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

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.

If you want to use any item or service in establishing or operating your Kidokinetics Business that we have not approved (for items or services that require supplier approval), you must first send us sufficient information, specifications or samples for us to determine whether the item or service complies with our standards and specifications or whether the supplier meets our approved supplier criteria. You must reimburse us for all of our reasonable expenses in connection with determining whether we will approve an item, service or supplier. We will decide within a reasonable time (usually 30 days) after receiving the required information whether you may purchase or lease the items or services or if you may purchase from the supplier. Our approval may later be withdrawn based on the supplier's performance, changes in our specifications, standards or requirements, or for other reasons.

Our approval process generally focuses on the supplier's dependability, general reputation and ability to provide sufficient quantity of product or services, and the products' or services' prices and quality. Our standards, specifications and other criteria for supplier or distributor approval have been developed by us, our principals and our affiliates through the expenditure of extensive work and time and are considered confidential information. We do not make our standards and specifications or our other criteria for supplier

or distributor approval available to our franchisees or approved suppliers. Our specifications, standards and requirements may, on occasion, change, in our sole discretion.

We reserve the right to limit the number of potential suppliers we may consider for approval and for some categories of products or services, we may designate a third party or ourselves as exclusive suppliers.

We may, but are not required to, negotiate purchase arrangements with suppliers and distributors for the benefit of franchisees and the System as a whole, and we may receive rebates or volume discounts from our purchase of equipment and supplies that we resell to you. We currently do not have any purchasing or distribution cooperatives.