consideration of $2,000,000. All of the gross proceeds that Axxent received fro m the note offering were used
to provide a bridge loan to KnowFat to meet KnowFat’s capital needs prior to the closing of the merger and the private placement. The
convertible notes bore interest at the rate of 9% per annum and were for a term of 180 days, and automatically converted into shares of our
common stock and warrants to purchase our common stock upon the closing of the merger. The aggregate principal amount o f the convertible
notes, plus accrued and unpaid interest, converted into 4,080,175 shares of our c o mmon stock and warrants to purchase 2,040,088 shares of our
common stock. The convertible notes were sold to accredited investors as defined under Regulation D and non -U.S. persons as defined under
Regulation S, and otherwise in accordance with the provis ions of Regulation D and/or Regulation S. In connection with the note offering, we
paid the placement agent for the note offering a cash co mmission of $200,000, and issued to that placement agent warrants to purchase 800,000
shares of our common stock at an exercise price of $1.00 per share.

Shares Issued in Connecti on with the Merger

Simu ltaneously with the closing of the merger in December 2007, all of the issued and outstanding shares of KnowFat, consisting of (i)
1,034,481 shares of series A preferred stock converted, on a one-to-one basis, (ii) 923,800 shares of series B preferred stock converted, one a
1-to-1.005504 basis and (iii) 719,440 shares of series C preferred stock converted, on a one-to-one basis, into shares of KnowFat common
stock. On the closing date, the holders of co mmon stock of KnowFat (including the converted shares of preferred stock) surrendered all of their
issued and outstanding shares and received 11,500,983 shares of our co mmon stock. Also on the closing date, (a) the holders of the issued and
outstanding warrants to purchase KnowFat common stock received the new warrants to purchase shares of our common stock, and ( b) the
holders of issued and outstanding options to purchase KnowFat common stock received new options to purchas e shares of our common stock.
607,226 and 391,791 shares of our co mmon stock, respectively, are reserved for issuance on exercise of the new warrants and t he new options.
The number of shares of our co mmon stock issuable under, and the price per share upon exercise of, the new options were calculated based on
the terms of the original options of KnowFat, as adjusted by the conversion ratio in the merger. The new options became immed iately
exercisable upon consummation of the merger. The nu mber of shares of our co mmon stock issuable under the new warrants was calculated
based on the terms of the original warrants of KnowFat, as adjusted by the conversion ratio in the merger. Immediat ely prior to the
consummation of the merger, the exercise price of all outstanding KnowFat warrants was adjusted to $1.00, and such exercise price was not
affected by the conversion ratio in the merger.

Our pre-merger stockholders retained 7,500,000 shares of our co mmon stock in the merger.

The transactions described above were exempt fro m registration under Section 4(2) of the Securities Act and Rule 506 of Reg ulation D. None
of the securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions invo lved.

Shares Issued in Connecti on with the Pri vate Pl acement

Concurrently with the closing of the merger in December 2007, and in contemp lation of the merger, we consummated a private of fering of
6,160,000 units of our securities, at a price of $1.00 per unit. Each unit consists of one share of our common stock and a warrant to purchase
one-half, or 50%, of a share of our co mmon stock. The investors collectively purchased the units for total cash consideration of $6,160,000.

                                                                      II-2
In January 2008, we sold 863,000 units at a price of $1.00 per unit, in February 2008, we sold 1,927,000 units at a price of $1.00 per unit and in
March 2008 we sold 1,991,000 units at a price of $1.00 per unit. Each unit consists of one share of our common stock and a wa rrant to
purchase one-half of one share of our common stock. The investors collectively purchased these units for a ggregate cash consideration of
$4,781,000.

All of the units were sold only to accredited investors, as defined under Regulation D under the Securit ies Act, and non -U.S. persons, as
defined under Regulation S under the Securities Act and otherwise in accordance with the provisions of Rule 506 of Regulation D and/or
Regulation S. In the offering, no general solicitation was made by us or any person acting on our behalf. The units were sold pursuant to
transfer restrictions, and the certificates for shares of common stock and warrants underlying the units sold in the offering contain appropriate
legends stating that such securities are not registered under the Securities Act and may not be offered or sold absent regist ration or an
exemption fro m reg istration.

We paid the placement agent retained in connection with the offering a co mmission of 10% of the funds raised from the investo rs in the
offering plus an expense allowance. In addit ion, the placement agent received warrants to purchase a number of shares of co mmon stock equal
to 20% of the shares of common stock included in the units sold to investors in the offering. As a result of the foregoing, t he placement agent
was paid co mmissions aggregating $1,094,100 and received warrants to purchase a total of 2,188,200 shares of our common stock in
connection with the offering.

The offering is more fu lly described in the Co mpany ’s Form 8-K, filed with the Securit ies and Exchange Co mmission (the ― SEC ‖) on
December 26, 2007, the Co mpany’s Form 8-K, filed with the SEC on February 8, 2008, and the Company’s Form 8-K, filed with the SEC on
March 31, 2008, each of wh ich is incorporated herein by reference.

Shares and Warrants Issued in Connecti on with Corporate Awareness Campaign

In May 2008, we co mmenced a corporate awareness campaign in the investment community. The campaign encompasses investor relat ions and
public relations services, including tradit ional med ia outlets like television, radio, and print, and the internet. The corpo rate awareness
campaign encompasses the following activit ies: (i) written articles and television coverage of the Co mpany via tradit ional media outlets; (ii)
arranging meetings with investment professionals and prospective investors in various cities in the United States; (iii) intr oductions to potential
financing sources; (iv) preparation, printing and distribution of profile reports about the Company to various proprietary da tabases; and (v)
distribution of press releases, news releases and research on the Co mpany and its activit ies. The campaign aims to build awareness for our
brand with current and prospective shareholders, franchisees and customers. The campaign does not involve the sale of franchi ses. In
connection with the campaign, we entered into service agreements with a number of investor relations and public relat ions firms, in connection
with wh ich we issued to the service providers an aggregate of 740,000 shares of our common stock and warrants to purchase an aggregate of
2,916,666 shares of our co mmon stock in part ial pay ment for their services. The services provided by the investor relat ions and public
relations firms are provided on a ―best efforts‖ basis. The transactions described above were exempt fro m reg istration under Section 4(2) of the
Securities Act as they did not involve any public offering or general solicitation, the recip ients had access to informatio n that would be
included in a registration statement, the recipients acquired the shares for investment and not resale, and we took appropria te measures to
restrict resale.

The shares of common stock vest as follows: 15,000 shares vested on June 17, 2008; 237,500 shares vest no later than 45 days after this
registration statement becomes effective; 237,500 shares vest in January 2009; and 250,000 shares vest in eq ual installments over 24 months
through April 2010 or upon the achievement of specified milestones, if such vesting period is shorter. At November 17, 2008, 77,500 shares
were vested. The warrants vest over 24 months as follows: (i) 83,333 warrants vest no later than 45 days after this registration statement
becomes effective, (ii) 83,333 warrants vest in January 2009, and (iii) 2,750,000 warrants vest in equal installments over 24 months through
April 2010 o r upon the achievement of specified milestones, if such vesting period is shorter. At November 17, 2008, 687,500warrants were
vested.

The table below shows the recipient, date and the nu mber of shares and warrants with respect to each issuance to one of these service
providers:

                              Service Provider                            Date                  Shares              Warrants
              New Century Capital Consultants, Inc.                 April 21, 2008                   250,000            2,750,000
              MarketByte LLC                                        April 9, 2008                    200,000               83,333
              TGR Group LLC                                         April 9, 2008                    200,000               83,333
              Neptune Media, LLC                                    April 9, 2008                     75,000                   —
              AviaTech                                              April 9, 2008                     15,000                   —

No dollar value was assigned to these services in the agreements. The aggregate consideration received for each issuance is b eing accounted for
in accordance with the provisions of SFAS 123R and EITF 96-18. Since there are no performance criteria (e.g., deliverables) or performance
commit ment dates specified in the agreements, the performance co mplet ion date is assumed to be the measurement date for deter min ing the
fair value of the equity awards. Accordingly, since the terms of each award are known, each a ward is valued at each vesting date until the
award is fully vested. Therefore, it is not feasible to state a total dollar value of the consideration received for the shares. See Note 4 and Note
5 to the unaudited financial statements for the nine months ended September 28, 2008, for addit ional informat ion.

                                                                        II-3
Item 16. Exhi bits.

Exhi bit No.            Descripti on
                2.1     Agreement and Plan of Merger and Reorganization, dated as of December 18, 2007, by and among UFood
                        Restaurant Group, Inc., KnowFat Acquisition Corp. and KnowFat Franchise Co mpany, Inc. (incorporated by
                        reference to Exh ibit 2.1 to the Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on
                        December 26, 2007)

                2.2     Cert ificate of Merger (incorporated by reference to Exhib it 2.2 to the Co mpany’s Form 8-K filed with the Securities
                        and Exchange Co mmission on December 26, 2007)

            3.1(a)      Amended and Restated Articles of Incorporation of UFood Restaurant Group, Inc. (f/k/a A xxent Media Corporation
                        and UFood Franchise Company) (incorporated by reference to Exhibit 3.1(a) to the Company’s Form 8-K filed with
                        the Securities and Exchange Co mmission on August 22, 2007)

           3.1(b)       Amend ment to Articles of Incorporation of UFood Restaurant Group, Inc. (incorporated by reference to
                        Exh ib it 3.1(b) to the Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on September 26,
                        2007)

                3.2     Amended and Restated Bylaws of UFood Restaurant Group, Inc. (f/k/a A xxent Media Corporation and UFood
                        Franchise Co mpany) (incorporated by reference to Exhib it 3.2 to the Company’s Registration Statement on Form
                        SB-2 filed with the Securit ies and Exchange Co mmission on July 31, 2006)

                4.1     Form of Investor Warrant of UFood Restaurant Group, Inc., issued as of December 18, 2007 (incorporated by
                        reference to Exh ibit 4.1 to the Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on
                        December 26, 2007)

                4.2     Form of Lock-Up Agreement (incorporated by reference to Exh ibit 4.2 to the Co mpany’s Form 8-K filed with the
                        Securities and Exchange Co mmission on December 26, 2007)

                4.3 †   Form of Warrant of UFood Restaurant Group, Inc., issued as of December 18, 2007, to former holders of Warrants of
                        KnowFat Franchise Co mpany, Inc.

                5.1 †   Opinion of Gottbetter & Partners, LLP

               10.1     Form of Registration Rights Agreement, dated as of December 18, 2007, by and between UFood Restaurant Group,
                        Inc., and the investors in the Offering (incorporated by reference to Exh ibit 10.1 to the Co mpany’s Form 8-K filed
                        with the Securities and Exchange Co mmission on December 26, 2007)

               10.2     Split-Off Agreement, dated as of December 18, 2007, by and among UFood Restaurant Group, Inc., Brent Hahn,
                        Axxent Media, Inc., and KnowFat Franchise Co mpany, Inc.(incorporated by reference to Exhib it 10.2 to the
                        Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on December 26, 2007)

               10.3     General Release Agreement, dated as of December 18, 2007, by and among UFood Restaurant Group, Inc., Brent
                        Hahn, A xxent Media, Inc., and KnowFat Franchise Co mpany, Inc.(incorporated by reference to Exh ibit 10.3 to the
                        Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on December 26, 2007)

               10.4     Emp loy ment Agreement between KnowFat Franchise Co mpany, Inc., and George Naddaff (incorporated by
                        reference to Exh ibit 10.4 to the Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on
                        December 26, 2007)

               10.5     Emp loy ment Agreement between KnowFat Franchise Co mpany, Inc., and Eric Sp itz (incorporated by reference to
                        Exh ib it 10.5 to the Co mpany’s Form 8-K filed with the Securit ies and Exchange Co mmission on December 26,
                        2007)

               10.6     KnowFat Franchise Co mpany, Inc., 2004 Stock Option Plan (incorporated by reference to Exh ibit 10.6 to the
                        Co mpany’s Form 8-K filed with the Securities and Exchange Co mmission on December 26, 2007)

                                                                    II-4
 10.7   UFood Restaurant Group, Inc., 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.7 to the
        Co mpany’s Form 10-QSB filed with the Securities and Exchange Co mmission on December 13, 2007)

 10.8   Form of Stock Option Agreement by and between UFood Restaurant Group, Inc., and participants under the 2004
        Stock Opt ion Plan (incorporated by reference to Exh ibit 10.8 to the Co mpany ’s Form 8-K filed with the Securities
        and Exchange Co mmission on December 26, 2007)

 10.9   Form of Stock Option Agreement by and between UFood Restaurant Group, Inc., and participants under the 2007
        Equity Incentive Plan (incorporated by reference to Exh ibit 10.9 to the Co mpany ’s Form 8-K filed with the
        Securities and Exchange Co mmission on December 26, 2007)

10.10   Escrow Agreement by and between UFood Restaurant Group, Inc., and Gottbetter & Partners, LLP, dated
        December 18, 2007 (incorporated by reference to Exhib it 10.10 to the Co mpany’s Form 8-K filed with the
        Securities and Exchange Co mmission on December 26, 2007)

10.11   Escrow Agreement by and between UFood Restaurant Group, Inc., George Naddaff, Eric Sp itz and Gottbetter &
        Partners, LLP, dated December 18, 2007 (incorporated by reference to Exhib it 10.11 to the Co mpany ’s Form 8-K
        filed with the Securities and Exchange Co mmission on December 26, 2007)

10.12   Securities Purchase Agreement by and between UFood Franchise Co mpany, Inc., and the Buyers (as defined
        therein), dated September 24, 2007 (incorporated by reference to Exhib it 10.12 to the Co mpany ’s Form 10-QSB
        filed with the Securities and Exchange Co mmission on December 13, 2007)

10.13   Form of Investor Note issued by UFood Franchise Co mpany, Inc. (incorporated by reference to Exh ibit 10.13 to
        the Co mpany’s Form 10-QSB filed with the Securit ies and Exchange Co mmission on December 13, 2007)

10.14   Form o f Placement Agent Warrant issued as of October 4, 2007 (incorporated by reference to Exh ibit 10.14 to the
        Co mpany’s Form 10-QSB filed with the Securities and Exchange Co mmission on December 13, 2007)

10.15   Placement Agency Agreement by and between UFood Franchise Co mpany, Inc., and Spencer Trask Ventures,
        Inc., dated as of August 24, 2007 (incorporated by reference to Exh ibit 10.15 to the Co mpany ’s Form 10-QSB
        filed with the Securities and Exchange Co mmission on December 13, 2007)

10.16   Subordination Agreement by and between T.D. Banknorth, N.A. and UFood Franchise Co mpany, Inc., dated as of
        September 24, 2007 (incorporated by reference to Exhib it 10.16 to the Co mpany ’s Form 10-QSB filed with the
        Securities and Exchange Co mmission on December 13, 2007)

10.17   Emp loy ment agreement between UFood Restaurant Group, Inc., and Charles A. Cocotas (incorporated by
        reference to Exh ibit 10.1 to the Co mpany’s Form 8-k filed with the Securit ies and Exchange Co mmission on
        February 19, 2008)

10.18   Placement Agency Agreement by and between UFood Restaurant Group, Inc., KnowFat Franchise Co mpany, Inc.,
        and Spencer Trask Ventures, Inc., dated October 17, 2007 (incorporated by reference to Exh ibit 10.21 to the
        Co mpany’s Form 10-KSB filed with the Securities and Exchange Co mmission on April 14, 2008)

10.19   Amend ment No. 1 to Placement Agency Agreement, dated February 14, 2008, by and between UFood Restaurant
        Group, Inc., KnowFat Franchise Co mpany, Inc., and Spencer Trask Ventures, Inc., dated October 17, 2007
        (incorporated by reference to Exhib it 10.22 to the Company’s Form 10-KSB filed with the Securities and
        Exchange Co mmission on April 14, 2008)

10.20   Form of Subscription Agreement between UFood Restaurant Group, Inc., Spencer Trask Ventures, Inc., and
        Private Placement Investors (incorporated by reference to Exh ibit 10.23 to the Co mpany’s Form 10-KSB filed
        with the Securities and Exchange Co mmission on April 14, 2008)

                                                 II-5
10.21     Form of Warrant Issued to Spencer Trask Ventures, Inc., in connection with the Offering (incorporated by reference
          to Exh ibit 10.24 to the Co mpany’s Form 10-KSB filed with the Securities and Exchange Co mmission on April 14,
          2008)

10.22     Finder’s Fee Agreement between UFood Restaurant Group, Inc., and Spencer Trask Ventures, Inc., dated December
          18, 2007 (incorporated by reference to Exh ibit 10.25 to the Co mpany ’s Form 10-KSB filed with the Securit ies and
          Exchange Co mmission on April 14, 2008)

10.23     UFood Restaurant Group, Inc., Non-Emp loyee Director Co mpensation Plan (incorporated by reference to Exhib it
          10.26 to the Co mpany’s Form 8-K filed with the Securit ies and Exchange Co mmission on February 19, 2008)

10.24 †   Services Agreement dated September 6, 2006, between KnowFat Franchise Co mpany, Inc., and George Foreman
          Ventures, LLC

10.25 †   Pro motion License Agreement dated September 6, 2006, between KnowFat Franc hise Co mpany, Inc., and George
          Foreman Ventures, LLC

10.26 †   Letter Agreement dated June 12, 2007, between KnowFat Franchise Co mpany Inc, and George Foreman Ventures,
          LLC

10.27 †   Cred it Agreement dated as of May 27, 2005, between KFLG Watertown, Inc., and TD Banknorth, N.A.

10.28 †   Guarantee and Security Agreement, dated as of September 6, 2006, made by Knowfat Of Land mark Center, Inc., in
          favor of TD Banknorth, N.A.

10.29 †   First Amendment to Credit Agreement dated as of December 31, 2005, between KFLG Watertown, Inc., and TD
          Banknorth, N.A.

10.30 †   Second Amendment to Credit Agreement dated as of May 31, 2006, between KFLG Watertown, Inc., and TD
          Banknorth, N.A.

10.31 †   Third A mend ment to Cred it Agreement dated as of July 31, 2006, between KFLG Watertown, Inc., and TD
          Banknorth, N.A.

10.32 †   Fourth Amend ment to Cred it Agreement dated as of October 2, 2006, between KFLG Watertown, Inc., and TD
          Banknorth, N.A.

10.33 †   Media Serv ices Agreement dated as of April 8, 2008, between Crosscheck Media Services and UFood Restaurant
          Group, Inc.

10.34 †   Consulting Agreement dated as of April 21, 2008, between New Century Capital Consultants and UFood Restaurant
          Group, Inc.

10.35 †   Consulting Agreement dated as of April 21, 2008, between Stara Zagora Ko mpanija, LTD, UFood Restaurant Group,
          Inc., and Neptune Media, LLC

10.36 †   Consulting Agreement dated as of April 9, 2008, between Market Byte LLC and UFood Restaurant Group, Inc.

10.37 †   Consulting Agreement dated as of April 9, 2008, between TGR Group LLC and UFood Restaurant Group, Inc.

10.38 †   Consulting Agreement dated as of June 16, 2008, between Aviatech and UFood Restaurant Group, Inc.

10.39 †   Joint Venture Agreement dated as of January 26, 2004 between Geo rge Naddaff and Eric Spit z and Low Fat No Fat
          Gourmet Café, Inc.

10.41 *   Form of UFood Area Develop ment Agreement

10.42 *   Form of UFood Franchise Agreement

 11.1     Statement re. Co mputation of Per Share Earn ings (omitted in accordance with section (b)(11) of Item 601 of
          Regulation S-K; the co mputation of per share earnings is set forth in Part I in Note 8, Earnings per Share , to the
         Consolidated Financial Statements for the Three Months Ended March 30, 2008, and April 1, 2007, and in Note 17,
         Earnings per Share , to the 2007 Consolidated Financial Statements)

14.1     UFood Restaurant Group, Inc., Code o f Eth ics (incorporated by reference to Exh ib it 14.1 to the Co mpany’s Form
         8-K filed with the Securities and Exchange Co mmission on February 19, 2008)

16.1     Letter to the Securities and Exchange Co mmission fro m Manning Elliot LLP, dated March 6, 2008, regard ing a
         change in Certify ing Accountant (incorporated by reference to Exhib it 16.1 to the Co mpany’s Form 8-K/A filed with
         the Securities and Exchange Co mmiss ion on March 11, 2008)

21.1     Subsidiaries of the Registrant (incorporated by reference to Exh ibit 21 to the Co mpany ’s Form 10-KSB filed with the
         Securities and Exchange Co mmission on April 14, 2008)

23.1 †   Consent of Gottbetter & Partners, LLP (included in its opinion filed as Exh ibit 5.1)

                                                      II-6
            23.2*    Consent of Carlin, Charron & Rosen, LLP

            24.1 †   Power o f Attorney (included on signature page)




* Filed herewith

† Previously filed

                                                                II-7
Item 17. Undertakings.

The undersigned registrant hereby undertakes:

        1.      To file, during any period in which o ffers or sales are being made, a post -effective amend ment to this registration statement:

                   i.    To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

                  ii.    To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the
                         most recent post-effective amend ment thereof) which, individually or in the aggregate, represent a fundamental
                         change in the information set forth in the reg istration statement. Notwithstanding the foregoing, any increase or
                         decrease in volume of securit ies offered (if the total dollar value of securities o ffered would not exceed that wh ich
                         was registered) and any deviation from the lo w or high end of the estimated maximu m o ffering range may be
                         reflected in the form of prospectus filed with the Co mmission pursuant to Rule 424(b) if, in the aggregate, the
                         changes in volume and price represent no more than 20% change in the maximu m aggregate offering price set forth
                         in the "Calcu lation of Registration Fee" table in the effective registration statement;

                 iii.    To include any material informat ion with respect to the plan of distribution not previously disclosed in the
                         registration statement or any material change to such information in the reg istration statement.

        2.      That, for the purpose of determining any liability under the Securities Act of 1933, each such post -effective amend ment shall
                be deemed to be a new reg istration statement relating to the securities offered therein, and the offering of such securities at
                that time shall be deemed to be the initial bona fide offering thereof.

        3.      To remove fro m reg istration by means of a post-effective amend ment any of the securities being registered which remain
                unsold at the termination of the offering.

        4.      That, for the purpose of determining liab ility under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant
                to Rule 424(b) as part of a registration statement relat ing to an offering, other than registration statements rely ing on Rul e
                430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part o f an d included in the registration
                statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration
                statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
                by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a
                time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement
                or prospectus that was part of the registration statement or made in any such document immediately prior to such date of firs t
                use.

        5.      That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any p urchaser in the initial
                distribution of the securit ies: The undersigned registrant undertakes that in a primary offering of securities of the undersigned
                registrant pursuant to this registration statement, regardless of the underwrit ing method used to sell the securit ies to the
                purchaser, if the securities are offered or sold to such purchaser by means of any of the following co mmunications, the
                undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

                   i.    Any preliminary p rospectus or prospectus of the undersigned registrant relating to the offering required to be filed
                         pursuant to Rule 424;

                  ii.    Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or
                         referred to by the undersigned registrant;

                 iii.    The portion of any other free writ ing prospectus relating to the o ffering containing material information about the
                         undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

                 iv.      Any other communicat ion that is an offer in the offering made by the undersigned registrant to the purchaser.
        6.      Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act of 1933 may be permitted to directors, officers a nd
                controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised tha t in
                the opinion of the Securities and Exchange Co mmission such indemnification is against public policy as exp ressed in the Act
                and is, therefore, unenforceable. In the event that a claim fo r indemn ification against such liabilities (other than the payment
                by the registrant of expenses incurred or paid by a director, officer o r controlling person of the registrant in the successfu l
                defense of any action, suit or proceeding) is asserted by such director, officer o r controlling person in connection with the
                securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controllin g
                precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public po licy
as expressed in the Act and will be governed by the final adjudicat ion of such issue.

                                                      II-8
                                                                 SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, th e registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Newton, Massachusetts, on November 18 , 2008 .

                                                                          UFood Restaurant Group, Inc.

                                                                          By:               /s/ Glenn E. Dav is
                                                                          Name:      Glenn E. Dav is
                                                                          Title:     Chief Financial Officer

         In accordance with the requirements of the Securit ies Act of 1933, as amended, this registration statement was signed by the follo wing
persons in the capacities and on the dates stated:

Signature                                   Title                                                              Date

*                                                                                                              November 18 , 2008
George Naddaff                              Chairman and Ch ief Executive Officer
                                            (Principal Executive Officer)


/s/ Charles A. Cocotas                                                                                         November 18, 2008
Charles A. Cocotas                          President, Ch ief Operating Officer
                                            and Director


/s/ Glenn E. Dav is                                                                                            November 18, 2008
Glenn E. Dav is                             Chief Financial Officer
                                            (Principal Financial Officer and Principal
                                            Accounting Officer)


*                                                                                                              November 18, 2008
Mark Giresi                                 Director


*                                                                                                              November 18, 2008
Robert Grayson                              Director


*                                                                                                              November 18, 2008
Jeffrey Ross                                Director


*By: /s/ Glenn E. Davis
Glenn E. Dav is
Attorney-in-Fact
[FORM OF UFOOD® AREA DEVELOPMENT AGREEMENT]

      _______________________________________

             (DEV ELOPMENT AREA)

                AREA DEVELOPER

          _____________________________
                                           TABLE OF CONTENTS

                                                                 Page

1.    INTRODUCTION AND CERTA IN DEFINITIONS                             1
      1.A. INTRODUCTION                                                 1
      1.B. CERTAIN DEFINITIONS                                          1

2.    DEVELOPM ENT RIGHTS A ND OBLIGATIONS                              6
      2.A. GRA NT OF DEVELOPM ENT RIGHTS                                6
      2.B. TERRITORIAL RIGHTS                                           6
      2.C. RIGHTS RETAINED BY FRANCHISOR                                6
      2.D. DEVELOPM ENT OBLIGATIONS                                     8
      2.E. OWNERS' GUA RANTY A ND JOINDER                               8

3.    DEVELOPM ENT PLA N AND GRA NT OF FRA NCHISES                      8
      3.A. DEVELOPM ENT PLA N                                           8
      3.B. EXECUTION OF FRA NCHISE A GREEM ENTS                         9

4.    DEVELOPM ENT FEE                                                  10

5.    TRAINING                                                          10
      5.A. INITIA L TRAINING                                            10
      5.B. ADDITIONA L TRAINING AND FEES                                10

6.    MARKS                                                             11
      6.A. OWNERSHIP AND GOODWILL OF MARKS                              11
      6.B. LIMITATIONS ON DEVELOPER'S USE OF MARKS                      11
      6.C. NOTIFICATION OF INFRINGEM ENTS AND CLAIMS                    11
      6.D. MODIFICATION AND DISCONTINUANCE OF MARKS                     12
      6.E. INDEMNIFICATION FOR USE OF MARKS                             12

7.    CONFIDENTIA L INFORMATION AND INNOVATIONS                         12
      7.A. CONFIDENTIA L INFORMATION                                    12
      7.B. INNOVATIONS                                                  14

8.    EXCLUSIVE RELATIONSHIP                                            15

9.    OTHER OBLIGATIONS OF DEVELOPER                                    16
      9.A. DEVELOPM ENT MANA GER AND OTHER DEVELOPER PERSONNEL          16
      9.B. OTHER MANA GEM ENT PERSONNEL                                 16
      9.C. RECORDS AND REPORTS                                          17
      9.D. COMPLIA NCE WITH LAWS A ND GOOD BUSINESS PRA CTICES          18

10.   TRANSFER                                                          19
      10.A. TRANSFER BY FRANCHISOR                                      19

                                                     i
      10.B.   TRANSFER BY DEVELOPER                                                19
      10.C.   FRA NCHISOR'S RIGHT TO APPROVE TRANSFERS                             20
      10.D.   CONDITIONS FOR APPROVA L OF TRA NSFERS                               21
      10.E.   DEATH OR INCAPA CITY OF DEVELOPER                                    22
      10.F.   PUBLIC OR PRIVATE OFFERING                                           23
      10.G.   EFFECT OF CONSENT TO TRANSFER                                        24
      10.H.   FRA NCHISOR'S RIGHT OF FIRST REFUSA L                                24
      10.I.   OWNERSHIP STRUCTURE                                                  26

11.   TERMINATION OF A GREEM ENT                                                   26
      11.A. BY DEVELOPER                                                           26
      11.B. BY FRANCHISOR                                                          26
      11.C. TERMINATION OF THE DEVELOPM ENT TERM AND CERTAIN RIGHTS OF DEVELOPER   28
      11.D. EFFECT OF TERMINATION                                                  28

12.   RIGHTS AND OBLIGATIONS OF FRA NCHISOR AND DEVELOPER UPON TERM INATION OR
      EXPIRATION OF THIS A GREEM ENT                                               28
      12.A.  PA YM ENT OF AMOUNTS OW ED                                            28
      12.B.  DE IDENTIFICATION                                                     28
      12.C.  CONFIDENTIA L INFORMATION                                             29
      12.D.  COVENANT NOT TO COMPETE                                               29
      12.E.  CONTINUING OBLIGA TIONS                                               30

13.   RELATIONSHIP OF THE PA RTIES/INDEM NIFICATION                                30
      13.A. INDEPENDENT CONTRA CTORS                                               30
      13.B. NO LIA BILITY FOR A CTS OF OTHER PA RTY                                31
      13.C. TAXES                                                                  31
      13.D. INDEMNIFICATION OF FRANCHISOR                                          31

14.   GENERA L PROVISIONS                                                          32
      14.A. ARBITRATION                                                            32
      14.B. SPECIFIC ENFORCEM ENT                                                  33
      14.C. GOVERNING LAW                                                          34
      14.D. INJUNCTIVE RELIEF                                                      34
      14.E. CONSENT TO JURISDICTION                                                34
      14.F. COSTS AND ATTORNEYS' FEES                                              34
      14.G. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL                              35
      14.H. LIMITATION OF CLAIM S                                                  35
      14.I. ENTIRE A GREEM ENT                                                     35
      14.J. NOTICES                                                                35
      14.K. SEVERA BILITY AND SUBSTITUTION OF VA LID PROVISIONS                    36
      14.L. THIRD PARTY BENEFICIA RIES                                             37
      14.M. WAIVERS                                                                37
      14.N. NO WARRANTIES OR GUA RANTEES                                           37
      14.O. FORCE MAJEURE                                                          38

                                                      ii
       14.P.   ASSIGNM ENT                                                            38
       14.Q.   CONSTRUCTION                                                           38
       14.R.   COUNTERPA RTS                                                          38
       14.S.   CUMULATIVE REM EDIES                                                   38
       14.T.   NO WITHHOLDING OF PA YM ENTS                                           39
       14.U.   EXERCISE OF BUSINESS JUDGM ENT                                         39
       14.V.   ELECTRONIC MAIL                                                        39

EXHIB ITS AND ATTACHMENTS

EXHIBIT A        -   DEVELOPER A CKNOWLEDGM ENTS A ND REPRESENTATIONS STATEM ENT

EXHIBIT B        -   DEVELOPM ENT FEE, DEVELOPM ENT A REA AND DEVELOPM ENT SCHEDULE

EXHIBIT C        -   FORM OF FRANCHISE A GREEM ENT

EXHIBIT D        -   OWNERS AND INITIA L CAPITALIZATION

EXHIBIT E        -   GUA RANTY AND ASSUMPTION OF DEVELOPER'S OBLIGATIONS

EXHIBIT F        -   FORM OF CONFIDENTIALITY AND NON-COMPETE A GREEM ENT

                                                     iii
                                                UFOOD® DEV ELOPMENT AGREEMENT

         THIS AGREEMENT is made and entered into as of this ______ day of ____________, 200__ (the " Effecti ve Date "), by and
between UFood Restaurant Group, Inc. , a Nevada corporation (" Franchisor "), and __________________ , a(n) ______________ ("
Devel oper ").

1.       INTRODUCTION AND CERTAIN DEFINITIONS .

         1.A.     INTRODUCTION .

          Franchisor and certain related parties have designed and developed methods of developing and operating distinctive retail out lets
offering food service featuring low-fat, lo w-carbohydrate and low-calorie food items, selected beverages and nutritional produ cts to the general
public. Each of these outlets, called a " UFood Outlet " in this Agreement (as defined more fully below), features the Marks (defined below)
and utilizes distinctive business formats, specifications, emp loyee selection and training programs, signs, equipment, layouts, systems,
methods, procedures, software, designs and market ing and advertising standards and formats, all o f which Franchisor may impro ve, further
develop and otherwise modify fro m t ime to t ime (all of wh ich are together called the " System "). Franchisor has obtained the right to grant
franchises and development rights to certain qualified parties to develop, own and operate UFood Outlets.

         Franchisor grants to certain qualified persons or entities who meet Franchisor's qualifications, and who are willing to undertake the
investment and effort, the right to develop a specified nu mber of UFood Outlets within a defined geographic area. Developer h as requested that
Franchisor grant it such rights. Franchisor has approved Develop er's request subject to the terms and conditions of this Agreement and in
reliance upon all of the representations made in Developer's application, other informat ion provided by Developer and its Aff iliates during the
application process and the representations of Developer in the Acknowledgements and Representations Statement, a copy of which is attached
hereto as Exhi bit A , which shall be executed by Developer concurrently with this Agreement.

         This Agreement governs the rights and obligations of Developer and its Controlled Affiliates (defined below) to enter into Fr anchise
Agreements (defined below) which grant them the right to develop and operate UFood Outlets (" Devel oper Outlets ," as further defined
below) within the Sub-Areas (defined below) in accordance with the Development Schedule (defined below). The operation of each Developer
Outlet will be governed by a Franchise Agreement.

         1.B.     CERTAIN DEFINITIONS .

         For purposes of this Agreement, the terms listed below have the meanings that follow them. Other terms used in this Agreement are
defined in the context in which they occur.

          ― Affiliate ‖ – W ith respect to any Person, a Person which, directly or indirectly, through one or mo re intermediaries, controls or is
controlled by, or is under common control with, the Person specified. For all purposes hereof, the term ― control ‖ means the possession,
directly or indirect ly, of the power to direct or to cause the direction of the management and policies of any Person, or the power to veto major
policy decisions of any Person, whether through the ownership of voting securities, by contract, or otherwise.
           ― Anti-Terrorism Law ‖ – Executive Order 13224 issued by the President of the United States, the Terrorism Sanctions Regulations
(Tit le 31, Part 595 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Reg ulations (Title 31, Part 597 of
the U.S. Code of Federal Regulations), the Cuban Assets Control Regulat ions (Tit le 31, Part 515 of the U.S. Code o f Federal Regulations), the
USA PATRIOT Act, and all other present and future federal, state and local laws, o rd inances, regulations, policies, lists and other requirements
of any governmental authority (including the Un ited States Department of Treasury Office of Foreign Assets Control) addressin g or in any way
relating to terrorist acts and acts of war.

        ― Competiti ve B usiness ‖ – A business or enterprise, other than a UFood Outlet operated by Franchisor, an Affiliate of Franchisor or
pursuant to a valid franchise agreement with Franchisor or one of its Affiliates, that:

                 (1) derives twenty-five percent (25%) or mo re o f its total revenue fro m the sale o f food items and/or beverages that are
         marketed as low-fat, lo w-carbohydrate or low-calo rie;

                  (2)   derives five percent (5%) or more of its total revenue fro m the sale of nutritional products; or

                  (3) grants or has granted franchises or licenses, or establishes or has established joint ventures, for the development and/or
         operation of one or more businesses or enterprises of a type described in either clause (1) or (2), above.

         ― Confi denti al Information ‖ – As defined in Section 7.A .

         ― Controlled Affiliate ‖ – A corporation, limited liability co mpany or partnership that Developer is authorized under this Agreement
to form fo r the sole purpose of developing and operating one or more UFood Outlets pursuant to Franchise Agreement(s), provid ed that:

                (1) Developer, together with its direct and indirect Owners, owns and controls at least seventy percent (70%) of that entity's
         Ownership Interests;

                  (2) Developer has the authority under the governing documents, and at least the percentage of votin g power required under
         applicable law, to authorize a merger, liquidation, dissolution or transfer of substantially all of the assets of that entity ;

                     (3) if the Controlled Affiliate is a partnership, Developer is the managing partner, or if the Controlled Affiliate is a limited
         liab ility co mpany, Developer is the manager or managing member;

                (4) Developer establishes to Franchisor's satisfaction that Developer has, and will at all times continue to have, the right
         and power to control the operation and the sale or other disposition of the UFood Outlets owned by the Controlled Affiliate;

                                                                         2
                 (5)   the entity conducts no business other than the operation of UFood Outlets;

                (6) Developer, its Owners, and all Owners of the Controlled Affiliate execute an agreement, in a form acceptable to
        Franchisor, under which they guarantee the Controlled Affiliate's performance of, and assume full and unconditional liab ility for and
        agree to perform, all of the Controlled A ffiliate's obligations, covenants and agreements contained in the applicable Franchi se
        Agreement; and

                (7) all Owners of the Controlled Affiliate are of good character and otherwise meet Franchisor's then current standards for
        owners of UFood Outlets franchisees.

        ― Controlling Interest ‖ – If Developer is a:

                  (1) corporation or limited liab ility co mpany, ― Controlling Interest ‖ shall mean such number of the voting shares or
        membership interests, as applicable, of Developer or such other rights as (a) shall permit voting control of Developer on any issue or
        (b) shall prevent any other person, group, combination, or entity fro m blocking voting control on any issue or exercising any veto
        power;

                  (2) general partnership, ― Controlling Interest ‖ shall mean a managing partnership interest, or such percentage of the
        general partnership interests in Developer or such other rights as (a) shall permit determination of the outcome on any issue or
        (b) shall prevent any other person, group, combination, or entity fro m blocking voting control on any issue or exercising any vet o
        power; or

                 (3) limited partnership, ― Controlling Interest ‖ shall mean a general partnership interest, such percentage of limited
        partnership interests or such other rights as shall permit the replacement or removal of any general partner.

        ― Devel oper ‖ – As defined in the introductory paragraph to this Agreement.

       ― Devel oper Outlets ‖ – The UFood Out lets developed, owned and operated by Developer or Controlled Affiliates pursuant to this
Agreement and Franchise Agreements.

        ― Devel opment Area ‖ – the area that is co mposed of all o f the Sub-Areas described in Exhi bi t B to this Agreement.

        ― Devel opment Fee ‖ – As defined in Section 4 .

        ― Devel opment Manager ‖ – As defined in Section 9.A .

        ― Devel opment Plan ‖ – As defined in Section 3.A .

        ― Development Schedule ‖ – The schedule of the number of UFood Outlets required to be open and operational at specified dates in
each Sub Area as set forth in Exhi bit B to this Agreement.

                                                                       3
       ― Devel opment Term ‖ – The period during which Developer is authorized and required to develop UFood Outlets pursuant to this
Agreement, wh ich will co mmence on the Effective Date and will exp ire, unless terminated earlier in accordance with the terms of this
Agreement, when the last Sub-Area Term expires.

        ― Effecti ve Date ‖ – As defined in the introductory paragraph to this Agreement.

        ― F&B Gross Receipts ‖ – As defined in the Franchise Agreement.

        ― Franchise ‖ – The right to operate a UFood Outlet at a particular location under a Franchise Agreement.

        ― Franchise Agreement ‖ – The form of franchise agreement to be used pursuant to this Agreement, together with all exhib its, riders,
addenda, guarantees, ancillary agreements and attachments thereto, all substantially in the fo rm attached hereto as Exhi bit C .

        ― Franchisor ‖ – As defined in the introductory paragraph of this Agreement.

        ― Franchisor Indemnified Parties ‖ – Franchisor, its Affiliates, its and their owners, and all of their respective officers, d irectors,
managers, agents, employees, representatives, successors and assigns.

        ― UFood Outlet ‖ – A co mb ination restaurant/retail store that (1) operates using the System and the Marks; and (2) is either o perated
by Franchisor or its Affiliates or pursuant to a valid franchise fro m Franchisor.

        ― Guaranty ‖ – As defined in Section 2.E .

         ― Immediate Family ‖ – (1) The spouse of an individual; (2) the natural and adoptive parents and natural and adopted children and
siblings of such individual and their spouses; and (3) the natural and adoptive parents and natural and adopted children and siblings of the
spouse of such individual.

          ― Marks ‖ – The trademarks, service marks, logos and other commercial symbols that Franchisor authorizes for use fro m t ime to time
to identify UFood Outlets and the products and services they offer, together with the Trade Dress (defined below).

        ― Nutriti onal Products ‖ – Those nutritional products that Franchisor periodically authorizes Deve loper to offer and sell from the
Developer Outlets.

        ― Nutritional Products Gross Receipts ‖ – as defined in the Franchise Agreement.

        ― Opening Date ‖ – With respect to each Developer Outlet, the date that Developer or a Controlled Affiliate is required to have that
Developer Outlet open for business under the terms of this Agreement and the applicable Franchise Agreement.

                                                                       4
          ― Owner ‖ – With respect to Developer, ― Owner ‖ shall mean each Person holding a direct or indirect, record or beneficial
Ownership Interest in Developer and each Person who has other direct or indirect p roperty rights in Developer, th is Agreement , or the right to
receive all or a portion of Developer's profits or losses or any capital appreciation right relating to Developer. With respect to a Controlled
Affiliate, each Person holding a direct or indirect, record or beneficial Ownership Interest in such Controlled Affiliate, an d each Person who
has other direct or indirect p roperty rights in such Controlled Affiliate, any Franchise Agreement signed by such Controlled Affilia te, a
Developer Outlet operated by such Controlled Affiliate, or the right to receive all or a portion of such Controlled Affiliate 's or such Developer
Outlet's profits or losses or any capital appreciation relat ing to such Developer Outlet.

          ― Ownershi p Interests ‖ – In relation to a: (1) corporation or limited liab ility company, the record or beneficial ownership of one or
more shares or membership interests (regardless of class, preferences or voting rights, if any) in, or the right to receive any portion of the
profits and/or losses of, the corporation or limited liab ility co mpany; (2) partnership, the record or beneficial ownership of a general or limited
partnership interest; or (3) trust, the ownership of a beneficial interest of such trust.

