Franchise Agreement

The original documents were scanned as an image. The original file can be downloaded at the link above.


Sample Franchise Agreement

EXHIBIT 3

DIPPIN' DOTS FRANCHISING, INC.'S FRANCHISE AGREEMENT

GENERAL RELEASE

CUSTOMER AGREEMENT

CREDIT/DEBIT CARD AND GIFT CARD AGREEMENTS


DIPPIN' DOTS® FRANCHISING, INC■ FRANCHISE AGREEMENT


PIPPIN' DOTS® FRANCHISE AGREEMENT TABLE OF CONTENTS

Section 1             GRANT ........................................... 2

Section 2              TERM AND RENEWAL................................3

Section 3             DUTIES OF FRANCHISOR............................5

Section 4             FEES............................................6

Section 5             CONSTRUCTION AND OPENING OF

THE FRANCHISED BUSINESS ......................... 8

Section 6             TRAINING........................................9

Section 7             DUTIES OF FRANCHISEE...........................10

Section 8              PROPRIETARY MARKS .............................. 17

Section 9              OPERATING MANUAL ............................... 2 0

Section 10           CONFIDENTIAL INFORMATION ....................... 2 0

Section 11           ACCOUNTING AND RECORDS.........................21

Section 12           ADVERTISING AND PROMOTION......................22

Section 13            INSURANCE......................................2 6

Section 14           TRANSFER OF INTEREST...........................27

Section 15           DEFAULT AND TERMINATION........................32

Section 16           OBLIGATIONS UPON TERMINATION OR EXPIRATION.....35

Section 17           COVENANTS......................................37

Section 18           CORPORATE OR PARTNERSHIP FRANCHISEE ............ 3 9

Section 19           TAXES, PERMITS AND INDEBTEDNESS ................ 40

Section 20           INDEPENDENT CONTRACTOR AND INDEMNIFICATION ..... 41

Section 21           APPROVALS AND WAIVERS..........................42

Section 22           NOTICES........................................42


Section 23 ENTIRE AGREEMENT ............................... 43

Section 24 SEVERABILITY AND CONSTRUCTION .................. 43

Section 25 APPLICABLE LAW.................................44

Section 26 ACKNOWLEDGEMENTS...............................47

Section 27 THE FRANCHISEE COUNCIL, INC. ...................48

Section 28 ACKNOWLEDGEMENT OF RISK........................48


PIPPIN' DOTS® FRANCHISE AGREEMENT

THIS AGREEMENT (this "Agreement"), is made and entered

into on this ____ day of ______________, _____, (the "Effective

Date")_by and between DIPPIN' DOTS FRANCHISING, INC., a Kentucky corporation with its principal place of business at 1640 McCracken Blvd., Suite 100, Paducah, Kentucky 42001

("Franchisor"), and _____________________________

_____________________________________ with a business address of

("Franchisee").

WITNESSETH:

WHEREAS, Franchisor, possesses a System (the "System") defined in Exhibit D attached hereto;

WHEREAS, Franchisee desires to enter into the business of operating a retail store or establishment featuring novelty frozen ice cream, yogurt and ice under the System and using the Proprietary Marks in connection therewith, and wishes to enter into an agreement with Franchisor for that purpose, and to receive the training and other assistance provided by Franchisor in connection therewith;

WHEREAS, Franchisee has had sufficient opportunity to be thoroughly advised with respect to the terms and conditions of this Agreement by counsel of Franchisee's own choosing, Franchisee and Franchisor have concluded an agreement that they hereby reduce to this written document, which is intended to fully set forth all of the understandings and agreements and representations and warranties between them with respect to the subject matter of this Agreement; and

WHEREAS, Franchisee understands and acknowledges the value of Franchisor's high standards of quality, cleanliness, appearance and service and the necessity of operating the business franchised hereunder in conformity with such standards and specifications;

NOW THEREFORE, for good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties agree as follows:

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1. GRANT

1.1  Franchisor grants to Franchisee the right and Franchisee accepts the obligation, upon the terms and conditions set forth in this Agreement: (a) to establish and operate a franchised business under the Proprietary Marks and System at the location specified in Section 1.2 below (the "Franchised Business"); and (b) to use the Proprietary Marks and the System solely in connection therewith.

