How does the Kidokinetics requirement to purchase from approved suppliers (Item 8) relate to the franchisee's obligations to maintain quality standards (Item 9)?

[Item 8: RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES]

You must operate your Kidokinetics Business according to our System and specifications. This includes purchasing or leasing products, services, supplies, equipment, computer hardware and software, and inventory related to establishing and operating the Kidokinetics Franchise under our specifications, which may include purchasing these items from: (i) our designees; (ii) approved suppliers; and/or (iii) us or our affiliates. You must not deviate from these methods, standards and specifications without our prior written consent, or otherwise operate in any manner which reflects adversely on our Marks or the System.

Our confidential franchise operations manual ("Franchise Operations Manual") states our standards, specifications and guidelines for all products and services we require you to obtain in establishing and operating your Kidokinetics Franchise and approved vendors for these products and services. We will notify you of new or modified standards, specifications and guidelines through periodic amendments or supplements to the Franchise Operations Manual or through other written communication (including electronic communication such as email or through a system-wide intranet).

You must purchase, install, maintain in sufficient supply and use equipment, signs and supplies that conform to the standards and specifications described in the Franchise Operations Manual or otherwise in writing.

Many of the products, supplies and services discussed above may only be purchased from approved suppliers in accordance with the Franchise Operations Manual. We will provide you with a list of these items and services and their approved suppliers, which may include or be limited to us or an affiliate. We are approved suppliers of the proprietary business management software. We or our affiliate are the exclusive provider of the Enhanced Business Coaching and Training Services for your Kidokinetics Businesses and of the marketing materials and services including the Initial Marketing Package. We are also an approved supplier of logoed items, such as uniforms, packaging supplies and other items bearing the Marks, but we may approve alternate suppliers in our discretion.

Franchisor will notify Franchisee whether Franchisor approves or disapproves of the proposed supplier or manufacturer within 60 calendar days after Franchisor receives all required information to evaluate the product or service.

Franchisor reserves the right, at its option, to re-inspect from time to time the facilities and products of any such approved supplier and to revoke its approval upon the supplier's failure to continue to meet any of Franchisor's then-current criteria.

Nothing in the foregoing should be construed to require Franchisor to approve any particular supplier.

Franchisor reserves the right to require Franchisee to pay to Franchisor all reasonable costs of evaluation of any proposed supplier or proposed product or service.

Franchisee shall use its best efforts to insure that Franchisee's employees maintain a neat and clean appearance and render competent and courteous service to patrons of the Kidokinetics Business.

Franchisee acknowledges and agrees that poorly trained employees, sloppy or unclean appearances and incompetent or discourteous service are extremely damaging to the goodwill of the System and the Marks and are a default of this Agreement;

• 11.1.7.

Obtain and use only equipment, vehicles, products, supplies, business forms, signs, stationery, and services that conform to the current standards and specifications for the System as required by Franchisor and obtained from Franchisor's previously approved suppliers.

Franchisor has the right to terminate this Agreement if Franchisee uses any equipment, vehicles or products that do not conform to such standards and specifications, if Franchisee fails to obtain any equipment required by Franchisor, or if Franchisee purchases from suppliers that have not been previously approved in writing by Franchisor.

Franchisee agrees to maintain an adequate inventory of all items in accordance with the Franchise Operations Manual;

11. FRANCHISEE'S OPERATIONS

• 11.1. Operation of Kidokinetics Business. In order to maintain the highest degree of quality and service on a uniform System-wide basis, Franchisee shall operate the Kidokinetics Business in conformity with the methods, standards, specifications and operating procedures prescribed by Franchisor. Franchisee agrees to comply with the Franchise Operations Manual, as it is modified from time to time, and all directives, rules and procedures specified by Franchisor, and will, among other things:
  • 11.1.1. Use only such supplies, equipment and vehicles which comply with Franchisor's specifications;
  • 11.1.2. Maintain and operate the Kidokinetics Business in good condition and repair and in a proper and businesslike manner, using Franchisee's best efforts to maintain the Kidokinetics Business in accordance with current System standards, the Franchise Operations Manual and all other directives and requirements of Franchisor, as they may be amended from time to time, and do such repairing, refurbishing and restoration as from time to time may be reasonably required to meet System standards and Franchisor's requirements as they may be modified from time to time;