         ― Person ‖ – An individual, corporation, partnership, joint venture, association, limited liability company, trust, unincorporated
association, other business entity, or governmental entity (or subdivision thereof).

         ― Sub Areas ‖ – The geographic areas designated as Sub Areas in Exhi bi t B to this Agreement.

         ― Sub Area Quota ‖ – As defined on Exhi bit B to this Agreement.

         ― Sub Area Ter m ‖ – The period during wh ich Developer is authorized and required to develop Developer Outlets in a g iv en Sub
Area pursuant to this Agreement, wh ich will co mmence on the Effective Date and will exp ire, unless terminated earlier in acco rdance with the
terms of th is Agreement, on the earlier to occur of: (a) the expiration of the last Sub-Area Develop ment Period set forth in Exhi bit B to this
Agreement for that Sub Area; or (b ) the date on which a Franchise Agreement has been executed and delivered fo r the f inal UFood Outlet to be
developed by Developer in the Sub-Area under this Agreement.

         ― System ‖ – As defined in Section 1.A .

         ― System Standards ‖ – Specifications, standards, policies and procedures that Franchisor periodically prescribes for UFood Outlets,
including standards concerning brands, types and/or models of operating assets, Nutrit ional Products, food and beverage inven tory, ingredients,
supplies and other products and services used in the development and operation of a UFood Outlet, as they may be modified, add ed to, replaced
and supplemented by Franchisor fro m t ime to t ime.

          ― Trade Dress ‖ – The UFood Outlet design, decor, color scheme and image which Franchisor authorizes and requires under the
Franchise Agreement for use in connection with the operation of a Developer Outlet, as it may be revised and further develope d by Franchisor
or its Affiliates fro m t ime to t ime.

                                                                         5
2.       DEVELOPMENT RIGHTS AND OBLIGATIONS .

         2.A.     GRANT OF DEVELOPMENT RIGHTS .

         Provided that Developer is in full co mpliance with all of the terms and conditions of this Agreement, including the developme nt
obligations contained in Section 2.D. hereof, and Developer and all Controlled Affiliates are then in full co mpliance with all F ranchise
Agreements executed pursuant to this Agreement, Franchisor will g rant to Developer and Controlled Affiliates, in accordance w ith
Section 3.B. hereof, Franchises to develop and operate, in each Sub Area, the nu mber o f UFood Outlets specified for su ch Sub Area on
Exhi bit B to this Agreement. Developer acknowledges and agrees that Developer's rights under this Agreement are limited t o the designated
number of UFood Outlets for each Sub Area, and the schedule and timing of the opening of UFood Outlets in each Sub Area durin g the
respective Sub Area Terms, as set forth on Exhi bi t B to this Agreement. Developer is not granted any rights under this Agreement to develop
or operate, and Developer shall not develop or operate, UFood Outlets (1) outside the Sub-Areas; (2) inside any Sub-Area after the exp iration
of the applicable Sub-Area Term; (3) in excess of the number of UFood Outlets specified for the applicable Sub -Area on Exhi bit B hereto.

         Developer's right to develop UFood Outlets shall exp ire upon expirat ion of the Development Term. Developer expressly
acknowledges and agrees that it has no right to renew its rights under this Agreement upon the expiration or termination of t his Agreement or
the Develop ment Term. Developer acknowledges and agrees that the execution and delivery o f this Agreement shall constitute no tice to
Developer of non renewal for purposes of fulfilling the requirements of any applicable state or federal law governing th e non renewal of
franchise or development rights.

         2.B.     TERRITORIAL RIGHTS .

          Except as otherwise provided in this Agreement, and provided that Developer is in fu ll co mpliance with this Agreement, and
Developer and all Controlled Affiliates are then in full co mpliance with all Franchise Agreements executed pursuant to this Agreement, during
the Development Term, neither Franchisor nor its Affiliates will operate, or grant a franchise fo r the operation of, a UFood Outlet, or any other
retail establishment that derives twenty-five percent (25%) or mo re of its total revenue fro m the sale of food items and/or beverages that are
marketed as low-fat and/or low-carbohydrate or low-calorie, or derives five percent (5%) or more of its total revenue from the sale of
Nutrit ional Products and that is substantially associated with the Marks and physically located within the Development Area.

         2.C.     RIGHTS RETAINED B Y FRANCHISOR .

          Except as expressly set forth in Section 2.B. hereof, during and after the Develop ment Term, Franchisor (on behalf of it self, its
Affiliates and its designees) retains all rights with respect to UFood Outlets, the System, the Marks, and the marketing and sale of any products
and services, anywhere in the wo rld, including:

                                                                        6
         (1) the right to develop and operate, and grant rights to others to develop and operate, UFood Outlets and any similar or
dissimilar businesses at any location outside the Development Area (including on the border of the Develop ment Area), whether under
the Marks or other trademarks or service marks, and on any terms Franchisor deems appropriate;

          (2) the right to operate and to grant others (including any person or entity related in any manner whatsoever to Franchisor)
the right to operate food service businesses and/or retail outlets using the Marks or any other marks and using the System o r an y other
system at such locations within and/or outside the Development Area, both during and upon expirat ion or termination of the te rm of
this Agreement, and on such terms and conditions as Franchisor, in its sole discretion, deems appropriate, including, without
limitat ion, the right to operate and grant others the right to operate UFood Outlets at " Non Tradi tional Sites " within and outside the
Develop ment Area on any terms and conditions Franchisor deems appropriate. Non Traditional Sites are sites that generate customer
traffic flow which is independent from the general customer traffic flow of the surrounding area, including, without limitation,
military bases, shopping malls, airports, stadiums, industrial or office facilities, food courts, hotels, school campuses, train stations,
travel plazas, toll roads, casinos, hospitals, and sports or entertainment venues.

         (3) the right to develop and operate, and grant rights to others to develop and operate, other establishments under the Marks
(other than UFood Outlets and other retail establishments specified in Section 2.B. above) or other trademarks or service marks, and
on any terms and conditions that Franchisor deems appropriate, anywhere in the wo rld (including within the Develop ment Area);

         (4) the right to prov ide, and grant rights to others to provide, on any terms Franchisor d eems appropriate, goods and
services which are similar to, co mpetitive with or co mplementary to those provided at UFood Outlets (including the Nut rit iona l
Products), whether identified by the Marks or other trademarks or service marks and wherever located or operating (whether within or
outside the Development Area), through any distribution channels, including retail stores, a Website, and catalog/mail order sales;

         (5) the right to be acquired (in whole or in part and regardless of the form of transaction) by a business providing products
and services similar or d issimilar to those provided at UFood Outlets, or by another business, even if such business operates ,
franchises and/or licenses Competit ive Business within the Develop ment Area; and

         (6) the right to acquire (in whole or in part and regardless of the fo rm of transaction) one or mo re businesses providing
products and services similar o r d issimilar to those provided at UFood Outlets, and to franchise, license and create other a rrang ements
of any type with respect to those businesses once acquired, wherever these businesses (or the franchisees or licensees of tho se
businesses) are located or operating.

                                                                7
         2.D.     DEVELOPMENT OB LIGATIONS .

           During the Develop ment Term, Developer will at all times faithfully, honestly and diligently perform its obligations under th is
Agreement, and continuously exert its best efforts to promote and enhance the development of UFood Outlets within the Sub -Areas. Without
limit ing the generality of the foregoing, Developer agrees to have open and in operation in each Sub Area the cu mulat ive numb er o f UFood
Outlets set forth as the respective Sub Area Quota in Exhi bit B attached hereto by the dates specified therein. If a Developer Outlet is closed
due to casualty or condemnation in co mpliance with the applicable Franchise Agreement, or is otherwise closed with Franchisor 's written
approval, that Developer Outlet shall be deemed open and in operation for purposes of the applicable Sub-Area Quota for one hundred eighty
(180) days after its closing but not afterward. Developer acknowledges that Franchisor makes no representations or warranties that the Sub
Areas can support, or that there are sufficient sites for, the n u mber of UFood Outlets specified in the Development Schedule. Developer
acknowledges and agrees that its failure to open and operate UFood Outlets pursuant to this Agreement shall be a material bre ach of this
Agreement entitling Franchisor to all remedies available to it pursuant to this Agreement and applicable law.

         2.E.     OWNERS' GUARANTY AND JOINDER .

         Developer shall cause all Persons who are Owners of Developer as of the Effective Date and who o wn fifteen percent (15%) or more
of the Ownership Interests in Developer as of the Effective Date, and each of their spouses, to execute and deliver to Franch isor concurrently
with the execution of this Agreement, and all Persons who become Owners of Developer thereafter, and each of their spouses, to execute and
deliver to Franchisor pro mptly thereafter, the fo rm of Guaranty and Assumption of Developer's Obligations (" Guaranty") attach ed hereto as
Exhi bit E and the Joinder of Owners at the end of this Agreement.

3.       DEVELOPMENT PLAN AND GRANT OF FRANCHIS ES

         3.A.     DEVELOPMENT PLAN .

          Within ten (10) days after the Effective Date, Developer shall prepare and submit to Franchisor for Franchisor's review, amendment
and approval a written develop ment plan fo r developing all of the Developer Outlets under this Agreement (the " Development Plan "), wh ich
shall include details on the sources and terms of funding for the develop ment and operation of all Developer Outlets and such other informat ion
and documents as Franchisor may require. A mong other factors, Franchisor may consider Developer's proposed debt/eq uity ratio and amount
of indebtedness in reviewing such Development Plan. Once a Develop ment Plan is approved by Franchisor, Developer must execute and
adhere to it. Any proposed deviations fro m the approved Develop ment Plan must be submitted to Franchisor in writing for its approval prior to
implementation. The Develop ment Plan shall be subject to periodic review by Franchisor which may required modifications to me et its then
current min imu m standards.

                                                                       8
         3.B.     EXEC UTION OF FRANCHIS E AGREEMENTS .

         During the Sub-Area Term of a particular Sub-Area, when Developer locates a proposed site in that Sub -Area at which it intends in
good faith to develop (or have a Controlled Affiliate develop) a UFood Outlet for such Sub -Area, and which Developer reasonably believes to
conform to the minimu m site selection criteria established by Franchisor from time to time, Developer shall submit to Franchisor a franchise
application package containing the forms and information that Franchisor periodically specifies, including informat ion, if applicable, about the
Controlled Affiliate that Developer intends to own and operate the UFood Outlet (and its direct and indirect Owners).

        Developer acknowledges that, in order to preserve and enhance the reputation and goodwill of all UFood Outlets and the goodwill of
the Marks, all UFood Outlets must be properly developed and operated. Developer therefore agrees that Franchisor may refuse t o grant to
Developer or a Controlled Affiliate a Franchise for a proposed Developer Outlet u nless Developer and, if applicable, the Controlled Affiliate
demonstrates:

                   (1) sufficient financial resources and management capabilities in Franchisor's judg ment, applying standards consistent with
         criteria Franchisor uses in other comparab le market areas, to develop and operate the proposed Developer Outlet properly; and

                  (2) that its Owners (i) do not own any interest in, or provide services to, any Competit ive Business; (ii) have not been
         involved in any criminal activity or other activ ity which, in Franchisor's judgment, might adversely affect the reputation of Developer,
         any of its Controlled Affiliates, any Developer Outlet or other UFood Outlets or the goodwill associated with the Marks; and (iii) are
         of good moral character and otherwise meet Franchisor's then current criteria for UFood Outlets' franchisees.

Developer must give Franchisor fro m t ime to time, during and after the approval process, the financial statements and other i nfo rmation
regarding Developer or its Controlled Affiliate and their Owners, and the development and operation of the proposed Developer Outlet, that
Franchisor reasonably requires, including investment and financing plans for the proposed Developer Outlet.

          If Franchisor approves the completed franchise applicat ion package delivered by Developer, and provided that Developer is then in
full co mpliance with this Agreement, and Developer and all Controlled Affiliates are then in full co mpliance with all Franchi se Agreements
executed pursuant to this Agreement, but subject to any restrictions of applicable law, Franchisor agrees to offer to Developer or its specified
Controlled Affiliate a Franchise to operate a UFood Outlet by delivering to Developer a Franchise Agreement in form for execu tion by
Developer or its applicable Controlled Affiliate and each of their respective Owners. Such Franchise Agreement shall be executed a nd returned
to Franchisor, together with all fees due upon execution thereof, with in twenty (20) days after Franchisor's delivery thereof, but in no event
sooner than the time period required under applicable law. Developer acknowledges that Franchisor will not commence its revie w of the
proposed site until Developer or its Controlled Affiliate signs the Franchise Agreement and pays a ll fees due to Franchisor upon such signing,
at which time the site review and approval process shall be governed by such Franchise Agreement. Neither Franchisor's offering a Franchise
to Developer or its Controlled Affiliate, nor any other written or oral co mmunicat ion fro m Franchisor to Developer or a Controlled Affiliate
prior to the signing of a Franchise Agreement, nor Franchisor's signing a Franchise Agreement shall be deemed an approval by Franchisor of
any site proposed by Developer or a Controlled A ffiliate. Such approval may be effected only in accordance with the terms and conditions of a
signed Franchise Agreement.

                                                                        9
        If Developer or the applicable Controlled Affiliate fails to return the Franchise Agreement (including the guarantees and all related
documents), or to pay any fees due upon execution thereof, within the t ime period specified above, Franchisor may withdraw it s offer to grant a
Franchise for a UFood Outlet in such geographic area at any time thereafter. In no event may a Developer Outlet be opened for business prior
to Developer's receipt of written notice fro m Franchisor authorizing the opening of such Deve loper Outlet.

4.       DEVELOPMENT FEE .

         Concurrently with and in consideration of the execution of this Agreement, Developer shall pay to Franchisor the sum set fort h on
Exhi bit B hereof as a development fee (the " Devel opment Fee ") which shall be deemed fully earned by Franchisor upon execution of this
Agreement. Franchisor shall apply Seventeen Thousand, Five Hundred Dollars ($17,500) of the Develop ment Fee toward the init ia l franchise
fee payable under each Franchise Agreement. The Develop ment Fee is not refundable under any circumstances, is not subject to offset, and is
payable to Franchisor regardless of whether Developer develops any Developer Outlets.

5.       TRAINING .

         5.A.     INITIAL TRAINING .

        Within thirteen (13) weeks after the Effective Date, Developer's Development Manager and Ch ief Executive Officer (if different fro m
the Development Manager) must attend and complete to Franchisor's satisfaction Franchisor's initial training program in the operation of a
UFood Outlet.

         5.B.     ADDITIONAL TRAINING AND FEES .

          Franchisor may, as it deems necessary, require the Develop ment Manager and/or other key employees of Developer to at tend or
participate in additional training programs during the Develop ment Term. Developer shall pay Franchisor's reasonable fees for thes e programs.
Franchisor also may charge for updated, additional or refresher training materials supplied to Developer or its personn el. Developer shall be
responsible for the travel, living and other expenses (including local transportation expenses) and compensation of Developer 's personnel
incurred in connection with any training programs.

                                                                       10
         In the event the trained Development Manager ceases to hold such position with Developer, Developer shall have thirty (30) da ys in
which to appoint a substitute or replacement officer who is subject to Franchisor's approv al pursuant to Section 9.A. belo w and must attend and
complete to Franchisor's satisfaction the initial train ing program that Franchisor designates promptly after appointment. Dev eloper shall pay
Franchisor's reasonable fees for train ing substitute or replacement officers. If Franchisor determines that any of Developer's personnel has
failed to satisfactorily co mplete any training program, Developer shall immediately h ire a substitute officer and promptly ar range for such
person to complete the train ing program that Franchisor designates to Franchisor's satisfaction.

6.       MARKS .

         6.A.      OWNERS HIP AND GOODWILL OF MARKS .

         Developer's right to use the Marks is derived only fro m this Agreement and is limited to Developer's developing and operating UFood
Outlets according to this Agreement, Franchise Agreements and all System Standards that Franchisor prescribes. Developer's u nauthorized use
of the Marks is a breach of this Agreement and infringes Franchisor's rights in the Marks. Developer acknowledges and agrees that its use of
the Marks and any goodwill established by that use are exclusively for Franchisor's benefit and tha t this Agreement does not confer any
goodwill or other interest in the Marks upon Developer (other than the right to operate the Outlet under this Agreement). A ll p rovisions of this
Agreement relating to the Marks apply to any additional proprietary trade and service marks Franchisor authorizes Developer t o use. Developer
may not at any time during or after this Agreement's term contest or assist any other Person in contesting the validity, or F ranchisor's
ownership, of any of the Marks.

         6.B.      LIMITATIONS ON DEV ELOPER'S US E OF MARKS .

         Developer agrees to identify itself as an independent licensee of the Marks in the manner Franchisor prescribes. Developer ma y not
use any Mark (1) as part of any corporate or legal business name, (2) with any prefix, suffix, or other modifying words, terms, designs, or
symbols (other than logos Franchisor has licensed to Developer pursuant to this Agreement), (3) in selling any unauthorized services or
products, (4) as part of any domain name, ho mepage, electronic address, or otherwise in connection with a Website, or (5) in any other manner
that Franchisor has not expressly authorized in writing.

         Developer agrees to display the Marks prominently on forms, advertising, supplies, and other materials in the manner that Franchisor
designates. Developer agrees to give the notices of t rade and service mark registrations that Franchisor specifies and to obt ain any fict itious or
assumed name registrations required under applicable law.

         6.C.      NOTIFICATION OF INFRINGEMENTS AND CLAIMS .

          Developer agrees to notify Franchisor immediately of any apparent infringement or challenge to Developer's use of any Mark, o r of
any Person's claim of any rights in any Mark, and not to communicate with any Person other than Franchisor, its attorneys, and Developer's
attorneys, regarding any in fringement, challenge, or claim. Franchisor may take the action deemed appropriate (including no a ction) and
control exclusively any lit igation, U.S. Patent and Trademark Office proceeding, or other administrative proceeding arising f ro m any
infringement, challenge, or claim or otherwise concerning any Mark. Developer agrees to sign any documents and take any other reasonable
action that, in Franchisor's judg ment or in the opin ion of Franchisor's attorneys, are necessary or advisable to protect and main tain Franchisor's
interests in any litigation or Patent and Trademark Office or other proceeding or otherwise to protect and maintain its interests in the Marks.

                                                                         11
         6.D.     MODIFICATION AND DISCONTINUANCE OF MARKS .

         Franchisor shall have the right to determine, in its sole discretion, whether at any time it is advisable to modify or discon tinue using
any Mark and/or to use one or more addit ional or substitute trade or service marks. Developer agrees to comp ly with Fra nchisor's directions
within a reasonable time after receiving notice. Franchisor need not reimbu rse Developer for its expenses related to modifyin g or discontinuing
any Marks, for any loss of revenue due to any modified or d iscontinued Mark, or for the exp enses of promoting a modified or substitute
trademark o r service mark.

         Franchisor's rights in this Subsection D apply to any and all of the Marks (and any portion of any Mark) that it authorizes Developer
to use in this Agreement. Franchisor may exercise these rights at any time and fo r any reason, business or otherwise, that it thinks best.
Developer acknowledges both Franchisor's right to take this action and its obligation to comply with its directions.

         6.E.     INDEMNIFICATION FOR US E OF MARKS .

        Franchisor agrees to reimburse Developer for all damages and expenses that Developer incurs in any trademark infrin gement
proceeding disputing Developer's authorized use of any Mark under this Agreement if Developer has timely notif ied Franchisor of, and
complies with Franchisor's directions in responding to, the proceeding. At Franchisor's option, it may defend and control the defense of any
proceeding arising fro m Developer's use of any Mark under this Agreement.

7.       CONFIDENTIAL INFORMATION AND INNOVATIONS .

         7.A.     CONFIDENTIAL INFORMATION .

          Franchisor and its Affiliates, as applicable, possess and may further develop and acquire certain confidential and proprietar y
informat ion and trade secrets relating to the System or the development or operation of UFood Outlets, including the follo win g categories of
informat ion, methods, techniques, procedures and knowledge developed or to be developed by Franchisor, its consultants or con tractors, its
Affiliates or its designees, and/or franchisees and developers (the " Confi dential Informati on "):

                  (1)   site selection criteria;

                   (2) standards, specifications, operating procedures and other methods, techniques, requirements, equipment, recipes,
         policies, info rmation, concepts and systems relat ing to, and knowledge of and experience in, the development, operation and
         franchising of UFood Outlets;

                                                                       12
                  (3)   marketing research and advertising, marketing and promot ional programs for UFood Outlets;

                  (4) knowledge concerning the logic, structure and operation of the Computer System (as defined in the Franchise
         Agreement) co mponents and the Specified Software (as defin ed in the Franchise Agreement), and all additions, modificat ions and
         enhancements thereof, all data generated fro m use of the Co mputer System and Specified Software, and the logic, structure and
         operation of the database file structures containing such data and all additions, modifications and enhancements thereof;

                   (5) specifications for and knowledge of suppliers of Nutritional Products and other assets, products and supplies used at or
         sold fro m UFood Outlets;

                  (6) info rmation concerning customers, customer lists, operating results, financial performance and other data of UFood
         Outlets (other than operating results, financial performance and other financial data of the Developer Outlets);

                  (7)   the Manuals (as defined in the Franchise Agreement);

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

                  (9)   the terms and conditions of this Agreement and the Franchise Agreements entered into pursuant to this Agreement.

         Franchisor will d isclose to Developer such parts of the Confidential Information as Franchisor deems necessary or advisable fro m time
to time for the performance of Developer's obligations under this Agreement, and Developer may learn or otherwise obtain addi tional
Confidential Informat ion fro m Franchisor, its Affiliates, its franchisees, its developers and others during the term of this Agreement. Developer
acknowledges and agrees that neither Developer nor any agent, rep resentative or contractor of Developer will acquire any interest in or right to
use the Confidential Informat ion, other than Developer's right to utilize certain Confidential Informat ion in the development of UFood Outlets
pursuant to this Agreement, and that the use or duplication of the Confidential Informat ion in any other business would constitute an unfair
method of competition with Franchisor and other UFood Outlets developers and franchisees. Developer agrees to disclose the Co nfidential
Information to its Owners and employees only to th e extent reasonably necessary for the performance o f Developer's oblig ations under this
Agreement and only if such individuals have agreed to maintain such informat ion in confidence in an agreement enforceable by Franchisor.

          Developer acknowledges and agrees that the Confidential Informat ion is confidential to and a valuable asset of Franchisor, is
proprietary, includes trade secrets of Franchisor, and is disclosed to Developer solely on the condition that Developer, its Owners and its
emp loyees who have access to the Confidential Informat ion agree, and Developer (on its and their behalf) does hereby agree, that, during and
after the term of this Agreement, Developer, its Owners and such employees:

                                                                        13
                 (a)   will not use the Confidential Information in any other business or capacity;

                 (b)   will maintain the absolute secrecy and confidentiality of the Confidential Informat ion;

                 (c) will not make unauthorized copies of any port ion of the Confidential Information d isclosed via electronic mediu m or in
        written or other tangible form; and

                (d) will adopt and implement all reasonable procedures prescribed fro m time to t ime by Franchisor to prevent unauthorized
        use or disclosure of or access to the Confidential Informat ion, including requiring the Develop ment Manager and such other
        emp loyees of Developer that Franchisor designates who will have access to such information to execut e the non-competition and
        confidentiality agreement in the form attached hereto as Exhi bit F (the " Confidentiality and Non Co mpetition Agreement").
        Developer shall p rovide Franchisor, at its request, executed originals of each such Confidentiality and Non Co mpetition Agree ment.

         Notwithstanding anything to the contrary contained in this Agreement and provided Developer shall have obtained Franchisor's prior
written consent, the restrictions on disclosure and use of the Confidential Information shall not apply to the follo wing:

                 (i) informat ion, methods, procedures, techniques and knowledge wh ich are o r beco me generally known throughout the
        restaurant industry or the nutritional supplement industry, other than through disclosure (whether deliberate o r inadvertent) by
        Developer or any other party having an obligation of confidentiality to Franchisor; and

                  (ii) the disclosure of the Confidential In formation in judicial or ad ministrative proceedings to the extent that Developer is
        legally co mpelled to disclose such information, provided Developer has notified Franchisor prior to disclosure and shall have used its
        best efforts to obtain, and shall have afforded Franchisor the opportunity to obtain, an appropriate protective order or othe r assurance
        satisfactory to Franchisor of confidential t reatment for the info rmation required to b e so disclosed.

         7.B.     INNOVATIONS .

         Developer agrees to disclose to Franchisor all ideas, concepts, methods, techniques and products conceived or developed by
Developer and/or its Affiliates, Owners, agents, representatives, contractors and employees during the term o f this Agreement relating to the
development or operation of UFood Outlets. Developer hereby grants to Franchisor, and agrees to procure fro m such other Perso ns, a perpetual,
non exclusive, and worldwide right to use, sublicense the use of, and co mmercialize in any way any such ideas, concepts, met hods, techniques
and products in all businesses operated by Franchisor or its Affiliates, developers, franchisees and designees. Franchisor sh all have no
obligation to make any lu mp sum or other payments to Developer or any other Person with respect to any such ideas, concepts, methods,
techniques and products. Developer will not use, nor will it allow any other Person to use, any such ideas, concepts, methods , techniques and
products, whether in connection with any Developer Outlets or o therwise, without obtaining Franchisor's prior written approval. Developer
agrees to sign and deliver such instruments and documents, provide such assistance and perform such other acts as Franchisor shall designate in
order for Franchisor or its designee to obtain intellectual property rights or exclusive ownership rights in such ideas, concepts, methods,
techniques and products.

                                                                       14
8.       EXCLUS IVE RELATIONS HIP .

          Developer acknowledges and agrees that Franchisor would be unable to protect the Confidential Information against unauthorize d use
or disclosure, and would be unable to encourage a free exchange of ideas and information among franchisees and developers of UFood Outlets,
if franchisees, developers and their Owners (and members of their respective Immediate Families) were permitted to engage in, hold interests in
or perform services for Co mpetitive Businesses. Developer further acknowledges and agrees that the restrictions contained in this Section 8
will not h inder its activities or the activit ies of its Owners (or members of their respective Immediate Families) under this Agreement or in
general. Franchisor has entered into this Agreement with Developer on the express condition that, with respect to restaurants featuring food
items and/or beverages that are marketed as low-fat, low-carbohydrate or low-calorie and retail businesses featuring the sale of nutrit ional
products or similar businesses , Developer and its owners and members of their respective Immed iate Families will deal exclusively with
Franchisor. Developer therefore agrees that, during the term o f this Agreement, neither Developer nor any Owner of Developer, nor any
member of the Immed iate Family of Developer or o f any Owner of Developer, shall d irectly or indirectly :

                 (a) have any controlling or non-controlling interest as a record or beneficial o wner in any Co mpetitive Business, wherever
        located or operating, provided that this restriction shall not apply to the ownership of shares of a class of securities listed on a stock
        exchange or traded on the over the counter market and quoted on a national inter dealer quotation system that represent less than
        one-half percent (0.5%) of the number of shares of that class of securities issued and outstanding;

                 (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any
        Co mpetitive Business, wherever located or operating;

                (c) d irectly or indirectly loan any money or other thing of value to, guarantee any loan to, lease any personal or real
        property to, or permit the use of its name in connection with, any Co mpetitive Business or any owner, director, officer, manager,
        emp loyee or agent of any Co mpetitive Business, wherever located or operating;

                 (d) divert or attempt to d ivert any actual or potential business or customers of any Developer Outlet or any other UFood
        Outlets to any Competit ive Business; or

                                                                       15
                   (e) emp loy or seek to employ any individual who is employed by Franchisor, its Affiliate or any other developer or
         franchisee of a UFood Outlet, or otherwise directly or indirect ly induce any such individual to leave said emp loyment, withou t the
         prior written consent of such individual's employer.

         Furthermore, if Developer is a corporation, limited liability co mpany, partnership or other business entity, it will not enga ge in any
business or other activ ity, d irectly or ind irectly, other than the develop ment a nd operation of Developer Outlets developed and operated
pursuant to Franchise Agreements with Franchisor.

         Developer acknowledges and agrees that the failure of any Person restricted pursuant to this Section 8 to co mply with the restrictions
of this Section 8 (regardless of whether that Person actually has executed this Agreement, a Guarantee or a Confiden tiality and Non
Co mpetition Agreement) shall constitute a breach of this Agreement by Developer.

9.       OTHER OB LIGATIONS OF DEV ELOPER .

         9.A.     DEVELOPMENT MANAGER AND OTHER DEVELOPER PERSONNEL .

          Within thirty (30) days after the Effective Date, Developer shall submit to Franchisor the identity and qualifications of the proposed
development manager for the Developer's business under this Agreement (the " Development Manager "), including curriculu m vitae, work
history, experience, references, background verifications and other information that Franchisor reasonably requests. Franchis or shall have the
right to conduct an in-person interview of the proposed Development Manager, with all travel and other expenses relating thereto being borne
by Developer. Developer shall not employ any Development Manager unless such individual has been approved by Fra nchisor.
Notwithstanding the foregoing or anything to the contrary in this Agreement, Developer shall be solely responsible for the hi ring, firing and
personnel decisions, and the terms and conditions of employ ment, relating to the Develop ment Manager and all of its other personnel.

          An approved and qualified Develop ment Manager must devote all of h is or her business time and attention to fulfilling the Developer's
obligations under this Agreement and otherwise supervising the development and operation of the Developer Outlets. Franchisor shall have the
right to deal with the Develop ment Manager on matters relating to the day-to-day operations of Developer under this Agreement.

         9.B.     OTHER MANAGEMENT PERSONNEL .

         In addition to the Development Manager, Developer shall hire, train and maintain the number and level of management personnel
required fo r the conduct of its business pursuant to this Agreement. Developer shall keep Franchisor advised of the identitie s of such personnel
and shall be responsible for ensuring that such personnel are properly trained to perform their duties.

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         9.C.     RECORDS AND REPORTS .

          Developer, at its expense, shall establish and maintain and preserve at its principal office, fu ll, co mplete and accurate rec ords and
reports, and, if required by Franchisor, co mpact disks and databases in the form specified by Franchisor fro m time to t ime pertaining to the
development and operation of Developer Out lets and the performance by Developer o f its obligations under this Agreement, incl uding: site
reports, market studies and analysis, supervisory reports relating to operation of Developer Outlets , records reflecting the fin ancial condition
and performance of Developer (utilizing Franchisor's bookkeeping, accounting, recordkeeping and records retention system, inc luding a
general ledger system which utilizes a standard chart of accounts prescribed by Franchisor from t ime to time) and information relating to
emp loyee turnover. Franchisor or its representatives shall have the right at any reasonable time to inspect, audit and copy a ny books, records,
reports, computer data bases and documents pertaining to Developer's obligations hereunder. Developer agrees to cooperate fully with
Franchisor in connection with any such inspection or audit.

        Developer shall adopt the calendar year as its fiscal year. In addition to the reports and information required under the Franchise
Agreements and otherwise in connection with the development and operation of Developer Outlets, Developer shall fu rnish to Fr anchisor in the
form and format fro m time to time prescribed by Franchisor, and/or restated in accordance with Franchisor's then current fina ncial and
accounting practices and procedures:

                   (1) on or before the tenth (10th) day of each month, consolidated rep orts of the Gross Receipts, F&B Gross Receipts and
         Nutrit ional Products Gross Receipts (each as defined in the Franchise Agreement) for all Developer Outlets for the preceding month;

                   (2) within fifteen (15) days follo wing the end of each calendar quarter, reports in the fo rmat prescribed by Franchisor fro m
         time to t ime on Developer's progress on its Development Plan and Developer's activ ities during the immed iately preceding quar ter,
         including Developer's activ ities in locating and developing sites and monitoring the develop ment and operation of Developer Outlets,
         training activit ies and emp loyee statistics;

                   (3) upon request by Franchisor, such other data, reports, information and supporting records for such periods as Franchisor
         fro m t ime to time requires; and

                  (4) by April 15 of each year, a consolidated year end balance sheet of Developer and all Controlled Affiliates, a
         consolidated profit and loss statement covering Developer's and its Controlled Affiliates' operations for such fiscal year reflecting all
         year end adjustments, and a consolidated statement of changes in cash flow of Developer and its Controlled Affiliates.

Each report and financial statement submitted by Developer shall be signed and verified by Develope r in the manner prescribed by Franchisor.
Franchisor may d isclose data derived form these reports and financial statements in any manner, but will not (without Dev elop er's consent)
disclose Developer's identity in connection therewith in any materials Fran chisor circulates publicly, unless Franchisor is required by law to do
so.

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          Developer agrees to maintain and to furnish to Franchisor upon request complete copies of all inco me, sales, use and service tax
returns, and employee withholding, worker's compensation and similar reports filed by Developer reflecting Developer's activi ties and the
activities of the Developer Out lets. Developer shall immediately report to Franchisor and/or its designee any events or developments wh ich
might have a materially adverse impact on the operation o f any of the Developer Outlets, the performance o f Developer under this Agreement,
or the goodwill associated with the Marks and UFood Outlets.

         9.D.     COMPLIANCE WITH LAWS AND GOOD B US INESS PRACTICES .

         Developer shall secure and maintain in force in its name all required licenses, permits, and certificates relating to the conduct of its
business pursuant to this Agreement. Developer shall co mply with all applicable laws, ordinances and regulations, including l aws relat ing to
worker's co mpensation insurance, unemploy ment insurance, and withholding and pay ment of all taxes. Developer shall, in all dealings with its
contractors, suppliers, Franchisor, and others adhere to high standards of honesty, integrity, fair dealing and ethical condu ct. Developer shall
pay all amounts owed to its vendors and suppliers (including Franchisor and its Affiliates) on time and in the ordinary course of business.
Developer agrees to refrain fro m any business or practice which may be injurious to the business of Franchisor and the goodwi ll associated
with the Marks and other UFood Outlets. Developer shall notify Franchisor in writing within three (3) days after the commencement of any
action, suit or proceeding, or issuance of any order, writ, in junction, award, or decree of any court, agency, or ot her governmental
instrumentality, which might adversely affect the operation or financial condition of Developer.

           Developer agrees to comp ly with, and to assist Franchisor to the fullest extent possible in its efforts to comply with, the
Anti-Terrorism Laws. In connection with such compliance, Developer certifies, represents, and warrants that none of its property or interests is
subject to being "blocked" under any of the Anti-Terroris m Laws, and that neither Developer nor any Owner of Developer is otherwise in
violation of any of the Anti-Terroris m Laws or listed in the Annex to Executive Order 13224. Developer cert ifies that none of Developer, its
Owners, its employees, or anyone associated with it is listed in the Annex to Executive Order 13224. (The A nnex is available at
http://www.treasury.gov/offices/enforcement/ofac/sanctions/ terrorism.html ) Developer agrees not to hire or contract with any individual who
is listed in the Annex. Developer also certifies that it has no knowledge or in formation that , if generally known, would cause Developer, any of
Developer's Owners or emp loyees, or anyone associated with Developer to be listed in the Annex to Executive Order 13224, and, if any of the
foregoing becomes listed on such Annex, Developer will immed iately notify Franchisor in writing. Developer is solely responsible for
ascertaining what actions it must take to co mply with the Anti-Terrorism Laws, and Developer specifically acknowledges and agrees that its
indemn ification responsibilit ies set forth in Section 13.D. of this Agreement extend to its obligations under this Subsection. Any
misrepresentation by Developer under this Subsection, or any vio lation of the Anti-Terroris m Laws by Developer or its Owners or emp loyees,
shall constitute grounds for immediate termination of this Agreement and any other agreement between Franchisor (or one of it s Affiliates) and
Developer (and one of its Affiliates) pursuant to Section 11.B. belo w.

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10.      TRANSFER .

         10.A.     TRANSFER B Y FRANCHISOR .

         This Agreement and any or all of Franchisor's rights and obligations hereunder are fully transferable by Franchisor and shall inure to
the benefit of any transferee or other legal successor to the interests of Franchisor herein. Upon Franchisor's assignmen t of all of its rights and
obligations under this Agreement, Franchisor shall have no further liability or obligation to Developer.

         10.B.     TRANSFER B Y DEVELOPER .

         Developer understands, acknowledges and agrees (and hereby represents and warrants to Franchisor that its Owners understand a nd
agree) that the rights and duties created by this Agreement are personal to Developer and its Owners and that a material caus e for Franchisor's
willingness to enter into this Agreement is its reliance upon the individual or collect ive character, skill, aptitude, busine ss ability and financial
capacity of Developer, its Owners and Persons that directly or indirect ly have a Controlling Interest in Developer. Therefore, Developer agrees
that:

                 (1)     no Ownership Interest in Developer or in any Person that directly or indirectly ho lds a Controlling Interest in
         Developer;

                   (2) no obligations, rights or interest of Developer in (a) th is Agreement, (b) any Ownership Interest in any Controlled
         Affiliate, or (c) all or substantially all of the assets of Developer; and

                   (3) no right to receive all or a portion of Developer's or any Developer Outlet's profits or losses or any capital appreciation
         relating to Developer or any Developer Outlet

may be transferred without the prior written consent of Franchisor. A transfer of th is Agreement may be made (subject to Franchisor's rights
below) only with a transfer of all o f Developer's rights and obligations under all Franchise Agreements signed by Developer a n d all Ownership
Interests in all Controlled Affiliates held by Developer or any Owner o f Developer. Any purported transfer in v iolation of t his Section shall
constitute a breach of this Agreement and shall convey to the transferee no rights or interests in the foregoing.

          As used in this Agreement, the term " transfer " shall include the following, whether voluntary or involuntary, conditional, d irect or
indirect: (1) assignment, sale, gift or p ledge; (2) the grant of a mortgage, charge, lien or security interest, including the grant of a collateral
assignment; (3) a merger, consolidation, exchange of shares or other Ownership Interests, issuance of additional Ownership Interests or
securities representing or potentially representing Ownership Interests, or redemption of Ownership Interests; (4) a sale or exchange of voting
interests or securities convertible to voting interests, or an agreement granting the right to exercise or control the exercise o f the voting rights of
any holder of Ownership Interests or to control the operations or affairs of Developer; and (5) except where specifically approved by
Franchisor, a management agreement whereby Developer delegates (i) any of its obligations under this Agreement or (ii) any or all of the
management functions with respect to the business to be conducted by Developer pursuant to th is Agreement. In addition to the foregoing, a
transfer (as defined above) will include any transfer by virtue of (a) d ivorce; (b) insolvency; (c) dissolution of a corporation, limited liability
company, partnership or other business entity; (d) will; (e) intestate succession; (f) declaration of or transfer in trust; or (g) foreclosure,
attachment, seizure or otherwise by operation of law.

                                                                          19
         10.C.     FRANCHISOR'S RIGHT TO APPROVE TRANS FERS .

          If Developer or any Person intends to make a transfer o f any interest which, under Paragraph B of this Sect ion, requires Franchisor's
prior written consent, Developer shall deliver to Franchisor written notice of such proposed transfer at least thirty (30) da ys prior to its intended
effective date. Such notice shall describe in detail the proposed t ransfer (including the nature of the transfer, the nature and amount of the
interests being transferred, the reason for the transfer, the consideration to be paid and the terms of payment of such consideration and the
effective date) and shall identify and provide all pert inent background information regarding the proposed purchaser.

             Franchisor shall have thirty (30) days from delivery of such notice and fee within wh ich to evaluate the proposed transaction and to
notify Developer of its approval o r d isapproval (with reasons) of the proposed transfer. If approved, the transfer must take p lace in full
compliance with all applicable laws, as described in the notice (as mod ified by any conditions imposed by Franchisor in grant ing its approval),
and within thirty (30) days of the delivery of notice of Franchisor's approval. No transfer shall relieve the transferor fro m an y obligatio ns or
liab ilit ies to Franchisor or its Affiliates under or relat ing to this Agreement, whether arising before or after the effectiv e date of such transfer.

          Developer agrees that it would be reasonable for Franchisor to disapprove any proposed transfer based on any and all reasonab le
factors, including the fact that:

                 (1) the proposed transfer is to a Competitive Business or to a Person who directly or indirectly owns any interest in or
         performs any services for a Co mpetit ive Business;

                   (2) Developer and its Owners are not in full co mpliance with this Agreement or Developer or any Controlled Affiliate is
         not in full co mpliance with any Franchise Agreement executed pursuant to this Agreement;

                 (3) the proposed transferee and, if applicable, any of its owners (a) are not of good moral character, (b) otherwise fail to
         meet Franchisor's then applicable standards for developers or owners of developers, or (c) are not in fu ll co mpliance with any
         agreement between Franchisor or its Affiliate and any of them; or

                                                                          20
                (4) the price and terms of the proposed transfer are so burdensome as to adversely affect or have a potentially adverse effect
        on Franchisor's rights and interests, or Developer's obligations, under this Agreement.

        10.D.    CONDITIONS FOR APPROVAL OF TRANSFERS .

