RECITALS

• B. Franchisor and Developer desire to enter into an area development agreement under which Developer shall obtain the exclusive right to establish and operate a specified number of

Franchised Businesses within a specified geographical area upon the terms and conditions contained in Franchisor's then-current standard franchise agreement (each, a "Franchise Agreement"); and

C. Developer and Franchisor have entered into that certain Franchise Agreement (the "Initial Franchise Agreement") dated the same date as this Agreement for the establishment and operation of the first Franchised Businesses to be developed under this Agreement.

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

I. GRANT OF DEVELOPMENT RIGHTS AND DEVELOPMENT AREA

Subject to the terms and conditions of this Agreement, Franchisor hereby grants the right to Developer, and Developer undertakes the obligation to establish and operate in the area designated in Exhibit 1 of this Agreement (the "Development Area") the number of Franchised Businesses specified in the development schedule on Exhibit 2 (the "Development Schedule"). This Agreement does not grant Developer any right to use the Marks; the rights to use the Marks are granted only by Franchise Agreements.

II. FEES

Developer must enter into Franchise Agreements and open and operate Punch King Fitness Franchised Business in accordance with the deadlines set forth in the Development Schedule. By each "Fee Deadline" specified in the Development Schedule, Developer must have delivered to Franchisor an initial franchise fee and a signed copy of Franchisor's then-current standard form of Franchise Agreement for the number of Punch King Fitness Franchised Businesses specified on the Development Schedule. By each "Opening Deadline" specified in the Development Schedule, Developer must have the specified number of Punch King Fitness Franchised Businesses open and operating. Developer must locate the

Punch King Fitness Franchised Businesses only at sites that Franchisor has accepted in accordance with the terms of the applicable Franchise Agreement.

IV. DEVELOPMENT AREA

A. Exclusivity

While this Agreement is in effect, provided that Developer opens and operates Punch King Fitness Franchised Businesses in accordance with the Development Schedule, and the minimum number of Franchised Business that Developer has open and is operating in the Development Area at any given time is not less than the minimum required pursuant to the Development Schedule, Franchisor shall not establish or license another to establish the same Punch King Fitness Model Concept in the Development Area; however, the Franchisor may establish or license another to establish a Punch King Fitness Model Concept including but not limited to storefront, brick, and mortar, co-branded, pop-up, virtual, or mobile outlets that are different than Developer's Model Concept within the Development Area under the Punch King Fitness Marks and the System within the Development Area.

B. No Other Restrictions

Developer acknowledges that, except to the extent expressly provided herein, Franchisor expressly retains all rights and discretion with respect to the Marks and System, including the right to:

• 1. establish and license others to establish Punch King Fitness Franchised Businesses at any location outside of the Development Area;
• 2. establish, and license others to establish businesses [other than a Competitive Business (as defined below)] under other systems using other proprietary marks at such locations, including within the Development Area, and on such terms and conditions as Franchisor deems appropriate;
• 3. purchase or otherwise acquire the assets or controlling ownership of, and thereafter continue to own and operate, one or more businesses identical or similar to the Punch King Fitness Franchised Businesses (and/or acquire a franchise, license, and/or similar agreements for such businesses), some or all of which may be located anywhere, including within the Development Area that does not use the Marks;
• 4. acquire (regardless of the form of the transaction) by any business, even if the other business operates, franchises, and/or licenses Competitive Businesses within the Development Area;
• 5. sell the services and products authorized for Franchised Business using the Marks or other trademarks, service marks, and commercial symbols through alternate channels of distribution or Model Concepts, including but not limited to a storefront, brick, and mortar, co-branded, pop-up, virtual, or mobile outlets, joint marketing with partner companies, direct mail, catalog sales,

internet sites, and co-branding strategies, pursuant to such terms and conditions as Franchisor deems appropriate; and

• 6. advertise, promote, market, or sell goods or services using the Marks over the internet, the world wide web, or any other electronic network.
• 7. engage in any activities not expressly forbidden by this Agreement.

Source: Item 22 — CONTRACTS (FDD pages 56–215)