Franchise Agreement

TABLE OF CONTENTS

		Page
1. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE			1
A. PREAMBLES			1
B. ACKNOWLEDGMENTS			2
C. ENTITY REQUIREMENTS			3
D. GRANT OF FRANCHISE			5
E. HUB AND ANNEX LOCATIONS, SITE SELECTION, AND LEASES			5
F. RIGHTS WE RESERVE			8
G. THE EXERCISE OF OUR JUDGMENT			9
H. MODIFICATION OF FRANCHISE SYSTEM			9
2. DEVELOPMENT AND OPENING OF FACILITY LOCATIONS			10
A. FACILITY DEVELOPMENT			10
B. OPERATING ASSETS			11
C. COMPUTER SYSTEM			11
D. FACILITY/LOCATION OPENING			12
E. PRESALE OF CLASSES, MEMBERSHIPS, AND BIRTHDAY PARTIES			13
3. FEES			13
A. INITIAL FRANCHISE FEE			13
B. ROYALTY FEE			13
C. DEFINITION OF “GROSS SALES”			15
D. LATE FEES AND INTEREST			15
E. APPLICATION OF PAYMENTS			15
F. METHOD OF PAYMENT			15
4. TRAINING AND ASSISTANCE			16
A. TRAINING			16
B. GENERAL GUIDANCE			18
C. OPERATIONS MANUAL			19
D. DELEGATION OF PERFORMANCE			19
5. MARKS			20
A. OWNERSHIP AND GOODWILL OF MARKS			20
B. LIMITATIONS ON YOUR USE OF MARKS			20
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS			20
D. DISCONTINUANCE OF USE OF MARKS			21
E. INDEMNIFICATION FOR USE OF MARKS			21
6. CONFIDENTIAL INFORMATION			21
7. EXCLUSIVE RELATIONSHIP			23
8. SYSTEM STANDARDS			24
A. COMPLIANCE WITH SYSTEM STANDARDS			24

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B. MODIFICATION OF SYSTEM STANDARDS			29
9. MARKETING			29
A. MARKET INTRODUCTION			29
B. BRAND FUND			29
C. YOUR LOCAL MARKETING			32
D. AREA BRAND COOPERATIVE			33
E. FRANCHISE SYSTEM WEBSITE			34
10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS			35
11. INSPECTIONS AND AUDITS			36
A. OUR RIGHT TO INSPECT THE LOCATIONS			36
B. OUR RIGHT TO AUDIT			36
12. TRANSFER			37
A. BY US			37
B. BY YOU			37
C. CONDITIONS FOR APPROVAL OF TRANSFER			38
D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR LIMITED LIABILITY COMPANY			41
E. DEATH OR DISABILITY			41
F. EFFECT OF CONSENT TO TRANSFER			42
G. OUR RIGHT OF FIRST REFUSAL			42
H. PUBLIC OFFERINGS			44
13. EXPIRATION OF THIS AGREEMENT			44
A. YOUR RIGHT TO ACQUIRE SUCCESSOR FRANCHISES			44
B. GRANT OF A SUCCESSOR FRANCHISE			45
C. AGREEMENTS/RELEASES			47
14. TERMINATION OF AGREEMENT			47
A. BY YOU			47
B. BY US			48
C. ASSUMPTION OF MANAGEMENT			50
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT			50
A. PAYMENT OF AMOUNTS OWED TO US			50
B. MARKS			51
C. CONFIDENTIAL INFORMATION			52
D. COVENANT NOT TO COMPETE			52
E. OUR RIGHT TO PURCHASE FACILITY			53
F. CONTINUING OBLIGATIONS			55

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16. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION			55
A. INDEPENDENT CONTRACTORS			55
B. NO LIABILITY FOR ACTS OF OTHER PARTY			56
C. TAXES			56
D. INDEMNIFICATION			56
17. ENFORCEMENT			57
A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS			57
B. WAIVER OF OBLIGATIONS			58
C. COSTS AND ATTORNEYS’ FEES			58
D. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US			59
E. RIGHTS OF PARTIES ARE CUMULATIVE			59
F. GOVERNING LAW			59
G. CONSENT TO JURISDICTION			59
H. WAIVER OF EXEMPLARY DAMAGES AND JURY TRIAL			59
I. BINDING EFFECT			60
J. LIMITATIONS OF CLAIMS			60
K. CONSTRUCTION			60
18. NOTICES AND PAYMENTS			61
19. COMPLIANCE WITH ANTI-TERRORISM LAWS			62

EXHIBIT A — LISTING OF OWNERSHIP INTERESTS
EXHIBIT B — TERRITORY
EXHIBIT C — ADDRESSES OF LOCATIONS
EXHIBIT D — CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBER(S)

GUARANTY AND ASSUMPTION OF OBLIGATIONS
NON-MONETARY GUARANTY AND ASSUMPTION OF OBLIGATIONS

KIDVILLE FRANCHISE COMPANY, LLC
FRANCHISE AGREEMENT

     THIS FRANCHISE AGREEMENT (the “Agreement”) is made and entered into as of the                      day of                                         , 20                     (the “Effective Date”) (regardless of the dates of the parties’ signatures) by and between KIDVILLE FRANCHISE COMPANY, LLC, a New York limited liability company with its principal business address at 163 East 84th Street, New York, New York 10028 (“we,” “us,” or “our”), and                                                             , whose principal business address is                                                              (“you” or “your”).

1. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE.

     A. PREAMBLES.

     (1) We and our affiliates have developed (and continue to develop and modify) policies and procedures, confidential information, intellectual property (including software and website), and a distinctive and comprehensive operating system (collectively, the “Branded System”) for the operation, identification, and promotion of facilities under the KIDVILLE® trademark and other trademarks, service marks, and commercial symbols (collectively, “Marks”) that provide to newborns through five-year-old children and their families a wide array of developmental classes such as music, gym, art, and enrichment classes, including classes under the LITTLE MAESTROS, MY BIG MESSY ART CLASS®, and RUN, WIGGLE, PAINT & GIGGLE® brands (collectively, “Classes”), as well as indoor playgrounds, birthday and themed parties, and related services (referred to collectively, with Classes, as “Services”), and also feature retail boutiques selling various children and family-oriented products, many of which bear the Marks (collectively, “Products”). Facilities offering and selling Services and Products, operating completely pursuant to the Branded System, and using the KIDVILLE® Mark as their primary trade identity are called “KIDVILLE Facilities” in this Agreement and individually a “Facility.”

     (2) The Marks have gained and will continue to gain public acceptance and goodwill, and new trademarks, service marks, and commercial symbols periodically may be created, used, and licensed for KIDVILLE Facilities. The Marks, Confidential Information (defined in Section 6 below), and Branded System (collectively, the “Intellectual Property”) are owned by our affiliate Kidville, NY, LLC, which has licensed us to use and sublicense the Intellectual Property for KIDVILLE Facilities. You acknowledge that our right to sublicense the Intellectual Property to you is subject to our license agreement with Kidville, NY, LLC.

     (3) Other affiliates of ours periodically may own musical compositions and other non-KIDVILLE brand intellectual property that they license us to use and sublicense others to use during and as part of Classes and other activities at KIDVILLE Facilities. You acknowledge that our right to sublicense that non-KIDVILLE brand

intellectual property to you is subject to our license agreement(s) with such affiliates and may not continue during the entire Term (as defined in Subsection 1.D. below).