        In granting its approval of a proposed transfer, Franchisor may also impose other reasonable conditions on its approval of th e
proposed transfer, including any one or more of the fo llo wing:

                  (1) that the proposed transferee and its owners demonstrate that they have sufficient business experience, aptitude and
        financial recourses to develop UFood Outlets and operate Developer Outlets in accordance with the requirements of this Agreement
        and all Franchise Agreements executed pursuant to this Agreement;

                (2) that Developer, the transferring Owners or the proposed purchaser pay a transfer fee to Franchisor of Twenty -Five
        Thousand Dollars ($25,000), provided that this amount will be adjusted to an amount that is co mmensurate with such inflatio n as has
        occurred between the date hereof and the time of the proposed transfer;

                 (3) that, if any part of the sale price is financed by the transferor, it agrees, in a manner satisfactory to Franchisor, that all
        obligations of the purchaser under or pursuant to any promissory notes, agreements or security interests reserved by the transferor be
        subordinate to any obligations of the purchaser to pay amounts then or thereafter due Franchisor and its Affiliates and all interests of
        Franchisor or its designee in connection with any right of first refusal or purchase option;

                 (4) that the purchaser and its owners execute any guarantees and other undertakings then being required by Franchisor of
        other developers or owners of developers of UFood Outlets;

                 (5) that Developer, the transferring Owners and the transferee (if the transferee is, or is the holder of Ownership Interests
        in, a developer o r franchisee of Franchisor or otherwise has, or is the holder of Ownership Interests in a Person that has, a contractual
        relationship with Franchisor or any of its Affiliates) execute a general release and consent agreement, in form satis factory to
        Franchisor, of any and all claims against Franchisor and its Affiliates and their respective shareholders, officers, directors, employees
        and agents, for matters arising on or before the effect ive date of the transfer;

                (6) that Developer o r, if applicable, the transferring Owners (and members of their Immediate Families) execute a
        noncompetition undertaking in favor of Franchisor and the transferee, wh ich undertaking shall contain the restrictions in Section 12.D.
        below and apply for a period of eighteen (18) months commencing on the effective date of such transfer or the date upon which all
        Persons bound by such undertaking begin to comply fully with the terms of such undertaking, whichever is later;

                                                                       21
                  (7) that Developer, the transferor and the transferee (if the transferee is, or is the holder of Ownership Interests in, a
         developer or franchisee of Franchisor or otherwise has, or is the holder of Ownership Interests in a Person that has, a contractual
         relationship with Franchisor or any of its Affiliates) pay all amounts owed to Franchisor or its Affiliates which are then du e and
         unpaid;

                  (8) that any new Develop ment Manager is reasonably acceptable to Franchisor and that the new Develop ment Manager
         must attend and complete to Franchisor's satisfaction Franchisor's initial management training program in the operation of a UFood
         Outlet;

                  (9) in the event of a transfer of th is Agreement, that the transferee and its owners agree, in a manner satisfactory to
         Franchisor, at Franchisor's option, to (a) be bound by all terms and conditions of this Agreement for the remainder of the term of this
         Agreement or (b) execute Franchisor's then current form of standard development agreement and such ancillary documents (including
         guarantees) as are then customarily used by Franchisor in the grant of development rights for UFood Outlets, which may contain
         provisions materially d ifferent fro m those contained in this Agreement, provided that (i) such development agreement shall be for a
         term equal to the remaining Develop ment Term of this Agreement and shall provide for the same Sub Areas and Sub Area Quotas as
         are reflected herein, and (ii) the Franchise Agreement to be executed for each UFood Outlets to be developed pursuant to such
         development agreement shall be the then current form of standard franchise agreement that is then customarily used by Franchisor in
         the grant of Franchises for UFood Out lets, which may contain provisions materially different fro m those contained in the Franchise
         Agreement attached hereto.

                   (10) that Developer, the transferor and the transferee execute an agreement, in form satisfactory to Franchisor, under wh ic h
         all parties agree to remain jointly and severally liable for all liabilities and obligations of the developer hereunder, o r u nder the
         development agreement and documents referenced in Subparagraph 9(b) above, as applicab le, whether accruing before or aft er the
         effective date of the transfer.

          Subparagraph (2) above shall not apply to transfers by gift, bequest, or inheritance. Developer acknowledges and agrees that the
failure of any Person restricted pursuant to Subparagraph (6) above to comp ly with this Section 10 , including the restrictions described in
Subparagraph (6) , shall constitute a breach of this Agreement by Developer.

         10.E.    DEATH OR INCAPACITY OF DEV ELOPER .

         If Developer is an individual, upon the death of Developer or the permanent incapacity of Developer to conduct business affairs, or, if
Developer is a corporation, limited liability company, partnership or other business entity, upon the death or permanent incapacity of an Owner
of Developer, all of such Person's interest in this Agreement, or such interest in Developer, shall be t ransferred to a t rans feree approved by
Franchisor. Such disposition of this Agreement or such interest in Developer (including t ransfer by bequest or inheritance) shall be co mpleted
within a reasonable time, not to exceed nine (9) months fro m the date of death or permanent disability, and shall be subject to all the terms and
conditions applicable to transfers contained in this Section 10 . Failu re to so transfer the interest in this Agreement or such interest in
Developer within said period of time shall constitute a breach of this Agreement.

                                                                       22
         10.F.    PUB LIC OR PRIVATE OFFERING .

          Developer acknowledges and agrees that it is the intent of both Franchisor and Developer that none of Developer or an y of its
Affiliates, or Owners shall be or beco me, and Developer covenants that neither it nor any such Person shall be o r beco me, a p ublic co mpany or
"reporting company" (as defined in Sections 12(b), 12(g) or 15(d) o f the Securit ies Exchange Act of 1934, as amended, any equivalent or
successor law or regulation, o r otherwise), including by way of an in itial public offering or transfer to or merger with an existing public
company. Accordingly, Developer agrees that no Ownership Interests in Developer or any such other Person may be offered pursu ant to a
public offering or transferred to a public company or "reporting company." Developer furth er agrees that such Ownership Interests will not be
offered pursuant to a private placement without the prior written consent of Franchisor. Franchisor may impose conditions on granting its
consent to a private placement of Ownership Interests by Developer, includ ing the conditions described in Sections 10.C. and 10.D. and the
conditions that:

                   (1) such private placement co mplies with all applicable federal, state and local laws governing offerings of sec urities and
         all applicable agreements between Developer and Franchisor or its Affiliates, including each of the relevant transfer procedu res,
         requirements, and limitations contained in this Agreement;

                  (2) such private placement does not result in any change in operating control of Developer or any Developer Outlet or in
         the parties owning a Controlling Interest in Developer or any Developer Outlet, or in the individual or individuals controlling the
         management, policies or decision making power of Developer;

                  (3) each such entity or individual receiv ing Ownership Interests in such private placement be an accredited investor, as
         defined by applicable law, and shall have been identified and be reasonably acceptable to Franchisor; provide d, however, that
         Franchisee may allow unaccredited investors to receive Ownership Interests if Franchisee has complied with applicab le law wit h
         respect thereto;

                    (4) a draft of any offering memorandum or other informat ion used in connection with any such private p lacement be
         submitted to Franchisor for review and co mment a reasonable time p rior to its use, that the reasonable comments and suggestio ns of
         Franchisor thereon are given due consideration and that a final version of such memo randum o r informat ion be provided to Franchisor
         at least five (5) days prior to its distribution to prospective investors;

                   (5) any offering memorandu m or information clearly state that it is not an offering by Franchisor and that Franchisor has
         not participated in its preparation and has not supplied any financial information, pro jections, budgets, cost estimates, or similar
         informat ion contained therein, all of which shall be the sole responsibility of Developer;

                                                                       23
                  (6)   each recip ient of information relat ing to such private placement agree to maintain it in confidence;

                  (7)   the structure, timing, allocation and nature of such private placement be reasonably acceptable to Franchisor;

                  (8) Developer or such other issuer not become a "reporting company" by virtue of Sections 12(b), 12(g ) or 15(d) of the
         Securities Exchange Act of 1934, as amended;

                 (9) each Person who or entity which becomes an Owner of Developer as a result of such private placement signs such
         guarantees and other undertakings that Franchisor then requires of owners of developers of UFood Outlets.

         Developer agrees to indemnify and hold harmless the Franchisor Indemn ified Parties fro m and against any and all costs, damages,
expenses, claims, act ions, judgments and liabilities (including costs and expenses related to legal defense) arising fro m or relat ing to any
private placement described in this Subsection. Developer also agrees to reimburse Franchisor for its reasonable expenses incurred in
connection with any such private placement (including attorneys' fees) and to comply with all requirements of Franchisor in c onnection with
such offering, including adding appropriate disclaimers to the offering documents and execution of appropriate indemn ificatio n agreements.

         10.G.     EFFECT OF CONS ENT TO TRANS FER .

          Franchisor's consent to a transfer under this Section 10 shall not constitute a waiver of any claims it might have against Developer (or
its Owners), nor shall it be deemed a waiver of Franchisor's right to demand full co mp liance with any of the terms or c onditions of this
Agreement by Developer or the transferee. Franchisor's consent to any such transfer shall not, unless expressly provided in s uch consent, effect
a release of Developer (or its Owners, as the case may be) fo llowing the transfer. Franchisor's approval of any proposed transfer indicates only
that the transferee meets, or that Franchisor has waived, the criteria established by Franchisor for developers as of the time of such transfer and
does not constitute a warranty or guaranty by Franchisor, express or imp lied, of the suitability of the terms of sale or of the successful operation
or profitability of the transferee.

         10.H.     FRANCHISOR'S RIGHT OF FIRST REFUS AL .

          If Developer or any of its Owners shall at any time determine to sell an interest in this Agreement, all o r substantially all o f th e assets
of Developer, or an Ownership Interest in Developer, Developer or its Owner(s) shall obtain a bona fide, arm's -length, executed purchase
agreement (and any ancillary agreements) in co mplete and definit ive form, not subject to any financing contingency or other material,
substantive contingency (other than Franchisor's consent and waiver of its right of first refusal as described herein), and a n earnest money
deposit (in the amount of five percent (5%) or more of the purchase price) fro m a qualified, responsible, bona fide and fully disclosed
purchaser. A true and co mp lete copy of such purchase agreement and any proposed ancillary agreements shall immediately be sub mitted to
Franchisor by Developer, such Owner(s) or both. The purchase agreement (1) must apply only to an interest which is permitted to be
transferred under this Agreement, (2) may not include the purchase of any other property or rights of Developer (or such Owner(s)), and
(3) must not provide for any additional pay ments to be made, o r any increase in the amounts payable, in the event Franchisor exer cises its right
of first refusal hereunder. The price and terms of purchase offered to Developer (or such Owner(s)) in the purchase agreement for the
aforementioned interests shall reflect the bona fide price offered therefor and shall not reflect any value for any other pro perty or rights.

                                                                          24
          Franchisor shall have the right, exercisable by written notice delivered to Developer or such Owner(s) within thirty (30) day s from the
date of receipt by Franchisor of an exact copy of such purchase agreement, together with pay ment of any applicable tran sfer fee and a
completed and executed application for Franchisor's consent to transfer such interest, to purchase such interest for the pric e and on the terms
and conditions contained in such purchase agreement, provided that: (i) Franchisor may substitute cash, a cash equivalent, or marketable
securities of equivalent value for any form of pay ment proposed in such purchase agreement; (ii) Franchisor's credit shall be deemed equal to
the credit of any proposed purchaser; and (iii) Franchisor shall have not less than ninety (90) days to prepare for closing, subject to extension at
Franchisor's option to enable Franchisor, Developer o r any other Person to obtain any necessary consent of a third party, inc luding obtaining
any necessary permits and licenses. Regardless of whether included in the purchase agreement, Franchisor shall be entit led to all customary
representations, warranties and indemn ities given by the seller of a business, including indemn ities for all actions, events and conditions that
existed or occurred prior to the closing in connection with Developer's business or the assets or Ownership Interests being purchased an d
representations and warranties as to: (1) o wnership, condition and tit le to the Ownership Interests and/or assets being purchased; (2) absence of
liens and encumb rances relating to such Ownership Interests and/or assets; (3) validity o f contracts; and (4) liabilities, contingent or otherwise,
of any legal entity whose Ownership Interests or assets are purchased. At the closing, the seller shall provide to the purchaser good, valid,
marketable, and indefeasible t itle (or equivalent rights) to all tangible and intangible property transferred, free and clear of any mortgage, claim,
lien, or encumbrance, with all sales and other transfer taxes paid by Developer. Local custom shall be followed as to formalities of any transfer
documentation, closing costs, and closing logistics. If Franchisor exercises its right of first refusal, Developer and/or suc h selling Owner(s)
(and members of their respective Immediate Families), as applicable, shall be bound by the restrictions in Section 12.D. below for a period of
eighteen (18) months commencing on the effective date of the transfer or the date upon which all Persons bound by such restrictions b egin to
comply fully with such restrictions, whichever is later.

          If Franchisor does not exercise its right of first refusal, Developer or such Owner(s) may co mplete the sale to such purchase r pursuant
to and on the exact terms of such purchase agreement, subject to Franchisor's approval of the transfer, as provided for in this Agreement.
However, if the sale to such purchaser is not completed within thirty (30) days after Franchisor's approval of the transfer, o r if there is a change
in the terms of the sale (of wh ich Developer shall pro mptly notify Franchisor), Franchisor shall have an additional right of first refusal for thirty
(30) days as set forth herein on the modified or init ial terms and conditions of sale, at Franchisor's option.

                                                                          25
         10.I.    OWNERS HIP S TRUCTUR E .

        Developer represents and warrants that its Owners are as set forth on Exhi bi t D attached to this Agreement and covenants that it will
not permit the identity of such Owners, or their respective interests in Developer, to change without complying with this Agr eement. Developer
covenants further that it will execute updated copies of Exhi bit D to reflect any changes in the informat ion contained therein.

11.      TERMINATION OF AGREEMENT .

         11.A.    B Y DEV ELOPER .

        If Developer and its Owners are in full co mp liance with this Agreement and Franchisor materially breaches this Agreement, and
Franchisor does not:

                   (1) correct such breach within thirty (30) days after Franchisor's receipt of written notice fro m Developer specifically
         identifying the material breach; or

                   (2) undertake within thirty (30) days after Franchisor's receipt of written notice fro m Developer specifically identifying the
         material breach, and continue until co mplet ion, reasonable efforts to cure such breach if such breach cannot reasonably be cured
         within th irty (30) days,

then Developer may terminate this Agreement, at its option and without waiving any other rights (including the right to damag es), effective
thirty (30) days after Franchisor's receipt of written notice of terminat ion. Any attempt to terminate this Agreement by Develo per other than as
provided in this Subsection A shall be a breach of this Agreement.

         11.B.    B Y FRANCHISOR .

        Franchisor may terminate this Agreement, at its option and without waiving any other rights (including the right to damages), effective
upon delivery of notice of termination to Developer, if:

                  (1)   Developer fails to satisfy the development obligations for any Sub-Area pursuant to this Agreement;

                  (2) Developer or any of its Owners has made or makes any material misrepresentation or omission in its application or
         acquisition of the rights under this Agreement, in materials submitted relat ing to a transfer, or in otherwise performing its obligations
         hereunder, including with respect to any Anti-Terroris m Laws;

                  (3) Developer, any of its Owners or the Develop ment Manager is convicted by a trial court of, or p leads guilty or no contest
         to a felony or any other crime or offense, or engages in any misconduct or behavior, that might adversely affect the reputation of
         UFood Outlets or Developer or the goodwill associated with the Marks;

                                                                        26
         (4)   Developer o r any other Person makes a purported assignment or transfer in v iolation of this Agreement;

           (5) Developer (o r any of its Owners or employees) makes any unauthorized use, disclosure or duplication of any of the
Confidential Informat ion, makes any unauthorized use of the Marks or challenges or seeks to challenge the valid ity of Franchisor's or
its Affiliates' rights in and to the Marks or the Confidential Info rmation;

         (6)   Developer (or any of its Owners) applies for or otherwise obtains a registration of any Mark anywhere in the world;

       (7) Developer, any of its Owners, or any member of their Immediate Families (whether or not bound by individual
noncompetition undertakings), or other Person who has executed such individual undertaking, violates the restrictions in this
Agreement or such undertaking with respect to Co mpetitive Businesses or Confidential Informat ion;

         (8) Developer fails to make payments of any amounts due Franchisor or its Affiliates and does not correct such failure
within ten (10) days after written notice of such failure is delivered to Developer;

         (9) Developer o r any of its Owners fails to comp ly with any other provision of this Agreement and does not correct such
failure with in thirty (30) days after written notice of such failure is delivered to Developer;

       (10) Franchisor has delivered a notice of termination of one (1) o r mo re Franchise Agreements executed pursuant to this
Agreement in accordance with its terms and conditions, or Developer (or a Controlled Affiliate) has attempted to termin ate th is
Agreement or a Franchise Agreement with Franchisor without complying with the appropriate termination provisions of this
Agreement or such Franchise Agreement;

          (11) Developer makes an assignment for the benefit of creditors or ad mits in writing its insolvency or inability to pay its
debts generally as they become due; Developer consents to the appointment of a receiver, trustee, or liquidator of all or the substantial
part of its property; any portion of Developer's assets is attached, seized, subjected to a writ or distress warrant, or levied upon, unless
the attachment, seizure, writ, warrant, or levy is vacated within thirty (30) days; or any order appointing a receiver, trust ee, or
liquidator of Developer or any portion of Developer's assets is not vacated within thirty (30) days following the order's entry; or

         (12) Developer or any o f its Owners fails on three (3) or more separate occasions within any period of t wenty -four (24)
consecutive months to comply with any one or more provisions of this Agreement (whether the s ame provision or different
provisions), whether or not such failures to comply are corrected after notice of default is given, or fails on two (2) or mo re separate
occasions within any period of twelve (12) consecutive months to comply with the same provis ion of this Agreement, whether or not
such failures to comply are corrected after notice of default is given.

                                                               27
         11.C.     TERMINATION OF THE DEVELOPMENT TERM AND CERTAIN RIGHTS OF DEV ELOPER .

         If Franchisor is entitled to terminate this Agreement in accordance with Section 11.B. , Franchisor shall, instead of terminat ing this
Agreement, have the option to terminate Developer's right to develop additional UFood Outlets in Sub -Areas specified by Franchisor and
Developer's territorial rights under Section 2.B . related to those Sub-Areas, effective ten (10) days after delivery of written notice thereof to
Developer. If any of such rights, options or arrangements are terminated in accordance with this Subsection, such termination shall be w ithout
prejudice to Franchisor's right to terminate this Agreement in accordance with Section 11.B. or to terminate any other rights, options or
arrangements under this Agreement at any time thereafter for the same default or as a result of any additional defaults of th e terms of this
Agreement.

         11.D.     EFFECT OF TERMINATION .

         The parties acknowledge and agree that the fact of the termination of th is Agreement alone shall not be grounds for the termin ation of
any Franchise Agreement executed prior to the effective date of the termination of this Agreement. However, nothing in th is Agreement shall
limit any party's right to terminate any such Franchise Agreement, including the right to terminate any such Franchise Agreement due to any
event, cause or default which also forms the basis or grounds of the termination of this Agreemen t.

         Any provision of this Agreement to the contrary notwithstanding, the termination of this Agreement shall not affect the right s of the
terminating party with respect to any damages it has suffered as a result o f any breach of this Agreement, nor shall it affect the rights of either
party with respect to liabilit ies or claims accrued, o r arising out of events occurring prio r to, the effective date of termination. Neither the right
of termination, nor the right to sue for damages or any other remedy available to either party hereunder, shall be exclusive of any other remedy
given hereunder or now or hereafter existing at law or in equity.

12.      RIGHTS AND OB LIGATIONS OF FRANCHIS OR AND DEV ELOPER UPON TERMINATION OR EXPIRATION OF
         THIS AGREEMENT .

         12.A.     PAYMENT OF AMOUNTS OWED .

         Developer shall immediately pay to Franchisor and its Affiliates, upon termination or exp irat ion of this Agreement for any re ason, all
amounts owed to Franchisor or its Affiliates which are then unpaid, whether or not attributable to the operation of Developer's business under
this Agreement.

         12.B.     DE IDENTIFICATION .

        Upon the termination or expiration of this Agreement for any reason, except with respect to Franchise Agreements then in effe ct
between Franchisor and Developer or its Controlled Affiliates, Developer shall:

                   (1)   have no further rights to develop or operate UFood Outlets;

                                                                           28
                    (2) immediately cease all use of the Marks and not thereafter directly or indirectly at any time or in any manner identify
         itself or any business as a current or fo rmer developer of Franchisor, or as otherwise associated with Franchisor, or use any Mark, any
         colorable imitation thereof or any mark o r trade dress substantially identical to or deceptively similar to any Mark in any ma nner or for
         any purpose, or utilize for any purpose any trade name, trademark or service mark, or other co mmercial symbol o r trade dress that
         suggests or indicates a connection or association with Franchisor;

                 (3) immediately take such action as may be required to cancel or, at Franchisor's option, transfer to Franchisor or its
         designee, all fictit ious or assumed name or equivalent reg istrations relating to its use of any Mark.

Developer shall furnish to Franchisor, within thirty (30) days after the effective date of termination or exp irat ion, evidenc e satisfactory to
Franchisor of Developer's comp liance with all of the foregoing obligations in Subparagraphs (2) and (3) above.

         12.C.    CONFIDENTIAL INFORMATION .

        Upon termination or expiration of this Agreement for any reason, except with respect to Franchise Agreements then in effect b etween
Franchisor and Developer or its Controlled Affiliates, Developer, and all of its Affiliates, Owners, employees, agents and other representatives,
will immediately cease to use, and will maintain the absolute confidentiality of, any Confidential Info rmation and will refra in fro m using such
Confidential In formation in any business or otherwise.

         12.D.    COVENANT NOT TO COMPET E .

          Upon the expirat ion or termination of this Agreement for any reason (other than pursuant to Section 11.A. ), and except with respect
to Franchise Agreements then in effect between Franchisor and Developer or its Controlled A ffiliates, neither Developer nor a ny of its Owners
shall directly or indirectly (through a member of the Immediate Family of Developer or any Owner or otherwise), for a period of eighteen
(18) months commencing on the effective date of such termination or expiration, or the date on wh ich all persons bound by this Sub section
begin comply ing fully with this Subsection, whichever is later:

                  (1) have any controlling or non-controlling interest as a record or beneficial owner in any Co mpetitive Business located or
         operating within the Develop ment Area, provided that this restriction shall not apply to the ownership of shares of a class of securities
         listed on a stock exchange or traded on the over the counter market and quoted on a national inter dealer quotation system th at
         represent less than one-half percent (0.5%) of the number o f shares of that class of securities issued and outstanding;

                  (2) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for any
         Co mpetitive Business located or operating within the Develop ment Area;

                                                                        29
                   (3) direct ly or indirect ly loan any money or other thing of value to, guaranty any loan to, lease any personal or real property
         to, or permit the use of its name in connection with, any Co mpet itive Business loca ted or operating within the Development Area;

                 (4) d ivert or attempt to divert any actual or potential business or customers of any UFood Outlet to any Co mpetit ive
         Business, wherever located or operating; or

                   (5) employ or seek to emp loy any indiv idual who is employed by Franchisor, its Affiliate o r any developer or franchisee of
         a UFood Outlet, or otherwise directly o r indirect ly induce or attempt to induce any such individual to leave said emp loyment, without
         the prior written consent of such individual's employer.

          Developer agrees that the provisions of this Section are necessary to protect the legitimate business interests of Franchisor , its
Affiliates and other franchisees of Franchisor and its Affiliates, including preventing the unauthorized disseminatio n of mar ket ing,
promotional, and other confidential info rmation to competitors thereof, protecting the trade secrets and the integrity of the System, preventing
duplication of the System by unauthorized third parties, and preventing damage to and/or loss of goodwill associated with the Marks and other
intellectual property rights of Franchisor.

         12.E.    CONTINUING OB LIGATIONS .

         All obligations of Franchisor and Developer which exp ressly or by their nature survive or are intended to sur vive the exp iration or
termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding its expiration or ter mination and until
they are satisfied in full or by their nature exp ire.

13.      RELATIONS HIP OF THE PARTIES/ INDEMNIFICATION .

         13.A.    INDEPEND ENT CONTRACTORS .

         It is understood and agreed by the parties hereto that this Agreement does not create a fiduciary relationship between them, that
Franchisor and Developer are and shall be independent contractors, and that nothing in this Agreement is intended to make eit her party a
general or special agent, jo int venturer, partner, or employee of the other for any purpose. Developer shall conspicuously identify itself in all
dealings with customers, suppliers, vendors, public officials, Developer personnel, and others as the owner of the business u nder a license
granted by Franchisor and shall conspicuously and prominently place such other notices of independent ownership in the form th at Franchisor
periodically designates at its principal office and on such forms, business cards, stationery, advertising, and such other materials as Franchisor
may require fro m time to time.

                                                                        30
         13.B.     NO LIAB ILITY FOR ACTS OF OTHER PARTY .

          Developer shall not employ any of the Marks in signing any contract, application for any license or permit, or in a manner t h at may
result in liab ility of Franchisor or its Affiliates for any indebtedness or obligation of Developer. Except as expressly aut horized in writing,
neither Franchisor nor Developer shall make any exp ress or imp lied agreements, warranties, guarantees or representations, or incur any debt, in
the name of or on behalf of the other, or represent that their relat ionship is other than licensor and licensee. Neither Franchisor nor Developer
shall be obligated by or have any liability under any agreements or representations made by the other that are not expressly authorized in
writing. Franchisor shall not be obligated for any damages to any Person or property directly or indirect ly arising out of the operation of any
Developer Outlet or Developer's business under this Agreement.

         13.C.     TAXES .

         Franchisor shall have no liability for any sales, use, service, o ccupation, excise, gross receipts, income, property, payroll, emp loyee
withholding or other taxes, whether levied upon this Agreement, Developer or Developer's property, or upon Franchisor, in con nection with the
business conducted by Developer, except any taxes Franchisor is required by law to collect fro m Developer with respect to purchases fro m
Franchisor and Franchisor's income taxes. Pay ment of all such taxes shall be the responsibility of Developer.

         13.D.     INDEMNIFICATION OF FRANCHIS OR .

        Developer agrees to indemnify, defend and hold Franchisor and other Franchisor Indemnified Parties harmless against, and to
reimburse them for any and all taxes described in Paragraph C of this Section and any and all claims against, and losses, obligations, damages
and expenses incurred by, any one or more of the Franchisor Indemnified Parties directly or indirectly arising out of:

                   (1) this Agreement, the business conducted by Developer pursuant to this Agreement, or the develop ment or operation of
         any UFood Outlets developed or to be developed by Developer, including any breach or violat ion of any agreement, contract or
         commit ment by Developer resulting fro m Developer's execution and delivery of th is Agreement or performance of an y of its
         obligations hereunder or liabilit ies asserted by Owners, emp loyees, agents or other representatives of Developer arising in c onnection
         with training provided by Franchisor or its Affiliates or designees or otherwise;

                  (2)   unauthorized activit ies conducted in association with the Marks; or

                  (3)   the transfer of any interest in this Agreement, some or all of the assets of Developer or Developer in any manner.

           For purposes of this indemn ification, "claims" shall mean and include all obligations, actual, consequential, special, and pu nitive
damages, and costs incurred in the defense or settlement of any claim, including reasonable accountants', attorneys', attorney assistants',
arbitrators' and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and any other expenses of
lit igation, arbitration o r alternative d ispute resolution, regard less of whether lit igation, arbitration o r alternative d ispute resolution is
commenced. Franchisor and the other Franchisor Indemn ified Parties shall have the right to defend any such indemnified claim against them in
such manner as Franchisor deems appropriate or desirable, and Developer may not settle any claim or take any other remedial, corrective or
similar actions relat ing to a claim without Franchisor's consent. This indemnity shall continue in fu ll fo rce and effect subs equent to and
notwithstanding the expiration or termination of this Agreement. A Franchisor Indemnified Party need not seek recovery from an insurer or
other third party, or otherwise mitigate its losses or expenses, in order to maintain and recover fully a claim against Developer.

                                                                        31
14.      GEN ERAL PROVIS IONS .

         14.A.     ARB ITRATION .

         Franchisor and Developer agree that, except for controversies, disputes, or claims related to or based on unauthorized use or
infringement of the Marks or unauthorized use or disclosure of Confidential Information, or enforcement of noncompetitio n pro visions, all
controversies, disputes, or claims between Franchisor and its Affiliates, and its and their respective owners, officers, managers, agents, a nd
emp loyees, as applicable, and Developer (and its Owners, guarantors, Affiliates, and emp loyees, as applicable) arising out of or related to:

                  (1)   this Agreement or any other agreement between Developer and Franchisor;

                  (2)   Franchisor's relationship with Developer;

                 (3) the scope and validity of this Agreement or any other agreement between Developer and Franchisor or any provision of
         any such agreement, including the validity and scope of the arb itration obligation under this Sect ion, wh ich Franchisor and D eveloper
         acknowledge are to be determined by the arbitrator and not by a court; or; or

                  (4)   any System Standard

must be submitted for binding arbitrat ion, on demand of either party, to the A merican Arb itration Association. The arbitrat io n proceedings will
be conducted by one arbitrator and, except as this subsection otherwise provides, according to the then current commercial arbitration rules of
the American A rbitration Association. All proceedings will be conducted at a suitable location chosen by the arbitrator which is with in ten
(10) miles of Franchisor's then existing principal business address. All matters relat ing to arbit ration will be governed by the Federal
Arbitration Act (9 U.S.C. Sections 1 et seq. ) and not by any state arbitration law. Judgment upon the arbitrator's award may be entered in any
court of competent jurisdiction.

          The arbitrator has the right to award or include in h is or her award any relief wh ich he or she deems proper in the circumstances,
including, without limitation, money damages (with interest on unpaid amounts from the date due), specific performance, inju n ctive relief, and
attorneys' fees and costs, provided that the arbitrator may not declare any mark generic or otherwise invalid and, except as Section 14.G.
otherwise provides, Franchisor and Developer (and the Owners) waive any right to or claim for any exemp lary or punit ive d amages. The
arbitrator's award and decision shall be conclusive and binding upon all part ies.

                                                                        32
          Franchisor and Developer agree to be bound by the provisions of any limitation on the period of time in which claims must be brought
under applicable law or this Agreement, whichever exp ires earlier. Franchisor and Developer further agree that, in any arbitr ation proceeding,
each party must submit or file any claim which would constitute a compulsory counterclaim (as defined by the Federal Rules of Civ il
Procedure) within the same proceeding as the claim to wh ich it relates. Any claim wh ich is not submitted or filed as required is forever barred.
The arbitrator may not consider any settlement discussions or offers that might have been made by either Developer or Franchisor. Franchisor
reserves the right, but has no obligation, to advance any portion of your share of the costs of any arbitration proceeding in order for such
arbitration proceeding to take place and by doing so shall not be deemed to have waived or relinquished its right to seek the recovery of those
costs in accordance with Section 14.F.

          Franchisor and Developer agree that arbitration will be conducted on an individual, not a class -wide, basis, and that an arbitration
proceeding between Franchisor and its Affiliates, and its and their respective owners, officers, managers, agents, and employ ees, as applicable,
and Developer (and its Owners, guarantors, Affiliates, and emp loyees, as applicable) may not be co mmenced, conducted, consolidated or
combined in any way with any other arbitrat ion proceeding or claim between us and any other Person. Notwithstanding the foreg oing or
anything to the contrary in this Section 14, if any court or arbitrator determines that all or any part of the preceding sentence is unenforceable
with respect to a dispute that otherwise would be subject to arbitration under this Section 14.A., then al l parties agree that this arbitration clause
shall not apply to that dispute and that such dispute shall be resolved in a judicial proceeding in accordance with this Sect ion 14 (excluding this
Section 14.A.).

         Despite this agreement to arb itrate, Franchis or and Developer each have the right in a proper case to seek temporary restrainin g orders
and temporary or preliminary injunctive relief fro m a court of co mpetent jurisdiction; provided, however, that they must cont emporaneously
submit the dispute for arbitration on the merits as provided in this subsection.

         The provisions of this subsection are intended to benefit and bind certain third party non -signatories and will continue in full force and
effect subsequent to and notwithstanding this Agreement's exp iration or termination.

          If either party commences any legal action or proceeding in any court in contravention of the terms of this Section 14.A. , that party
shall pay all costs and expenses that the other party incurs in the action or proceeding, including, without limitation, reasonable attorneys' and
related fees.

         14.B.     SPECIFIC ENFORCEMENT .

         Each party to this Agreement agrees that this Section 14 shall be specifically enforceable against such party by the other parties. The
provisions of this Section 14 are intended to benefit and bind third party non-signatories and shall continue in full force and effect subsequent
to and notwithstanding the expiration and termination of this Agreement.

                                                                          33
         14.C.     GOVERNING LAW .

         Except to the extent governed by the Federal Arbitration Act (9 U.S.C. Sect ions 1 et seq.), the United States Trademark Act of 1946
(Lanham Act, 15 U.S.C. Sections 1051 et seq. ) or other federal law, this Agreement, the rights and obligations of the parties hereto and the
relationship of the parties hereto shall, by this express ag reement of the part ies, be governed by, and construed and enforced in accordance
with, the laws of the State of Nevada, without regard to its conflicts of law provisions, except that any Nevada law regulat ing the offer and sale
of franchises, business opportunities or similar rights, or governing the relationship of the parties to a contract involving those rights, shall not
apply unless its jurisdictional requirements are met independently without reference to this paragraph.

         14.D.     INJ UNCTIVE RELIEF .

          Notwithstanding anything to the contrary contained in Section 14.A. hereof, Franchisor and Developer each have the right in a proper
case to seek temporary restraining orders and temporary or preliminary in junctive relief fro m a court of co mpetent jurisdictio n, provided that
they must contemporaneously submit for arb itration on the merits any Dispute required to be arbitrated pursuant to Section 1 4.A . Developer
and its Affiliates, and their respective officers, directors, owners, employees, agents and representatives, agree to entry without bond of
temporary and permanent injunctions and orders of specific performance enforcing any of the provisions of this Agreement. If Franchisor
secures any such injunction or order of specific performance, Developer further agrees to pay Franchisor an amount equal to the aggregate of
its costs of obtaining any such relief, including reasonable attorneys' fees, costs of investigation and proof of facts, cour t costs, other litigation
expenses and travel and living expenses, and any damages incurred by Franchisor as a result of any breach.

         14.E.     CONS ENT TO J URIS DICTION .

          Subject to the arbitration provisions of this Agreement and the provisions below, Developer and the Owners agree that all lit igation
proceedings arising under this Agreement or otherwise as a result of the relat ionship between Developer and Franchisor must be commenced in
the state, and in the state or federal court of general jurisdiction closest to, where Franchisor's principal office then is located, and Developer
(and its Owners) irrevocably submit to the jurisdiction of those courts and waive any objec tion Developer (or its Owners) mig ht have to either
the jurisdiction of or venue in those courts. Nonetheless, Developer and its Owners agree that Franchisor may enforce this Ag reement and any
arbitration orders and awards in the courts of the state or states in wh ich Developer is domiciled or any Developer Outlet is located.

         14.F.     COSTS AND ATTORNEYS' FEES .

          If Franchisor incurs expenses due to Developer's failure to pay when due amounts owed to Franchisor, to submit when d ue any
reports, informat ion, or supporting records, or otherwise to co mp ly with this Agreement, Developer agrees, whether o r not Fra nchisor initiates
a legal proceeding, to reimburse Franchisor for all of the costs and expenses incurred by Franchisor, including, without limitation, reasonable
accounting, attorneys', arbitrators', and related fees.

                                                                          34
         14.G.    WAIVER OF PUNITIVE DAMAGES AND J URY TRIAL .

         Except in connection with claims by third parties for which a party is entitled to indemnification pursuant to this Agreement and
claims Franchisor brings against Developer for unauthorized use of the Marks or unauthorized use or disclosure of any Confide ntial
Information, Franchisor and Developer waive to the fullest extent permitted by law any right to or claim for any mult iple, pu nitive or
exemplary damages against the other and agree that, in the event of a dispute between them, the party making a claim will be limited to
equitable relief and to recovery of any actual damages it sustains. Franchisor and Developer irrevocably waive trial by jury in any action,
proceeding, or counterclaim, whether at law or in equity, brought by either of them.

         14.H.    LIMITATION OF CLAIMS .

         Except for claims arising fro m Developer's nonpayment or underpayment o f amounts owed to Franchisor or its Affiliates, any an d all
claims arising out of or relat ing to this Agreement or Franchisor's relationship with Developer will be barred unless a proce eding is commenced
within one (1) year fro m the date on which the party asserting the claim knew or should have known of the facts giving rise to the claim.

         14.I.    ENTIRE AGREEMENT .

          This Agreement, together with the Manuals and the documents referred to herein, and the Exh ibits and other attachments hereto,
constitute the entire, fu ll and comp lete agreement between Franchisor and Developer concerning the subject matter hereof, and supersede all
prior agreements, no other representations having induced Developer to execute this Agreement. No representations, inducements, promises, or
agreements, oral or otherwise, not embodied or referenced in this Agreement or attached hereto (unless of subsequent date) we re made by
either party, and none shall be of any force or effect with reference to this Agreement or otherwise. However, nothing in this or any related
agreement is intended to disclaim the representations Franchisor made in the Franchise Disclosure Document that Franchisor furnished to you.
Except as otherwise provided in this Agreement (including Franchisor's right to periodically imp lement and modify System Stan dards and
modify the Manual), no amendment, change or variance fro m this Agreement shall be binding on either party un less mutually agreed to by the
parties and executed by their authorized officers in writing. Any policies that Franchisor adopts and implements fro m time to time to guide it in
its decision making are subject to change, are not a part of this Agreemen t and are not binding on Franchisor.

         14.J.    NOTICES .

          Except as otherwise provided in this Agreement, all notices, demands, requests, consents, approvals and other communications,
required or permitted to be given hereunder, or which are to be given with respect to this Agreement, shall be in writing and personally
delivered, or sent by facsimile with proof of receipt (with a confirming copy mailed by registered mail as described herein), or sent by a
recognized overnight courier service, or sent by registered mail, postage prepaid, return receipt requested, a ddressed to the party to be so
notified as follows:

                                                                       35
         If to Developer, to:                                          _____________________________________
                                                                       _______________________________
                                                                       _______________________________
                                                                       _______________________________
                                                                       Attention:_____________________________
                                                                                 _____________________________
                                                                       Telephone No.:_________________________
                                                                       Facsimile No.:__________________________

         If to Franchisor, to:                                         UFood Restaurant Group, Inc.
                                                                       255 Washington Street
                                                                       Suite 100
                                                                       Newton, Massachusetts 02458
                                                                       Attention: President
                                                                       Telephone No.: (617) 787-6000
                                                                       Facsimile No.: (617) 787-6010

         With a copy to:                                               _____________________________________
                                                                       _______________________________
                                                                       _______________________________
                                                                       _______________________________
                                                                       Attention:_____________________________
                                                                                 _____________________________
                                                                       Telephone No.:_________________________
                                                                       Facsimile No.:__________________________

         Such notices and other communications shall be deemed received on the date of delivery if personally delivered, two (2) business days
after sending if sent by facsimile with proof of receipt or overnight courier service, or seven (7) business days after sending if sent by registered
mail.

         14.K.     SEVERAB ILITY AND S UBS TITUTION OF VALID PROVIS IONS .

         Except as expressly provided to the contrary elsewhere herein, each section, part, term and/or provision of this Agreement sh all be
considered severable and shall be construed as independent of any other section, part, term and/or provision of this Ag reement. If, fo r any
reason, all or any part of any section, part, term and/or provision herein is held to be invalid, unenforceable, or in conflict wit h any applicable
law by a court or properly convened arbitrators having valid jurisdiction in an unappea led final decision to which Franchisor is a party or by
which Franchisor may be bound, such holding shall not impair the operation of, or have any other effect upon, any other secti on, part, term
and/or provision of this Agreement as may remain otherwise v alid and enforceable, and the latter shall continue to be given full force and effect
and bind the parties hereto, and said invalid or unenforceable sections, parts, terms and/or provisions shall be deemed limit ed b y construction in
scope and effect to the min imu m extent possible to render the same valid and enforceable.

                                                                         36
          To the extent that any restrictive covenant contained in this Agreement is deemed unenforceable because of its scope in terms of area,
activity prohibited and/or length of t ime, Developer and its Owners agree that the unenforceable provision will be deemed mo dified or limited
to the extent and in the manner necessary to make that particular provision valid, and to make the obligations enforceable to the fullest extent
possible, under the laws applicable to the covenant's validity. If any provision o f this A greement is inconsistent with any law applicable to this
Agreement which requires a greater advance notice of termination or nonrenewal than is required under this Agreement, then bo th parties will
comply with the requirements of that law as if they were s ubstituted for the inconsistent provision(s) of or added to this Agreement. If any law
applicable to this Agreement makes any provision of this Agreement (including any provision in the Manuals and any System Sta ndard) invalid
or unenforceable, then Franchisor will have the right, in its sole discretion, to mod ify that provision to the extent necessary to make it valid and
enforceable. Developer agrees to be bound by each provision of this Agreement to the greatest extent to which it may lawfully be bound.

         14.L.     THIRD PARTY B EN EFICIARIES .

         Except as expressly provided herein, no provision of this Agreement is intended or shall be construed to provide or create an y third
party beneficiary right or any other right of any kind in any customer, Affiliate, insurer, lender, shareholder, partner, officer, d irector, emp loyee
or agent of any party hereto, or in any other Person, and all terms and provisions hereof shall be personal solely among the parties to this
Agreement and their proper successors and assigns.

         14.M.     WAIVERS .

          No failure by any party hereto to insist upon the strict performance of any covenant, agreement, term or condition of this Ag reement,
or to exercise any right or remedy consequent upon the breach thereof, shall constitute a waiver of any such breach or any subsequent breach of
such covenant, agreement, term or condition. No covenant, agreement, term or condition of this Agreement, and no breach there of, shall be
waived, altered or mod ified except by written instrument signed by the party to be charged therewith. No waiver of any breach of any covenant,
agreement, term or provision of this Agreement shall affect or alter this Agreement, but each and every co venant, agreement, term and
condition of this Agreement shall continue in full force and effect. Any waiver granted by Franchisor will be without prejudi ce to any other
rights of Franchisor, will be subject to Franchisor's continuing review, and may be rev oked at any time and for any reason, effective upon
delivery of ten (10) days' written notice to Developer.

         14.N.     NO WARRANTIES OR GUARANTEES .

        Franchisor makes no warranties or guarantees upon which Developer may rely, and assumes no liability or obligation to Develop er, by
providing any waiver, approval, consent or suggestion to Developer in connection with this Agreement, or by reason of any de lay, or denial o f
any request therefor.

                                                                          37
         14.O.     FORCE MAJ EUR E .