1.2     Franchisee shall operate the Franchised Business only at the location(s) shown on the attached EXHIBIT A -APPROVED LOCATION(S) ("Approved Location"). If, at the time of execution of this Agreement, a location for the Franchised Business has not been obtained by Franchisee and approved by Franchisor, Franchisee shall lease or acquire a location, subject to Franchisor's approval, as provided in the Site Selection Addendum attached hereto as EXHIBIT A. Franchisee shall not relocate the Franchised Business, or operate the Franchised Business from any other location, without the prior written approval of Franchisor.

1.3

1.3.1     During the term of this Agreement, and except as otherwise provided herein, Franchisor shall not establish, nor license any other person to establish, a Franchised Business: at any location within a radius of thirty (30) feet from the principal entrance of the Approved Location (the "Protected Territory"}. Franchisor retains the rights, among others: (a) to establish, and franchise others to establish, Franchised Businesses in any location outside the Protected Territory, regardless of proximity to the Approved Location; (b) to authorize the sale of the product in any format except a Franchised Business at any location, regardless of proximity to the Approved Location; and (c) to acquire and operate a business of any other kind at any location, regardless of proximity to the Approved Location.

1.3.2     After written request, and upon written approval from Franchisor, Franchisee will have the right to solicit and sell to a particular School Event within a reasonable proximity to Franchisee's Approved Location. No franchisee shall contact any School without prior written approval from Franchisor. Franchisor shall not grant any franchise to anyone to sell or supply any school as that term is defined in Exhibit D. Also, Franchisor shall not grant a franchise to anyone to

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sell or supply any Airline, Airport, Amusement Center, Arena, Company Cafeteria, Movie Theater or Stadium as those terms are defined in Exhibit D hereof, nor shall Franchisee conduct sales via the World Wide Web or other similarly computer-linked telecommunications systems, including placing of orders or requests to pickup Product from Franchisee by e-mail. This provision shall not prevent Franchisee from otherwise communicating with customers by e-mail, so long as that communication does not involve receipt of orders for Product.

1.4

1.4.1     Franchisee acknowledges that absolute uniformity under certain conditions may not be possible or in the best interest of the System, Franchisee or Franchisor, and as a result the System may be modified from time to time by Franchisor with respect to certain of its other franchisees; and Franchisee agrees that Franchisor shall have the right to modify the terms of the franchise agreement for any other Franchisees based upon the unique attributes of its specific site or situation, existing business practices, business potential, population density or any other condition Franchisor considers important to the successful operation of such franchisee's business. Franchisee is not entitled to require Franchisor to grant Franchisee equivalent or similar variations granted to or permitted to any other franchisee or franchisor operated location.

1.4.2     Franchisee also acknowledges that modifications to the System may be appropriate from time to time because of developments (e.g. technology, industry standards, consumer preferences or costs of components of the System) or other changes affecting the System, and that as a result the System may be supplemented, improved or otherwise modified by Franchisor from time to time; and Franchisee agrees to comply with any such modifications implemented by Franchisor which Franchisor deems to be in the best interests of the System as a whole, including, without limitation, modifications with respect to offering and selling new or different products or services.

2. TERMS AND RENEWAL

2.1 This Agreement shall at 12:01 A.M. on the Effective Date, or in the event of a renewal of an existing Franchised Business, five (5) years from the expiration date of an existing Franchisee's previous Franchise Agreement, become fully effective and shall not relieve either party of any contractual obligation owed to the other party with respect to subject matter not covered by this Agreement, nor relieve either party of obligations owed by them to any third party, by way of

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agreement entered into prior to the execution of this Agreement, and, except as otherwise provided herein, the term of this Agreement shall be five (5) years from the Effective Date.

