ver all advertising, marketing and public relations programs and activities financed by the Media Fund, including the creative concepts, materials and endorsements used and the geographic market, media placement and allocation. You agree that the Media Fund may be used to pay the costs of preparing and producing associated materials and programs that we determine, including video, audio and written advertising materials employing advertising agencies; sponsorship of sporting, charitable or similar events, administering regional and multi-regional advertising programs including purchasing direct mail and other media advertising, social media programs, and employing advertising agencies to assist with marketing efforts; and supporting public relations, market research and other advertising, promotional and marketing activities.

Advertising Contributions by Us. Company-Owned Units are required to contribute to the Media Fund on the same basis that Franchised Units are required to contribute.

Termination of Expenditures. We maintain the right to terminate the collection and disbursement of the Advertising Contributions and the Media Fund. Upon termination, we will disburse the remaining funds to existing Franchised Units and Company-Owned Units on a pro-rata basis based on their relative amount of contributions.

Media Placement. The advertising funded by the Media Fund is anticipated to be placed, based on our decisions, in regional and/or national markets and it is anticipated to be placed with

television, radio, periodicals, newspapers and/or direct mail campaigns. We do not have to spend any of your contributions to the Media Fund in your Limited Protected Territory.

Creation of Materials. It is anticipated that most marketing materials will be prepared by our advertising department and/or a national or regional advertising agency.

Annual Report. We will prepare an annual report of the receipts and expenditures of the Media Fund and send a copy of the report to you upon request. We will not audit this report.

ITEM -12 TERRITORY

Franchise Agreement

NO EXCLUSIVE TERRITORY

You will not receive an exclusive territory. You may face competition from other Franchised Units, Company-Owned Units, or from other channels of distribution or competitive brands that we control.

LOCATION OF FRANCHISED UNIT

The Franchise Business is to be operated at a specific location you select that we approve in accordance with the terms of the Franchise Agreement. If you have not found a specific location before the parties sign the Franchise Agreement it is your responsibility to find a location for the Franchise Business that we approve.

NO MINIMUM TERRITORY

You are not obtaining any minimum territory.

RELOCATION RIGHTS

You may not change the location without our written consent and compliance with our relocation procedures.

Loss of Lease. If you lease the Premises and the lease expires or terminates before the expiration of the Franchise Agreement (provided termination is not due to your default), we permit

you 30 days to obtain new Premises within your Limited Protected Territory. The relocated Premises must not infringe upon the Limited Protected Territory of a Company-Owned Unit or another Franchised Unit then operating or under development. We must approve the new location in writing in accordance with Section 2.1 of the Franchise Agreement. During the period when your Franchise Business is not in operation due to the relocation of the Premises, you are not required to spend the minimum Local Advertising Contributions. You have 60 days from the date you sign a new lease in which to open and begin operating the Franchise Business, unless we otherwise agree in writing to extend the time. Your failure to secure a new location and begin operation within the specified times is an Event of Default on your part.

Casualty. If the Premises are substantially destroyed by fire or other casualty, we permit you 30 days to obtain new Premises within your Limited Protected Territory. The relocated Premises must not infringe upon the Limited Protected Territory of a Company-Owned Unit or another Franchised Unit then operating or under development. We must approve the new location in writing in accordance with Section 2.1 of the Franchise Agreement. During the period when your Franchise Business is not in operation due to the relocation of the Premises, you are not required to spend the minimum Local Advertising Contributions. You have 60 days from the date you sign the new lease in which to open and begin operating the Franchise Business, unless we otherwise agree in writing to extend the time. Your failure to secure a new location and begin operation within the specified times is an Event of Default on your part.

Condemnation. You will give us notice of any proposed taking of the Premises by eminent domain, as soon as possible. We permit you 30 days from the date you have to vacate the Premises to obtain new Premises within your Limited Protected Territory. The relocated Premises must not infringe upon the Limited Protected Territory of a Company-Owned Unit or another Franchised Unit then operating or under development. We must approve the new location in writing in accordance with Section 2.1 of the Franchise Agreement. During the period when your Franchise Business is not in operation due to the relocation of the Premises, you are not required to spend the minimum Local Advertising Contributions. You have 60 days from the date you sign the new lease in which to open and begin operating the Franchise Business, unless we otherwise agree in writing to extend the time. Your failure to secure a new location and begin operation within the specified times is an Event of Default on your part.