         Neither party will be liable fo r loss or damage or be in breach of this Agreement if its failure to perform its obligations results from:

                (1) co mpliance with the orders, requests, regulations, recommendations, or instructions of any federal, st ate, or municipal
         government or any of its departments or agencies;

                  (2)   acts of God;

                  (3)   fires, strikes, embargoes, war, or riot; or

                  (4)   any other similar event or cause.

Any delay resulting fro m any of these causes will extend performance accordingly or excuse performance, in whole or in part, as may be
reasonable, except that these causes will not excuse payments of amounts owed at the time of the occurrence or payment of other fees or
contributions due afterward pursuant to this Agreement or any related agreement.

         14.P.     ASSIGNMENT .

         Subject to the restrictions on transfer herein, this Agreement shall be b inding upon and inure to the benefit of, and be enforceable by,
the respective heirs, legal representatives, successors and permitted assigns of the parties hereto.

         14.Q.     CONSTRUCTION .

          The section and other headings contained herein are fo r convenience of reference only and are not intended to define, limit o r d escribe
the scope or intent of any provision of this Agreement. The wo rds " including ," " include " and other words of similar import shall be
interpreted to mean " includi ng, but not li mited to ."

         14.R.     COUNTERPARTS .

         This Agreement may be executed in two or more counterparts, each of which shall be deemed an orig inal, but all o f wh ich toget her
shall constitute one and the same instrument.

         14.S.     CUMULATIV E REMEDIES .

         All rights and remed ies of the part ies hereto are cu mu lative of each other and of every other right or remedy such parties ma y
otherwise have at law or in equity, and the exercise of one or mo re rights or remedies shall not prejudice or impair the conc urrent or subsequent
exercise of other rights or remedies.

                                                                         38
         14.T.     NO WITHHOLDING OF PAYMENTS .

          Developer may not withhold payment of any amounts owed to Franchisor or its Affiliates on the grounds of alleged noncomplianc e by
Franchisor or its Affiliate with any of its obligations under this Agreement, a Franchise Agreement or any other agreement be t ween Franchisor
or its Affiliate and Developer.

         14.U.     EXERCIS E OF B US INESS J UDGMENT .

          Franchisor has the right to operate, develop and change the System and System Standards in any manner that is not specificall y
prohibited by this Agreement. Whenever Franchisor has reserved in this Agreement a right to take or withhold an act ion, or to grant or d ecline
to grant Developer a right to take or o mit an action, Franchisor may, except as otherwise specifically provided in this Agr eement, make its
decision or exercise its rights based on the information readily available to it and its judgment of what is in its or its Af filiates' best interests
and/or the best interests of UFood Outlets as a whole at the time the decision is made, regardless of whether Franchisor could have made other
reasonable or even arguably preferable alternative decisions or whether Franchisor's decision or the action it takes promotes its or its Affiliates'
financial or other individual interest.

         14.V.     EL ECTRONIC MAIL .

         Developer acknowledges and agrees that exchanging informat ion with Franchisor by e -mail is efficient and desirable for day-to-day
communicat ions and that Franchisor and Developer may utilize e-mail for such communicat ions. Developer authorizes the transmission of
e-mail by Franchisor and Franchisor's emp loyees, vendors, and affiliates ("Official Senders") to Developer during the term of t his Agreement.

         Developer fu rther agrees that: (a) Official Senders are authorized to send e-mails to those of Developer's employees as Developer may
occasionally authorize for the purpose of communicating with Franchisor; (b) it will cause its officers, directors, and employ ees to give their
consent to Official Senders ' transmission of e-mails to them; (c) that it will require such persons not to opt out or otherwise ask to no longer
receive e-mails fro m Official Senders during the time that such person works for or is affiliated with Developer; and (d) it will not opt out or
otherwise ask to no longer receive e-mails fro m Official Senders during the term of this Agreement.

         The consent given in this Section 14.W. shall not apply to the provision of notices by either party under this Agreement pursuant to
Section 14.J. using e-mail un less the parties otherwise agree in a written document manually signed by both parties.

         IN WITNESS WHER EOF , the parties hereto have executed and delivered this Agreement in mu ltip le originals on the day and year
first above written.

                                                                         39
UFood Restaurant Group, Inc. , a             [Developer]
Nevada corporation

By:_____________________________________     By:_____________________________________
Title:___________________________________    Title:___________________________________

                                            40
                                                         JOINDER OF OWNERS

        In consideration of the grant of the rights to Developer pursuant to t he foregoing Development Agreement, and as an inducement to
Franchisor's grant of such rights, the undersigned Owners hereby agree to be personally bound by all provisions of the fo rego ing Develop ment
Agreement applicable to Owners.

____________________________________                                   ____________________________________
Name:                                                                  Name:

____________________________________                                   ____________________________________
Name:                                                                  Name:

                                                                      41
                                                                  EXHIB IT A

                          DEVELOPER ACKNOWLEDGMENTS AND REPRES ENTATIONS STATEMENT

         1. Developer acknowledges that it has read the Develop ment Agreement (the " Agreement ") between UFood Restaurant Group,
Inc. ("Franchisor") and Developer dated as of the date hereof and Franchisor's Franchise Disclosure Document in their entirety and that it
understands and accepts the terms, conditions and covenants contained in the Agreement as being reasonably necessary to maint ain
Franchisor's high standards of quality and service and the uniformity of those standards at all UFood Outlets in order to protect and preserve the
goodwill of the Marks. (Capitalized terms not defined herein shall have the respective meanings set forth in the Agreement.) Developer
acknowledges that: (a) Franchisor delivered and Developer received a copy of Franchisor's Franchise Disclosure Docu ment at the earlier of
fourteen (14) calendar days prior to the execution of the Agreement or the payment of any consideration by Developer in conne ction with the
transactions contemplated in the Agreement; and (b) Franchisor delivered and Developer received the Agreement in form for execution at least
seven (7) calendar days prior to the execution of the Agreement.

          2. Attached to Franchisor's Franchise Disclos ure Docu ment are copies of the current forms of Area Develop ment Agreement and
Franchise Agreement. Developer acknowledges that these are the current forms and that Franchisor, at its option, may from t ime to time
modify or amend in any respect the standard forms of Area Develop ment Agreement and Franchise Agreement used by Franchisor in offering
or granting area development and franchise rights (subject to Developer's rights set forth in the Agreement). Developer ackno wledges and
agrees that it is not entering into this Agreement as a result of any representations about Franchisor made by Franchisor’s shareholders,
officers, directors, members, employees, agents, representatives, independent contractors, franchisees or area developers that are contrary to the
terms set forth in this Agreement or in any disclosure document, prospectus or any similar docu ment required or permitted to be given to you
pursuant to applicable law.

         3. Developer acknowledges that the food service and nutritional suppleme nt businesses are highly competit ive, wit h often
challenging market conditions. Developer acknowledges that it has conducted an independent investigation of the business contemp lated by the
Agreement and recognizes that, like any other business, the nature of the business conducted by UFood Out lets may change over time, that an
investment in a UFood Outlet involves business risks, and that the success of the venture is largely dependent upon the busin ess abilit ies and
efforts of Developer. Developer acknowledges that it and its Affiliates, and their respective Owners and officers, are sophisticated and have
significant experience in the business of developing and operating restaurants and other businesses.

         4. Developer acknowledges and agrees that Franchisor may (at its option) also allow variations between developers and franchisees
in the areas of trademarks, trade dress, operational items or other aspects of UFood Outlets. Developer acknowledges and agre es that only
Franchisor may determine what variations Developer may use and that Developer will in any event conform strict ly t o the standards,
specifications, operating procedures and rules which Franchisor establishes for Developer Outlets.

                                                                        1
          Developer understands and accepts that, over time during the term of the Agreement, Franchisor will continue to develop and r efine
various aspects of the System and that as products, services, operating procedures, trade dress and othe r refinements are introduced, Franchisor
may, at its option, cease to allow some or all of the variat ions and may require unifo rmity among UFood Outlets as to aspects for which
Franchisor had previously allowed variations. Developer acknowledges and agrees that this may mean that Developer may be required, for
example, to change one or more of (a) the trademarks and/or service marks Developer uses; (b) the trade dress or operational procedures
Developer uses; or (c) other aspects of Developer Outlets, whether already developed, under development or to be developed. So me or all of
these changes may require Developer to make substantial additional capital expenditures. Developer acknowledges and agrees th at Franchisor
may discontinue any of the variat ions which it had prev iously allowed Developer to utilize and that Developer will conform to all required
local, regional and/or national standards, specifications, operating procedures and requirements which Franchisor may establish fro m t ime to
time even if it means substantial additional expense for Developer.

         5. Developer acknowledges that other area developers and franchisees of Franchisor and its Affiliates have been and/or might be
granted rights similar to those granted to Developer under the Agreement at different times and locations, under different market and economic
conditions, and in different situations. Developer therefore acknowledges that the economic and other terms and conditions of such rights might
vary substantially in form and substance fro m those granted under the Agreement.

         6.   Developer acknowledges that, except as expressly set forth in Franchisor's Franchise Disclosure Docu ment:

                  (A) neither Franchisor nor any of its Affiliates, nor any of their respective officers, directors, emp loyees, agents or
         representatives, has made any representations or statements of actual, average, p rojected or forecasted sales, profits, earnin gs, cash
         flow or costs with respect to any UFood Outlets;

                  (B) neither Franchisor's sales personnel nor any other employee, officer, director, agent or representative of Franchisor or
         any of its Affiliates is authorized to make any claims or statements as to the sales, profits, earnings, cash flow, costs or prospects or
         chances of success that any area developer or franchisee can expect or that present or past franchisees or area developers have had;
         and

                  (C) Franchisor specifically instructs its and its Affiliates' sales personnel, employees, officers, d ire ctors, agents and
         representatives (as applicable) that they are not permitted to make such claims or statements as to the sales, profits, earnin gs, cash
         flow, costs or the prospects or chances of success, nor are they authorized to represent or estimate amounts of sales, profits, earnings,
         cash flow, costs or other measures as to any aspect of the operation of UFood Outlets.

                                                                        2
Franchisor recommends that applicants for UFood Outlets development rights make their own investigations and determine whether or not
UFood Outlets are profitable. Franchisor will not be bound by any unauthorized representations as to Developer's sales, profits, earnings, cash
flow, costs or prospects or chances of success. Franchisor reco mmends that each applicant for develop ment rights for UFood Outlets consult
with an attorney of its choosing and further be represented by legal counsel at the time of closing of the purchase of its de velopment rights.
Developer acknowledges that it has had ample opportunity to consult with legal counsel and other professional advisors. Developer
acknowledges that it has not received or relied on any representations about the rights granted under the Agreement by Franch isor, its
Affiliates, or its or their sales personnel, emp loyees, officers, d irectors, agents or representatives, that are contrary to th e statements made in
Franchisor's Franchise Disclosure Document or to the terms of the Agreement or this Statement.

          7. Developer acknowledges that Franchisor's approval of a Develop ment Plan for Developer's development and operation o f UFood
Outlets under the Agreement does not constitute any assurance that such Development Plan is adequate, favorable or not unduly burdensome,
or that such UFood Outlets will be successful if the Develop ment Plan is imp lemented by Developer. Franchisor's approval of t he Develop ment
Plan indicates only that such Development Plan is deemed acceptable by Franchisor solely for its own purposes a t the time of approval thereof.

         8. Developer acknowledges that in all of Franchisor's and its Affiliates' dealings with Developer, the officers, d irectors, employees
and agents of Franchisor or its Affiliate act only in a rep resentative capacity and not in an individual capacity. Developer fu rther acknowledges
that the Agreement, and all business dealings between Developer and s uch individuals as a result of the Agreement, are solely between
Developer and Franchisor or its applicable Affiliate. Developer further represents to Franchisor, as an inducement to its ent ry into this
Agreement, that neither Developer nor its Owners have made any misrepresentations in obtaining the rights granted under the Agreement.

         9.   If Developer is a legal entity, Developer:

                  (A) represents that it is duly organized and valid ly existing in good standing under the laws of the jur isdiction of its
         organization, is qualified to do business in all jurisdictions in which its business activities or the nature of properties it owns requires
         such qualification, and has the authority to execute and deliver the Agreement and perform all of Developer's obligations under the
         Agreement; and

                   (B) agrees that all certificates representing Ownership Interests of Developer now outstanding or hereafter issued will be
         endorsed with a legend in form approved by Franchisor recit ing that the transfer of Ownership Interests in Developer is subject to
         restrictions contained in the Agreement.

         10. Developer, whether or not a legal entity, represents and warrants that Developer is not subject to any restriction, agreement ,
contract, commit ment, law, judg ment or decree which would prohibit or be breached or violated by Developer's execution and delivery of the
Agreement or performance of its obligations thereunder. At Franchisor's request, Developer shall furnish an opinion of counse l to Franchisor,
in form and substance satisfactory to Franchisor, to the effect that the Agreement is a valid and binding agreement of Develo per, enforceable
against Developer in accordance with its terms, and that Developer is not subject to any restrict ion, agreement, law, judgment or decree which
would prohibit or be violated by Developer's execution and delivery of the Agreement and performance of its obligations there under.

                                                                          3
          11. Developer further represents and warrants that all Owners of Developer and their interests therein are co mpletely and accurat ely
listed in Exhib it D to the Agreement and covenants that Developer will make, execute and deliver to Franchisor such revis ions thereto as may
be necessary during the term of the Agreement to reflect any changes in the information contained therein.

         12.   Developer represents and warrants that its domicile is as set forth below:

               __________________________________________________________________________
                                                     Address

               __________________________________________________________________________
                                                   City and State

                                                                 [DEV ELOPER]

                                                                 By:_____________________________________________
                                                                 Name:___________________________________________
                                                                 Title:____________________________________________

                                                                 Date:____________________________________________

                                                                        4
                                                                EXHIB IT B

                        DEVELOPMENT FEE, DEV ELOPMENT AREA AND DEV ELOPMENT S CHEDUL E

        1.   Devel opment Fee . The Develop ment Fee shall be _______________________ Thousand Dollars ($_________).

        2.   Devel opment Area . The Develop ment Area shall be ____________________________.

        3.   Sub-Areas . The Sub-Areas shall be described as follows:

                                                              Sub-Area No. 1

                                                              Sub-Area No. 2

                                                              Sub-Area No. 3

       4. Outlet Development . Developer agrees to develop exactly _________ UFood Outlets in accordance with the terms of this
Agreement.

         5. Development Schedule . Developer agrees to have each UFood Outlet specified below open on or before the specified "
Opening Date " shown below and to have open and in operation in each Sub-Area indicated, on or before the Opening Dates specified below,
the cumulat ive nu mbers of UFood Outlets shown below. For each Sub Area, the cu mulat ive nu mber of UFood Outlets listed below f or the end
of each Develop ment Period shall be known as the " Sub Area Quota " for that Develop ment Period:

                                                                    B-1
                                           Sub Area No. 1

                                                                                Cumulati ve Number
                                                                                of UFood Outlets to
                                                                                 be Opened and in
                       Date Devel opment                    Date Devel opment      Operation (the
Devel opment Peri od   Period Commences                        Period Ends      “Sub-Area Outlets”)


                                           Sub Area No. 2

                                                                                Cumulati ve Number
                                                                                of UFood Outlets to
                                                                                 be Opened and in
                       Date Devel opment                    Date Devel opment      Operation (the
Devel opment Peri od   Period Commences                        Period Ends      “Sub-Area Outlets”)



                                                 B-2
                                                           Sub Area No. 3
                                                                                                      Cumulati ve Number
                                                                                                      of UFood Outlets to
                                                                                                       be Opened and in
                                       Date Devel opment                    Date Devel opment            Operation (the
    Devel opment Peri od               Period Commences                        Period Ends            “Sub-Area Outlets”)



Total UFood Outlets To Be Developed:

UFood Restaurant Group, Inc. , a                                  [Developer]
Nevada corporation
                                                                  ______________________________

By:______________________________________                         By:______________________________________
Title:_____________________________________                       Title:_____________________________________

                                                                 B-3
                                                  EXHIB IT C

                                    FORM OF FRANCHIS E AGREEMENT

[Form of Franchise Agreement to be inserted at ti me of signing Area Development Agreement]

                                                       C-1
                                                                    EXHIB IT D

                                                 OWNERS AND INITIAL CAPITALIZATION

         1. Owners : Listed below is the full name and mailing address of each person or entity who is an Owner of Developer, and a
description of the nature and amount of such Owner's direct or indirect equity or voting interest in Developer:

Name:___________________________________                               Nu mber and Type of Interests Owned:__________________
Address:_________________________________                              % of Total Interests:________________________________
__________________________________                                     Nu mber of Interests Owner is Entit led to
__________________________________                                     Vote:____________________________________________
__________________________________                                     Other Interest (Describe):____________________________
                                                                       ________________________________________

Name:___________________________________                               Nu mber and Type of Interests Owned:__________________
Address:_________________________________                              % of Total Interests:________________________________
__________________________________                                     Nu mber of Interests Owner is Entit led to
__________________________________                                     Vote:____________________________________________
__________________________________                                     Other Interest (Describe): __________________________________
                                                                       _______________________________________

Name:___________________________________                               Nu mber and Type of Interests Owned:__________________
Address:_________________________________                              % of Total Interests:________________________________
__________________________________                                     Nu mber of Interests Owner is Entit led to
__________________________________                                     Vote:____________________________________________
__________________________________                                     Other Interest (Describe): __________________________________
                                                                       _______________________________________

         2. Initial Capitalizati on . Developer: (a) represents and warrants that it has developed and previously provided to Franchisor a
description of its initial capital structure (the " Initi al Capital Structure ") which is a true, correct, comp lete and detailed description of
Developer's capital structure; (b) covenants that it will not deviate fro m the In itial Capital St ructure without Franchisor's prio r written consent;
and (c) acknowledges that Franchisor has relied on the Init ial Capital Structure in ent ering into this Agreement.

UFood Restaurant Group, Inc. , a                                         [Developer]
Nevada corporation
                                                                         ____________________________________

By:_____________________________________                                 By:________________________________________
Title:___________________________________                                Title:______________________________________

                                                                         D-1
                                                                  EXHIB IT E

                                 GUARANTY AND ASS UMPTION OF DEV ELOPER'S OBLIGATIONS

        THIS GUARANTY AND ASSUMPTION OF DEV ELOPER'S OB LIGATIONS is g iven this ___________ day of 20______, by
the undersigned.

Devel oper :   _____________________________________________________________________________
                                              (NAM E)

Date of Development Agreement :________________________________________________________________________

          In consideration of, and as an inducement to, the execution of the UFood Area Development Agreement dated as indicated ab ove (the
" Area Development Agreement ") by UFood Restaurant Group, Inc. (" Franchisor "), each of the undersigned and any other parties who
sign counterparts of this guaranty (referred to herein ind ividually as a " Guarantor " and collectively as " Guarantors ") h ereby personally
and unconditionally : (a) guarantees to Franchisor, and its successors and assigns, for the term of the Area Develop ment Agreement and
thereafter as provided in the Area Development Agreement, that Developer shall punctu ally pay and perform each and every undertaking,
agreement and covenant set forth in the Area Development Agreement; and (b) agrees to be personally bound by, and personally liab le for the
breach of, each and every provision in the Area Development Agreeme nt as if the undersigned were a signatory to the Area Development
Agreement, both monetary obligations and other obligations, including, without limitation, arb itration obligations, the oblig ation to pay costs
and legal fees as provided in the Area Development Agreement, and the obligation to take or refrain fro m taking specific actions or to engage
or refrain fro m engaging in specific activit ies (including, without limitat ion, the provisions of the Area Development Agreement relat ing to
competitive act ivities).

         Each Guarantor waives:

                  (1)   acceptance and notice of acceptance by Franchisor of the foregoing undertakings;

                  (2)   notice of demand for pay ment of any indebtedness or nonperformance of any obligations hereby guaranteed;

                 (3)    protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby
         guaranteed;

                  (4) any right such Guarantor might have to require that an action be brought against Developer or any other Person as a
         condition of liability; and

                  (5)   any and all other notices and legal or equitable defenses to which such Guarantor might be entit led.

                                                                       E-1
         Each Guarantor consents and agrees that:

                  (A) such Guarantor's d irect and immediate liability under this Guaranty shall be jo int and several not only with Developer,
         but also among the Guarantors and other guarantors of Developer's obligations;

                   (B)   such Guarantor shall render any payment or performance required under the Area Development Agreement upon
         demand;

                 (C) such liability shall not be contingent or conditioned upon pursuit by Franchisor of any remedies against Developer or
         any other Person;

                  (D) such liability shall not be d iminished, relieved or otherwise affected by any subsequent rider or amend ment to the Area
         Develop ment Agreement or by any extension of t ime, cred it or other indulgence which Franchisor may fro m time to t ime grant to
         Developer or to any other person, including, without limitation, the acceptance of any partial pay ment or performance, or the
         compro mise or release of any claims, none of which shall in any way modify or amend this Guaranty, which shall be continuing and
         irrevocable throughout the term of the Area Develop ment Agreement and for so long thereafter as there are any mon ies or obligations
         owing to Franchisor under the Area Develop ment Agreement; and

                   (E) the written acknowledg ment of Developer, accepted in writing by Franchis or, or the judgement of any court or
         arbitration panel of co mpetent jurisdiction establishing the amount due from Developer shall be conclusive and binding on the
         undersigned as Guarantors.

          If Franchisor is required to enforce this Guaranty in a judicial or arbitrat ion proceeding, and prevails in such proceeding, it shall be
entitled to reimbursement of its costs and expenses, including, but not limited to, reasonable accountants', attorneys', atto rneys' assistants',
arbitrators' and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and liv ing
expenses, whether incurred prior to, in preparation for or in contemp lation of the filing of any such proceeding. If Franchis or is required to
engage legal counsel in connection with any failure by the undersigned to comply with this Guaranty, the Guarantors shall reimburse
Franchisor for any of the above listed costs and expenses incurred by it.

         Each of the undersigned Guarantors represents and warrants that, if no signature appears below for such Guarantor's spouse, s uch
Guarantor is either not married or, if married, is a resident of a state which does not require the consent of both spouses t o encumber the assets
of the Guarantor's marital estate.

         This Guaranty, the rights and obligations of the Guarantors and the Franchisor with respect to this Guaranty and the relation ship of the
Guarantors and the Franchisor shall be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without
regard to its conflicts of laws principles.

                                                                       E-2
       IN WITNESS WHER EOF , each Guarantor has hereunto affixed his signature on the same day and year as the Area Development
Agreement was executed.

Print Name:___________________________________            Print Spouse’s Name:______________________________________

Signature:_____________________________________           Signature:_______________________________________________

Print Name:___________________________________            Print Spouse’s Name:_____________________________________

Signature:_____________________________________           Signature:________________________________________________

                                                             E-3
                      EXHIB IT F

FORM OF CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

                         F-1
                                   CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
                                               (Area Development Agreement)

         THIS AGREEMENT (the " Agreement ") is made and entered into as of this _____ day of _____________, 20___ (the "Effective
Date"), by and among COVENA NTOR (defined below), UFood Restaurant Group, Inc., a corporation organized under the laws of the State of
Nevada, U.S.A. ("COMPANY" ) and ___________________________________________, a _____________________________ _
("DEVELOPER").

"                                                                                                                              COVENANTOR
":________________________________________________________________________________________________

Address:____________________________________________________________________________________________________________
__________
      ______________________________________________________________________________

1.      PREAMB LES .

         COMPANY has signed or intends to sign an area development agreement with DEVELOPER (the "Area Development Agreement"),
under which COMPANY grants to DEVELOPER certain rights with regard to the development and operation of retail outlets offering food
service featuring lo w-fat, low-carbohydrate and low-calorie food items selected beverages and nutritional products under the trademark
"UFOOD  " ("UFood Outlets"). DEVELOPER's UFood Outlets will be operated pursuant to a form of franchise agreement (the "Franchise
Agreement") between DEVELOPER and COMPA NY. COVENANTOR is or will be either an o wner or an employee of DEVELOPER. Befo re
allo wing COVENA NTOR to have access to the Confidential Information (defined below), and as a material requirement necessary to protect
COMPANY's proprietary rights in and DEVELOPER's right to use the Confidential Information, COM PANY and DEVELO PER require that
COVENANTOR enter into this Agreement.

       To induce COMPANY to enter into the Area Development Agreement and/or to avoid a material breach thereof, as the case may be,
COMPANY, DEVELOPER and COVENA NTOR desire that COVENA NTOR enter into this Agreement. Furthermore, due to the nature of
COMPANY's and DEVELOPER's business, any use or disclosure of the Confidential Information other than in accordance with this
Agreement will cause COMPA NY and DEVELOPER substantial harm.

2.      DEFINITIONS .

        The following terms shall have the mean ings set forth below:

                 (a) " Affiliate " : W ith respect to any Pers on, a Person which, directly o r indirectly, through one or more intermed iaries,
        controls or is controlled by, or is under co mmon control with, the Person specified. For all purposes hereof, the term "contr ol" means
        the possession, directly or indirect ly, of the power to direct or to cause the direction of the management and policies of any Person, or
        the power to veto major policy decisions of any Person, whether through the ownership of voting securities by contract, or ot herwise.

                                                                        F-2
         (b) " Competiti ve Business ": A business or enterprise, other than a UFood Outlet operated by Franchisor, by an Affiliate
of Franchisor or pursuant to a valid franchise agreement with Franchisor or one of its Affiliates, that:

                  (1) derives twenty-five percent (25%) or more of its total revenue fro m the sale of food items and/or beverages
        that are marketed as low-fat and/or lo w-carbohydrate or lo w-calo rie;

                 (2)   derives five percent (5%) or more of its total revenue fro m the sale of Nutritional Products; or

                (3) grants or has granted franchises or licenses, or establishes or has established joint ventures, for the
        development and/or operation of one or more businesses or enterprises of a type described in either clause (1) or (2), above.

         (c) " Confi denti al Information " : Certain confidential and proprietary informat ion and trade secrets, including, but not
limited to, the following categories of information, methods, techniques, procedures and knowledge developed or to be developed by
COMPANY, its Affiliates, and/or developers and franchisees related to the development and operation of UFood Outlets:

                 (1)   site selection criteria;

                 (2) standards, specifications, operating procedures and other methods, techniques, requirements, equipment,
        recipes, policies, information, concepts and systems relating to, and knowledge of and experience in, the development,
        operation and franchising of UFood Outlets;

                 (3)   marketing research and advertising, marketing and promot ional programs for UFood Outlets;

                 (4) knowledge concerning the logic, structure and operation of the Computer System (as defined in the Franchise
        Agreement) co mponents and the Specified So ftware (as defined in the Franchise Agreement), and all addit ions, modifications
        and enhancements thereof, all data generated fro m use of the Co mputer System and Specified Soft ware, and the logic,
        structure and operation of the database file structures containing such data and all addit ions, modifications and enhancements
        thereof;

                 (5) specifications for and knowledge of suppliers of Nutritional Products and other assets, products and supplies
        used at or sold fro m UFood Outlets;

                                                             F-3
                         (6) info rmation concerning customers, customer lists, operating results, financial performance and other data of
                  UFood Outlets (other than operating results, financial perfo rmance and other financial data of the Developer Outlets);

                           (7)   the Manuals (as defined in the Franchise Agreement);

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

                          (9) the terms and conditions of the Area Development Agreement and the Franchise Agreements entered into
                  pursuant to the Area Development Agreement.

                  (d) " Immedi ate Family ": (1) The spouse of an individual; (2) the natural and adoptive parents and natural and adopted
         children and siblings of such individual and their spouses; and (3) the natural and adoptive parents and natural and adopted children
         and siblings of the spouse of such individual.

                 (e) " Person ": An individual, corporation, partnership, jo int venture, association, limited liab ility co mpany, trust,
         unincorporated association, other business entity, or governmental entity (or subdivision thereof).

                 (f) " Terminati on Event ": The first to occur of: (a) termination or exp iration of the Area Development Agreement without
         extension or renewal; or (b) the date as of wh ich COVENA NTOR is neither an o wner nor an emp loyee of DEVELOPER.

                  (g) " Transfer ": The transfer by DEVELOPER of the Area Development Agreement, provided that such transfer is made
         in co mpliance with the terms of the Area Develop ment Agreement.

3.       PROTECTION OF CONFIDENTIAL INFORMATION .

         COVENANTOR agrees to use the Confidential Info rmation only to the extent reasonably necessary to perform his or her duties on
behalf of DEVELOPER, taking into consideration the confidential nature of the Confidential Informat ion. COVENA NTOR may d isclo se the
Confidential Informat ion only as agent for DEVELOPER. COVENA NTOR acknowledges and agrees that neither COVENANTOR nor any
other person or entity will acquire any interest in or right to use the Confidential Informat ion under this Agreement or othe rwise other than the
right to utilize it as authorized in this Agreement, and that the unauthorized use or duplicat ion of the Confidential Informat ion would be
detrimental to COMPANY and DEVELOPER and would be a breach of COVENANTOR's obligations of confidentiality and an unfair method
of competit ion with COMPA NY and its Affiliates, DEVELOPER and other UFood Outlets owned by COMPANY, its Affiliates, developers
and franchisees.

         COVENANTOR acknowledges and agrees that the Confidential Informat ion is confidential to and a valuable a sset of COM PANY.
The Confidential Informat ion will be disclosed to COVENA NTOR solely on the condition that COVENA NTOR agrees to the terms and
conditions of the Agreement. COVENA NTOR therefo re agrees that, during the term of the Area Develop ment Agreement a nd thereafter, he or
she: (a) will not use the Confidential Information in any other business or capacity; (b) will maintain the absolute confidentiality of the
Confidential Informat ion; (c) will not make unauthorized copies of any portion of the Confident ial Informat ion disclosed or recorded in written
or other form; and (d) will adopt and implement all reasonable procedures prescribed from t ime to time by COMPANY and DEVELOPER to
prevent unauthorized use or disclosure of or access to the Confidential In fo rmation.

                                                                       F-4
         Notwithstanding anything to the contrary contained in this Agreement, the restrict ion s on COVENA NTOR's disclosure and use of the
Confidential Information shall not apply to the following: (a) in formation, methods, procedures, techniques and knowledge which are or
become generally known or easily accessible other than by COVENA NTOR's breach o f an obligation of confidentiality; and (b) the disclosure
of the Confidential Information pursuant to applicable law or in judicial or ad min istrative proceedings to the extent that CO VENA NTOR is
legally co mpelled or required by a regulatory body to disclose such information, provided COVENA NTOR has notified COMPANY and
DEVELOPER prior to disclosure and shall have used its best efforts to obtain, and shall have given COMPA NY and DEVELOPER the
opportunity to obtain, an appropriate assurance reasonably satisfactory to COMPANY o f confidential treat ment fo r the information required to
be so disclosed.

4.       IN-TERM RESTRICTIVE COVENANTS .

          COVENANTOR acknowledges and agrees that COM PANY and DEVELOPER would be unable to protect the Confidential
Information against unauthorized use or disclosure if persons authorized to use the Confidential Informat ion (or members of t heir Immediate
Families) were permitted to engage in similar, co mpeting businesses. COVENA NTOR therefore agrees that from the Effective Date until the
earlier of a Termination Event or a Transfer, neither COVENANTOR nor any member of the Immediate Family of COVENANTOR, shall
directly or indirectly:

                 (a) have any controlling or non-controlling interest as a record or beneficial o wner in any Co mpetitive Business, wherever
        located or operating, provided that this restriction shall not apply to the ownership of shares of a c lass of securities listed on a stock
        exchange or traded on the over the counter market and quoted on a national inter dealer quotation system that represent less than
        one-half percent (0.5%) of the number of shares of that class of securities issued and ou tstanding;

                 (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any
        Co mpetitive Business, wherever located or operating;

                (c) d irectly or indirectly loan any money or other thing of value to, guarantee any loan to, lease any personal or real
        property to, or permit the use of its name in connection with, any Co mpetitive Business or any owner, director, officer, mana ger,
        emp loyee or agent of any Co mpetitive Business, wherever located or operating;

                                                                      F-5
                  (d) divert or attempt to d ivert any actual or potential business or customers of any Developer Outlet or any other UFood
         Outlets to any Competit ive Business; or

                  (e) employ or seek to emp loy any individual who is emp loyed by Franchisor, an Affiliate of Franchisor or any other
         developer or franchisee of a UFood Outlet, o r otherwise directly or indirectly induce any such individual to leave said emplo yment,
         without the prior written consent of such individual's employer.

5.       RES TRICTIVE COVENANT UPON TERMINATION OR EXPIRATION                                          OF    THE     AREA      DEV ELOPMENT
         AGREEMENT OR OF COVENANTOR'S ASSOCIATION WITH DEV ELOPER .

         Upon the earlier of a Termination Event or a Transfer, COVENANTOR agrees that for a period o f eighteen (18) months commencing
on the effective date of a Termination Event or a Transfer, as applicab le, neither COVENANTOR nor any member of the Immediate Family of
COVENANTOR shall directly or indirect ly:

                           (1) have any controlling or non-controlling interest as a record or beneficial owner in any Co mpetit ive Business
                  located or operating with in the Development A rea, p rovided that this restriction shall not apply to the ownership of shares o f
                  a class of securities listed on a stock exchange or traded on the over the counter market and quoted on a national inter dealer
                  quotation system that represent less than one-half percent (0.5%) of the nu mber of shares of that class of securities issued and
                  outstanding;

                          (2) perform services as a director, o fficer, manager, employee, consultant, representative, agent or otherwise for
                  any Co mpetitive Business located or operating within the Development Area;

                          (3) direct ly or indirectly loan any money or other thing of value to, guaranty any loan to, lease any personal or real
                  property to, or permit the use of its name in connection with, any Co mpetit ive Business located or operating within the
                  Develop ment Area;

                  divert or attempt to divert any actual or potential bus iness or customers of any UFood Outlet to any Co mpetit ive Business,
                  wherever located or operating; or

                           (4) employ or seek to emp loy any individual who is employed by Franchisor, its Affiliate or any developer or
                  franchisee of a UFood Outlet, or otherwise directly o r indirect ly induce or attempt to induce any such individual to leave said
                  emp loyment, without the prior written consent of such individual's employer.

         COVENANTOR agrees that the restrictive covenants set forth in Paragraphs 4 and 5 of this Agreement are reasonable. If any court or
tribunal of co mpetent jurisdiction shall refuse to enforce any such covenant because it is more extensive than is enforceable , it is expressly
understood and agreed that such covenants shall not be void, but that the restrictions contained therein shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants.

                                                                       F-6
         COVENANTOR expressly acknowledges and agrees that COVENA NTOR possesses skills and abilities of a general nature and has
opportunities for exp loit ing such skills. Consequently, enforcement of the covenants made in Paragraphs 4 and 5 of this Agreement will not
deprive COVENA NTOR of the ability to earn a living.

6.       SURRENDER OF DOCUMENTS .

         COVENANTOR agrees that, as of the earlier o f a Transfer or a Termination Event, as applicable, COVENANTOR shall immediately
cease to use the Confidential Info rmation disclosed to or otherwise learned or acquired by COVENANTOR and shall return to DEVELOPER
(or to COMPA NY if d irected by COMPANY) all copies of the Confidential Information loaned or made availab le to COVEN ANTOR.

7.       COSTS AND ATTORNEYS' FEES .

         If COM PANY o r DEVELOPER engages legal counsel in connection with any failure by COVENA NTOR to comp ly with this
Agreement, COVENA NTOR shall reimburse COMPANY and/or DEVELOP, as applicable, their reasonable attorneys ' fees whether incurred
before, during or after any trial, arb itration or appeal.

8.       WAIVER .

          Failure to insist upon strict compliance with any of the terms, covenants or conditions hereof shall not be a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or remedy hereunder at any one or more t imes be a waiver of such
right or remedy at any other time or t imes.

9.       SEVERAB ILITY .

         Each provision of this Agreement, and any portion thereof, shall be considered severable, and if, for any reason, any such pr ovision is
held to be invalid or contrary to or in conflict with any applicable law or regulat ion in a final, unappealable ruling issued by any cour t, agency
or tribunal with co mpetent jurisdiction in a proceeding which COMPA NY is a party, that ruling shall not have any effect u pon, such other
portions of this Agreement as may remain otherwise intellig ible, which shall continue to be g iven fu ll force and effect and b ind the part ies
hereto, although any portion held to be invalid shall be deemed not to be a part of this Agreement fro m the date the time for appeal exp ires, if
COVENANTOR is a party thereto, otherwise upon COVENANTOR's receipt of a notice fro m COMPA NY that it will not enforce the
provision in question.

                                                                       F-7
10.      RIGHTS OF PARTIES ARE CUMULATIVE .

        The rights of the parties hereunder are cumu lative and no exercise or enforcement by a party hereto of any right or remedy gr anted
hereunder shall preclude the exercise or enforcement by them of any other right or remedy it may have.

11.      B ENEFIT .

        This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assig ns. In the
event COMPANY does not sign this Agreement (regard less of the reason), COMPANY shall be deemed a third party beneficiary of this
Agreement and shall have the right to enforce this Agreement direct ly.

12.      EFFECTIVEN ESS .

          This Agreement shall be enforceable and effect ive when signed by COVENANTOR, even if COMPANY and DE VELOPER do not
sign this Agreement.

13.      GOVERNING LAW .

        This Agreement and the rights and obligations of the parties under this Agreement shall, by express agreement of the parties, be
governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without regard to its conflicts of law provisions.