2.2 If this is not a renewal of an existing agreement, Franchisee may renew the term of this Agreement for two (2) additional consecutive terms of five (5) years each, subject to the following conditions:

2.2.1     Franchisee shall give Franchisor written notice of Franchisee's election to renew not less than three (3) months nor more than six (6) months prior to the end of the then-current term;

2.2.2     Franchisee shall make or provide for, in a manner satisfactory to Franchisor, such renovation and modernization of the premises of the Franchised Business {the "Premises") as Franchisor may reasonably require, including, without limitation, installation of new equipment and renovation of signs, furnishings, fixtures and trade dress to reflect the then-current standards and image of the System;

2.2.3     Franchisee shall not be in default of any provision of this Agreement, any amendment hereof or successor hereto, or any other agreement between Franchisee and Franchisor and its affiliates; and Franchisee shall have substantially complied with all the terms and conditions of such agreements during the terms thereof;

2.2.4     Franchisee shall have satisfied all monetary obligations owed by Franchisee to Franchisor and its affiliates, and shall have timely met those obligations throughout the term of this Agreement;

2.2.5     Franchisee shall, at Franchisor's option, execute Franchisor's then-current form of franchise agreement, but only for such renewal terms as are provided by this Agreement, which shall supersede this Agreement in all respects, and the terms of which may differ from the terms of this Agreement including, without limitation, a higher percentage royalty fee and advertising contribution, except that Franchisee shall not be required to pay any Initial Franchise Fee nor any increase in renewal fee;

2.2.6     Franchisee shall execute a general release, attached as Exhibit B, , of any and all claims against Franchisor, Franchisor's owners and affiliates, and their respective officers, directors, agents and employees; and

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2.2.7            Franchisee shall comply with Franchisor's

then-current qualification and training requirements.

3.            DUTIES OF FRANCHISOR

3.1            Franchisor shall make available, at no charge to Franchisee, standard plans and specifications for the prototypical Franchised Business, including lists, forms, schedules, equipment, exterior and interior design and layout, fixtures, furnishings and signs.

3.2            Franchisor shall provide training as set forth in Section 6 of this written Agreement.

3.3            Franchisor shall provide on-site pre-opening and opening supervision and assistance in such quantities as Franchisor deems advisable.

3.4            Franchisor shall make available to Franchisee advertising and promotional materials as described herein.

3.5            Franchisor shall provide Franchisee, on loan, one copy of Franchisor's Confidential Operating Manual, as more fully described herein.

3.6            Franchisor will maintain a telephone line for the exclusive benefit of its franchisees for informational assistance. Franchisor shall also provide to Franchisee from time to time, as Franchisor deems appropriate, advice and written materials concerning techniques of managing and operating the Franchised Business.

3.7            Franchisor shall conduct, as it deems advisable, inspections of Franchisee's operation of the Franchised Business.

3.8            Franchisor must approve the proposed site for the Premises in writing before beginning any construction or improvements. Franchisor will supply to Franchisee its site selection criteria. FRANCHISOR'S APPROVAL OF A SITE IS NOT A REPRESENTATION OR WARRANTY THAT THE DIPPIN' DOTS® FRANCHISE WILL BE PROFITABLE OR THAT FRANCHISEE'S SALES WILL ATTAIN ANY PREDETERMINED LEVELS. APPROVAL IS INTENDED ONLY TO INDICATE THAT THE PROPOSED SITE MEETS FRANCHISOR'S MINIMUM CRITERIA FOR IDENTIFYING SITES. FRANCHISEE AGREES THAT FRANCHISOR'S APPROVAL OR DISAPPROVAL OF A PROPOSED SITE DOES NOT IMPOSE ANY LIABILITY ON FRANCHISOR.

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3.9      Franchisor may promote its franchises through advertising and public relations using the advertising fees paid by Franchisee as set forth herein. Franchisor shall continue to provide support to Franchisee in the improvement and operation of Franchisee's Franchised Business by means of periodic visits by representatives of Franchisor. Franchisor shall continue to make itself available for consultation on matters such as operation, advertising and promotion, and business methods on such terms and for such additional service fees as may be mutually agreed.