Relocation Fee. If you must relocate your Franchise Business, you will reimburse us for our costs incurred in assisting you with relocation plus pay us a relocation fee of $1,000.

NO OPTIONS, RIGHTS OF FIRST REFUSAL OR SIMILAR RIGHTS

Except for any Area Development Rights you have also purchased, you have no option to purchase an additional Franchise Business, no right of first refusal to purchase an additional Franchise Business and no similar rights to acquire additional Franchise Business in the Limited Protected Territory or any contiguous territory.

LIMITED PROTECTED TERRITORY

We grant you a Limited Protected Territory that we define in Section 18.1 of the Franchise Agreement and designate on the Map attached as Exhibit A to the Franchise Agreement, if the Premises exist that we have approved. If the Premises do not exist at this time, we will describe the Limited Protected Territory in the Approved Location Addendum attached as Exhibit D. During the Initial Term, if you are not in default, we agree not to open the premises of a Company-Owned Unit within your Limited Protected Territory or franchise another Stretch Zone Franchise having premises

located within your Limited Protected Territory, except for Non-Traditional Locations. This does not mean that there might not be overlap with a Company-Owned Unit's or another Franchised Unit's Limited Protected Territory as long as the premises of the Company-Owned Unit or the other Franchised Unit is not physically located in your Limited Protected Territory. You may not advertise outside of your DMA.

We (and any Affiliates that we may have from time to time) will, at all times, have the right to engage in any activities that we or they consider appropriate that are not expressly prohibited by the Franchise Agreement, whenever and wherever we or they desire, including:

• (a) establishing and operating, and granting rights to others to establish and operate, on any terms and conditions that we consider appropriate, Units (as applicable) at any locations outside the Limited Protected Territory and Non-Traditional Locations within or outside the Limited Protected Territory;
• (b) establishing and operating, and granting rights to others to establish and operate, on any terms and conditions that we consider appropriate, any businesses that are similar or dissimilar to Units that either are not primarily identified by the Trademarks or do not use the Business System at any locations, whether within or outside the Limited Protected Territory;
• (c) exercising all rights relating directly or indirectly to the Trademarks, and all products and services associated with any of the Trademarks, in connection with any methods of distribution, except as specifically stated in the first paragraph of this Section. This includes providing, and granting rights to others to provide (except as specifically stated in the first paragraph of this Section), products and services to customers and other third parties that are similar or dissimilar to, or competitive with, any products and services provided at Units, whether identified by the Trademarks or other trademarks or service marks, regardless of the method of distribution (including through our Website, other retail outlets, shipping and delivery), including temporary locations, such as events occurring for a limited duration; and
• (d) acquiring the assets or ownership interests of, or being acquired (regardless of the form of transaction) by, one or more businesses providing products and services similar or dissimilar to those provided at Units, and franchising, licensing or creating other arrangements with respect to these businesses once acquired, wherever these businesses (or the franchisees or licensees of these businesses) are located or operating, whether within or outside the Limited Protected Territory.

CONDITIONS TO CONTINUED LIMITED PROTECTED TERRITORY.

Minimum Performance Standard. We expressly condition the grant of your Limited Protected Territory upon your successful penetration of the market in your Limited Protected Territory. You agree to promote actively and aggressively the services offered at your Franchise Business within your Limited Protected Territory. Beginning in your 2nd full business year of operation and each full business year thereafter, the Franchise Business must generate at least $240,000 in annual Gross Revenues. To cure this default you must pay us an "Underperformance Fee" equal to 6% of the difference between your actual Gross Revenues and $240,000. If you fail to do this within 30 days on completion of your year-end financial statements, we have the option of exercising any of our rights under the Franchise Agreement including: (i) eliminating your rights in your Limited Protected Territory; or (ii) terminating the Franchise Agreement. This minimum performance standard is not a financial performance representation and does not infer that you will experience Gross Revenues of any particular level.

Our Right to Modify the Limited Protected Territory. We may not unilaterally alter your Limited Protected Territory. The parties may alter the Limited Protected Territory by a written amendment to the Franchise Agreement signed by the parties. If you breach the Franchise Agreement and fail to timely cure, we may reduce the size of your Limited Protected Territory or terminate the Franchise Agreement.

ALTERNATE METHODS OF DISTRIBUTION.

Source: Item 12 — ITEM -12 TERRITORY (FDD pages 54–58)