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

                                                                       DEVELOPER

________________________________                                       _________________________________
Print name of COVENANTOR

                                                                       By: _______________________________
________________________________                                           Name: ___________________________
Signature of COVENA NTOR                                                   Title: ____________________________

                                                                       COMPANY

                                                                       UFood Restaurant Group, Inc. , a
                                                                       Nevada corporation

                                                                       By: ________________________________
                                                                           Name: ____________________________
                                                                           Title: _____________________________

                                                                      F-8
[FORM OF UFOOD® FRANCHIS E AGREEMENT]

    ____________________________________
                (LOCATION)

               FRANCHIS EE:

    ____________________________________
                                             TABLE OF CONTENTS

Section                                                                 Page

1.   INTRODUCTION AND CERTA IN DEFINITIONS                                 1
     1.A. INTRODUCTION                                                     1
     1.B. DEFINITIONS                                                      1

2.   GRA NT OF FRANCHISE                                                   6
     2.A. GRA NT OF FRANCHISE AND TERM                                     6
     2.B. TERRITORIAL RIGHTS                                               6
     2.C. RIGHTS RETAINED BY FRANCHISOR                                    6
     2.D. OWNERS' GUA RANTY                                                8

3.   SITE SELECTION, DEVELOPM ENT AND OPENING OF THE OUTLET                8
     3.A. SITE SELECTION                                                   8
     3.B. FINA NCING PLA N                                                 9
     3.C. LEASE OF APPROVED SITES                                          9
     3.D. OUTLET DEVELOPM ENT SPECIFICATIONS A ND CONSTRUCTION PLA NS     10
     3.E. DEVELOPM ENT OF THE OUTLET                                      11
     3.F. GENERA L MANA GER A ND OTHER MA NA GEM ENT PERSONNEL            12
     3.G. OPERATING ASSETS                                                12
     3.H. COMPUTER SYSTEM                                                 12
     3.I. OUTLET OPENING                                                  13
     3.J. GRA ND OPENING MARKETING PROGRAM                                14
     3.K. RELOCATION OF THE OUTLET                                        14

4.   TRAINING AND GUIDA NCE                                               14
     4.A. TRAINING                                                        14
     4.B. PRE-OPENING TRAINING AT THE OUTLET                              16
     4.C. ONGOING GUIDANCE AND ASSISTA NCE                                16
     4.D. MANUA LS                                                        17
     4.E. DELEGATION BY FRANCHISOR                                        17

5.   MARKS                                                                17
     5.A. OWNERSHIP AND GOODWILL OF MARKS                                 17
     5.B. LIMITATIONS ON FRANCHISEE'S USE OF MA RKS                       18
     5.C. NOTIFICATION OF INFRINGEM ENTS AND CLAIMS                       18
     5.D. MODIFICATION AND DISCONTINUANCE OF MARKS                        18
     5.E. INDEMNIFICATION FOR USE OF MARKS                                19

6.   CONFIDENTIA L INFORMATION AND INNOVATIONS                            19
     6.A. CONFIDENTIA L INFORMATION                                       19
     6.B. INNOVATIONS                                                     21


                                                      i
                                           TABLE OF CONTENTS
                                               (Continued)

Section                                                           Page

7.   EXCLUSIVE RELATIONSHIP                                         22
     8.   FEES                                                      23
     8.A. INITIA L FRANCHISE FEE                                    23
     8.B. ROYA LTY FEE                                              23
     8.C. DEFINITIONS                                               23
     8.D. INTEREST ON LATE PA YM ENTS                               24
     8.E. APPLICATION OF PA YM ENTS                                 24
     8.F. ELECTRONIC FUNDS TRA NSFER                                25

9.   OUTLET IMA GE A ND OPERATION                                   25
     9.A. CONDITION A ND APPEA RANCE OF THE OUTLET                  25
     9.B. OUTLET PRODUCTS AND SERVICES                              26
     9.C. CATERING SERVICE AND DELIVER Y SERVICE                    26
     9.D. APPROVED PRODUCTS, DISTRIBUTORS AND SUPPLIERS             27
     9.E. COMPLIA NCE WITH SYSTEM STANDARDS                         29
     9.F. COMPLIA NCE WITH LAWS A ND GOOD BUSINESS PRA CTICES       31
     9.G. MANAGEM ENT AND PERSONNEL OF THE OUTLET                   32
     9.H. INSURANCE                                                 32
     9.I. CREDIT CA RDS A ND OTHER M ETHODS OF PA YM ENT            33
     9.J. PRICING                                                   33

10. ADVERTISING, MA RKETING AND PROMOTION                           33
    10.A. SYSTEMWIDE ADVERTISING FUND                               33
    10.B. ADVERTISING BY FRANCHISEE                                 35
    10.C. REGIONA L/ LOCAL ADVERTISING COOPERATIVE                  36
    10.D. CUSTOM ER LOYA LTY PROGRAM                                36
    10.E. PROMOTION OF UFOOD LIFESTYLE GRILLE FRA NCHISE SA LES     37
    10.F. FRA NCHISE SYSTEM W EBSITE                                37

11. RECORDS, REPORTS AND FINANCIA L STATEM ENTS                     38

12. INSPECTIONS AND AUDITS                                          39
    12.A. FRA NCHISOR'S RIGHT TO INSPECT THE OUTLET                 39
    12.B. FRA NCHISOR'S RIGHT TO AUDIT                              40

13. TRANSFER                                                        40
    13.A. BY FRANCHISOR                                             40
    13.B. NONTRANSFERA BILITY OF CERTAIN RIGHTS                     40
    13.C. FRA NCHISOR'S RIGHT TO APPROVE TRANSFERS                  41
    13.D. CONDITIONS FOR APPROVA L OF TRA NSFERS                    42
    13.E. DEATH OR INCAPA CITY OF FRANCHISEE                        44
    13.F. PUBLIC OR PRIVATE OFFERING                                44
    13.G. EFFECT OF CONSENT TO TRANSFER                             45
    13.H. FRA NCHISOR'S RIGHT OF FIRST REFUSA L                     46
    13.I. OWNERSHIP STRUCTURE                                       47


                                                      ii
                                           TABLE OF CONTENTS
                                               (Continued)

Section                                                                                          Page

14. GRA NT OF SUCCESSOR FRANCHISE                                                                  47
    14.A. FRA NCHISEE'S RIGHT TO A SUCCESSOR FRANCHISE                                             47
    14.B. NOTICES                                                                                  48
    14.C. SUCCESSOR FRANCHISE A GREEM ENT/ RELEA SES                                               48

15. TERMINATION OF A GREEM ENT                                                                     49
    15.A. BY FRANCHISEE                                                                            49
    15.B. BY FRANCHISOR                                                                            49
    15.C. TERMINATION OF CERTA IN RIGHTS OF FRANCHISEE                                             51
    15.D. ASSUMPTION OF MANA GEM ENT                                                               52
    15.E. EFFECT OF TERMINATION                                                                    53

16. RIGHTS AND OBLIGATIONS OF FRA NCHISOR AND FRANCHISEE UPON TERMINATION OR EXPIRATION OF THE     53
    AGREEM ENT
    16.A. PA YM ENT OF AMOUNTS OW ED                                                               53
    16.B. MARKS AND TRADE DRESS                                                                    53
    16.C. CONFIDENTIA L INFORMATION                                                                54
    16.D. COVENANT NOT TO COMPETE                                                                  55
    16.E. CONTINUING OBLIGA TIONS                                                                  56
    16.F. FRA NCHISOR'S RIGHT TO PURCHASE ASSETS OF THE OUTLET                                     56

17. RELATIONSHIP OF THE PA RTIES/INDEM NIFICATION                                                  58
    17.A. INDEPENDENT CONTRA CTORS                                                                 58
    17.B. NO LIA BILITY FOR A CTS OF OTHER PA RTY                                                  58
    17.C. TAXES                                                                                    58
    17.D. INDEMNIFICATION OF FRANCHISOR                                                            59

18. GENERA L PROVISIONS                                                                            59
    18.A. ARBITRATION                                                                              59
    18.B. SPECIFIC ENFORCEM ENT                                                                    61
    18.C. GOVERNING LAW                                                                            61
    18.D. INJUNCTIVE RELIEF                                                                        62
    18.E. CONSENT TO JURISDICTION                                                                  62
    18.F. COSTS AND ATTORNEYS' FEES                                                                62
    18.G. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL                                                62
    18.H. LIMITATION OF CLAIM S                                                                    62
    18.I. ENTIRE A GREEM ENT                                                                       63
    18.J. NOTICES                                                                                  63
    18.K. SEVERA BILITY AND SUBSTITUTION OF VA LID PROVISIONS                                      64
    18.L. THIRD PARTY BENEFICIA RIES                                                               65
    18.M. WAIVERS                                                                                  65
    18.N. NO WARRANTIES OR GUA RANTEES                                                             65
    18.O. FORCE MAJEURE                                                                            65
    18.P. ASSIGNM ENT                                                                              66
    18.Q. CONSTRUCTION                                                                             66
    18.R. COUNTERPA RTS                                                                            66


                                                    iii
                                              TABLE OF CONTENTS
                                                  (Continued)

Section                                                                            Page

    18.S.   CUMULATIVE REM EDIES                                                     66
    18.T.   NO WITHHOLDING OF PA YM ENTS                                             66
    18.U.   EXERCISE OF BUSINESS JUDGM ENT                                           66
    18.V.   ELECTRONIC MAIL                                                          67

EXHIB ITS AND ATTACHMENTS

EXHIBIT     A   -   FRA NCHISEE ACKNOW LEDGM ENTS AND REPRESENTATIONS STATEM ENT
EXHIBIT     B   -   IDENTITY OF DEVELOPER AND DATE OF DEVELOPM ENT A GREEM ENT
EXHIBIT     C   -   OWNERS
EXHIBIT     D   -   SITE, FEES, TERRITORY
EXHIBIT     E   -   GUA RANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
EXHIBIT     F   -   CONFIDENTIA LITY A ND NON-COM PETE A GREEM ENT
EXHIBIT     G   -   COLLATERAL ASSIGNM ENT OF TELEPHONE NUM BERS AND LISTINGS


                                                      iv
                                                   UFOOD® FRANCHIS E AGREEMENT

         THIS AGREEMENT is made and entered into as of this ______ day of _______________, 200___ (the " Effecti ve Date "), by and
between UFood Restaurant Group, Inc ., a Nevada corporation (" Franchisor "), and "Franchisee": __
______________________________                a
Principal Address: ____________________________________________________________________

1.       INTRODUCTION AND CERTAIN DEFINITIONS .

         1.A.   INTRODUCTION .

          Franchisor and certain related parties have designed and developed methods of developing and operating distinctive retail outlets
offering food service featuring low-fat, lo w-carbohydrate and low-calorie food items, selected beverages and nutritional products to the general
public. Each of these outlets, called a " UFood Outlet " in this Agreement (as defined more fully below), features the Marks (defined below)
and utilizes distinctive business formats, specifications, emp loyee selection and training programs, signs, equipment, layouts, systems,
methods, procedures, software, designs and market ing and advertising standards and formats, all o f which Franchisor may impro ve, further
develop and otherwise modify fro m t ime to t ime (all of wh ich are together called the " System "). Franchisor has obtained the right to grant
franchises and development rights to certain qualified parties to develop, own and operate UFood Outlets.

         Franchisee has requested that Franchisor grant it a franchise to develop, own and operate a UFoo d Outlet in the Territory (defined
below). Franchisor has approved Franchisee's request subject to the terms and conditions of this Agreement and in reliance up on all of the
representations made in Franchisee's application, other info rmation provided by Franchisee and its Affiliates under the Develop ment
Agreement and during the application process, and the representations of Franchisee in the Acknowledgments and Representation s Statement, a
copy of which is attached hereto as Exhi bit A , which shall be executed by Franchisee concurrently with this Agreement.

         1.B.   DEFINITIONS.

         For purposes of this Agreement, the terms listed below have the meanings that follow them. Other terms used in this Agreement are
defined in the context in which they occur.

          " Affiliate " – With respect to any Person, a Person which, direct ly or indirect ly, through one or more intermed iaries, controls or is
controlled by, or is under common control with, the Person specified. For all purposes hereof, the term " control " means the possession,
directly or indirect ly, of the power to direct or to cause the direction of the management and policies of any Person, or the power to veto major
policy decisions of any Person, whether through the ownership of voting securities by contract, or otherwise.
        " Anti-Terrorism Law " - As defined in Section 9.F.

         " Catering Services " – The delivery of food and/or beverage products which are prepared or partially prepared at the Outlet and
delivered to customers at locations other than the Site, where, in addition to the delivery of such products, Franchisee provides ancillary
services (such as setting up for, serving or otherwise distributing such food and beverage products) at such locations.

         " Competi ti ve Business " - A business or enterprise, other than a UFood Outlet operated by Franchisor, by an Affiliate o f Franchisor
or pursuant to a valid franchise agreement with Franchisor or one of its Affiliates, that:

                (1) derives twenty-five percent (25%) or mo re o f its total revenue fro m the sale o f food items and/or beverages that are
        marketed as low-fat, lo w-carbohydrate or low-calo rie;

                 (2)   derives five percent (5%) or more of its total revenue fro m the sale of nutritional products; or

                 (3) grants or has granted franchises or licenses, or establishes or has established joint ventures, for the development and/or
        operation of one or more businesses or enterprises of a type described in either clause (1) or (2), above.

         " Computer System " - Those brands, types, makes, and/or models of co mmunicat ions and computer systems, hardware and
peripheral equip ment specified o r required by Franchisor for use by, between, or among UFood Outlets, including: (1) back office and point of
sale systems, data, audio, video, and voice storage, retrieval, and transmission systems for use at the Outlet, between or among UFood Outlets,
and between and among the Outlet and Franchisor and/or Franchisee; (2) security systems; (3) monitors, modems and printers; and (4) archival
and back-up systems.

        " Confi dential Informati on " – As defined in Section 6 .

        " Construction Plans " – As defined in Section 3.D .

        " Controlling Interest " – If Franchisee is a:

                 (1) corporation or limited liability co mpany, "Controlling Interest" shall mean such number of the voting shares or
        membership interests, as applicable, of Franchisee or such other rights as (a) shall permit voting control of Franchisee on any issue
        and (b) shall prevent any other person, group, combination, or entity fro m b locking voting control on any issue or exercising any veto
        power;

                 (2) general partnership, " Controlling Interest" shall mean a managing partnership interest, or such percentage o f the general
        partnership interests in Franchisee or such other rights as (a) shall permit determination of the outcome on any issue and (b) shall
        prevent any other person, group, combination, or entity fro m b locking voting control on any issue or exercising any veto power; and


                                                                        2
                  (3) limited partnership, "Controlling Interest" shall mean a general partnership interest, such percentage of limited
         partnership interests or such other rights as shall permit the replacement or removal of any general partner.

          " Deli very Services " – The delivery o f food and beverage products that are fu lly prepared at the Outlet and ready for consumption to
customers at locations other than the Site, where Franchisee provides no ancillary services (such as setting up for, serving or otherwise
distributing such food and beverage products) at such locations.

         " Development Agreement " – If applicab le, the UFood Area Develop ment Agreement executed by Franchisor and "Developer" (as
defined therein), dated as of the date stated in Exhi bit B attached hereto, pursuant to which Developer and its Controlled Affiliates (as defined
in the Develop ment Agreement) were granted the right to develop UFood Outlets in the geographic area specified in such agreement.

         " Development S pecifications " – As defined in Section 3.D .

         " Effecti ve Date " – As defined in the introductory paragraph of this Agreement.

         " F&B Gross Receipts " – As defined in Section 8.C .

         " Financing Pl an " – As defined in Secti on 3.B .

         " Franchisee " – As defined in the introductory paragraph of this Agreement.

         " Franchisor " – As defined in the introductory paragraph of this Agreement.

         " Franchisor Indemnified Parties " – Franchisor, its Affiliates, and its and their owners, officers, directors, agents, emp loyees,
representatives, successors and assigns.

         " General Manager " – As defined in Section 3.F .

        " UFood Outlet " - A co mbination restaurant/retail store that (1) operates using the System and the Marks; and (2) is either o perated
by Franchisor or its Affiliates or pursuant to a valid franchise fro m Franchisor.

         " Gross Receipts " – As defined in Section 8.C .

         " Guaranty " – As defined in Section 2.D .

         " Immedi ate Family " - (1) The spouse of an individual; and (2) the natural and adoptive parents and natural and adopted children and
siblings of such individual and their spouses; and (3) the natural and adoptive parents and natural and adopted children and siblings of the
spouse of such individual.


                                                                        3
         " Ini tial Franchise Fee " – As defined in Section 8.A .

         " Lease " – The lease, sublease or other occupancy arrangement pursuant to which Franchisee occupies or will occupy the Site and
the   Outlet in the circu mstance that Franchisee does not own the Site.

         " Local Marketing S pendi ng Requirement " – As defined in Section 10.B .

         " Management Personnel " – As defined in Section 3.F .

         " Managing Owner " – As defined in Section 9.G .

         " Manuals " – Materials, which might include one or more handbooks, audio tapes, video tapes, computer diskettes, compact disks,
and/or other written or intangible materials, and which may be made available to Franchisee by various means (including acces s through the
Internet or through an intranet), all of wh ich may be modified, added to, replaced and supplemented by Franchisor from time to time, whether
by way of supplements, replacement pages, franchise bulletins, or other official pronouncements or means, that conta in System Standards and
other information concerning Franchisee's obligations under this Agreement.

         " Marks " - The trademarks, service marks, logos and other commercial symbols that Franchisor authorizes for use to identify UFood
Outlets and the products and services they offer, together with the Trade Dress; provided that such trademarks, service marks, logos, other
commercial symbols, and the Trade Dress are subject to modification and discontinuance by Franchisor and may inclu de addition al or
substitute trademarks, service marks, logos, commercial symbols and trade dress as provided in this Agreement.

         " Nutritional Products " - Those nutritional products that Franchisor periodically authorizes Franchisee to offer and sell from the
Outlet. Those products may include, without limitation, nutritional supplements, healthy snacks, energy drinks, vitamins, meal replacement
bars, health-and nutrition-oriented books and magazines, protein powders and diet products.

         " Nutriti onal Products Gross Recei pts " – As defined in Section 8.C .

         " Opening Date " - The date that Franchisee opens the Outlet for business under the terms of this Agreement.

         " Operating Assets " – The furniture, furnishings, and equipment (including Co mputer System equip ment, kitchen equip ment,
Specified Software, decorations, signs, smallwares, china, un iforms, and similar supplies and items) used in connection with the operation of
the Outlet pursuant to the terms and conditions of this Agreement.

         " Outlet " – The UFood Outlet that Franchisee develops and operates pursuant to this Agreement.

          " Owner " - Each Person holding a direct or indirect, record or beneficial Ownership Interest in Franchisee and each Person who has
other direct or indirect property rights in Franchisee, this Agreement, the Outlet or the right to receive all o r a portion of Franchisee's or the
Outlet's profits or losses or any capital appreciation relat ing to the Outlet.


                                                                        4
            " Ownershi p Interests " - In relation to a: (1) corporation, the record or beneficial o wnership of one or mo re shares (regardless of
class, preferences or voting rights, if any) in, or the right to receive any portion of the profits and/or losses o f, the corporation; (2) limited
liab ility co mpany, the record or beneficial ownership of a membership interest in, or the right to receive any portion of the profits and/or losses
of, the limited liability company; (3) partnership, the record or beneficial ownership of a general o r limited partnership interest; or (4) trust, the
ownership of a beneficial interest of such trust.

         " Person " – An individual, corporation, partnership, joint venture, association, limited liability company, trust, unincorporate d
association, other business entity, or governmental entity (or subdivision thereof).

         ― Proprietary Products ‖ – Those food products, beverages and Nutritional Products that: (1) are prepared accord ing to our
proprietary recipes and/or formulat ions; or (2) that are marketed under the Marks or other brands that are proprietary to us or our Affiliates.

         " Royal ty Fee " – As defined in Section 8.B .

         " Sample Designs " – As defined in Section 3.D .

          " Site " - The location identified in Exhi bit D of this Agreement. As used herein, the term " Site " also refers to the interior and
exterior of the structure housing the Outlet, the parking lot and all other areas around the Outlet used in the operation of Franchisee's business.

         " Site Package " – As defined in Section 3.A .

        " Specified Software " - Such software programs, programming and services which Franchisor fro m t ime to time specifies or requires
in connection with utilizat ion of the Co mputer System, including any replacements, mod ifications, upgrades or updates thereto which
Franchisor designates, and whether developed by, for, or on behalf of Franchisor, its Affiliate or an independent third party .

         " Successor Franchise " – As defined in Section 14.A .

         " System " – As defined in Section 1.A .

          " System Standards " – Specificat ions, standards, policies and procedures that Franchisor periodically prescribes for UFood Outlets,
including standards concerning brands, types and/or models of Operating Assets, Nutritional Products, food and beve rage inventory,
ingredients, supplies and other products and services used in the development and operation of a UFood Outlet, as they may be modified, added
to, replaced and supplemented by Franchisor fro m time to time.

         " System Website " – As defined in Section 10.D .


                                                                          5
         " Systemwi de Advertising Fund " – As defined in Section 10.A .

         " Territory " - The geographic area defined in Exhi bit D of this Agreement.

         " Trade Dress " - The UFood Outlet design, decor, color scheme and image wh ich Franchisor authorizes and requires for use in
connection with the operation of the Out let, as it may be revised and further developed by Franchisor or its Affiliates fro m t ime to time and as
further described in the Manuals.

2.       GRANT OF FRANCHIS E .

         2.A.   GRANT OF FRANCHIS E AND TER M .

         Subject to the provisions of this Agreement, Franchisor hereby grants to Franchisee the right, and Franchisee hereby accepts the
obligation, to operate the Outlet at the Site, and to use the Marks and System in the operation thereof, for a term of fiftee n (15) years
commencing on the Effective Date. Termination or exp iration of this Agreement shall constitute a termination or expiration of the franchise
and any and all licenses granted herein.

          Franchisee acknowledges and agrees that its rights under this Agreement are limited to the operation of the Outlet at the Sit e, p ursuant
to and in compliance with this Agreement, and that Franchisee has no right to use the Marks in any manner not contemp la ted by this
Agreement or to offer or sell Nutrit ional Products or other items bearing the Marks through any channel of distribution other than the Outlet.
Franchisee will conduct no business or other activities other than the operation of the Outlet. Franc hisee agrees that it will at all t imes
faithfully, honestly and diligently perform its obligations hereunder, and that it will continuously exert its best efforts to promote and enhance
the business of the Outlet and the goodwill of the Marks and to procure the greatest sales volume fo r the Outlet consistent with good service to
the public and in co mp liance with the terms of this Agreement. Except as set forth in this Agreement, Franchisee shall not co nduct the business
of the Outlet fro m any location other than the Site.

         2.B.   TERRITORIAL RIGHTS .

          Except as otherwise provided in this Agreement, and provided that Franchisee is in full co mpliance with this Agreement, durin g the
term of this Agreement neither Franchisor nor its Affiliates will operate, or grant a franchise fo r the operation of, a UFood Out let, or any other
retail establishment that derives twenty-five percent (25%) or mo re of its total revenue fro m the sale of food items and/or beverages that are
marketed as low-fat and/or low-carbohydrate or low-calorie; or derives five percent (5%) or more of its total revenue from the sale of
Nutrit ional Products and that is substantially associated with the Marks and is physically located within the Territory.

         2.C.   RIGHTS RETAINED B Y FRANCHISOR .

          Subject to the territorial rights expressly set forth in Section 2.B . hereof, during and after the term o f this Agreement, Franchisor (on
behalf of itself, its Affiliates and its designees) retains all rights with respect to UFood Outlets, the System, the Marks, and the market ing and
sale of any products and services, anywhere in the world, including:


                                                                         6
         (1) the right to develop and operate, and grant rights to others to develop and operate, UFood Outlets and any similar or
dissimilar businesses at any location outside the Territory (including on the border of the Territory), whether under the Mar ks or other
trademarks or service marks, and on any terms Franchisor deems appropriate;

          (2) the right to operate and to grant others (including any person or entity related in any manner whatsoever to Franchisor)
the right to operate food service businesses and/or retail outlets using the Marks or any other marks and using the System o r an y other
system at such locations within and/or outside the Territory, both during and upon exp irat ion or termination o f the term of t h is
Agreement, and on such terms and conditions as Franchisor, in its sole discretion, deems appropriate, including, without limitation, the
right to operate and grant others the right to operate UFood Outlets at "Non Traditional Sites" with in and outside the Territ ory on any
terms and conditions Franchisor deems appropriate. " Non Traditi onal Sites " are sites that generate customer traffic flow which is
independent fro m the general customer traffic flo w o f the surrounding area, including, without limitation, military bases, sh opping
malls, airports, stadiums, industrial or office facilit ies, food courts, hotels, school campuses, tra in stations, travel p lazas, toll roads,
casinos, hospitals, and sports or entertainment venues.

         (3) the right to develop and operate, and grant rights to others to develop and operate, other establishments under the Marks
(other than UFood Outlets as provided in Section 2.B. above) or other trademarks or service marks, and on any terms and conditions
that Franchisor deems appropriate, anywhere in the world (including within the Territory);

         (4) the right to prov ide, and grant rights to others to provide, on any terms Franchisor deems appropriate, goods and
services which are similar to, co mpetitive with or co mplementary to those provided at UFood Outlets (including the Nut rit iona l
Products), whether identified by the Marks or other trademarks or service marks and wherever located or operating (whether within or
outside the Territory), through any distribution channels, including retail stores, a Website, and catalog/mail order sales;

         (5) the right to be acquired (in whole or in part and regardless of the form of transaction) by a business providing products
and services similar or d issimilar to those provided at UFood Outlets, or by another business, even if such business operates ,
franchises and/or licenses Competit ive Business within the Territory; and

         (6) the right to acquire (in whole or in part and regardless of the fo rm of transaction) one or mo re businesses providing
products and services similar o r d issimilar to those provided at UFood Outlets, and to franchise, license and create other arrang ements
of any type with respect to those businesses once acquired, wherever these businesses (or the franchisees or licensees of tho se
businesses) are located or operating.


                                                                 7
         2.D.   OWNERS' GUARANTY .

         Franchisee shall cause all Persons who are Owners as of the Effect ive Date and who own fifteen percent (15%) or more of the
Ownership Interests in Franchisee as of the Effective Date, and each of their spouses, to execute and deliver to Franchisor c oncurrently with
this Agreement, and all Persons who become Owners thereafter, and their spouses, to execute and deliver to Franchisor pro mptly thereafter, the
form of Guaranty and Assumption of Franchisee's Obligations (" Guaranty ") attached hereto as Exhi bi t E and the Joinder of Owners at the
end of this Agreement.

3.       SITE S ELECTION, DEVELOPMENT AND OPENING OF THE OUTLET .

         3.A.   S ITE S ELECTION .

         If the Site is not specified in Exhi bi t D as of the Effective Date, then within seventy (70) days after signing this Agreement,
Franchisee shall submit to Franchisor a co mp lete site approval request package and location feasibility analysis (a " Site Package ") on
Franchisor's specified forms, containing such demographic, commerc ial, economic, and other informat ion, photographs and collateral material
as Franchisor may require, fo r the site at wh ich Franchisee proposes and intends in good faith to establish and operate the O utlet and which
Franchisee reasonably believes to conform to certain min imu m site selection criteria established by Franchisor fro m t ime to time. In approving
or disapproving any proposed site, Franchisor may consider such matters as it deems material fro m t ime to t ime, wh ich factors may (but are not
required to) include demographic characteristics, traffic patterns, parking, visib ility, allowed signage, the predominant character of t he
neighborhood, competition fro m other businesses providing similar products and services within the area, the nature of other businesses in
proximity to the site, and other commercial characteristics (including the purchase price or rental obligations and other lea se terms for the
proposed site) and the size, appearance, and other physical characteristics of the proposed site.

          Franchisor will approve or disapprove sites by delivery of written notice to Franchisee. Franchisee will use commercially reason able
efforts to deliver such notification within t wenty (20) days after receipt by Franchisor of a co mp lete Site Package and other materials requested
by Franchisor, but Franchisor's failure to deliver such notification within such twenty (20) day period shall not be deemed a n approval of the
proposed site. Franchisor shall have the sole right to approve or disapprove a site, and Fran chisee acknowledges and agrees that Franchisor
shall have no liability therefor.

          Franchisee acknowledges that Franchisor's approval of the Site and any informat ion communicated to Franchisee regarding propo sed
sites are not a representation or warranty of any kind, exp ress or imp lied, of the suitability of the Site for a UFood Outlet or any other purpose.
Franchisor's approval indicates only that Franchisor believes that the particular site meets, or that Franchisor has waived, the general site
criteria wh ich Franchisor has established as of that time. Applying criteria that have appeared effective for other sites might not acc urately
reflect the potential fo r all sites, and, after Franchisor approves a site, demographic and/or other factors included in or excluded fro m
Franchisor's site criteria could change, thereby altering a site's potential. The changeable nature of these criteria is beyo nd Franchisor's control,
and Franchisor is not responsible for the failure of a site which it has approved to meet F ranchisor's or Franchisee's expectations.


                                                                          8
         3.B.   FINANCING PLAN .

         Within twenty (20) days after the execution of this Agreement, Franchisee must submit a written plan for Franchisee's funding of the
development and operation of the Outlet, which p lan shall be reasonably acceptable to Franchisor and which shall include de tails of the sources
and terms of such funding and such other informat ion or documents required by Franchisor fro m t ime to time (the " Financing Plan ").
Franchisee may not begin development of the Outlet until Franchisor has given its approval of such Financing Plan. Amo ng othe r factors,
Franchisor may consider Franchisee's debt/equity ratio and amount of indebtedness in reviewing such Financing Plan. Once a plan is approved
by Franchisor, Franchisee must adopt it and adhere to it. Any proposed material deviat ion fro m or mod ifications to the origin ally-approved plan
must be submitted to Franchisor for prior approval.

         3.C.   LEAS E OF APPROVED SITES .

        Franchisee shall obtain Franchisor's prior written approval of the Lease before Franchisee signs it (if Franchisee is not the fee simp le
owner of the Site and Outlet premises). After negotiating the Lease terms with the Site owner or lessor, and in any event within one hundred
twenty (120)) days after the Effect ive Date, Franchisee shall present the ready -to-be-signed Lease to Franchisor for its rev iew and approval.
Franchisee shall ensure that such Lease includes such lease terms as Franchisor may require, includ ing but not limited to:

                (1)     a provision reserving to Franchisor the right to receive an assignment of the Lease upon termination or exp iration of this
         Agreement;

                  (2)   a provision requiring the lessor to give to Franch isor all info rmation Franchisor requests relating to the Outlet’s
         operation;

                   (3) a provision requiring the lessor concurrently to send to Franchisor a copy of any written notice of a Lease default sent to
         Franchisee and granting to Franchisor the right (but without any obligation) to cure any Lease default within fifteen (15) bu siness days
         after the expiration of any applicable cure period (if Franchisee fails to do so);

                  (4) a provision evidencing Franchisee’s right to display the Marks in the manner that Franchisor requires (subject only to
         applicable law);

                  (5)   a provision stating that the premises may be used only for the operation of the Outlet; and

                  (6) a provision stating that the Lease may not be materially amended without Franchisor’s prior written consent and that the
         lessor will deliver copies of such modificat ions to Franchisor both when any modificat ions are proposed and when any amendments
         are signed.


                                                                        9
        After receiv ing a copy of a proposed Lease in form for execution, Franchisor shall have the sole right to approve, approve with
modifications or disapprove such proposed Lease, and Franchisee acknowledges and agrees that Franchisor shall have no liability therefor.
Franchisor agrees to use commercially reasonable efforts to deliver such notification to Franchisee within ten (10) business days after receipt
by Franchisor of the proposed Lease. Franchisee agrees that it will not execute a Lease without the prior written approval of Franchisor, and
any such Lease shall contain the express condition precedent of Franchisor's prior written approval thereof.

         Franchisee acknowledges that Franchisor's approval of the Lease is not a represen tation or warranty of any kind, exp ress or imp lied, of
the suitability of the Lease. Franchisor's approval indicates only that Franchisor believes that the Lease meets, or Franchis or has waived, the
general criteria of acceptability that Franchisor has established as of that time.

         Franchisee shall deliver to Franchisor a copy of the fully signed Lease as previously approved within fifteen (15) days after its full
execution. Franchisee further agrees that it will not execute or agree to any modification of the Lease wh ich would affect Franchisor's rights
without the prior written approval of Franchisor. If Franchisee fails to obtain lawfu l possession of an approved site (throug h a signed and
approved Lease) with in sixty (60) days after delivery of Franchiso r's approval of the site, Franchisor may withdraw approval o f such site at any
time thereafter.

         3.D.     OUTLET DEVELOPMENT SPECIFICATIONS AND CONS TRUCTION PLANS .

        Following Franchisor's approval of the Site and Lease Franchiso r will furn ish to Franchisee one or more sets of design plans for
UFood Outlets developed by Franchisor or its Affiliates (" Sample Designs "). The Sample Designs are provided merely to provide guidance
on the design and layout of other UFood Outlets. Fran chisor makes no representation or warranty concerning the suitability of the Sample
Designs for the Site.

         Franchisor also will furn ish to Franchisee specifications of Franchisor's requirements for decoration, layout, color scheme, image,
Operating Assets, and the Trade Dress relating to the development of the Outlet (the " Development S pecifications "). Franchisee
acknowledges and agrees that the Development Specifications, which include Trade Dress, are an integral part of the System an d that
Franchisee will design and construct the Outlet in accordance with the Development Specificat ions. Franchisee will, at its sole expense, cause
to be prepared and submit to Franchisor for approval the preliminary layout for the Outlet and detailed construction plans, specificat ions and
space plans for the Outlet (the " Construction Plans ") that comp ly with the Develop ment Specifications and all applicable ordinances,
building codes, permit requirements, and Lease requirements and restrictions. Franchisee shall make su ch changes to the Construction Plans
that Franchisor specifies. Franchisee shall make no changes to the approved Construction Plans unless such changes are presen ted to and
approved by Franchisor.


                                                                        10
          Despite Franchisor's providing the Samp le Plans and Develop ment Specifications, any changes and approval that Franchisor migh t
provide for the Construction Plans, as between Franchisor (and its Affiliates) and Franchisee, Franchisee is solely responsible for co mp lying
with all laws, ordinances, rules and regulations relating directly or indirectly to the construction and development of the O utlet, including the
Americans with Disabilit ies Act and other laws regarding public acco mmodatio ns for persons with disabilit ies. Franchisee is solely responsible,
as between Franchisor (and its Affiliates) and Franchisee, for any and all claims, liabilities, costs and damages relating to noncompliance or
alleged noncompliance with any such laws, ordinances, rules and regulations, and Franchisee must promptly remedy, at its expense, any such
noncompliance or alleged noncompliance.

         3.E.   DEV ELOPMENT OF THE OUTLET .

         Within two hundred forty (240) days after the Effective Date, Franchisee ag rees at its expense to do or cause to be done (to the extent
not already done) the following:

                  (1)   secure all financing required to fu lly develop the Outlet in accordance with this Agreement;

                  (2)   submit the Construction Plans (and any revisions thereto) and preliminary layout to Franchisor for approval;

                  (3) obtain all required zoning changes, planning consents, building, utility, sign, health, sanitation and business permits,
         licenses and approvals and any other required permits and licenses;

                 (4) construct all required improvements in co mp liance with the Develop ment Specificat ions and Construction Plans
         approved by Franchisor;

                 (5) decorate and lay out the Outlet in comp liance with the Development Specifications and other plans and specifications
         approved by Franchisor;

                  (6) (a) acquire the Co mputer System for the Outlet and acquire the right to use, for the entire term o f this Agreement, the
         Specified Soft ware in the manner specified by Franchisor; (b) arrange for any and all support services that may be necessary to enable
         the Co mputer System and Specified So ftware to operate as specified by Franchisor, whether fro m Franc hisor, its Affiliate or a third
         party; and (c) take all other actions (including installation of electrical wiring and cabling, and temperature and hu mid ity controls) that
         may be necessary to prepare the Outlet to enable the Computer System and Specified Soft ware to operate as specified by Franchisor;

                  (7)   purchase or lease and install (or have installed) all Operating Assets;

                 (8) purchase an adequate opening inventory of Proprietary Products, food and beverage inventory, ingredients, Nutritional
         Products and other products and supplies that Franchisor specifies for the development and operation of the Outlet;

                  (9) obtain all customary contractors' sworn statements and partial and final waivers of lien for construction, remo deling,
         decorating and installation services; and


                                                                         11
                 (10)    open the Out let for business and thereafter operate the Outlet on a regular and continuing basis for the term of this
          Agreement.

          Franchisee shall p rovide Franchisor periodic updates on the schedule and progress for constructing, developing and opening th e
Outlet.

          3.F.   GEN ERAL MANAGER AND OTHER MANAGEMENT PERSONNEL .

          At least sixty (60) days before the Outlet's anticipated Opening Date, Franchisee shall submit to Franchisor the identity and
qualifications of the proposed general manager for the Outlet (the " General Manager ") and the identity and qualificat ions of the proposed
assistant general manager and kitchen manager, (the General Manager and the assistant manager are referred to collectively as the "
Management Personnel "), including curriculu m vitae, work history, experience, references, background verificat ions and other informat ion
that Franchisor reasonably requests on all Management Personnel. Franchisee shall be solely responsible for the hiring, firin g and personnel
decisions, and the terms and conditions of employ ment, relating to the Management Personnel and all other Outlet personnel.

          3.G.   OPERATING ASSETS.

          Franchisee agrees to use in the development and operation of the Outlet only those brands, ty pes, makes and/or models of Operating
Assets which meet Franchisor's standards and specifications. If Franchisor requires, Franchisee must purchase approved brands , types, makes
and/or models of Operating Assets only fro m suppliers designated or approved b y Franchisor, which may include or be limit ed to Franchisor
and/or its Affiliates.

          3.H.   COMPUTER S YS TEM .

         Franchisee agrees to use in the development and operation of the Outlet only those brands, types, makes and/or mo dels of
communicat ions systems, hardware and peripheral equip ment for the Co mputer System, and Specified Soft ware wh ich Fran chisor has fro m
time to time specified or required. Franchisor may periodically mod ify specificat ions for and components of the Comp uter Syst em and
Specified Soft ware during the term of this Agreement. These requirements and modifications, and/or other technological developments or
events, may require Franchisee to purchase, lease and/or license new or modified equip ment, hardware and/or software and to o btain service
and support for the Co mputer System and Specified Software. A lthough Franchisor cannot estimate the future costs of the Compu ter System
and Specified Soft ware, Franchisee agrees to incur the costs of obtaining the equipment, hard ware and software (or addit ions or modifications)
and required service or support. Franchisor has no obligation to reimburse Franchisee for any costs relating thereto. Within sixt y (60) days after
receiving notice fro m Franchisor, Franchisee agrees to obtain the new or mo dified co mponents of the Co mputer System or Specified So ftware,
as applicable, that Franchisor designates and ensure that it, as modified, is functioning properly.


                                                                        12
          Franchisor may charge Franchisee reasonable fees if Franchisor develops or has developed (and, once developed, for supporting ,
modifying and enhancing) proprietary software or other technology that Franchisor licenses to Franchisee, products, services and support
relating to the Computer System maintenance and support services that Franchisor or its Affiliates provide to Franchisee. Fra nchisee agrees to
sign any software license agreement or similar docu ment that Franchisor or its Affiliates prescribe to re gulate Franchisee's use of, and
Franchisor's and Franchisee's respective rights and responsibilities with respect to, any software, other technology or maint enance or support
services that Franchisor or its Affiliates periodically provide.

          Notwithstanding the fact that Franchisee must buy, use and maintain the Co mputer System and Specified Soft ware under Franchisor's
standards and specifications, and notwithstanding any software, other technology or maintenance or support services that Fran chisor or its
Affiliates might periodically provide to Franchisee, Franchisee will have sole and co mp lete responsibility for: (1) the acquisition, operat ion,
maintenance and upgrading of the Computer System and Specified Software; (2) the manner in which Franchisee's Co mputer System interfaces
with Franchisor's equipment and that of third parties; and (3) any and all consequences that may arise if the Co mputer System is not properly
operated, maintained and upgraded or if the Co mputer System fails to operate on a continuo us basis or as expected by Franchisor or Franchisee.

         3.I.   OUTL ET OPENING .

         Franchisee agrees not to open the Outlet for business until:

                  (1) Franchisor notifies Franchisee in writing that all of Franchisee's pre-opening obligations under this Agreement have
         been fulfilled;

                 (2) pre-opening train ing of the General Manager and the assistant manager (and, if applicable, the Managing Owner) has
         been completed to Franchisor's satisfaction;

                  (3) all amounts then due to Franchisor and its Affiliates have been paid and all required Guaranties and other agreements
         are executed and delivered to Franchisor; and

                 (4) Franchisor has been furnished with copies of all insurance policies required pursuant to this Agreement, or such other
         evidence of insurance coverage and payment of premiu ms as Franchisor requests.

         Franchisee agrees to comply with these conditions and to be prepared to open the Outlet for business within the appropriate t ime
period specified in Section 3.E. above. Franchisor's determination that Franchisee has met all of Franchisor's pre -opening requirements shall
not constitute a waiver of non-co mpliance by Franchisee or o f Franchisor's right to demand full co mp liance with such requirements. Franchisee
further agrees to open the Out let for business and commence conduct of business at the Outlet pursuant to this Agreement with in five (5) days
after Franchisor gives notice to Franchisee stating that the Outlet is ready for opening.


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         3.J.   GRAND OPENING MARKETING PROGRAM.

         Unless there is an operating UFood Outlet at the Site being purchased by Franchisee, Franchisee shall conduct a grand opening
advertising, marketing and promotional program for the Outlet to commence appro ximately 30 days after the opening of the Outl et during the
period commencing no less than seven (7) days prior to, and ending seven (7) days after, to last for appro ximately two weeks, and to expend no
less than Fifteen Thousand Dollars ($15,000) on such advertising, marketing and promot ion during such pe riod. Such program shall:

                 (1) be in addit ion to advertising, marketing and pro motion conducted pursuant to Section 10 of this Agreement and shall
         not count towards the Local Marketing Spending Requirement;

                 (2) utilize only those advertising, marketing and public relations programs, firms, media and materials approved by
         Franchisor; and

                  (3) be conducted in accordance with Franchisor's specifications and standards and pursuant to a grand opening plan which
         Franchisee shall p repare and submit to Franchisor fo r approval at least twenty -one (21) days prior to the Outlet's Opening Date. If
         Franchisee does not prepare a grand opening program and obtain Franchisor's approval of such plan, Franchisor may (but need not)
         prepare and execute the grand opening plan for the Outlet at Franchisee's expense.

         3.K.   RELOCATION OF THE OUTL ET .

         If the Lease expires or terminates without fault of Franchisee, if the Site is destroyed, condemned or otherwise rendered unusable as a
UFood Outlet in accordance with this Agreement, or if, in the judg ment of Franchisor and Franchisee, there is a change in the character of the
location of the Site sufficiently detrimental to its business potential to warrant the Outlet's relocation, Franchisor will n ot unreasonably
withhold permission for relocation of the Outlet to a site within the Territory which meets Franchisor's then current site criteria. Any such
relocation shall be at Franchisee's sole expense. Franchisee shall seek and obtain Franchisor's approval of the rep lacement site and lease
pursuant to Franchisor's then current site approval process, and the Outlet shall re -open at the replacement site as soon as reasonably
practicable but in no event mo re than one hundred eig hty (180) days after the closing of the orig inal location. Franchisee shall not relocate the
Outlet except pursuant to this Subsection.

4.       TRAINING AND GUIDANCE .

         4.A.   TRAINING .

          Prior to the co mmencement of the operation of the Outlet, the Management Personnel must attend and complete to Franchisor's
satisfaction Franchisor's initial management train ing program in the operation of a UFood Outlet. Each Outlet must have a min imu m of one
General Manager, one assistant manager and one kitchen manager, all of whom must be certified by Franchisor as having success fully
completed init ial management training. If the Outlet is the first UFood Outlet operated by Franchisee, the Managing Owne r mu st also complete
the initial management train ing program to Franchisor’s satisfaction.


                                                                        14
            If Franchisee wishes to have additional personnel attend initial t rain ing, Franchisee sh all require Franchisor's consent and Franchisor
may impose a charge fo r each additional person. Such in itial train ing program may include classroom train ing, instruction at designated
facilit ies and/or hands-on training in an operating UFood Outlet. The Management Personnel (and, if applicable, the Managing Owner) must
complete all required in itial training to Franchisor's satisfaction at least three (3) weeks before the Opening Date.

         Franchisor may, as it deems necessary, require any or all of the Management Personnel or other supervisory employees at the Outlet to
attend or participate in updated, additional or refresher train ing programs or conferences during the term of this Agreement, which might be
administered via the Co mputer System. Franchisee shall pay Franchisor's reasonable fees for these programs. Franchisor also may charge for
updated, additional or refresher training materials supplied to Franchisee or its personnel.

         In the event that the General Manager ceases to hold such position at the Outlet, Franchisee shall have thirty (30) days in which to
appoint a replacement General Manager, who is subject to Franchisor's approval pursuant to Section 3.F. above and must attend and comp lete
to Franchisor's satisfaction the initial management train ing program that Franchisor designates promptly after appoint ment. Franchisee must
pay Franchisor's reasonable fees for training substitute or replacement managers. If Franchisor determines that the General M anager has failed
to satisfactorily co mplete the init ial management training program or any additional or refresher train ing program, Franchisee shall
immed iately hire a rep lacement General Manager and promptly arrange for such person to complete the initial management traini ng program
that Franchisor designates to the satisfaction of Franchisor.

        Franchisee shall be responsible for the travel, liv ing and other expenses (includ ing local transportation expenses) and compe nsation of
the Management Personnel and any other agents or emp loyees of Franchisee incurred in connection with attendance at training programs or
conferences or work at UFood Outlets that is part of their training.

         Franchisee will cooperate with other franchisees of Franchisor and Franchisor's Affiliates by making available to such othe r
franchisees, at the request of Franchisor, such facilit ies at the Outlet for the staff of such other franchisees to gain expe rience in the operation
and management of UFood Outlets, all as Franchisor may reasonably require, provided that any out -of-pocket expense incurred by Franchisee
as a result of so doing shall be borne by such other franchisee, and provided that such cooperation does not unreasonably int erfere with the
proper operation of the Outlet.