3.10    Franchisor undertakes these obligations exclusively for the benefit of Franchisee, and no party other than Franchisee shall be entitled to the benefit thereof.

4 . FEES

4.1      In consideration of the franchise granted herein, Franchisee shall pay to Franchisor an Initial Franchise Fee (the "Initial Franchise Fee") of Twelve Thousand Five Hundred Dollars ($12,500.00) upon execution of this Agreement.

4.1.1     The Initial Franchise Fee for original and any additional franchise shall be deemed fully earned and nonrefundable in consideration of administrative and other expenses incurred by Franchisor in connection with entering into this Agreement.

4.1.2     Franchisee shall pay to Franchisor, upon Franchisee's election to renew the term of this Agreement, a renewal fee as indicated in Exhibit E. The renewal fee shall be deemed fully earned and non-refundable upon payment in consideration of administrative expenses incurred by Franchisor for the renewal process.

4.1.3     Notwithstanding the provisions of Section 4.1 above, if Franchisee has purchased, or received, a prior franchise directly from Franchisor for the above stated Initial Franchise Fee, then the Initial Franchise Fee for any additional franchise shall be, as indicated in Exhibit E. Franchisor reserves the right to alter, modify or rescind this provision, at Franchisor's sole discretion, without notice to Franchisee. Franchisor does not guarantee this franchise fee scale on future purchases; all subsequent purchases will be at the then-current Initial Franchise Fee rate for additional purchases.

4.2     Franchisee shall make weekly expenditures and contributions for advertising and promotion as specified herein.

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4.3     Franchisee shall pay to Franchisor a continuing Royalty Fee in an amount equal to four percent (4%) of the Gross Sales of the Franchised 3usiness.

4.4     All payments required by Sections 4.2 and 4.3 shall be made on or before five o'clock p.m. CST each Wednesday, calculated on the Gross Sales for the preceding week which begins on Sunday and ends on Saturday. Any payment or report not actually received by Franchisor on or before its due date shall be deemed overdue. If any payment is overdue, Franchisee shall pay Franchisor a late charge for the fourth late payment in a calendar year and each subsequent late payment immediately upon demand by DDF of Seventy-Five Dollars ($75.00), or the maximum permitted by law, whichever is less. Entitlement to such late fee shall be in addition to any other remedies Franchisor may have. Franchisee shall not be entitled to set-off any payments required to be made under this Section against any monetary claim, or to withhold any such payments as a result of any claim, it may have against Franchisor. Franchisee acknowledges that Franchisor may utilize an automated information collection system for sales reports and payment collection. Franchisee agrees to take whatever action is necessary to obtain telephone and Internet access in order to access and utilize Franchisor's system.

4.5     If directed by Franchisor, Franchisee agrees to make all payments required herein by wire transfer (or ACH debit) to such bank account as Franchisor may designate (the "Bank Account"). Franchisee's cost of remittance of payments to the Bank Account shall be borne by Franchisee. In the event such bank account as Franchisee designates for ACH debit payments has insufficient funds at the time an ACH debit transfer is attempted, then Franchisee shall pay Franchisor a service fee of Fifty Dollars ($50.00), immediately upon demand by Franchisor. This fee may, if applicable, be in addition to the late fee of Seventy Five Dollars ($75.00) in Section 4.4.

4.6     Persons owning a franchise by Franchisor will have, for a fee of Two Hundred Fifty Dollars ($250.00), the option, for a term of three (3) months, to purchase a franchise, subject to the terms of the then existing Franchise Agreement, provided Franchisor shall have the right at all times prior to the exercise of the option to offer the franchise for sale, and in the event Franchisor receives a bona fide offer satisfactory to Franchisor, said franchise shall first be offered to such persons holding the option at the price and under the terms of the Franchise Agreement existing at the time of the purchase of the

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option. One option fee will be applied toward the Initial Franchise Fee upon exercise of the option. In the event the option is not exercised before the expiration of such three (3) month term, Franchisor shall retain the option fee.

