Under the Alloy franchise agreement, what is the franchisee agreeing to develop and operate?

• D. “System” means the ALLOY System, which consists of specific equipment, fixtures, furnishings, materials and supplies; methods, uniform standards, specifications and procedures for operations; procedures for management; training and assistance; and merchandising, advertising and promotional programs and other proprietary information, all of which we may change, improve and further develop. The System is identified by the Trademarks. The System includes a proprietary software application (the "Alloy App"). The Alloy App will provide a franchisee with tools to manage and communicate with coaches and clients through a personal profile.
• E. “Trademarks” means the ALLOY trademark and service mark that has been registered in the United States and elsewhere, and the other trademarks, service marks, trade names, the trade dress and other commercial symbols that we authorize you to use in the operation of the Facility from time to time, each as we may modify and update from time to time. Trade dress includes the designs, color schemes and image we authorize you to use from time to time.

GRANT OF DEVELOPMENT RIGHTS

The following provisions control with respect to the rights granted hereunder:

• A.

We grant to you, under the terms and conditions of this Agreement, the right to develop and operate the number of ALLOY Facilities set forth in Appendix B (the “Facilities”) within the territory described on Appendix C (the “Development Territory”).

• B.

You are bound by the development schedule set forth in Appendix B (the “Development Schedule”).

Time is of the essence for the development of each Facility in accordance with the Development Schedule.

Each Facility must be developed and operated pursuant to a separate Franchise Agreement that you enter into with us pursuant to Section 4.B below.

• C.

If you are in compliance with the Development Schedule, we will not develop or operate or grant anyone else a franchise to develop and operate a ALLOY facility (except for Special Sites as defined in Section 2.D or as otherwise set forth in this Agreement) in the Development Territory prior to the earlier of (i) the expiration or termination of this Agreement; (ii) the date on which you must execute the Franchise Agreement for your last Facility pursuant to the terms of the Development Schedule or (iii) the date on which the Authorized Location for your final Facility under this Agreement is determined.

Notwithstanding anything in this Agreement, upon the earliest occurrence of any of the foregoing events (a) your right to develop any additional Facility will expire and (b) we will be entitled to develop and operate, or to franchise others to develop and operate, ALLOY facilities in the Development Territory, except as may be otherwise provided under any Franchise Agreement that has been executed between us and you and that has not been terminated.

At the time you execute your final Franchise Agreement under the Development Schedule, you must have an Authorized Location for the Facility to be developed under the final Franchise Agreement.

• D.

The rights granted under this Agreement are limited to the right to develop Facilities located in the Development Territory, and do not include (i) any right to sell products and services identified by the Trademarks at any location or through any other channels or methods of distribution, including the Internet (or any other existing or future form of electronic commerce), other than at Facilities within the Development Territory pursuant to the terms of the applicable Franchise Agreement, (ii) any right to sell products and services identified by the Trademarks to any person or entity for resale or further distribution, or (iii) any right to exclude, control or impose conditions on our development or operation of franchised, company or affiliate owned facilities at

any time or at any location outside of the Development Territory. You may not use the words ALLOY or any of the other Trademarks as part of the name of your corporation, partnership, limited liability company or other similar entity.

You acknowledge and agree that we and our affiliates have the right to operate and franchise others the right to operate facilities or any other business within and outside the Development Territory under trademarks other than the ALLOY Trademarks, without compensation to any franchisee, except that our operation of, or association or affiliation with, facilities (through franchising or otherwise) in the Development Territory that compete with ALLOY facilities will only occur through some form of merger or acquisition with an existing facility or retail chain business. Outside of the Development Territory, we and our affiliates have the right to grant other franchises or develop and operate company or affiliate owned ALLOY facilities and offer, sell or distribute any products or services associated with the System (now or in the future) and under the Trademarks or any other trademarks, service marks or trade names or through any distribution channel or method, all without compensation to any franchisee.

You acknowledge and agree that certain locations within the Development Territory are by their nature unique and separate in character from sites generally developed as facilities. As a result, you agree that the following captive market locations (“Special Sites”) are excluded from the Development Territory and we have the right to develop or franchise such locations: (1) military bases; (2) public transportation facilities (including airports); (3) business or industry locations (e.g. manufacturing site, office building), or sports facilities; (4) student unions or other similar buildings on college or university campuses; (5) malls or enclosed shopping centers; and (6) community and special events.

• C.

You must construct and equip each Facility in strict accordance with our thencurrent approved specifications and standards pertaining to equipment, inventory, signage, fixtures, design and layout of the building.

You must furnish to us, at least 60 days prior to the earlier of (i) the date set forth in the Development Schedule by which you must execute a Franchise Agreement or (ii) the actual date on which the Franchise Agreement would be executed, a franchise application for the proposed Facility, financial statements and other information regarding you, the operation of any of your other Facilities within the Development Territory and the development and operation of the proposed Facility (including, without limitation, investment and financing plans for the proposed Facility) as we may reasonably require.

You must receive written confirmation from us that you meet our then-current standards for franchisees, including financial capability criteria for the development of a new Facility.

You acknowledge and agree that this requirement is necessary to ensure the proper development and operation of your Facilities, and to preserve and enhance the reputation and goodwill of all ALLOY facilities and the goodwill of the Trademarks.

Source: Item 23 — RECEIPTS (FDD pages 69–245)