                                                                         15
         4.B.   PRE-OPENING TRAINING AT THE OUTL ET .

         Franchisor will p lace (as Franchisor shall consider necessary or desirable) staff of Franchisor or its Affiliate in the Outle t for a period
of five days before and five days after the Opening Date as Franchisor shall, in its sole discretion, consider necessary to help establish the
proper operation of the Outlet in accordance with this Agreement and the Manuals, provided that if Franchisor determines that Franchisee
needs such opening assistance for more than ten (10) days, Franchisee shall pay Franchisor for such assistance at Franchisor's then current per
diem rates. Franchisor will pay salaries, taxes, benefits and per diem fo r Franchisor’s opening trainers for up to 10 days. Franchisee shall pay
for Franchisor’s trainers’ travel, hotel acco mmodations, and ground transportation.

         Franchisee will cooperate fu lly, and require that its staff cooperate fully, with the personnel of Franchisor or its Affiliat e in p roviding
such assistance.

         4.C.   ONGOING GUIDANCE AND ASSIS TANCE .

         Franchisor shall fro m t ime to time fu rnish reasonable guidance to Franchisee with respect to:

                  (1)   methods, specifications, standards and operating procedures utilized by UFo od Outlets and any modificat ions thereof;

                 (2) purchasing and leasing required or reco mmended Operating Assets, Nutritional Products, Proprietary Products, food
         and beverage inventory, ingredients, supplies and other materials;

                  (3)   development and imp lementation of local advertising, marketing and promotional programs;

                  (4)   general operating and management procedures of UFood Outlets;

                  (5)   establishing and conducting emp loyee training programs at the Outlet; and

                  (6)   ad min istrative, bookkeeping and accounting procedures for UFood Outlets.

         Such guidance shall, in the discretion of Franchisor, be furn ished in the form of the Manuals, bulletins, Franchisor's intran et, written
materials, reports and reco mmendations, other materials and intangibles, refresher training programs and/or telephonic consultations or
consultations at the offices of Franchisor or at the Outlet. If Franchisee requests that Franchisor provide special or addit ional guidance or
training of Franchisee or Outlet personnel or other assistance in operating the Outlet, and Franchisor agrees, then Franchisee sha ll pay
Franchisor's then applicable charges, including Franchisor's per diem charges and travel and liv ing expenses for Franchisor personnel.

         If Franchisor determines that Franchisee’s operations at the Outlet are not in co mpliance with System Standards, Franchisor may
require that Franchisee’s personnel obtain additional guidance, re-train ing or other assistance from Franchisor at the expense of Franchisee, to
include but not be limited to Franchisor’s then current per diem charges and travel and liv ing expenses for Franchisor’s personnel.


                                                                          16
         4.D.   MANUALS .

          Franchisor shall loan to Franchisee, fo r its sole use, one (1) set of the Manuals, as they may be mod ified, added to, replaced or
supplemented by Franchisor fro m t ime to time, whether by way of supplements, rep lacement pages, franchise bulletin s, or other official
pronouncements or means. Franchisor may modify the Manuals from time to time to reflect changes in the System Standards Franc hisee shall
keep its copy of the Manuals current by immediately inserting all modified pages or materials furn ished by Franchisor. If Fran chisee's copy of
the Manuals is lost or stolen, Franchisee shall obtain a replacement copy at Franchisor's then applicable charge. Franchisee must promptly
communicate all changes to the Manuals to its employees. In the event of a dispute about the contents of the Manuals, the master copies
maintained by Franchisor at its principal office shall control. Franchisee acknowledges that the Manuals are part of the Conf idential
Information and will be used and protected accordingly.

         At Franchisor's option, Franchisor may post the Manuals on an intranet or a restricted Website to wh ich Franchisee and certain
emp loyees of Franchisee designated by Franchisor will have access. If Franchisor does so, Franchisee and such employees must sign the
agreement(s) that Franchisor periodically specifies pertaining to the use of such intranet or Website and must monitor the We bsite for any
updates to the Manuals or System Standards. Any passwords or other digital identificat ions necessary to access the Manuals on such an intranet
or Website are part of Confidential Information and will be used and protected accordingly.

         4.E.   DEL EGATION B Y FRANCHISOR .

         Franchisee agrees that Franchisor shall have the right, fro m time to time, to delegate the performance of any portion or all of its
obligations and duties under this Agreement to designees, whether they are Affiliates of Franchisor, agents of Franchisor or independent
contractors with wh ich Franchisor has contracted to provide such services.

5.       MARKS .

         5.A.   OWNERS HIP AND GOODWILL OF MARKS .

           Franchisee's right to use the Marks is derived only fro m this Agreement and is limited to Franchisee's operating the Outlet a ccording
to this Agreement and all System Standards Franchisor prescribes during its term. Franchisee's unauthorized use of the Marks is a breach of this
Agreement and infringes Franchisor's rights in the Marks. Franchisee acknowledges and agrees that its use of the Marks and an y goodwill
established by that use are exclusively for Franchisor's benefit and that this Agreement does not confer any goodwill or other interest in the
Marks upon Franchisee (other than the right to operate the Outlet under this Agreement). All provisions of this Agreement relat ing to the Marks
apply to any additional proprietary trade and service marks Franch isor authorizes Franchisee to use. Franchisee may not at any time during or
after this Agreement's term contest or assist any other Person in contesting the validity, or Franchisor's ownership, of the Marks.


                                                                       17
         5.B.   LIMITATIONS ON FRANCHIS EE'S US E OF MARKS .

         Franchisee agrees to use the Marks as the Outlet's sole identification, except that Franchisee agrees to identify itself as t he Outlet's
independent owner in the manner Franchisor prescribes. Franchisee may not use any Mark (1) as part of any co rporate or legal business name,
(2) with any prefix, suffix, or other modifying words, terms, designs, or symbols (other than logos Franchisor has licensed to Fr anchisee
pursuant to this Agreement), (3) in selling any unauthorized services or products, (4) as part of any do main name, ho mepage, electronic
address, or otherwise in connection with a Website, or (5) in any other manner that Franchisor has not expressly authorized in writing.

          Franchisee agrees not to use any Mark in advertising the transfer, sale, or other disposition of the Outlet or an ownership int erest in
Franchisee without Franchisor's prior written consent, which will not be unreasonably withheld. Franchisee agrees to dis play the Marks
prominently as Franchisor prescribes at the Outlet and on forms, advertising, supplies, and other materials Franchisor design ates. Franchisee
agrees to give the notices of trade and service mark registrations that Franchisor specifies and to obtain any fictit ious or assumed name
registrations required under applicable law.

         5.C.   NOTIFICATION OF INFRINGEMENTS AND CLAIMS .

           Franchisee agrees to notify Franchisor immediately of any apparent infringement or challenge to Franchisee's use of any Mark, or of
any Person's claim of any rights in any Mark, and not to communicate with any Person other than Franchisor, its attorneys, an d Franchisee's
attorneys, regarding any in fringement, challenge, or claim. Franchisor may take the action dee med appropriate (including no action) and
control exclusively any lit igation, U.S. Patent and Trademark Office proceeding, or other administrative proceeding arising f ro m any
infringement, challenge, or claim or otherwise concerning any Mark. Franchisee ag rees to sign any documents and take any other reasonable
action that, in Franchisor's judgment or in the opinion of its attorneys, are necessary or advisable to protect and maintain its interests in any
lit igation or Patent and Trademark Office o r other proceeding or otherwise to protect and maintain its interests in the Marks. Franchisor will
reimburse Franchisee for the costs of taking any action that Franchisor has asked Franchisee to take.

         5.D.   MODIFICATION AND DISCONTINUANCE OF MARKS .

         Franchisor shall have the right to determine, in its sole discretion, whether at any time it is advisable to modify or discontinue using
any Mark and/or to use one or more addit ional or substitute trade or service marks. Franchisee agrees to comply with Fran chisor's directions
within a reasonable time after receiv ing notice. Franchisor need not reimbu rse Franchisee for its direct expenses of changing the Outlet's signs,
for any loss of revenue due to any modified or discontinued Mark, or for the expenses of p romoting a modified or substitute trademark or
service mark.


                                                                        18
          Franchisor's rights in this Section 5.D. apply to any and all of the Marks (and any portion of any Mark) that it autho rizes Franchisee to
use in this Agreement. Franchisor may exercise these rights at any time and for any reason, business or otherwise, that it th inks best. Franchisee
acknowledges both Franchisor's right to take this action and its obligation to comply wit h its directions.

         5.E.   INDEMNIFICATION FOR US E OF MARKS .

        Franchisor agrees to reimburse Franchisee for all damages and expenses that Franchisee incurs in any trademark infrin gement
proceeding disputing Franchisee's authorized use of any Mark under this Agreement if Franchisee has timely notified Franchiso r of, and
complies with Franchisor's directions in responding to, the proceeding. At Franchisor's option, it may defend and control the defense of any
proceeding arising fro m Franchisee's use of any Mark under this Agreement.

6.       CONFIDENTIAL INFORMATION AND INNOVATIONS .

         6.A.   CONFIDENTIAL INFORMATION .

          Franchisor and its Affiliates, as applicable, possess and may further develop and acquire certain confidential and proprietar y
informat ion and trade secrets relating to the System or the development or operation of UFood Outlets, including the follo wing categories of
informat ion, methods, techniques, procedures and knowledge developed or to be developed by Franchisor, its consultants or con tractors, its
Affiliates or its designees, and/or franchisees and developers (the " Confi dential Informati on "):

                  (1)   site selection criteria;

                  (2)   recipes and related informat ion concerning Proprietary Products and other items offered for sale by UFood Outlets;

                  (3)    System Standards and other methods, techniques, requirements, equipment, recipes, specifications (including
         Develop ment Specificat ions), standards, policies, procedures, in formation, concepts and systems relating to, and knowledge of and
         experience in, the development, operation and franchising of UFood Out lets;

                  (4)   marketing research and advertising, marketing and promot ional programs for UFood Outlets;

                   (5) knowledge concerning the logic, structure and operation of Compute r System components and Specified Soft ware, and
         all additions, modifications and enhancements thereof, all data generated fro m use of the Co mputer System and Specified So ftw are,
         and the logic, structure and operation of the database file structures contain ing such data and all additions, modificatio ns and
         enhancements thereof;

                 (6) specifications for and knowledge of suppliers of Proprietary Products, Nutritional Products, certain Operating Assets,
         and other products and supplies used at or sold fro m UFood Outlets;


                                                                        19
                (7) info rmation concerning customers, customer lists, operating results, financial performance and other financial data of
         UFood Outlets (other than operating results, financial perfo rmance and other financial data of the Outlet);

                  (8)    the Manuals;

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

                  (10)    the terms and conditions of this Agreement and the Development Agreement.

          Franchisor will d isclose to Franchisee such parts of the Confidential Informat ion as Franchisor deems necessary or advisable fro m
time to time for the development and operation of the Outlet, both during training and in guidance and assistance furnished t o Franchisee
during the term of this Agreement, and Franchisee may learn or otherwise obtain additional Confidential In formation fro m Fran chisor, its
Affiliates, its franchisees, its developers and others during the term of this Agreement. Franchisee acknowledges and agrees that neither
Franchisee nor any agent, representative or contractor of Franchisee will acquire any interest in or right to use the Confide ntial Informat ion,
other than Franchisee's right to utilize certain Confidential Informat ion in the development and operation of the Outlet pursuant to this
Agreement, and that the use or duplication of the Confidential Informat ion in any other business would constitute an unfair m ethod of
competition with Franchisor and other UFood Outlet developers and franchisees. Franchisee agrees to disclose the Confidential Informat ion to
its Owners and to employees of the Outlet only to the extent reasonably necessary for the operation of the Outlet and only if such individuals
have agreed to maintain such informat ion in confidence in an agreement enforceable by Franchisor.

          Franchisee acknowledges and agrees that the Confidential Info rmation is confidential to and a valuable asset of Franchisor, is
proprietary, includes trade secrets of Franchisor, and is disclosed to Franchisee solely on the condition that Franchisee, its Owners and its
emp loyees who have access to the Confidential Informat ion agree, and Franchisee (on its and their behalf) does hereby agree, that, during and
after the term of this Agreement, Franchisee, its Owners and such employees:

                  (a)    will not use the Confidential Information in any other business or capacity;

                  (b)    will maintain the absolute secrecy and confidentiality of the Confidential Informat ion;

                  (c) will not make unauthorized copies of any port ion of the Confidential Information d isclosed via electronic mediu m or in
         written or other tangible form; and

                   (d) will adopt and implement all reasonable procedures prescribed fro m time to t ime by Franch isor to prevent unauthorized
         use or disclosure of or access to the Confidential Information, including requiring its employees who will have access to such
         informat ion to execute a non-co mpetition and confidentiality ag reement in the form attached hereto a s Exhi bit F (the ―
         Confi dentiality and Non-Competiti on Agreement ‖). Franchisee shall provide Franchisor, at its request, executed originals of each
         such Confidentiality and Non-Co mpetition Agreement.


                                                                         20
         Notwithstanding anything to the contrary contained in this Agreement and provided Franchisee shall have obtained Franchisor's prior
written consent, the restrictions on Franchisee's, its Owners' and its emp loyees' disclosure and us e of the Confidential In format ion shall not
apply to the following:

                  (i) informat ion, methods, procedures, techniques and knowledge wh ich are o r beco me generally known throughout the
         restaurant industry or the nutritional supplement industry, ot her than through disclosure (whether deliberate o r inadvertent) by
         Franchisee or any other party having an obligation of confidentiality to Franchisor; and

                   (ii) the disclosure of the Confidential Informat ion in judicial or ad ministrative procee dings to the extent that Franchisee is
         legally co mpelled to d isclose such information, provided Franchisee has notified Franchisor prior to d isclosure and shall have used its
         best efforts to obtain, and shall have afforded Franchisor the opportunity to obt ain, an appropriate protective order or other assurance
         satisfactory to Franchisor of confidential t reatment for the info rmation required to be so disclosed.

         6.B.   INNOVATIONS .

         Franchisee agrees to disclose to Franchisor all ideas, concepts, methods, techniques and products conceived or developed by
Franchisee and/or its Affiliates, Owners, agents, representatives, contractors and employees during the term of th is Agreemen t relating to the
development or operation of UFood Outlets. Franchisee hereby grants to Franchisor, and agrees to procure from such other Persons, a
perpetual, non-exclusive, and worldwide right to use, sublicense the use of, and commercialize in any way any such ideas, concepts, methods,
techniques and products in all businesses operated by Franchisor or its Affiliates, developers, franchisees and designees. Franchisor shall have
no obligation to make any lu mp sum or other payments to Franchisee or any other Person with respect to any such ideas, concep ts, methods,
techniques or products. Franchisee will not use, nor will it allow any other Person to use, any such idea, concept, method, technique or product,
whether in connection with the Outlet or otherwise, without obtaining Franchisor's prior written approval. Franchisee ag rees to sign and deliver
such instruments and documents, provide such assistance and perform such other acts as Franchisor shall designate in order fo r Franchisor or
its designee to obtain intellectual property rights or to obtain exclusive ownership right s in such ideas, concepts, methods, techniques and
products.


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7.       EXCLUS IVE RELATIONS HIP .

          Franchisee acknowledges and agrees that Franchisor would be unable to protect the Confidential In formation against unauthorized use
or disclosure, and would be unable to encourage a free exchange of ideas and information among franchisees and developers of UFood Outlets,
if franchisees, developers and their Owners (and members of their respective Immediate Families) were permitted to engage in, hold interests in
or perform services for Co mpet itive Businesses. Franchisee further acknowledges and agrees that the restrictions contained in this Section 7
will not h inder its activities or the activit ies of its Owners (or members of their respective Immediate Families) under this Agreement or in
general. Franchisor has entered into this Agreement with Franchisee o n the express condition that, with respect to restaurants featuring food
items and/or beverages that are marketed as low-fat, low-carbohydrate or low-calorie food and retail businesses featuring the sale of nutritional
products or similar businesses, Franchisee and its Owners and members of their respective Immediate Families will deal exclusively with
Franchisor. Franchisee therefore agrees that, during the term of this Agreement, neither Franchisee nor any Owner of Franchis ee, nor any
member of the Immed iate Family of Franchisee or of any Owner, shall d irectly or indirectly :

                  (a) have any controlling or non-controlling interest as a record or beneficial o wner in any Co mpetitive Business, wherever
         located or operating, provided that this restrict ion shall not be applicable to the ownership of shares of a class of securit ies listed on a
         stock exchange or traded on the over-the-counter market and quoted on a national inter-dealer quotation system that represent less
         than one-half percent (0.5%) of the number of shares of that class of securities issued and outstanding;

                  (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any
         Co mpetitive Business, wherever located or operating;

                 (c) d irectly or indirectly loan any money or other thing of value to, guara ntee any loan to, lease any personal or real
         property to, or permit the use of its name in connection with, any Co mpetitive Business or any owner, director, officer, mana ger,
         emp loyee or agent of any Co mpetitive Business, wherever located or operating;

                  (d) divert or attempt to divert any actual or potential business or customers of the Outlet or any other UFood Outlet to any
         Co mpetitive Business; or

                  (e) employ or seek to emp loy any individual who is emp loyed by Franchisor, an Affilia te of Franchisor or any other
         developer or franchisee of a UFood Outlet, o r otherwise directly or indirectly induce any such individual to leave said emplo yment,
         without the prior written consent of such individual's employer.

         Furthermore, if Franchisee is a corporation, limited liab ility co mpany, partnership or other business entity, it will not engage in any
business or other activity, directly or indirectly, other than the development and operation of the Outlet and other UFood Ou t lets developed and
operated pursuant to other agreements with Franchisor.


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          Franchisee acknowledges and agrees that the failure of any Person restricted pursuant to this Section to comply with the restrictions of
this Section (regardless of whether that Person actually has executed this Agreement, a Guarantee or a confidentiality or non -competition
agreement) shall constitute a breach of this Agreement by Franchisee. Without limiting the foregoing, and in addition to any remedies
Franchisor may have under this Agreement, if Franchisee or any Affiliate of Franchisee should hire an individual who, at t he time of such
hiring, is employed by Franchisor or one of its Affiliates and whose duties include training, Franchisee shall pro mptly pay t o Franchisor as
liquidated damages an amount equal to the then current annual salary of the indiv idual as reflected in the personnel records of Franchisor or its
Affiliate, as applicable. Franchisee acknowledges and agrees that Franchisor makes a substantial investment in its training p ersonnel and that
the aforementioned liquidated damages are a reasonable estimate of the actual damages which would be incurred by Franchisor or its Affiliate.

8.       FEES .

         8.A.   INITIAL FRANCHIS E FEE .

         Franchisee agrees to pay to Franchisor upon execution of this Agreement an init ial franchise fee s et forth in Exhi bit D heret o (the "
Initial Franchise Fee "). The Init ial Franchise Fee shall be fu lly earned by Franchisor upon the earlier of payment thereof or execution of this
Agreement. The In itial Franchise Fee is non-refundable in whole or in part and is paid to co mpensate Franchisor for various services provided
to Franchisee prior to the opening of the Outlet, including providing initial training and inspecting the Outlet prior to ope ning. The Initial
Franchise Fee is not compensation for the use of the Marks or the Copyrighted Works.

         8.B.   ROYALTY FEE .

         Franchisee shall pay to Franchisor a continuing royalty fee (the " Royal ty Fee ") in an amount equal to: (1) five percent (5%) of the
Outlet's F&B Gross Receipts; plus (2) five percent (5%) of the Outlet's Nutritional Products Gross Receipts. The Royalty Fee shall be payable
to Franchisor on or before Tuesday of each week based on the Outlet's F&B Gross Receipts and Nutritional Products Gross Receipts for
the weeks ending on the immediately preced ing Sunday. Franchisor, upon written notice to Franchisee, shall have the right to change the timing
of Franchisee's payments of Royalty Fees and Systemwide Advertising Fund contributions (as defined below) due under this Agre ement.
Franchisee shall not subordinate to any other obligation its obligation to pay the Royalty Fee or any other fee or charge hereunder.

         8.C.   DEFINITIONS .

         As used in this Agreement, the term " Gross Receipts " shall mean and include all receipts generated directly o r indirect ly as a result
of the operation of the Outlet, or otherwise resulting fro m or attributable to the rights granted herein to Franchisee, wheth er arising fro m sales
of food and beverage items , Nutrit ional Products, Catering Serv ice, Delivery Serv ice or other goods or services sold on or from the Outlet, or
otherwise, and shall include the follo wing:

                  (1) the retail p rice of all food, beverage, Nutritional Products and approved gift certificates, gift cards and stored value
         cards sold by Franchisee. For all purposes of this Agreement, items sold at a discount imp lemented by Franchisee in good fait h and
         consistent with sound business practices shall be valued at the discounted retail v alue thereof.


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                 (2) All charges for services rendered in connection with the operation of the Outlet ( e.g. , cover charges, service charges,
         customer gratuit ies, etc.).

                  (3) A ll credit transactions of whatever nature carried out during the week in question shall be recorded as a closed
         transaction when the transaction is effected ( i.e. , at point of sale).

         Notwithstanding the foregoing, the following, and only the follo wing, receipts shall be excluded fro m the term " Gross Receipts ":

                  (a) sales taxes imposed by governmental authorities upon operations of the Outlet, charged to Outlet patrons, and actually
         paid to such governmental authorities by Franchisee; and

                  (b) the retail p rice of food, beverage and Nutritional Products sold which are paid for using approved gift certificates, gift
         cards or stored value cards.

        " F&B Gross Receipts " shall mean only those Gross Receipts generated from the sale of food and beverage items to Outlet patrons
for consumption. " Nutritional Produc ts Gross Recei pts " shall mean and include all Gross Receipts that are not specifically designated as
F&B Gross Receipts.

         8.D.   INTEREST ON LATE PAYMENTS .

         All fees and other amounts which Franchisee owes to Franchisor or its Affiliates shall bear interest after due date for the number of
days which such payment is overdue at a rate equal to the lesser of: (1) eighteen percent (18%) per annum; or (2) the highest legal rate
permitted by applicab le law. Franchisee acknowledges that this Subsectio n shall not constitute Franchisor's agreement to accept such payments
after they are due or a co mmit ment by Franchisor to extend credit to, o r otherwise finance, Franchisee's operation of the Out let. Further,
Franchisee acknowledges that failure to pay all such amounts when due shall, notwithstanding the provisions of this Subsection, constitute
grounds for termination of th is Agreement, as provided in this Agreement.

         8.E.   APPLICATION OF PAYMENTS .

        Notwithstanding any designation by Franchisee, Franchisor may apply any payments received fro m Franchisee, or any indebtedness of
Franchisor or any of its Affiliates to Franchisee, to any past due indebtedness, of whatever nature, of Franchisee to Franchisor or its Affiliates.


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         8.F.   ELECTRONIC FUNDS TRANS FER .

         Franchisee agrees to remit fees and other amounts due to Franchisor hereunder via electronic funds transfer or other means as
Franchisor may specify fro m time to time. If Franchisor notifies Franchisee to use such payment method, Franchisee agrees to comp ly with
procedures specified by Franchisor and to perform such acts and deliver and execute such documents, including authorizat ion f or direct debits
fro m Franchisee's business bank operating account, as may be necessary to assist in or accomp lish payment b y such method. Under this
procedure Franchisee shall authorize Franchisor to initiate debit entries and/or credit correction entries to a designated ch ecking or savings
account for payments of fees and other amounts payable to Franchisor and its Affiliates and any interest charges due thereon. Franchisee shall
make the funds available to Franchisor for withdrawal by electronic transfer no later than the due date for payment therefor. If Franchisee has
not timely reported the Outlet's Gross Receipts to Franchisor for any reporting period, then Franchisor shall be authorized, at Franchisor's
option, to debit Franchisee's account in an amount equal to (a) the fees transferred fro m Franchisee's account for the last reporting period for
which a report of the Outlet's Gross Receipts was provided to Franchisor as required hereunder or (b) the amount due based on information
retrieved fro m the Co mputer System.

9.       OUTLET IMAGE AND OPERATION .

         9.A.   CONDITION AND APPEARANCE OF THE OUTLET .

         Franchisee agrees that, during the term of this Agreement:

                 (1) neither the Outlet nor the Site will be used for any purpose other than the operation of a UFood Outlet in fu ll
         compliance with this Agreement and all System Standards;

                  (2) Franchisee will maintain the condition and appearance of the Site, the Outlet and its Operat ing Assets in accordance
         with the specifications and standards of Franchisor and consistent with the image o f a UFood Outlet as a first -class business;

                   (3) Franchisee will perform such maintenance (including maintenance procedures and routines which Franchisor prescribes
         fro m t ime to t ime) with respect to the Operating Assets, the Outlet and the Site as may be required or directed by Fran chisor fro m time
         to time to maintain such condition, appearance, and efficient operation, including: (a) continuous and thorough cleaning and sanitation
         of the interior and exterior of the Outlet; (b) thorough repainting and redecorating of the interior an d exterior o f the Outlet and/or the
         Site at reasonable intervals; (c) interior and exterior repair of the Outlet and/or the Site; and (d) repair or replacement of damaged,
         worn out or obsolete Operating Assets.

                  (4) Franchisee will not make any material alterations to the Site, or to the appearance of the Outlet as orig inally developed,
         without the prior approval of Franchisor;

                  (5) Franchisee will place or d isplay at the Outlet (interio r and exterior) only such signs, emb lems, lettering, logos, and
         display and advertising materials that are fro m time to time approved by Franchisor; and


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                   (6) Subject to approval by Franchisor of the plans, layouts, designs and contractor, upon Franchisor's request made not
         more than once during the initial term of this Agreement, Franchisee will substantially remodel, expand, redecorate, re -eq uip and
         refurnish the Site, the Outlet and/or those Operating Assets specified by Franchisor to reflect changes in the appearance and operation
         of UFood Outlets prescribed by Franchisor and required of new franchisees. Franchisor shall not make such a request of Franch isee
         during the first five (5) years of the term of this Agreement. Franchisee acknowledges that its obligations under this
         Subparagraph 9.A.(6) could result in its making extensive structural changes to, and significantly remodeling and renovating, the
         Site and the Outlet, and/or in Franchisee's spending substantial amounts for new Operating Assets, and Franchisee agrees to incur an y
         capital and other expenditures required in order to comply with such obligations, even if such expenditures cannot be amortiz ed over
         the remain ing term of this Agreement. The limitations set forth in this Subparagraph 9.A.(6) shall not apply to changes in the
         Co mputer System and Specified Software (wh ich are addressed in Section 3.H. )

         In addition to any other remedies available to Franchisor, if Franchisee does not maintain the condition and appearance of the
Operating Assets, Site and Outlet as herein required, Franchisor may, upon not less than ten (10) days' written notice (or, in cases of health or
sanitation hazards or other public endangerment, as determined by Franchisor, immediately on oral o r written notice) to Franchisee: (i) arrange
for the necessary cleaning or sanitation, repair, remodeling, upgrading, painting or decorating; or (ii) replace, as necessary, Operating As sets
and/or other equipment. Franchisee shall pay the entire cost thereof on or before the fifth (5th) day following the receipt o f a b ill fo r such work
fro m Franchisor.

         9.B.   OUTLET PRODUCTS AND S ERVICES .

         Franchisee agrees that it shall:

                 (1) offer for sale and sell at and fro m the Outlet all products (including Nutrit ional Products and food and beverage items
         prepared in accordance with Franchisor's specifications) and services that Franchisor specifies fro m time to time;

                  (2) not offer fo r sale, sell, g ive away or otherwise distribute, whether at the Outlet, the Site or any other location, any
         products or services that Franchisor has not authorized;

                  (3) discontinue offering for sale, selling, giving away or otherwise distributing any products or services that Franchisor at
         any time disapproves in writ ing; and

                   (4) not permit any vending equipment or gaming machinery of any kind or nature in the Outlet or on the Site, except with
         the prior written approval of Franchisor in each instance.

         Franchisee acknowledges and agrees that its provision of high quality products and services is essential to the proper functioning and
goodwill o f the System and, therefore, that Franchisee shall provide all produ cts and services that Franchisor periodically authorizes in
accordance with the System Standards. Franchisee also acknowledges and agrees that if Franchisor requires the Outlet to offer new or
substitute products or services not currently offered at UFood Outlets, Franchisee agrees to offer such services and/or products in compliance
with the System Standards and to diligently pursue obtaining any permits and taking such actions (including acquiring Operati ng Assets,
supplies and materials) required to offe r such products and/or services.

         9.C.   CATERING S ERVICE AND DELIV ERY S ERVICE .

          Franchisee shall have the right to provide Catering Service and/or Delivery Service fro m the Outlet, provided that Franchisee
complies with the terms and conditions of this Agreement and all System Standards applicable thereto, and provided that Franc hisee shall pay
the Royalty Fee on all Gross Receipts generated from offering Catering Serv ice or Delivery Service. Furthermore, Franchisor shall have the
right to require Franchisee to offer Catering Service, but not Delivery Service. Franchisee shall provide Franchisor at least ninety (90) days'
written notice of its election to provide Catering Serv ice and/or Delivery Serv ice. Franchisee shall not establish another ou tlet or property
(other than the Site) for use in connection with Catering Serv ice or Delivery Service.

         Franchisee may determine the geographic area within wh ich it will offer Catering Serv ice or Delivery Service, provid ed that
(1) Franchisee must ensure that its customers receive at all t imes high quality food and beverage products prepared and maintaine d in
accordance with Franchisor's specifications, and (2) Franchisee shall not provide Catering Serv ice or Delivery Service to any location within
the contract territory of another franchisee of UFood Outlets.

         Franchisee shall:

                  (a) require all catering and delivery drivers to strictly co mply with all regulations, laws and ord inances applicable to the
         operation of motor vehicles and use due care, taking into consideration road conditions, when performing Catering Serv ices an d
         Delivery Services;
         (b) require all catering and delivery drivers to maintain adequate motor vehicle liability insurance in the amounts specified
by Franchisor fro m time to time that complies with all applicable laws and regulations and that extends to the operation of a motor
vehicle for use for co mmercial delivery;

        (c) maintain or cause drivers to maintain all catering and delivery vehicles in good and safe operating condition in full
compliance with all applicable laws and regulations and containing the signs or other marking s that Franchisor periodically specifies;

           (d)   conduct initial and periodic (at least once every six (6) months) driv ing record checks on all catering and delivery
drivers;

         (e) require all catering and delivery drivers to possess and maintain valid drivers licenses and driving records free of
disqualifying violat ions;


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                  (f) where appropriate under Franchisor's specifications and standards as in effect fro m time to time, prohib it any catering or
         delivery driver who does not conform to Franchisee's standards and specifications for Catering Service or Delivery Service (a s
         applicable) fro m providing or assisting in the provision of such services; and

                   (g) obtain and maintain all licenses, permits and other governmental approvals necessary or advisable for the provision of
         Catering Serv ices and/or Delivery Services, and conduct such Catering Services and/or Delivery Serv ices in a manner which complies
         with all sanitary, safety and food preparation and holding period standards.

         Franchisee shall maintain the condition and appearance of, and perform maintenance with respect to, vehicles, furniture, fixtu res and
equipment used in connection with the provision of Catering Serv ices and/or Delivery Services in accordance with Franchisor's standards,
specifications and procedures, and consistent with the image of UFood Outlets a s first class, clean, sanitary, attractive and efficiently-operated
food service businesses.

         If Franchisee fails to co mp ly with any provision of this Agreement, inc luding any System Standard, pertaining to Catering Service o r
Delivery Serv ice, then in addition to any other rights and remed ies that Franchisor might have (including the right to termin ate this Agreement
pursuant to Section 15 , if applicable), Franchisor may temporarily suspend or permanently terminate Franchisee's right to provide Catering
Service and/or Delivery Service.

         9.D.   APPROVED PRODUCTS, DIS TRIB UTORS AND S UPPLIERS .

          The reputation and goodwill of all UFood Out lets are based upon, and can only be maintained by, the offer and sale of d istinctive,
high-quality products and services and the presentation, packaging and service of products in an efficient and appealing manner. T herefore,
during the term of this Agreement, Franchisee must purchase or lease all Operat ing Assets, Proprietary Products, food and beverage ingredients
and inventory, Nutritional Products, and other equipment, materials, supplies and services offered or used by or in connectio n with the Outlet
only according to Franchisor's System Standards (including with respect to brands, types and models) and, if Franchisor requires, only fro m
suppliers or distributors that Franchisor designates or approves (which might include or be limited to Franchisor or its Affi liates). Franchisor
and its affiliates have developed and may further develop Proprietary Products for use in the operation of UFood Outlets. Fra nchisee must use
only the Proprietary Products in the preparation and sale by the Outlet of those products that Franchisor specifies fro m t ime to t ime.

          Franchisor may fro m t ime to time mod ify the list of designated or approved suppliers and distributors. Franchisee shall not, after
receipt in writing of such modification, reorder any product fro m any supplier or d istributor or purchase services fro m a provider that is no
longer approved. Franchisor may designate or approve a single d istributor, supplier or prov ider for any p roducts or services and may designate
or approve a distributor, supplier or prov ider only as to certain products, materials, supplies or services, and such approval may be temporary
pending a further evaluation of such distributor, supplier or prov ider by Franchisor. Franchisor may concentrate purchases wi th one or mo re
distributors, suppliers or providers to obtain lower p rices, advertising support and/or services for the benefit of the UFood Outlet network, and
establish Franchisor or Affiliate-owned manufacturing or distribution facilit ies or servicing capabilities wh ich Franchisor may designate as an
approved or required distributor, supplier or provider. Franchisor may designate itself or an Affiliate as a designated or appro ved manufacturer,
supplier, distributor and/or provider of certain products and/or services. If Franchisor is a designated or appro ved manufacturer, supplier o r
distributor, Franchisee acknowledges and agrees that Franchisor may earn a profit on goods and services it supplies to Franch isee.


                                                                        27
          Upon Franchisor's request, or if Franchisee wants to use or sell (as applicable) any Operating Assets, food and beverage ingr edients
and inventory, Nutrit ional Products, or other equip ment, materials, supplies or services that Franchisor has not yet evalua ted or purchase or
lease any item or service fro m a supplier that Franchisor has not yet approved (for items and services that require supplier approval),
Franchisee shall notify Franchisor and submit to Franchisor such information, specifications and samp les as Franchisor req uests. Franchisor
shall use commercially reasonable efforts to notify Franchisee within one hundred twenty (120) days after receipt of all requ ested information
and materials whether Franchisee is authorized to purchase or lease such item or service or to purchase or lease such item or service fro m such
distributor, supplier or provider. Franchisor may condition its approval based on standards and requirements relating to q ual ity, quantity,
warranties, prices, volu me capability, frequency of delivery, distribution methods and locations, standards of service (including prompt
attention to complaints), consistency, reliab ility, financial capability, labor and customer relations and other criteria. Fr anchisee shall ensure
that all vendors and suppliers for the Outlet comply with the corporate compliance guidelines that Franchisor specifies (as Franchisor may
periodically modify them), including guidelines relating to quality and co mpliance with environ mental, child labor and other laws. If
Franchisee fails to receive a notice of approval o r disapproval within such one hundred twenty (120) day period, then the requ est is deemed
approved. Franchisee must reimburse Franchisor for its reasonable costs incurred in connection with the evaluation of a proposed item o r
supplier. Franchisor reserves the right periodically to re -inspect the facilit ies and products of any approved supplier, d istributor or provider and
to revoke its approval of any supplier, distributor, provider, item or service that doe s not continue to meet Franchisor's criteria. Franchisor may
require Franchisee to reimburse Franchisor for its reasonable costs incurred in connection with the evaluation, inspection an d supervision of
any distributor, supplier, provider, item or service that does not continue to meet Franchisor's criteria. W ithout limiting Franchisor's other rights
and remedies under this Agreement, including the right to terminate this Agreement under Section 15 hereof, Franchisor shall have the right,
without liab ility to Franchisee or any other Person, to enter the Outlet or other part of the Site and remove any material o r it em that does no t
comply with Franchisor's standards.

         Franchisee acknowledges and agrees that Franchisor and/or its Affiliates may receive pro mot ional allowances, rebates, and other
payments from suppliers on account of purchases by some or all of Franchisor's franchisees and developers. Franchisor and its Affiliates shall
contribute such allowances and rebates to the Systemwide Advertising Fund.


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         9.E.   COMPLIANCE WITH S YSTEM S TANDARDS .

          Franchisee acknowledges that the operation of the Outlet in strict co mpliance with Franchisor's System Standards is important to
Franchisor and other UFood Outlets. Franchisee agrees strictly to co mply with and maintain such System Standards in the opera tion of the
Outlet at all t imes during the term o f this Agreement. System Standards may regulate any aspect of the Site's and Outlet's con dition, operation,
business and maintenance, including:

                  (1) all aspects of the offer, sale and display of Nutritional Products and the preparation, offer, presentation and sale of
         Proprietary Products, food and beverage items, including proper use of ingredients and recipes and standards concerning portions,
         appearance, display, quality, coloring and flavoring;

                  (2) purchase and use of packaging material and other supplies for use in connection with the display and/or sales of
         Proprietary Products, food and beverage items and Nutritional Products;

                   (3) terms and conditions for the sale and delivery of, and terms and methods of payment for, Proprietary Products, other
         products, and services that Franchisee obtains fro m Franchisor and its affiliated and unaffiliated suppliers; and Franchisor ’s and its
         Affiliates’ right not to sell to Franchisee any Proprietary Products, or other products, or to provide Franchisee with services, or to do
         so only on a ―cash-on-delivery‖ or other basis, if Franchisee is in default under any agreement with Franchisor or its Affiliates;

                  (4) sales and marketing procedures and market ing, advertising, promotional and customer service programs, and
         cooperation with Franchisor, its Affiliates and its and their franchisees and licensees in the manner that Franchisor prescribes to
         provide for and pro mote the best interests of the Marks and the UFood Outlet network throughout the world;

                  (5) days and hours of operation (which may vary among UFood Outlets), including standards, procedures and limitations
         on closing the Outlet to the public during private parties;

                  (6) requirements for vehicles, training, qualificat ions, conduct and appearance of personnel, product packaging, format and
         use of materials and supplies (including display of the Marks thereon), and other aspects of providing Catering Services or D elivery
         Services;

                  (7) co mpliance, and ensuring comp liance by Franchisee's vendors and suppliers, with anti -counterfeiting programs
         periodically imp lemented by Franchisor, including by purchasing labels, tags and similar items only fro m suppliers that Franchisor
         designates or approves (which might include or be limited to Franchisor or its Affiliates);

                  (8)   layout, decor and color scheme of the Outlet and the Site;


                                                                        29
                  (9) recru it ment, selection, training, qualificat ions, appearance, demeanor and dress of employees, general staffing levels for
         the Outlet and number, type and qualifications of Outlet personnel;

                     (10)   safety, maintenance, appearance, quality, cleanliness, sanitation, standards of service and operation of the Outlet and
         the Site;

                     (11)   use and illu mination of signs, posters, displays, standard formats and similar items;

                     (12)   identification of Franchisee as the owner of the Outlet;

                     (13)   part icipating in customer loyalty programs and periodic pro motion of Franchisor’s franchise opportunities;

                  (14) issuing and honoring gift certificates, gift cards, coupons, sto red value cards and similar items and participating in
         other promotions; and

                   (15) part icipation in market research and test programs required or approved by Franchisor concerning various aspects of
         the System, including procedures, systems, techniques, furnishings, fixtures, equip ment, signs, labels, trade dress, logos, packaging,
         supplies, market ing materials and strategies, merchandising and products and services. Franchisee agrees, if requested by Fra nchisor,
         to participate in Franchisor's customer surveys and market research programs.

          Franchisee acknowledges and agrees that all mandatory System Standards prescribed from time to time by Franchisor in the Manu als
or otherwise commun icated to Franchisee in writ ing or other form are part of this Agreement as if fully set forth within its text and shall
constitute binding obligations on the part of Franchisee as if fu lly set forth herein. All references to this Agreement shall in clude all System
Standards, as periodically modified. Any failure by Franchisee to adhere to such System Standards or to pass Franchisor's periodic quality
control inspections shall constitute grounds for termination of this Agreement by Franchisor, as provided in Section 15.B .

          Franchisee acknowledges that Franchisor's periodic mod ification of System Standards (including changes to the components of the
Co mputer System and Specified Software), which may acco mmodate local or reg ional variations, may obligate Franchisee to inves t additional
capital in the Outlet and/or incur higher operat ing costs, and Franchisee agrees to do so within the time period that Franchisor specifies.


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         9.F.   COMPLIANCE WITH LAWS AND GOOD B US INESS PRACTICES .

         Franchisee shall secure and maintain in fo rce in its name all required licenses, permits, and certificates relating to the co nduct of its
business pursuant to this Agreement. Franchisee shall comp ly with all applicable laws, ord inances and regulations, inc luding laws relating to
occupational hazards, hazardous materials and other environmental matters, health, safety and sanitation, worker's compensation insurance,
unemploy ment insurance, and withholding and payment of all taxes. A ll advertising by Franchis ee shall be subject to approval by Franchisor
under Section 10.B. hereof and be completely factual, in good taste in the judgment of Franchisor, and shall conform to high standards of
ethical advertising. Franchisee shall in all dealings with its customers , suppliers, Franchisor, and public officials adhere to h igh standards of
honesty, integrity, fair dealing and ethical conduct. Franchisee shall pay all amounts owed to its vendors and suppliers (inc luding Franchisor
and its Affiliates) on time and in the ordinary course of business. Franchisee agrees to refrain fro m any business or advertising practice which
may be inju rious to the business of Franchisor and the goodwill associated with the Marks and other UFood Outlets. Franchisee shall notify
Franchisor in writing:

                  (1) within three (3) days after the co mmencement of any action, suit, proceeding or issuance of any order, writ, injunction,
         award, or decree of any court, agency, or other governmental instrumentality, which might adversely affect the operation or financial
         condition of Franchisee or the Outlet; or

                  (2) immediately upon the receipt of any notice of vio lation of any law, ordinance or regulation relating to health, sanitation
         or the operation of the Outlet.

          Franchisee agrees to comply with, and to assist Franchisor to the fullest extent possible in its efforts to comply with, Anti-Terrorism
Laws (as defined below). In connection with such comp liance, Franchisee certifies, represents, and warrants that none of its property or
interests is subject to being "blocked" under any of the Anti-Terroris m Laws and that neither Franchisee nor any Owner is otherwise in
violation of any of the Anti-Terrorism Laws. For the purposes of this Paragraph, " Anti-Terrorism Law " means Executive Order 13224
issued by the President of the United States, the Terroris m Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Fed eral Regulations),
the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of t he U.S. Code of Federal Regulat ions), the Cuban Assets
Control Regulat ions (Tit le 31, Part 515 of the U.S. Code of Federal Regulations), the USA PATRIOT Act, and all other p resent and future
federal, state and local laws, ordinances, regulations, policies, lists and other requirements of any governmental authority (including the United
States Department of Treasury Office of Foreign Assets Control) addressing or in any way relating to terrorist acts and acts of war.

         Franchisee certifies that none of Franchisee, its Owners, its employees, or anyone associated with it is listed in the Annex to Executive
Order 13224. (The Annex is available at http://www.treasury.gov/offices/enforcement/ofac/sanctions/terrorism.html.) Franchise e agrees not to
hire or contract with any individual who is listed in the Annex. Franchisee also certifies that it has no knowledge or informat ion that, if
generally known, would cause Franchisee, any of Franchisee's Owners or employees, or anyone associated with Franchisee to be listed in the
Annex to Executive Order 13224, and, if any of the foregoing becomes listed on such Annex, Franchisee will immediately notify Franchisor in
writing. Franchisee is solely responsible fo r ascertaining what actions it must take to co mp ly with the Anti-Terrorism Laws, and Franchisee
specifically acknowledges and agrees that its indemnificat ion responsibilit ies set forth in Section 17.D. of this Agreement extend to its
obligations under this Subsection F . Any misrepresentation by Franchisee under this Subsection, or any v iolation o f the Anti-Terrorism Laws
by Franchisee or its Owners or employees, shall constitute grounds for immed iate termination of this Agreement and any other agreement
between Franchisor (or one of its Affiliates) and Franchisee (and o ne of its Affiliates) pursuant to Section 15.B below.


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         9.G.   MANAGEMENT AND PERSONNEL OF THE OUTLET .

        An approved and qualified General Manager must devote all of h is or her business time and attention to the supervision of the Outlet's
day-to-day operations. Except as provided belo w, a " Managing Owner " must act as the General Manager of the Outlet. A Managing Owner
is an Owner who owns at least ten percent (10%) of the Ownership Interests in Franchisee and who has been approved by Franchisor.

        If Franchisee owns more than one UFood Outlet, each of those must be under the direct on -premises supervision of a General
Manager Franchisor has approved and who has completed Franchisor's training programs. In that case, the Managing Owner need n ot act as the
General Manager of the Outlet, so long as the Managing Owner retains overall management responsibility fo r the Outlet.

          Except for temporary periods of no more than thirty (30) days during which Management Personnel are being replaced as a resul t of
emp loyment separations, Franchisee shall ensure that an individual who m Franchisor has approved shall function in each Management
Personnel position. Franchisee also shall emp loy the number of assistant managers and other personnel required for adequate s taffing of the
Outlet and shall ensure that all personnel are trained in accordance with the System Standards. Franchisor shall have the right to deal with the
General Manager and assistant managers on matters pertaining to day -to-day operations of, and reporting requirements for, the Outlet. The
Outlet at all t imes shall be under the direct, on-site supervision of the General Manager or assistant general manager wh o has completed
satisfactorily a training program certified by Franchisor. Franchisee shall hire all emp loyees of the Outlet and shall be exc lusively responsible
for the terms of their employ ment and compensation and for their proper training.

         9.H.   INS URANCE .

            During the term of this Agreement, Franchisee must maintain in force at its sole expense comprehensive public liab ility, gene ral
liab ility, product liability and motor vehicle liability insurance against claims for bodily and personal in jury, death and property damage caused
by or occurring in connection with the Outlet's operation, all containing the min imu m liab ility coverage Franchisor prescrib e s fro m time to
time. Franchisor may periodically increase the amounts of coverage required under these insurance policies and/or require d ifferent or
additional insurance coverages (including reasonable excess liability insurance) at any time to reflect inflation, identifica t ion of new risks,
changes in law or standards of liability, higher damage awards or other relevant changes in circu mstances. These insurance poli cies must be
purchased from licensed insurers having an A.M. Best rating of ―A‖ or higher and must name Franchisor and any affiliates Franchisor
designates as additional named insureds and provide for thirty (30) days' prior written notice to Franchisor of a policy's ma terial mod ification,
cancellation or expiration. Each insurance policy must contain a waiver of all subrogation right s against Franchisor, its Affiliates and their
successors and assigns. Franchisee routinely must furn ish to Franchisor copies of Certificates of Insurance or other evidence of Franchisee's
maintaining this insurance coverage and paying premiu ms. If Franchisee fails or refuses to obtain and maintain the insurance Franchisor
specifies, in addition to Franchisee's other remedies, Franchisor may (but need not) obtain such insurance for Franchisee and the Outlet on
Franchisee's behalf, in which event it shall cooperate with Franchisor and reimburse Franchisor for all premiu ms, costs and expenses incurred
in obtaining and maintaining the insurance, plus a reasonable fee for the time incurred in obtaining such insurance.


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         9.I.    CREDIT CARDS AND OTHER METHODS OF PAYMENT .

          Franchisee shall at all t imes have arrangements in existence with a fu ll range of credit and debit card issuers or sponsors, check
verification services and electronic fund transfer systems as Franchisor designates from time to t ime in order that the Outlet may accept
customers' credit and debit cards, checks and other methods of pay ment. Franchisee shall use only such methods of payment which Franchisor
authorizes or approves. Franchisor may at its option institute a cred it program or centralized b illing system for UFood Outlet customers, in
which event Franchisee shall co mply with Franchisor's System Standards relating thereto.

         9.J.    PRICING.

         Franchisor reserves the right to establish maximu m, min imu m or other pricing requirements to the fullest extent allowed by law.

10.      ADVERTIS ING, MARKETING AND PROMOTION .

         10.A.    S YSTEMWIDE ADVERTIS ING FUND .

          Recognizing the value of advertising and marketing to the goodwill and public image of UFood Outlets, Franchisor may institut e and
maintain and ad minister an advertising fund (the " Systemwi de Advertising Fund ") for such advertising, media placement , market ing and
public relations and promotional programs, market research and related activit ies as Franchisor may deem necessary or appropriate to generally
promote UFood Outlets in the Un ited States. Franchisee shall contribute to the Systemwide Advertising Fund the amounts that Franchisor
periodically prescribes, payable to Franchisor by separate check or electronic transfer at the same time and in the same mann er as the Royalty
Fees due hereunder. As of the date of this Agreement, the required contribution is one and one-half percent (1½%) of Gross Receipts, provided
that the required contribution shall in no event exceed two and one-half percent (2½%) of Gross Receipts. UFood Outlets in the United States
which are owned by Franchisor (or its Affiliates, to the extent Franchisor has the right to require such Affiliates to do so) shall contribute to the
Systemwide Advertising Fund on the same basis as Franchisee.


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         Franchisor shall direct all programs and activities financed by the Systemwide Advertising Fund, with sole control over the s trategic
direction, creat ive concepts, materials and endorsements used and the geographic, market, and media placement and allocation thereof.
Franchisee agrees that the Systemwide Advertising Fund may be used to pay various costs and expenses, including: creatin g and producing
video, audio and written advertising materials and electronic media; interest on borrowed funds; costs to prepare and place coupons and inserts
in newspapers and other publications; sponsorship of sporting, charitable, entertain ment or other events; establishment and maintenance of the
System Website (defined below); reasonable salaries and expenses of emp loyees of Franchisor or its Affiliates working for or on behalf of the
Systemwide Advertising Fund or on advertising, market ing, public relat ions materials, programs, activ ities or pro motions for the benefit of the
Systemwide Advertising Fund; and ad ministrative costs and overhead of Franchisor or its Affiliates incurred in act ivities reasonably related to
the administration of the Systemwide Advertising Fund, (including collecting and accounting for Systemwide Advertising Fund c ontributions;
purchasing direct ma il, radio, television and other media advertising and employing advertising agencies and other professionals to assist
therewith; and supporting public relat ions, market and consumer research and other advertising, promotional and marketing act ivities,
including testing and test marketing programs, fulfillment charges, and development, imp lementation and testing of Trade Dress a nd design
prototypes). Franchisee agrees to participate in all advertising, marketing, pro motions, research and public relat ions programs instituted by the
Systemwide Advertising Fund. The Systemwide Advertising Fund shall furnish Franchisee with reasonable quantities of marketing , advertising
and promotional formats and sample materials at cost plus any related shipping, handling and storage charges.

         The Systemwide Advertising Fund shall be accounted for separately, but shall not be required to be segregated, from the other funds
of Franchisor and shall not be used to defray any of Franchisor's general operating expenses, except as descried above. If at any time Franchisor
incurs expenses for the types of goods and services that would otherwise be paid for out of the Systemwide Advertising Fund, Franchisor may
reimburse itself for those items using monies fro m the Systemwide Advertis ing Fund. The Systemwide Advertising Fund is not Franchisor's
asset nor a trust, and Franchisor does not have a fiduciary duty to Franchisee for maintain ing, direct ing or ad ministering th e Systemwide
Advertising Fund or for any other reason. Franchisor may spend in a fiscal year an amount greater or less than the aggregate contributions of all
UFood Outlets to the Systemwide Advertising Fund in that year. The Systemwide Advertising Fund may borrow fro m Franchisor or other
lenders at standard commercial interest rates to cover deficits or cause the Systemwide Advertising Fund to invest any surplus for future use by
the Systemwide Advertising Fund. An annual, unaudited statement of monies collected and costs incurred by the Systemwide Adve rtising Fund
for Franchisor's immediately preceding fiscal year shall be made available to Franchisee upon Franchisee's written request. Franchiso r will
have the right, at its option, to cause the Systemwide Advertising Fund to be incorporated or operated through an entity sep arate from
Franchisor at such time as Franchisor deems appropriate, and such successor entity shall have all rights and duties of Franch isor pursuant to
this Section 10.A .


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         Franchisee understands and acknowledges that the Systemwide Advertising Fund is intended to promote recognition of the Marks, the
System and UFood Outlets in the United States generally. A lthough Franchisor will endeavor to utilize the Systemwide Advertis ing Fund to
develop advertising and marketing materials and programs, and to place advertising, in order to benefit all UFood Outlets tha t contribute to the
Systemwide Advertising Fund, Franchisor undertakes no obligation to ensure that expenditures by the Systemwide Advertising Fund in or
affecting any geographic area are proportionate or equivalent to the contributions by UFood Outlets operating in that geograp hic area or that
any UFood Outlet will benefit directly or in proportion to its contribution fro m the d evelopment of advertising and marketing materials or the
placement of advertising. Franchisee acknowledges that its failure to derive any such benefit will not serve as a basis for a reduction or
elimination of its obligation to contribute to the Systemwid e Advertising Fund. Franchisor has the right, but no obligation, t o use collection
agents and institute legal proceedings to collect Systemwide Advertising Fund contributions at the Systemwide Advertising Fun d's expense.
Franchisor also may forg ive, waive, settle and co mpro mise all claims by or against the Systemwide Advertising Fund without affecting the
obligations of any other contributor to the Systemwide Advertising Fund. Except as expressly provided in this Section 10.A. , Franchisor
assumes no direct o r indirect liability or obligation to Franchisee with respect to the maintenance, direction, or ad ministration of the
Systemwide Advertising Fund.

         Franchisor reserves the right, at any time and fro m time to time, to suspend contributions of one or more franchisees to, and operations
of, the Systemwide Advertising Fund for such periods that it determines to be appropriate and to terminate the Systemwide Adv ertising Fund
upon written notice to Franchisee. All unspent monies on the date of termination shall be d istributed to Franchisor, its Affiliates and franchisees
in proportion to their respective contributions to the Systemwide Advertising Fund during the preceding twelve (12) month period. Franchisor
has the right to reinstate the Systemwide Advertising Fund upon the same terms and conditions set forth herein upon thirty (30) days' prior
written notice to Franchisee.

         10.B.   ADVERTIS ING B Y FRANCHIS EE .

           Franchisee must spend at least one and one-half percent (1½%) of the Out let's Gross Receipts each month on advertising, marketing
and promoting the Outlet on the local level in accordance with the terms of this Agreement (the " Local Marketing S pending Requirement
"). The following shall not count toward the Local Marketing Spending Requireme nt: (1) mon ies spent on classified telephone directory
listings, advertisements, advertising and promotional expenses required under the Lease, and costs associated with customer d iscounts, coupons
and similar items; (2) the cost of goods or services supplied by Franchisee without charge; (3) amounts spent on Franchisee's behalf or
reimbursed to Franchisee by distributors or suppliers; (4) amounts spent on grand opening marketing pursuant to this Agreement; and
(5) Systemwide Advertising Fund contributions. Franchisor may periodically rev iew Franchisee's books and records and/or require proof of
compliance with this Subsection, and may require Franchisee to pay unspent portions to the Systemwide Advertising Fund.

         Prior to their use by Franchisee, samples of all advertising, marketing and pro motional materials not prepared or previously approved
by Franchisor shall be submitted to Franchisor for approval, in the form and manner prescribed by Franchisor fro m t ime to time. If approval is
not granted by Franchisor within fifteen (15) days from the date Franchisor receives such materials, they shall be deemed dis approved.
Franchisee shall not use any advertising, marketing or pro motional materials that Franchisor has not approved, has disapproved or that do not
include the copyright registration notices and trademark registration notices designated by Franchisor. Franchisor may disapp rove on a
prospective basis materials that it had previously approved.


                                                                        35
        Franchisor assumes no liability to Franchisee or any other Person due to its approval or disapproval of any advertising, mark eting or
promotional materials or programs, and Franchisee is responsible for ensuring that all such materials and programs that it uses and imp lements
comply with all applicable laws, ord inances and regulations.

           Franchisee agrees to list and advertise the Outlet in each major classified telephone directory covering the Site in the business
classifications Franchisor periodically prescribes and, if Franchisor requires, using Franchisor's standard form of advertise ment. Franchisee
will, at its expense, cooperate with Franchisor, Franchisor's Affiliates, and other franchisees of Franchisor and Franchisor' s Affiliates in any
advertising campaign, sales or pro motion program, or other special advertising or marketing act iv ity in which Franchisor may engage or
specify fro m t ime to time, including co mpetitions, the display of point -of-service advertising, and the distribution of s pecial novelties,
promotional literature, and the like.

         10.C.   REGIONAL/LOCAL ADVERTIS ING COOPERATIVE .

         Franchisor reserves the right to require that Franchisee participate in a local or regional advertising cooperative for UFood Outlets in
Franchisee's area. Franchisee agrees to pay any contributions that Franchisor requires Franchisee to make for expenditures by such a local or
regional cooperative or that may be otherwise approved by the cooperative, but such contributions will in no event exceed one and one-half
percent (1½%) of the Gross Receipts of the Outlet. Franchisee's contribu tions to any local or reg ional advertising cooperative shall be due and
payable on the same terms as Franchisee's contributions to the Systemwide Advertising Fund

         Any local or regional advertising cooperative must be established, governed and operated in a manner that Franchisor approves.
Franchisee agrees to sign any documents that Franchisor requires for Franchisee to become a participant in the cooperative an d Franchisee
agrees to participate in the cooperative in compliance with the rules, policies an d procedures that Franchisor has approved. A cooperative and
its members may not use any advertising or promotional plans without Franchisor's prior written consent. Franchisee's contrib utions to such a
cooperative shall be counted toward Franchisee's Local Market ing Spending Requirement.

         10.D.   CUS TOMER LOYALTY PROGRAM .

         Franchisor’s customer loyalty program is the cornerstone of Franchisor’s guest marketing platform. Franchisor’s current loyalty
program is the ―In-the-Know‖ guest rewards program. Franchisee acknowledges and agrees that the success of Franchisor’s loyalty program
depends on active participation by Franchisee. Therefore, Franchisee agrees to actively promote Franchisor ’s loyalty program by offering
guests program applications at the Outlet in the restaurant and nutrition centers, in the expediting area and periodically during guests ’ dining
experience, in co mpliance with Franchisor’s policies and procedures as Franchisor may modify and update them during the te rm of this
Agreement. Franchisee will also be required to inquire with each guest if he/she has a customer loyalty card at the point -of-sale at the Outlet.
Furthermore, Franchisee will participate in Franchisor’s guest communicat ions (such as e-mail offerings and direct mail offerings) in
compliance with Franchisor’s policies and procedures. As of the date of this Agreement, Franchisor requires a min imu m o f 12 such guest
communicat ions per calendar year. Franchisee will also be required to distribute and ac cept coupons mailed to the public periodically during
the term o f this Agreement.


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         10.E.     PROMOTION OF UFOOD LIFES TYL E GRILLE FRANCHIS E SALES .

        Franchisee acknowledges and agrees that Franchisor may require Franchisee to include commun ications at the Outlet to promote the
opportunity to become a Franchisee of a UFood Outlet.

         10.F.   FRANCHIS E S YS TEM WEBSITE .

         At Franchisor's option, Franchisor may establish one or more Websites to advertise, market, and pro mote UFood Outlets and the
products and services that they offer and sell (each a " System Website "). If Franchisor establishes a System Website, Franchisor will
reference the Outlet in the manner that Franchisor determines fro m time to time. Franchisee must give Franchisor the information that
Franchisor requests fro m t ime to time concerning the Out let to include on the System Website. By provid ing the informatio n to Franchisor,
Franchisee will be representing to Franchisor that it is accurate and not misleading and does not infringe any third party's righ ts. Franchisor will
own all intellectual property and other rights in the System Website, all in formation contained on it and all information g enerated from it
(including the do main name or URL, the log of "hits" by visitors, and any personal or business data that visitors supply).

         If Franchisor establishes a System Website, Franchisor shall have the right to use the Systemwide Adve rtising Fund's assets to
develop, maintain and update the System Website. Franchisor periodically may update and modify the System Website. Franchisee must notify
Franchisor whenever any informat ion on Franchisee's listing changes or is not accurate. Franc hisee acknowledges that Franchisor has final
approval rights over all information on the System Website. Franchisor may imp lement and periodically modify System Standards relating to
the System Website.

         Franchisor will reference the Outlet on the System Website only while Franchisee is in fu ll co mpliance with this Agreement and all
System Standards (including those relating to the System Website). If Franchisee is in default of any obligation under this A greement or the
System Standards, then Franchisor may, in addition to its other remedies, temporarily remove references to the Outlet fro m the System Website
until Franchisee fully cures the default. Franchisor may, at its option, discontinue any or all System Websites at any time.

          All advertising, marketing and pro motional materials that Franchisee develops for the Outlet must contain notices of the System
Website's domain name in the manner Franchisor designates. Franchisee may not develop, maintain or authorize any other Websit e that
mentions or describes Franchisee or the Outlet or displays any of the Marks. Franchisee may not conduct electronic commerce or direct ly or
indirectly o ffer or sell any products or services using any Website or otherwise over the Internet.


                                                                         37
         Nothing in this Section shall limit Franchisor's right to maintain websites other than the System Website.

11.      RECORDS, REPORTS AND FINANCIAL S TATEMENTS .

         Franchisee agrees to establish and maintain at its own expense a bookkeeping, accounting, and recordkeeping system conforming to
the requirements and formats Franchisor prescribes fro m time to t ime. Franchisee shall adopt the calendar year as its fiscal year. Franchisor
may require Franchisee to use a Computer System and Specified Soft ware to maintain certain sales data and other information. Franchisee
agrees that Franchisor shall have access to the Computer System and Specified Soft ware of the Outlet at a ll t imes and that Franchisor shall
have the right to collect and retain from the Co mputer System and Specified Software any and all data concerning the Outlet a t any time.
Franchisee agrees to give Franchisor in the manner and format that it prescribes fro m time to time:

                 (a) on o r before Tuesday of each week, a report on the Out let's Gross Receipts, F&B Gross Receipts and Nutritional
         Products Gross Receipts during the week ending on the preceding Sunday;

                  (b) within fifteen (15) days after the end of each calendar month, monthly profit and loss statements for the Outlet for the
         immed iately preceding month and a balance sheet as of the end of the immediately preceding month;

                  (c) within fifteen (15) days after the end of each calendar quarter, the operating statements, financial statements, statistical
         reports, purchase records, and other informat ion Franchisor requests regarding Franchisee and the Outlet covering the previou s
         calendar quarter and the fiscal year to date;

                  (d) by April 15 th of each year, annual profit and loss and source and use of funds statements and a balance sheet for the
         Outlet as of the end of the prior calendar year; and

                 (e) within ten (10) days after Franchisor's request, exact copies of federal and state income tax returns, sales tax returns, and
         any other forms, records, books, and other informat ion Franchisor periodically requires relating to the Outlet and Franchisee .

          Franchisee agrees to verify and sign each report and financial statement in the manner Franchisor prescribes. Franchisor may disclose
data derived fro m these reports, although Franchisor will not without Franchisee's consent (unless required by law) d isclose Franchisee's
identity in any materials that Franchisor circu lates publicly.

         Franchisee agrees to preserve and maintain all records in a secure location at the Outlet for at least three (3) years (inclu ding, but not
limited to, sales checks, purchase orders, invoices, payroll records, customer lists, check stubs, sales tax records and returns, cash receipts and
disbursement journals, and general ledgers). Franchisor may require Franchisee to have audited financial statements prepared annually during
the term o f this Agreement.


                                                                        38
12.      INSPECTIONS AND AUDITS .

         12.A.   FRANCHIS OR'S RIGHT TO INSPECT THE OUTL ET .

          To determine whether Franchisee and the Outlet are co mplying with this Agreement and all System Standards, Franchisor and/or its
agents or representatives shall have the right, at any reasonable time and without prior notice to Franchisee, to: (1) inspect, monitor and test the
Site, the Outlet, the Co mputer System, Specified Software, and other Operating Assets of the Outlet, whether at the Outlet, r emotely via the
Co mputer System or by other means; (2) inspect, observe, photograph and videotape the operations of the Outlet (including
"mystery-shopping" and any Catering Service and Delivery Service provided by Franchisee) fo r such consecutive or intermittent periods as
Franchisor deems necessary; (3) remove fro m the Outlet at no cost and/or test samples of any food and beverage items, ingredients, Nutritional
Products or other products; (4) interview personnel and customers of the Outlet; and (5) inspect and copy any books, records, reports, computer
databases and documents relating to the operation of the Ou tlet. Franchisee agrees to cooperate fully with Franchisor and/or its agents or
representatives in connection with any such activities. Franchisee agrees that Franchisor may inspect and monitor electronica lly info rmation
concerning Franchisee's sales and Gross Receipts, and such other information as may be contained or stored in the Comp uter System and
Specified Soft ware.

          Franchisee acknowledges that Franchisor may conduct quality, service, cleanliness, and other inspections of the Outlet and
Franchisee's operations fro m time to time without notice to Franchisee to determine co mp liance with this Agreement and the System Standard s,
and that performance meeting Franchisor's standards in such inspections is required hereunder. Franchisee shall present to its customers such
evaluation forms as are periodically prescribed by Franchisor and shall part icipate and/or request its customers to participa te in any surveys
performed by or on behalf of Franchisor. Franchisor also may designate an independent evaluation s ervice to conduct a "mystery shopper"
quality control and evaluation program or similar program with respect to any group or all UFood Out lets. Franchisee agrees t hat the Outlet
will part icipate in any such programs, as prescribed and required by Franchiso r. Franchisee agrees to timely pay the then current charges
imposed by Franchisor or such evaluation service for the Outlet's participation in such program.


                                                                        39
         12.B.   FRANCHISOR'S RIGHT TO AUDIT .

         Franchisor and/or its agents or representatives shall have the right at any t ime during business hours, and without prior notice to
Franchisee, to inspect and audit, or cause to be inspected and audited, the business records, bookkeeping and accounting records, computer
databases, tax records and returns, and other records of the Outlet and of Franchisee and the books and records of Fran chisee if it is a
corporation, limited liability company or other business entity. Franchisee shall fu lly cooperate in connection with any such inspection or audit.
In the event any inspection or audit shall disclose an understatement of the Outlet's Gross Receipts, Nutritional Products Gr oss Receipts or
F&B Gross Receipts or an underpayment of any fees or other amounts due under this Agreement or any related agreement, Franchisor shall be
authorized to initiate immediately a debit to Franchisee's account for the amount due plus interest, via electronic funds tra nsfer. Alternatively,
at Franchisor's option, Franchisee shall pay to Franchisor, with in fifteen (15) days after receipt of the inspection or audit report, the fees due on
the amount of such understatement, plus interest (at the rate and on the terms provided fo r herein) fro m the date o riginally due until the date of
payment. Further, in the event such inspection or audit is made necessary by the failure of Franchisee to furnish reports, su pporting records,
other informat ion or financial statements as herein required, or to furnish such reports, records, info rmation or financial statements on a timely
basis, or if an understatement of Gross Receipts, Nutritional Products Gross Receipts or F&B Gross Receipts for the perio d of any audit is
determined by any such audit or inspection to be greater than two percent (2%), Franchisee shall reimburse Franchisor for the cost of such
inspection or audit, including legal fees and accountants' fees, and the travel expenses, room and board and applicable per d iem charges for
emp loyees of Franchisor. The foregoing remedies shall be in addit ion to all other remedies and rights of Franchisor hereunder or under
applicable law.

13.      TRANSFER .

         13.A.   B Y FRANCHIS OR .

         This Agreement and any or all of Franchisor's rights and obligations hereunder are fully transferable by Franchisor and shall inure to
the benefit of any transferee or other legal successor to the interests of Franchisor herein. Franchisor is free to t rans fer and assign all of its
rights and obligations under this Agreement to any Person, and upon such assignment, Franchisor shall have no further liab ility or obligation to
Franchisee.

         13.B.   NONTRANS FERAB ILITY OF CERTAIN RIGHTS .

         Franchisee understands, acknowledges and agrees (and hereby represents and warrants to Franchisor that its Owners understand and
agree) that the rights and duties created by this Agreement are personal to Franchisee and its Owners and that a material cau se for Franchisor's
willingness to enter into this Agreement is its reliance upon the individual or collect ive character, skill, aptitude, busine ss ability and financial
capacity of Franchisee, its Owners and Persons that directly or ind irectly have a Controlling Interest in Franchisee. Therefore, Franchisee
agrees that:

                 (1)    no Controlling Interest in Franchisee or in any Person that directly or indirectly holds a Controlling Interest in
         Franchisee;

                  (2) no obligations, rights or interest of Franchis ee in (a) this Agreement, (b) the Lease, (c) the Outlet or (d ) all or
         substantially all o f the Operat ing Assets; and

                 (3) no right to receive all or a portion of Franchisee's or the Outlet's profits or losses or any capital appreciation relating to
         Franchisee of the Outlet

may be transferred without the prior written consent of Franchisor. This restriction shall not apply to the sale of inventory in the ordinary
course of business. A transfer of all or substantially all of the Operating Assets may be made (subject to Franchisor's rights below) only with a
transfer of this Agreement and the Lease. Any purported transfer in violat ion of this Section shall constitute a breach of th is Agreement and
shall convey to the transferee no rights or interes ts in the foregoing.


                                                                          40
          As used in this Agreement, the term " transfer " shall include the following, whether voluntary or involuntary, conditional, d irect or
indirect: (1) assignment, sale, gift or p ledge; (2) the grant of a mortgage, charge, lien or security interest, including the grant of a collateral
assignment; (3) a merger, consolidation, exchange of shares or other Ownership Interests, issuance of additional Ownership Interests or
securities representing or potentially representing Ownership Interests, or redemption of Ownership Interests; (4) a sale or exchange of voting
interests or securities convertible to voting interests, or an agreement granting the right to exe rcise or control the exercise of the voting rights of
any holder of Ownership Interests or to control the operations or affairs of Franchisee or the Outlet; and (5) except where specifically approved
by Franchisor, a management agreement whereby Franchisee delegates (i) any of its obligations under this Agreement or (ii) any or all of the
management functions with respect to the Outlet or the business to be conducted by Franchisee pursuant to this Agreement. In addition to the
foregoing, a transfer (as defined above) will include any transfer by virtue of (a) d ivorce; (b) insolvency; (c) dissolution of a corporation,
limited liab ility company or other business entity; (d) will; (e) intestate succession; (f) declarat ion of or transfer in trust; or (g) foreclosure,
attachment, seizure or otherwise by operation of law.

         13.C.   FRANCHISOR'S RIGHT TO APPROVE TRANS FERS .

          If Franchisee or any Person intends to make a transfer of any interests which, under Section 13.B. , requires Franchisor's prior written
consent, Franchisee shall deliver to Franchisor written notice of such proposed transfer at least ninety (90) days prior to its intended effective
date. Such notice shall describe in detail the proposed transfer (inclu ding the nature of the transfer, the nature and amount of the interests being
transferred, the reason for the transfer, the consideration to be paid and the terms of payment of such consideration and the effective date) and
shall identify and provide all pertinent background information regarding the proposed purchaser. Franchisor shall have thirty (30) days fro m
delivery of such notice within which to evaluate the proposed transaction and to notify Franchisee of its approval or d isappr oval (with reasons)
of the proposed transfer. If approved, the transfer must take p lace in full co mp liance with all applicable laws, as described in the notice (as
modified by any conditions imposed by Franchisor in granting its approval), and within thirty (30) days of the de livery of notice of Franchisor's
approval. No transfer by Franchisee, its Owner or any Person that directly or indirectly holds a Controlling Interest in Fran chisee shall relieve
the transferor fro m any obligations or liabilities to Franchisor or its Affil iates under or relat ing to this Agreement, whether arising before or
after the effective date of such transfer.

          Franchisee agrees that it would be reasonable for Franchisor to disapprove any proposed transfer based on any and all reasona ble
factors, including the fact that:

                 (1)    the proposed transfer is to a Co mpetitive Business or to a direct or indirect owner of interests in a Competit ive
         Business;

                  (2)   Franchisee and its Owners are not in fu ll co mpliance with this Agreement;


                                                                          41
                  (3) the proposed transferee and, if applicab le, any of its owners (a) are not of good moral character, (b ) do not have
        sufficient business experience, aptitude and financial resources to operate the Outlet in accordance with the requirements of this
        Agreement, (c) otherwise fail to meet Franchisor's then applicable standards for franchisees or owners o f franchisees, or (d) are not in
        full co mpliance with an agreement between Franchisor and them; or

                (4) the price and terms of the proposed transfer are so burdensome as to adversely affect or have a potentially adverse affect
        on Franchisor's rights and interests or Franchisee's obligations u nder this Agreement.

        13.D.   CONDITIONS FOR APPROVAL OF TRANSFERS .

         In granting its approval of a proposed transfer that requires Franchisor's consent, Franchisor may also impose certain reason able
conditions, including any one or more of the following:

                 (1) that Franchisee, the transferring Owner o r the proposed purchaser pay a transfer fee to Franchisor of Ten Thousand
        Dollars ($10,000), provided that this amount will be adjusted to an amount that is commensurate with such inflation as has occurred
        between the date hereof and the time of the proposed transfer;

                 (2) that, if any part of the sale price is financed by the transferor, it agrees, in a manner satisfactory to Franchisor, that all
        obligations of the purchaser under or pursuant to any promissory notes, agreements or security interests reserved by the transferor be
        subordinate to any obligations of the purchaser to pay amounts then or thereafter due Franchisor and its Affiliates and all interests of
        Franchisor or its designee in connection with any right of first refusal or purchase option;

                 (3) that the purchaser and its owners execute any guarantees and other undertakings then being required by Franchisor of
        other franchisees or owners of franchisees of UFood Outlets;

                  (4) that Franchisee, the transferring Owner and the transferee (if the transferee is, or is the owner o f interests in, another
        area developer o r franchisee of Franchisor or otherwise has a contractual relationship with Franchisor or any of its Affiliat es) execute
        a general release and consent agreement, in fo rm satisfactory to Franchisor, of any and all claims against Franchisor and its A ffiliates
        and their respective shareholders, officers, d irectors, employees and agents, for matters arising on or before the effective date of the
        transfer;

                 (5) that Franchisee or, if applicable, the transferring Owner execute a noncompetit ion undertaking in favor of Franchisor
        and the transferee, which undertaking shall contain the restrictions in Section 16.D . belo w and apply for a period of eighteen (18)
        months commencing on the effect ive date of such transfer or the date upon which all Persons bound by such undertaking begin t o
        comply fully with the terms of such undertaking, whichever is later;


                                                                       42
                  (6) that Franchisee, the transferor and the transferee (if the transferee is, or is the owner of interests in, an area developer or
        franchisee of Franchisor or otherwise has a contractual relationship with Franchisor or any of its Affiliates) pay such Royalty Fees,
        Systemwide Advertising Fund contributions, amounts owed for purchases by Franchisee or such transferee fro m Franchisor and it s
        Affiliates, and all other amounts owed to Franchisor or its Affiliates, which are then due and unpaid;

                  (7) that any new General Manager and other Management Personnel co mplete to Franchisor's satisfaction Franchisor's
        initial management training program in the operation of a Outlet prior to t he transfer at the time specified by Franchisor, and that the
        transferee pay Franchisor's then current standard training charges;

                 (8) in the event of a transfer of th is Agreement, that the transferee and its owners agree, in a manner satisfacto ry to
        Franchisor, at Franchisor's option, to (a) be bound by all terms and conditions of this Agreement for the remainder of its term or
        (b) execute Franchisor's then current form of standard franchise agreement and such ancillary documents (including guar antees) as are
        then customarily used by Franchisor in the grant of franchises for UFood Outlets, which may contain fees, terms and condition s that
        are materially different fro m those contained in this Agreement, provided that such agreement shall be for a term equal to the
        remain ing term of this Agreement;

                 (9) that the transferee and Franchisee acknowledge and agree that Franchisor's approval of the proposed transfer indicates
        only that the transferee meets, or that Franchisor has waived, the criteria established by Franchisor for franchisees as of t he time of
        such transfer and does not constitute a warranty or guaranty by Franchisor, express or imp lied, of the suitability of the terms of sale or
        of the successful operation or profitability of the Outlet by the transferee; and

                 (10) that the Franchisee, the transferor and the transferee execute an agreement, in fo rm satisfactory to Franchisor, under
        which all part ies agree to remain jointly and severally liab le for all liabilities and obligations of the Franchisee hereunde r, whether
        accruing before or after the effect ive date of the transfer.

         Subparagraph (1) above shall not apply to transfers by gift, bequest, or inheritance. Franchisee acknowledges and agrees that the
failure of any Person restricted pursuant to Subparagraph (5) to co mply with this Section 13 , including the restrictio ns described in
Subparagraph (5) , shall constitute a breach of this Agreement.


                                                                        43
         13.E.   DEATH OR INCAPACITY OF FRANCHIS EE .

         If Franchisee is an individual, upon the death of Franchisee or the permanent incapacity of Franchisee to conduct business af fairs, or,
if Franchisee is a corporation, limited liab ility company or other business entity, upon the death or permanen t incapacity of the Managing
Owner of Franchisee, all of such person's interest in this Agreement, or such interest in Franchisee, shall be transferred to a transferee approved
by Franchisor. Such disposition of this Agreement or such interest in Franchise e (including transfer by bequest or inheritance) shall be
completed within a reasonable time, not to exceed nine (9) months fro m the date of death or permanent disability, and shall b e subject to all the
terms and conditions applicable to transfers contained in this Section. Failure to so transfer the interest in this Agreement or such interest in
Franchisee with in said period of t ime shall constitute a breach of this Agreement.

          Until such disposition of this Agreement or such interest in Franchisee, Fran chisor may, at its option, assume the management of the
Outlet, for any period of time that Franchisor deems appropriate, on the terms and conditions set forth in the first paragrap h of Section 15.D. of
this Agreement.

         13.F.   PUB LIC OR PRIVATE OFFERING .

          Franchisee acknowledges and agrees that it is the intent of both Franchisor and Franchisee that neither Franchisee nor any of its
Affiliates, nor any Person holding a Controlling Interest in Franchisee, be or become, and Fran chisee covenants that neither it nor any such
Person shall be or become, a public co mpany or "reporting company" (as defined in Sections 12(b), 12(g) or 15(d) of the Securities Exchange
Act of 1934, as amended, or otherwise), including by way of an in itial public offering or transfer to or merger with an existing public co mpany.
Accordingly, Franchisee agrees that no Ownership Interests in Franchisee or any such other Person may be offered pursuant to a public offering
or transferred to a public company or ―reporting company.‖ Franchisee further agrees that such Ownership Interests will not be offered
pursuant to a private p lacement without the prior written consent of Franchisor. Franchisor may impose conditions on granting its consent to a
private placement of Ownership Interests by Franchisee, including the conditions described in Sections 13.C and 13.D . and the conditions that:

                   (1) such private placement co mplies with all applicable federal, state and local laws governing offerings of securit ies and
         all applicab le agreements between Franchisee and Franchisor or its Affiliates, including each of the relevant transfer proced ures,
         requirements, and limitations contained in this Agreement;

                  (2) such private placement does not result in any change in operating control of Franchisee or the Outlet or in the parties
         owning a Controlling Interest in Franchisee or the Outlet, or in the indiv idual or individuals controlling the management, po licies or
         decision-making power of Franchisee;

                  (3) each such entity or individual receiv ing Ownership Interests in such private placement be an accredited investor, as
         defined by applicable law, and shall have been identified and be reasonably acceptable to Franchisor; provided, however, that
         Franchisee may allow unaccredited investors to receive Ownership Interests if Franchisee has complied with applicab le law with
         respect thereto;


                                                                        44
                    (4) a draft of any offering memorandum or other informat ion used in connection with any such private p lacement be
         submitted to Franchisor for review and co mment a reasonable time p rior to its use, that the reasonable comments and suggestio ns of
         Franchisor thereon are given due consideration and that a final version of such memo randum o r informat ion be provided to Franchisor
         at least five (5) days prior to its distribution to prospective investors;

                  (5) any offering memorandu m or information used in connection with any such private placement clearly identify that it is
         not an offering by Franchisor and that Franchisor has not participated in its preparation and has not supplied any financial informat ion,
         projections, budgets, cost estimates, or similar informat ion contained therein, all o f wh ich shall be the sole responsibility of
         Franchisee;

                  (6)   each recip ient of information relat ing to such private placement shall agree to maintain it in confidence;

                  (7)   the structure, timing, a llocation and nature of such private placement be reasonably acceptable to Franchisor;

                  (8) Franchisee or such other issuer not become a "reporting co mpany" by virtue of Sections 12(b), 12(g) or 15(d ) of the
         Securities Exchange Act of 1934, as a mended; and

                 (9) each person who or entity which beco mes an Owner as a result of such private placement signs such guarantees and
         other undertakings that Franchisor then requires of owners of franchisees of UFood Outlets.

         Franchisee agrees to indemn ify and hold harmless the Franchisor Indemn ified Parties fro m and against any and all costs, damages,
expenses, claims, act ions, judgments and liabilities (including costs and expenses related to legal defense) arising fro m or relat ing to any
private placement described in this Section 13.F. Franchisee also agrees to reimburse Franchisor for its reasonable expenses incurred in
connection with any such private placement (including attorney's fees) and to comply with all requirements of Franchisor in c onnection with
such offering, including adding appropriate disclaimers to the offering documents and execution of appropriate indemn ificatio n agreements.

         13.G.   EFFECT OF CONS ENT TO TRANSFER .

          Franchisor's consent to a transfer under this Section 13 shall not constitute a waiver of any claims it may have against Franchisee (or
its Owners), nor shall it be deemed a waiver of Franchisor's right to demand full co mp liance with any of the terms or conditi ons of this
Agreement by Franchisee or the transferee. Franchisor's consent to any such transfer shall not, unless expressly provided in such consent, effect
a release of Franchisee (or its Owners, as the case may be) following the transfer.


                                                                         45
         13.H.   FRANCHIS OR'S RIGHT OF FIRS T REFUSAL .

         If Franchisee or any of its Owners shall at any time determine to sell an interest in this Agreement, the Outlet, some or all of the
Operating Assets (other than in the ordinary course of business) or an Ownership Interest in Franchisee, Franchisee or its Owner(s) shall obtain
a bona fide, arm's-length, executed purchase agreement (and any ancillary agreements) in co mplete and definitive form, not subject to any
financing contingency or other material, substantive contingency (other than Franchisor's consent and waiver of its right of first refusal as
described herein), and an earnest money deposit (in the amount of five percent (5%) or mo re of the purchase price) from a qua lified,
responsible, bona fide and fully disclosed purchaser. A true and complete copy of such purchase agreement and any proposed an cillary
agreements shall immediately be submitted to Franchisor by Franchisee, such Owner(s) or both. The purchase agreement (1) must apply only to
an interest which is permitted to be transferred under this Agreement, (2) may not include the purchase of any other property or rights of
Franchisee (or such Owner(s)), and (3) must not provide for any additional payments to be made, or any increase in the amounts payable, in the
event Franchisor exercises its right of first refusal hereunder. The price and terms of purchase offered to Franchisee (or su ch Owner(s)) in the
purchase agreement for the aforementioned interests shall reflect th e bona fide price o ffered therefor and shall not reflect any value for any
other property or rights.

          Franchisor shall have the right, exercisable by written notice delivered to Franchisee or such Owner(s) within thirty (30) da ys from the
date of receipt by Franchisor of an exact copy of such purchase agreement, together with pay ment of any applicable transfer fee and a
completed and executed application for Franchisor's consent to transfer such interest, to purchase such interest for the pric e and on the terms
and conditions contained in such purchase agreement, provided that: (i) Franchisor may substitute cash, a cash equivalent, or marketable
securities of equivalent value for any form of pay ment proposed in such purchase agreement; (ii) Franchisor's credit shall be deemed equal to
the credit of any proposed purchaser; and (iii) Franchisor shall have not less than ninety (90) days to prepare for closing, subject to extension at
Franchisor's option to enable Franchisor, Franchisee or other Person to obtain any necessary consent of a third party, including obtaining any
necessary permits and licenses. Regardless of whether included in the purchase agreement, Franchisor shall be entitled to all customary
representations, warranties and indemn ities given by th e seller of a business, including indemn ities for all actions, events and conditions that
existed or occurred prior to the closing in connection with the Outlet, Franchisee's business or the assets or Ownership Inte rests being
purchased and representations and warranties as to: (1) ownership, condition and title to the Ownership Interests and/or assets being purchased;
(2) absence of liens and encumbrances relating to such Ownership Interests and/or assets; (3) valid ity of contracts; and (4) liabilit ies, contingent
or otherwise, o f any legal entity whose Ownership Interests or assets are purchased. At the closing, the seller shall p rovide to the purchaser
good, valid, marketable, and indefeasible tit le (or equivalent rights) to all tangible and intangible property transferred, free and clear of any
mortgage, claim, lien, o r encumbrance, and local custom shall be followed as to formalit ies of any transfer documentation, cl osing costs, and
closing logistics. If Franchisor exercises its right of first refusal, Franchisee and/or such selling Owner(s) (and members of their respective
Immediate Families), as applicable, shall be bound by the restrictions in Section 16.D. belo w for a period of eighteen (18) months commencing
on the effective date of the transfer or the date upon which all Persons bound by such restrictions begin to comply fu lly with s uch restrictions,
whichever is later.


                                                                         46
         If Franchisor does not exercise its right of first refusal, Franchisee or such Owner(s) may co mplete the sale to such purchaser pursuant
to and on the exact terms of such purchase agreement, subject to Franchisor's approval of the transfer, as provided for in th is Agreement.
However, if the sale to such purchaser is not comp leted within one hundred twenty (120) days after receipt of such purchase agreement by
Franchisor, or if there is a change in the terms of the sale (of wh ich Franchisee shall pro mptly notify Franchisor), Franchis or shall have an
additional right of first refusal for thirty (30) days as set forth herein on the modified or init ial terms and conditions of sale, at Fr anchisor's
option.

         13.I.   OWNERS HIP STRUCTURE .

        Franchisee represents and warrants that its Owners are as set forth on Exhi bi t C attached to this Agreement and covenants that it will
not permit the identity of such Owners, or their respective interests in Franchisee, to change without complying with this Ag reement.
Franchisee covenants further that it will execute updated copies of Exhi bit C to reflect any changes in the information contained therein.

14.      GRANT OF S UCCESSOR FRANCHIS E .

         14.A.   FRANCHIS EE'S RIGHT TO A S UCCESSOR FRANCHIS E .

          Subject to the provisions of Subsections B and C of this Sect ion, upon expiration of the init ial term of this Agreement, Franchisee
shall have the right to obtain a successor franchise to continue to operate the Outlet under the System and the Marks (a " Successor Franchise
") for up to two (2) successor terms of five (5) years, provided that Franchisee has met the fo llowing conditions as of the end of the initial term
or the first successor term (as applicable):

                  (1)   Franchisee and its Owners have complied in all material respects with this Agreement during the preceding term(s);

                  (2)   Franchisee and its Owners are then in fu ll co mpliance with this Agreement;

                  (3)   Franchisor continues to maintain a franchise program for UFood Outlets in the geographic area surrounding the Site;

                     (4) Franchisee’s general manager, assistant general manager and kitchen manager must have comp leted our then -current
         initial t rain ing program; and

                   (5) Franchisee maintains possession of the Site and agrees (regard less of cost) to remodel and/or expand the Outlet, add or
         replace improvements and Operating Assets, and otherwise modify the Outlet and the Site to b ring it into co mpliance with Syst em
         Standards then applicable under new or successor franchises for UFood Outlets; or if Fra nchisee is unable to maintain possession of
         the Site, or if, in the judg ment of Franchisor, the Outlet should be relocated within the Territory, Franchisee secures a sub stitute site
         within the Territory approved by Franchisor and agrees to develop expeditiously such substitute site in co mpliance with specifications
         and standards then applicable under new or successor franchises for UFood Outlets.


                                                                         47
         In consideration of the grant of the Successor Franchise, Franchisee shall pay to Franchisor a successor franchise fee equal to twenty
percent (20%) of Franchisor's then current standard initial franchise fee.

         14.B.   NOTICES .

         Franchisee shall g ive Franchisor written notice of its election to obtain a Successor Franchise not more than twenty -four (24) months,
and not less than twelve (12) months, prior to the expiration of this Agreement. Franchisor agrees to give Franchisee written notice, not more
than ninety (90) days after receipt of Franchisee's notice and all other information Franchisor requests, of Franchisor's det ermination (1) to
grant Franchisee a Successor Franchise pursuant to this Section; (2) to g rant Franchisee a Successor Franchise on the conditio n that Franchisee
corrects existing deficiencies of the Outlet or in Franchisee's operation of the Outlet; or (3) not to grant Franchisee a Successor Franchise based
on Franchisor's determination that Franchisee has not q ualified to obtain a Successor Franchise pursuant to Section 14.A above. If applicab le,
such notice shall (a) describe the remodeling, expansion, improvements and/or modifications required to bring the Outlet an d the Operating
Assets into compliance with the then applicable System Standards for new UFood Outlets; and (b) state what actions Franchisee must take to
correct the deficiencies and time period in which such deficiencies must be corrected. If Franchisor elects not to grant Fran chisee a Successor
Franchise, Franchisor shall give Franchisee written notice of the decision not less than ninety (90) days prior to the exp iration o f the in itial term
of this Agreement; provided, however, that Franchisor need not give ninety (90) days' notice if its decision not to grant a Successor Franchise is
due to Franchisee's breach of this Agreement during the ninety (90) day period before it expires. Such notice shall state the reasons for
Franchisor's refusal to grant a Successor Franchise. In the event Franchisor fa ils timely to give Franchisee any notice required hereunder,
Franchisor may extend the term of this Agreement for such period of time as is necessary in order to provide Franchisee adequ ate notice under
the terms hereof. The grant of a Successor Franchise shall be conditioned upon Franchisee's continued compliance with all the terms and
conditions of this Agreement and the conditions on obtaining a Successor Franchise specified by Franchisor up to the date of expiration.

         14.C.   S UCCESSOR FRANCHIS E AGREEMENT/ REL EAS ES .

         To obtain a Successor Franchise, Franchisor, Franchisee and its Owners shall execute the form of franchise agreement and any
ancillary agreements then customarily used by Franchisor in the grant of franchises for the operation of UFood Outlets (with appropriate
modifications to the term and other appropriate provisions to reflect the fact that the agreement relates to a Successor Fran chise), wh ich may
contain fees, terms and conditions that are materially different fro m those contained in this Agreement. Su ch agreement shall contain the
successor franchise fee provided for above, but shall not require pay ment of an initial franchise fee. Franchisee and its Own ers further agree to
execute general releases, in form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates and their respective
shareholders, officers, directors, employees, agents, successors and assigns. The franchise agreement for a Successor Franchise will not include
any right to any further renewal, extension, or successor franchise rights. Failure by Franchisee and its Owners to sign and deliver to Franchisor
such agreements and releases within thirty (30) days after delivery thereof to Franchisee shall be deemed an election by Fran chisee not to
obtain a Successor Franchise.


                                                                          48
15.      TERMINATION OF AGREEMENT .

         15.A.   B Y FRANCHIS EE .

        If Franchisee and its Owners are in fu ll co mpliance with this Agreement and Franchisor materially breaches this Agreement, an d
Franchisor does not:

                   (1) correct such breach within th irty (30) days after Franchisor's receipt of written notice fro m Franchisee specifically
         identifying the material breach; or

                   (2) undertake within thirty (30) days after Franchisor's receipt of written notice fro m Franchisee specifically identifying the
         material breach, and continue until co mplet ion, reason able efforts to cure such breach if such breach cannot reasonably be cured
         within th irty (30) days,

then Franchisee may terminate this Agreement, at its option and without waiving any other rights (including the right to dama ges), effective
thirty (30) days after Franchisor's receipt o f written notice of termination. Any attempt to terminate this Agreement by Franchisee other than as
provided in this Section 15.A. shall be a breach of this Agreement.

         15.B.   B Y FRANCHIS OR .

        Franchisor may terminate this Agreement, at its option and without waiving any other rights (including the right to damages), effective
upon delivery of notice of termination to Franchisee, if:

                  (1) Franchisee fails to develop the Outlet in accordance with this Ag reement and commence operation of business within
         the time period provided in this Agreement;

                 (2) Franchisee fails to operate, abandons, surrenders or transfers control of the operation of the Outlet for any period of
         twenty-four (24) hours or longer without prior written approval of Franchisor;

                  (3) Franchisee or any of its Owners has made or makes any material misrepresentation or o mission in the application for or
         acquisition of the rights under this Agreement, in materials submitted relating to a transfer, or in operating the Outlet or ot herwise
         performing its obligations hereunder, including with respect to any Anti-Terrorism Laws, or has violated or violat es any
         Anti-Terrorism Laws


                                                                        49
         (4) Franchisee or any of its Owners, or any of the Management Personnel, is convicted by a trial court of, or pleads guilty
or no contest to, a felony, or to another crime or offense, or engages in any misconduct or behavior, that might adversely af fect the
reputation of Franchisee, the Outlet, any UFood Outlet, or the goodwill associated with the Marks;

         (5)   Franchisee or any of its Owners makes a purported assignment or transfer in v iolation of this Agreement;

          (6) Franchisee (or any of its Owners or emp loyees) makes any unauthorized use or disclosure of or duplicates any
Confidential Informat ion or any part of the Manuals, makes any unauthorized use of the Marks or challenges or seeks to challe nge the
validity of Franchisor's or its Affiliates' rights in and to the Marks or the Confidential Info rmation;

         (7)   Franchisee (or any of its Owners) applies for or otherwise obtains a registration of any Mark anywhere in the world;

          (8) Franchisee's General Manager or any other employee of Franchisee fails to co mplete to Franchisor's reasonable
satisfaction any of the training required pursuant to this Agreement within thirty (30) days of the date on which Franchisor gives
written notice to Franchisee of such delinquency, and either (i) such failure results in a vacancy in a Management Personnel position
or other position which, in the reasonable judg ment of Franchisor, adversely affects Franchisee's ability to operate the Outlet in
compliance with the System Standards and all other terms o f this Agreement, or (ii) Franchisee fails pro mptly to rep lace such General
Manager or other emp loyee with another person who has the qualifications required by this Agreement and is able successfully to
complete the required train ing;

         (9) Franchisee loses the right to possession of the Site and does not relocate the Outlet to another Site pursuant to the terms
of this Agreement;

           (10) Franchisee makes an assignment for the benefit of cred itors or admits in writ ing its insolvency or inability to pay its
debts generally as they become due; Franchisee consents to the appointment of a receiver, trustee, or liquidator of all or th e substantial
part of its property; the Outlet is attached, seized, subjected to a writ o r distress warrant, or levied upon, unless the att achment, seizure,
writ, warrant, or levy is vacated within thirty (30) days; or any order appointing a receiver, trustee, or liq uidator of Franchisee or the
Outlet is not vacated within thirty (30) days following the order's entry;

       (11) Franchisee, any of its Owners or any member of their Immediate Families (whether or not bound by individual
noncompetition undertakings ), or other Persons who have executed such individual undertakings, violate the restrictions in this
Agreement with respect to Competit ive Businesses or Confidential Information;


                                                                 50
                 (12) Franchisee fails to: (a) report accurately the Outlet's Gross Receipts, Nutrit ional Products Gross Receipts or F&B
        Gross Receipts; (b) make payments of any amounts due Franchisor or its Affiliates for Royalty Fees, Systemwide Advertising Fun d
        contributions, purchases from Franchisor or its Affiliates, or any other amounts due; or (c) adhere to the Financing Plan in t he form
        approved by Franchisor, and in any such event does not correct such failure within ten (10) days after written notice of such failure is
        delivered to Franchisee;

                 (13) Franchisee or any of its Owners fails on three (3) or mo re separate occasions within any period of twenty -four (24)
        consecutive months to comply with any one or more provisions of this Agreement (whether the same provision or different
        provisions), whether or not such failures to comply are corrected after notice of default is given, or fails on two (2) or mo re separate
        occasions within any period of twelve (12) consecutive months to comply with the same provision under this Agreement, wh ether or
        not such failures to comp ly are corrected after notice of defau lt is given;

                 (14) Franchisee or any of its Owners fails to co mp ly with any other provision of this Agreement or any mandatory System
        Standard, or to pass Franchisor's quality control inspection, and does not correct such failu re within thirty (30) days after Franchisee's
        receipt of Franchisor's written notice of such failure to co mp ly;

                 (15)    any license or permit necessary for the Outlet's proper operation is suspended, revoked or not renewed;

                 (16) Franchisee vio lates any health, safety, environ mental or sanitation law, ord inance or regulation, or operates the Outlet
        in an unsafe manner, and does not immed iately begin to cure the vio lation, and correct the violat ion to Franchisor's satisfaction within
        twenty-four (24) hours, after receiving written notice thereof;

                 (17) any franchise agreement or other material agreement between Franchisor (or any of its Affiliates) and Franchisee (or
        any of its Affiliates), (but excluding the Development Agreement, if applicable) is terminated by any party, excluding the pe rmanent
        closing of any UFood Outlets with the prior written approv al of Franchisor; or

                 (18) Franchisee has attempted to terminate this Agreement or any other franchise agreement with Franchisor without
        comply ing with Section 15.A . of this Agreement or the applicable section of such franchise agreement.

        15.C.   TERMINATION OF CERTAIN RIGHTS OF FRANCHIS EE .

        If Franchisor is entitled to terminate this Agreement in accordance with Section 15.B ., Franchisor shall have the option to terminate
any one or more of the following instead of terminating this Agreement:

                 (1)    Franchisee's right to participate in any conventions offered by Franchisor fro m t ime to t ime;


                                                                         51
                  (2)   Franchisee's right to provide Catering Services or Delivery Services; and

                  (3)   any exclusivity fo r the Territory granted under Section 2.B . of this Agreement,

effective ten (10) days after delivery of written notice thereof to Franchisee. If any of such rights, options or arrangements are terminated in
accordance with this Subsection, such termination shall be without prejudice to Franchisor's right to terminate this Agreemen t in accordance
with Section 15.B. o r to terminate any other rights, options or arrangements under this Agreement at any time thereafter for the same defau lt or
as a result of any additional defaults of the terms of th is Agreement.

         15.D.   ASS UMPTION OF MANAGEMENT .

         Franchisor has the right (but not the obligation), under the circu mstances described below or in Section 13.E. , to enter the Site and
assume the Outlet's management for any period of time that Franchisor deems appropriate. If Franchisor assumes the Outlet's management
under Subparagraphs (1) and (2) belo w or pursuant to Section 13.E. , Franchisee must pay Franchisor (in addition to the Royalty Fees,
Systemwide Advertising Fund contributions and other amounts due Franchisor) One Thousand Dollars ($1,000) per day , plus all d irect
out-of-pocket costs and expenses incurred by Franchisor, during th is time. If Franchisor assumes the Outlet's management, Franchisee
acknowledges that Franchisor will have a duty to utilize only reasonable efforts and will not be liable to Franchisee or its Owners for any debts,
losses, or obligations the Outlet incurs, or to any of Franchisee's creditors for any supplies or other assets or services pu rchased for the Outlet,
while Franchisor manages it. Franchisor has the unrestricted right to assign its rights under this Section 15.D.

         Franchisor may assume the Outlet's management under the following circu mstances or as provided in Section 13.E. :

                  (1)   if Franchisee abandons or fails actively to operate the Outlet;

                  (2) if Franchisee fails to co mply with any provision of this Agreement or any System Standard and does not correct the
         failure with in the time period Franchisor specifies in its notice to Franchisee; or

                   (3) if this Agreement expires or is terminated and Franchisor is deciding whether to exercise its option to purchase the
         Outlet's assets under Section 16.F . belo w.

         Franchisor's exercise of its rights under Subparagraphs (1) or (2) above will not affect its right to terminate this Agreemen t under
Section 15.B. above.


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         15.E.   EFFECT OF TERMINATION .

         Any provision of this Agreement to the contrary notwithstanding, the termination of this Agreement shall not affect the right s of the
terminating party with respect to any damages it has suffered as a result o f any breach of this Agreement, nor shall it af fect the rights of either
party with respect to liabilit ies or claims accrued, o r arising out of events occurring prio r to, the effective date of termination. Neither the right
of termination, nor the right to sue for damages or any other remedy available to either party hereunder, shall be exclusive of any other remedy
given hereunder or now or hereafter existing at law or in equity.

16.      RIGHTS AND OBLIGATIONS OF FRANCHISOR AND FRANCHIS EE UPON TERMINATION OR EXPIRATION OF
         THE AGREEMENT .

         16.A.    PAYMENT OF AMOUNTS OWED .

          Franchisee shall immed iately pay to Franchisor and its Affiliates upon termination or exp iration of this Agreement for any re ason such
Royalty Fees, Systemwide Advertising Fund contributions, amounts owed for purchases by Franchisee, interest due on any of the fo regoing,
and all other amounts owed to Franchisor or its Affiliates which are then unpaid, whether or not attributable to the Outlet.

         16.B.    MARKS AND TRADE DRESS .

        Upon the termination or exp irat ion of this Agreement for any reason (without grant of a Successor Franchise), Franchisee and its
Owners shall:

                    (1) except in connection with other UFood Outlets operated pursuant to effective franchise agreements with Fran chisor,
         immed iately cease use of all the Marks and Trade Dress and not thereafter directly or indirectly at any time or in any manner identify
         itself o r any business as a current or former UFood Outlet, or as a cu rrent or fo rmer franchisee of or as otherwise associated with
         Franchisor, or use any Mark or Trade Dress, any colorable imitation thereof or any mark or trade dress substantially identica l to or
         deceptively similar to any Mark or Trade Dress in any manner or for any purpose, or utilize for any purp ose any trade name,
         trademark or service mark, o r other commercial sy mbol or trade dress that suggests or indicates a connection or association w ith
         Franchisor;

                  (2) immediately remove fro m the Site all signs containing any Mark, remove the Marks fro m all vehicles, fixtures,
         furnishings, decor items and other objects displaying any Mark at the Site, and return to Franchisor or destroy all signs, pa ckaging
         materials and forms, advertising and pro motional materials, menus, paper goods, catalogs, in voices and other materials containing any
         Mark or otherwise identifying or relat ing to a UFood Outlet;

                 (3) immediately take such action as may be required to cancel or, at Franchisor's option, to transfer to Franchisor or its
         designee, all fictit ious or assumed name or equivalent reg istrations relating to its use of any Mark;


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                    (4) immediately take all such actions as may be necessary to transfer any telephone number and any telephone directory
         listings associated with the Marks to Franchisor or its designee. Franchisee acknowledges that, as between Franchisor and Fra nchisee,
         Franchisor has the sole right to and interest in all telephone numbers and directory listings associated with the Marks. Conc urrently
         with the execution of this Agreement, Franchisee shall execute Franchisor's form of co llateral assignment of telephone n umbers and
         listings (the " Telephone Number Assignment ") attached to this Agreement as Exhi bit G . Franchisee acknowledges and agrees that
         the telephone company and all listing agencies may accept the Telephone Nu mber Assignment as conclusive evidence of the exclusive
         right of the Franchisor in such telephone numbers and directory listings and its authority to direct their transfer; and

                   (5) if Franchisor does not purchase the assets of the Outlet as provided in Section 16.F . , at Franchisee's expense,
         immed iately make such modificat ions and alterations, including removal of all d istinctive physical and structural features as sociated
         with the Trade Dress or UFood Outlets, as may be necessary to distinguish the Site and the Outlet so clearly fro m its former
         appearance and from other UFood Outlets as to prevent any possibility that the public will associate the Site with UFood Outlets and
         to prevent confusion created by such association. At a min imu m, such changes and modificat ions to the Outlet wi ll include:
         (a) repainting, and, where applicable, recovering both the exterior and interior of the Outlet with different colors, including r emoving
         distinctive colors and designs from the walls; (b) remov ing all Trade Dress, fixtures and other decor items and replacing them with
         other items not of the general type and appearance customarily used in a UFood Outlet; and (c) removing all exterior and interior
         signage bearing any Mark. If Franchisee fails to in itiate immed iately or co mp lete such modifications, alterations and/or removals
         within such time as Franchisor deems appropriate, Franchisee agrees that Franchisor or its designated agents may enter the Ou tlet and
         adjacent areas, without prior notice, to make such modificat ions, alterations and/or removals , at Franchisee's expense, without liability
         for trespass or damages. Franchisee expressly acknowledges that its failure to make such alterations will cause irreparable i njury to
         Franchisor and consents to entry, at Franchisee's expense, of an ex-parte order by any court of competent jurisdiction authorizing
         Franchisor or its agents to take such action, if Franchisor seeks such an order.

Franchisee shall furn ish to Franchisor (i) within thirty (30) days after the effect ive date of termination or expiratio n, ev idence satisfactory to
Franchisor of Franchisee's compliance with Subparagraphs (1), (3) and (4) of the foregoing obligations, and (ii) within thirty (30) days after
the later of exp iration of Franchisor's option to purchase the Outlet, as provided in this Section, or receipt of notice that Franchisor elects not to
purchase the Outlet pursuant to this Section, ev idence satisfactory to Franchisor of Franchisee's co mpliance with all of the foregoing
obligations. If Franchisor exercises its option to purchase the Outlet under this Section, Franchisor shall direct Franchisee regarding which, if
any, of the above requirements Franchisee shall observe.

         16.C.   CONFIDENTIAL INFORMATION .

         Franchisee agrees that upon termination or exp iration of this Agreement for any reason (without grant of a Successor Franchis e):


                                                                          54
                 (1) it, and all of its Affiliates, Owners, emp loyees, agents and other representatives, will immediately cease to use, and will
        maintain the absolute confidentiality of, any Confidential Information and will refrain fro m using such Confidential Informat ion in
        any business or otherwise; and

                (2) it will return to Franchisor all copies of the Manuals and any other confidential materials wh ich have been loaned or
        made available to it by Franchisor.

        16.D.   COVENANT NOT TO COMPET E .

         Upon exp iration or termination of this Agreement for any reason (without grant of a Successor Franchise), other than pursuant to
Section 15.A. , neither Franchisee nor any of its Owners shall direct ly or indirectly (through a member of the Immediate Family of Franchis ee
or a Owner or otherwise), for a period of eighteen (18) months commencing on the effective date of such termination o r expiration, or the date
on which all persons bound by this Subsection begin comp lying fully with this Subsection, whichever is later:

                  (1) have any controlling or non-controlling interest as a record or beneficial owner in any Co mpetitive Business located or
        operating: (a) at the Site; (b) within a five (5) mile rad ius of the Site; (c) within a five (5) mile rad ius of any other UFood Outlet in
        operation or under develop ment on the effective date of termination or expiration of this Agreement; or (d) within the Territory or
        within five (5) miles of the boundary of the Territory, provided that the restrictions contained in this paragraph 16.D(1) 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 and
        quoted on a national inter-dealer quotation system that represent less than one-half percent (0.5%) of the number of shares of that class
        of securities issued and outstanding;

                 (2) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for any
        Co mpetitive Business located or operating: (a) at the Site; (b) within a five (5) mile radius of the Site; (c) within a five (5) mile radius
        of any other UFood Outlet in operat ion or under development on the effective date of termination or expiration o f this Agreement; or
        (d) within the Territory or within five (5) miles of the boundary of the Territory;

                  (3) direct ly or indirect ly loan any money or other thing of value to, guaranty any loan to, lease any personal or real property
        to, or permit the use of its name in connection with, any Co mpetit ive Business located or operating: (a) at the Site; (b ) within a five (5)
        mile radius of the Site; (c) within a five (5) mile radius of any other UFood Outlet in operation or under develop ment on the effective
        date of termination or expiration of this Agreement; or (d) within the Territory or within five (5) miles of the boundary of the
        Territory;

                (4) d ivert or attempt to divert any actual or potential business or customers of any UFood Outlet to any Co mpetit ive
        Business, wherever located or operating; or


                                                                        55
                   (5) employ or seek to emp loy any indiv idual who is employed by Franchisor, its Affiliate o r any developer or franchisee of
         a UFood Outlet, or otherwise directly o r indirect ly induce or attempt to induce any such individual to leave said emp loyment, without
         the prior written consent of such individual's employer.

          Without limiting the foregoing, and in addit ion to any other remedies Franchisor may have under this A greement, if Franchisee or any
Affiliate of Franchisee should hire an individual who, at the time of such hiring, is emp loyed by Franchisor or one of its Af filiates and whose
duties include training, Franchisee shall pro mptly pay to Franchisor as liquidate d damages an amount equal to the then current annual salary of
the individual as reflected in the personnel records of Franchisor or its Affiliate, as applicab le. Franchisee acknowledges a nd agrees that
Franchisor makes a substantial investment in its train ing personnel and that the aforementioned liquidated damages are a reasonable estimate of
the actual damages which would be incurred by Franchisor or its Affiliate.

         16.E.   CONTINUING OB LIGATIONS .

         All obligations of Franchisor and Franchisee wh ich expressly or by their nature survive or are intended to survive the exp ira tion or
termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding its expiration or t ermination and until
they are satisfied in full or by their nature exp ire.

         16.F.   FRANCHIS OR'S RIGHT TO PURCHAS E ASS ETS OF THE OUTL ET .

         Upon exp iration or termination of this Agreement for any reason (without the grant of a Successor Franchise), other than purs uant to
Section 15.A. , Franchisor or its assignee shall have the option, exercisable by giving written notice thereof with in sixty (60) days from the date
of such exp iration or termination, to purchase fro m Franchisee and/or any of its Affiliates, as applicable, any or all of the assets used in the
Outlet. As used in this Paragraph, " assets " shall mean and include leasehold improve ments, Operating Assets, Nutritional Pro ducts, inventory,
ingredients, materials and supplies, and the Lease (or, if Franchisee or its Affiliate owns the Site, the assets shall includ e the Site); p rovided,
however, that Franchisor may exclude fro m the assets so purchased any assets which do not meet Franchisor's then current System Standards
for new UFood Outlets. Franchisor shall have the unrestricted right to assign this option to purchase.

         At its option, Franchisor may exercise its option to purchase t he assets under this Subsection on a conditional basis, subject to
complet ion to Franchisor's satisfaction of any due diligence, inspection or tests that Franchisor designates. Franchisee shall cooperate fully with
Franchisor and its representatives in connection with any such due diligence, inspections and tests. Within sixty (60) days after delivering its
written notice to conditionally exercise its option to purchase the assets under this Subsection, Franchisor shall notify Fra nchisee of its decision
(1) to proceed with the purchase of the assets, or (2) to cancel its purchase of the assets for any reason that Franchisor deems appropriate.
Franchisor or its assignee shall be entitled to all customary indemnities, warranties and representations given by th e seller of a business in
connection with its asset purchase, including indemn ities for all actions, events and conditions that existed or occurred prior to the closing of
the purchase in connection with the Outlet or Franchisee's business and representations and warranties as to: (1) ownership, co ndition and tit le
to assets; (2) absence of liens and encumbrances relating to the assets; (3) valid ity of contracts; and (4) liabilities, contingent or otherwise,
affecting the assets.


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         The purchase price for the assets shall be equal to their fair market value, provided that the purchase price shall take into account the
termination or exp irat ion of this Agreement and shall not contain an y factor or increment for any trademark, service mark or o ther commercial
symbol used in connection with the operation of the Outlet or any goodwill or "going concern" value for the Outlet.

         If Franchisor and Franchisee cannot agree on the fair market value of the assets to be purchased, fair market value will be d etermined
by three (3) independent appraisers, each of who m will conduct a separate appraisal and, in doing so, be bound by the ter ms o f this Subsection
concerning the purchase price. Franchisor will appoint one appraiser, Franchisee will appoint one appraiser, and the two appr aisers will appoint
the third appraiser. Franchisor and Franchisee shall select their respective appraisers w ithin fifteen (15) days after Franchisor notifies
Franchisee that Franchisor wishes to exercise its purchase option (if Franchisor and Franchisee have not agreed on fair marke t value befo re
then) and the two appraisers so chosen shall be obligated to appoint the third appraiser within fifteen (15) days after they have both been
appointed. Franchisor and Franchisee will each bear the cost of its own appraiser and share equally the fees and expenses of the third appraiser.
The appraisers must complete their appraisals within thirty (30) days after the third appraiser's appointment. The purchase price to be paid will
be the median of the fair market values determined by the three (3) appraisers.

          The purchase price shall be paid in cash, a cash equivalent, or marketable securities of equivalent value at the closing of the purchase,
which shall take place no later than ninety (90) days after receipt by Franchisee of notice of exercise of this option to pur chase, at which time
Franchisee shall deliver instruments transferring to Franchisor or its designee: (i) good, valid, marketable and indefeasible t itle (or equivalent
rights) to the assets purchased, free and clear of any mortgage, claim, lien or encu mbrance (other than liens and security in terests acceptable to
Franchisor or its designee), with all sales and other transfer taxes paid by Franchisee; (ii) all licenses and permits of the Outlet which may be
assigned or transferred; and (iii) the Lease or fee interest in the Site. Local custom shall be fo llo wed as to formalities of any transfer
documentation, closing costs and closing logistics. In the event that Franchisee cannot deliver clear t itle to all of the pur chased assets as
aforesaid, or in the event there shall be other unresolved issues, the closing of t he sale shall be accomplished through an escrow. Further,
Franchisee and Franchisor shall, prior to closing, co mply with all applicable legal requirements, including the bulk sales pr ovisions of the
Unifo rm Co mmercial Code of the state in wh ich the Outlet is located (if any) and the notification and other provisions of any applicable tax
laws and regulations applying to bulk transfers outside of the ord inary course of business. Franchisee shall, p rior to or simu ltaneously with the
closing of the purchase, pay all tax liabilities incurred in connection with the operation of the Outlet. Franchisor shall have the right to set off
against and reduce the purchase price by any and all amounts owed by Franchisee to Franchisor or its Affiliates, and the amou nt of any
encumbrances or liens against the assets or any obligations assumed by Franchisor or its designee.


                                                                        57
         If Franchisor or its designee exercises this option to purchase, pending the closing of such purchase, Franchisor shall have the right to
appoint a manager to maintain the operation of the Outlet pursuant to Section 15.D . A lternatively, Franchisor may require Franchisee to close
the Outlet during such time period without removing any assets from the Outlet. Franchisee shall maintain in fo rce all in surance policies
required pursuant to this Agreement through the date of closing. If the Site is leased, Franchisor will indemnify and hold ha rmless Franchisee
fro m any ongoing liab ility under the Lease fro m the date Franchisor assumes possession of the Site.

17.      RELATIONS HIP OF THE PARTIES/ INDEMNIFICATION .

         17.A.   INDEPENDENT CONTRACTORS .

          It is understood and agreed by the parties hereto that this Agreement does not create a fiduciary relationship between them, that
Franchisor and Franchisee are and shall be independent contractors, and that nothing in this Agreement is intended to make ei ther party a
general or special agent, joint venturer, partner, or emp loyee of the other for any purpose. Franchisee shall conspicuously identify itself in all
dealings with customers, suppliers, vendors, public officials, Franchisee personnel, and others as the owner of the Outlet under a franchise
granted by Franchisor and shall conspicuously and prominently place such other notices of independent ownership on the Site a nd on such
forms, menus, guest checks, emp loyment applications, business cards, station ery, advertising, and other materials as Franchisor may require
fro m t ime to time.

         17.B.   NO LIAB ILITY FOR ACTS OF OTHER PARTY .

          Franchisee shall not employ any of the Marks in signing any contract, application for any license or permit, or in a manner that may
result in liability of Franchisor or its Affiliates for any indebtedness or obligation of Franchisee. Except as exp ressly aut horized in writ ing,
neither Franchisor nor Franchisee shall make any express or imp lied agreements, warranties, guarantees or representations, or incur any debt, in
the name o f or on behalf of the other, or represent that their relationship is other than franchisor and franchisee, and neit her Franchisor nor
Franchisee shall be obligated by or have any liability under any agreements or representations made by the other that are not exp ressly
authorized in writing. Franchisor shall not be obligated for any damages to any person or property directly or indirect ly arising out of the
operation of the Outlet or Franchisee's business under this Agreement.

         17.C.   TAXES .

         Franchisor shall have no liability for any sales, use, service, occupation, excise, gross receipts, income, property, payroll, emp loyee
withholding or other taxes, whether levied upon this Agreement, Franchisee, the Outlet or Franchisee's property, or upon Franchisor, in
connection with the sales made or business conducted by Franchisee, except any taxes Franchisor is required by law to collect fro m Franchisee
with respect to purchases fro m Franchisor and Franchisor's income taxes. Pay ment of all such taxes shall be the responsibility of Franchisee.


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         17.D.    INDEMNIFICATION OF FRANCHISOR .

         Franchisee agrees to indemnify, defend and hold Franchisor and the other Franchisor Indemnified Parties harmless against, and to
reimburse them for, any and all taxes described in Section 17.C. and any and all claims against, and losses, obligations, damag es and expenses
incurred by, any one or more of the Franchisor Indemnified Parties directly or indirectly arising out of:

                  (1) this Agreement or the development or operation of the Outlet, including any breach or violation of any agreement,
         contract or commit ment by Franchisee resulting fro m Franchisee's execution and delivery of this Agreement or performance of any o f
         its obligations hereunder or liabilities asserted by Owners, employees, agents or other representatives of Franchisee arising in
         connection with training provided by Franchisor, its Affiliates or designees or otherwise;

                   (2)   unauthorized activit ies conducted in association with the Marks;

                   (3)   any occurrence at the Site, whether associated with the operation of the Outlet or otherwise; or

                 (4) the transfer of any interest in this Agreement, the Outlet, some or all o f the assets of the Outlet or Franchisee in any
         manner not in accordance with this Agreement.

          For purposes of this indemnificat ion, " claims " shall mean and include all obligations, actual, incidental, consequential, special, and
punitive damages, and costs incurred in the defense or settlement of any claim, including reasonable accountants', attorneys' , attorney
assistants', arbitrators' and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and any other
expenses of litigation, arb itration or alternative dispute resolution, regardless of whether lit igation, arbitrat ion or alter native dispute resolution
is commenced. Franchisor and the other Franchisor Indemn ified Parties shall have the right to defend any such indemn ified cla im against them
in such manner as Franchisor deems appropriate or desirable, and Franchisee may not settle any c laim or take any other remed ial, corrective or
similar actions relat ing to a claim without Franchisor's consent. This indemnity shall continue in fu ll fo rce and effect subs equent to and
notwithstanding the expiration or termination of this Agreement. A Fra nchisor Indemnified Party need not seek recovery from an insurer or
other third party, or otherwise mitigate its losses or expenses, in order to maintain and recover fully a claim against Franc hisee.

18.      GEN ERAL PROVIS IONS .

         18.A.    ARB ITRATION .

         Franchisor and Franchisee agree that all controversies, disputes, or claims between Franchisor and its affiliates, and its an d their
respective owners, officers, managers, agents, and emp loyees, as applicable, and Franchisee (and its owners, guarantors, affiliates, and
emp loyees, as applicable) arising out of or related to:


                                                                           59
                  (1)   this Agreement or any other agreement between Franchisee and Franchisor;

                  (2)   Franchisor's relationship with Franchisee;

                 (3) the scope and validity of this Agreement or any other agreement between Franchisee and Franchisor or any pro vision of
         any such agreement, including the validity and scope of the arbitrat ion obligation under this Section, which Franchisor and F ranchisee
         acknowledge are to be determined by the arbitrator and not by a court; or

                  (4)   any System Standard;

must be submitted for binding arbitrat ion, on demand of either party, to the A merican Arb itration Association. The arbitrat io n proceedings will
be conducted by one arbitrator and, except as this subsection otherwise provides, according to the then curren t commercial arbitration rules of
the American Arb itration Association. All proceedings will be conducted at a suitable location chosen by the arbitrator which is within five (5)
miles of Franchisor's then existing principal business address. All matters relat ing to arbitrat ion will be governed by the Federal Arbitration Act
(9 U.S.C. Sect ions 1 et seq. ) and not by any state arbitration law. Judg ment upon the arbitrator’s award may be entered in any court of
competent jurisdiction.

          The arbitrator has the right to award or include in h is or her award any relief wh ich he or she deems proper in the circumstances,
including, without limitation, money damages (with interest on unpaid amounts from the date due), specific performance, inju n ctive relief, and
attorneys’ fees and costs, provided that the arbitrator may not declare any mark generic or otherwise invalid and, except as Section 18.G.
otherwise provides, Franchisor and Franchisee (and the Owners) waive any right to or claim for any exemp lary or punitiv e damages. The
arbitrator’s award and decision shall be conclusive and binding upon all part ies.

          Franchisor and Franchisee agree to be bound by the provisions of any limitation on the period of time in which claims must be brought
under applicable law or this Agreement, whichever exp ires earlier. Franchisor and Franchisee further agree that, in any arbitration proceeding,
each party must submit or file any claim which would constitute a compulsory counterclaim (as defined by the Federal Rules of Civ il
Procedure) within the same proceeding as the claim to wh ich it relates. Any claim wh ich is not submitted or filed as required is forever barred.
The arbitrator may not consider any settlement discussions or offers that might have been made by either Franchise e or Franchisor. Franchisor
reserves the right, but has no obligation, to advance any portion of your share of the costs of any arbitration proceeding in order for such
arbitration proceeding to take place and by doing so shall not be deemed to have waived or relinquished its right to seek the recovery of those
costs in accordance with Section 18.F above.


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          Franchisor and Franchisee agree that arbit ration will be conducted on an individual, not a class -wide, basis, and that an arb itration
proceeding between Franchisor and its affiliates, and its and their respective owners, officers, managers, agents, and emp loyees, as applicable,
and Franchisee (and the Owners, and Franchisor's guarantors, affiliates, and employees, as applicable) may not be commenced, conducted,
consolidated or co mbined in any way with any other arb itration proceeding or claim between us and any other Person. Not withstanding the
foregoing or anything to the contrary in this Section 18, if any court or arbitrator determines that all or any part of the p receding sentence is
unenforceable with respect to a dispute that otherwise would be subject to arbitration under this Section 18.A., then all part ies agree that this
arbitration clause shall not apply to that dispute and that such dispute shall be resolved in a judicial proceeding in accord ance with this Section
18 (excluding this Section 18.A.).

         Despite this agreement to arbitrate, Franchisor and Franchisee each have the right in a proper case to seek temporary restrainin g orders
and temporary or preliminary injunctive relief fro m a court of co mpetent jurisdiction; provided, however, that they must contemporaneously
submit the dispute for arbitration on the merits as provided in this subsection.

         The provisions of this subsection are intended to benefit and bind certain third party non -signatories and will continue in full force and
effect subsequent to and notwithstanding this Agreement’s exp iration or termination.

          If either party commences any legal action or proceeding in any court in contravention of the terms of this Section 18.A. , that party
shall pay all costs and expenses that the other party incurs in the action or p roceeding, including, without limitat ion, reasonable attorneys ’ and
related fees.

         18.B.   SPECIFIC ENFORCEMENT .

         Each party to this Agreement agrees that this Section 18 shall be specifically enforceable against such party by the other parties. The
provisions of this Section 18 are intended to benefit and b ind third party non-signatories and shall continue in full force and effect subsequent
to and notwithstanding the expiration and termination of this Agreemen t.

         18.C.   GOVERNING LAW .

         Except to the extent governed by the Federal Arbitrat ion Act (9 U.S.C. Sect ions 1 et seq .), the Un ited States Trademark Act of 1946
(Lanham Act, 15 U.S.C. Sections 1051 et seq .) or other federal law, this Agreement, the rights and obligations of the parties hereto and the
relationship of the parties hereto shall, by this express agreement of the part ies, be governed by, and construed and enforce d in accordance
with, the laws of the State of Nevada, without regard to its conflicts of law provisions, except that any Nevada law regulat ing the offer and sale
of franchises, business opportunities or similar rights, or governing the relationship of the parties to a contract involving those rights, shall not
apply unless its jurisdictional requirements are met independently without reference to this paragraph.


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         18.D.    INJ UNCTIVE RELIEF .

          Notwithstanding anything to the contrary contained in Section 18.A hereof, Franchisor and Franchisee each have the right in a proper
case to seek temporary restraining orders and temporary or preliminary in junctive relief fro m a court of co mpetent jurisdic tio n, provided that
they must contemporaneously submit for arbitrat ion on the merits any Dispute required to be arbitrated pursuant to Section 1 8.A . Franchisee
and its Affiliates, and their respective officers, directors, owners, employees, agents and rep resentatives, agree to entry without bond of
temporary and permanent injunctions and orders of specific performance enforcing any of the provisions of this Agreement. If Franchisor
secures any such injunction or order of specific performance, Franchisee fu rther agrees to pay Franchisor an amount equal to the aggregate of
its costs of obtaining any such relief, including reasonable attorneys' fees, costs of investigation and proof of facts, cour t costs, other litigation
expenses and travel and living expenses, and any damages incurred by Franchisor as a result of any breach.

         18.E.   CONS ENT TO J URISDICTION .

          Subject to the arbitration provisions of this Agreement and the provisions below, Franchisee and the Owners agree that all li tigation
proceedings arising under this Agreement or otherwise as a result of the relationship between Franchisee and Franchisor must be comm enced in
the state, and in the state or federal court of general ju risdiction closest to, where Franchisor's principal office then is located, a