4.6.1 In no event will the purchase of an option described in Section 4.6 cause the Initial Franchise Fee to be less than the amount shown in Exhibit E, less the option fee.

5. CONSTRUCTION AND OPENING OF THE FRANCHISED BUSINESS

5.1     Franchisee shall purchase from an Approved Supplier a kiosk, cart and/or equipment to complete their Approved Location.

5.2     Franchisee shall participate in Franchisor's credit/debit card and gift card acceptance program through Approved Suppliers that Franchisor provides to Franchisees. Franchisee agrees to lease or purchase, as required by Franchisor's Approved Supplier for its credit/debit card payment and gift card programs, such equipment as is necessary for Franchisee to fully participate in Franchisor's credit card payment and gift card programs.

5.3     Franchisee shall employ a qualified, licensed architect or engineer to prepare, for Franchisor's approval, preliminary plans and specifications for construction of the Franchised Business based upon the plans and specifications furnished by Franchisor, if necessary in the opinion of Franchisor. Franchisee shall be responsible for obtaining all zoning classifications and clearances which may be required by state or local laws, ordinances or regulations, or which may be necessary or advisable. Franchisee must submit to Franchisor, for Franchisor's approval, final plans for construction based upon the preliminary plans and specifications. Once approved by Franchisor, such final plans may not thereafter be changed or modified without the prior written consent of Franchisor. Franchisee must obtain all permits required for the lawful construction and operation of the Franchised Business and must certify in writing to Franchisor that all such permits have been obtained. Franchisee must employ a qualified general contractor to construct the Franchised Business and to complete all improvements. Franchisee must obtain and maintain in force during the entire period of construction the insurance required under this Agreement.

5.4     Franchisee shall open the Franchised Business within

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twelve (12) months after the Effective Date of this Agreement. The parties agree that time is of the essence in the opening of the Franchised Business.

5.5 In connection with the opening of the Franchised Business:

5.5.1     Franchisee shall conduct, at Franchisee's expense, such grand opening promotional and advertising activities as Franchisor may require, but be a minimum of at least $500.00.

5.5.2     Franchisee shall provide at least seven (7) days' prior notice to Franchisor of the date on which Franchisee proposes to first open the Franchised Business. Franchisee shall not open the Franchised Business without Franchisor's prior approval or without a representative of Franchisor present, unless Franchisor specifies that neither such approval nor a representative of Franchisor is required.

6. TRAINING

6.1     Prior to the opening of the Franchised Business, Franchisee (or, if Franchisee is a corporation or partnership, a principal of Franchisee acceptable to Franchisor), and Franchisee's manager shall attend and complete to Franchisor's satisfaction the initial training program offered by Franchisor. At Franchisor's option, any persons subsequently employed by Franchisee in the position of manager shall also attend and complete Franchisor's training program, to Franchisor's satisfaction.

6.2     Basic Management Training will be for up to two (2) individuals representing Franchisee for a four-day training period (minimum of seven hours per day) at Franchisor's offices or a Dippin' Dots® business as designated by Franchisor. DDF has the discretion to shorten the training period. However, all trainees must satisfactorily pass the Basic Management Training test. Unless otherwise agreed in writing, Franchisee must be one of these two individuals. Franchisee shall designate as one of these two individuals a person who will be active in the day-to-day activities of the Franchise Location. All trainees must be acceptable to Franchisor.

6.2.1 In addition to a written test, Basic Management Training includes instruction in food preparation and

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service, food ingredients and general nutrition, equipment usage, system operation, marketing, accounting and use of trademarks, all at a time scheduled by Franchisor.

6.2.2      Basic Management Training is provided approximately 30-45 days after the signing of the Franchise Agreement and the approval of the site selected for the Franchised Business, whichever occurs later.

6.2.3     Franchisor will provide, at its expense, instructors, facilities, training materials and technical training tools for Basic Management Training. Franchisee is responsible for all expenses of its trainees incurred in attending Basic Management Training including, without limitation, all travel, lodging and meal expenses.

6.2.4      If Franchisee desires that additional individuals receive Basic Management Training, or if additional individuals must be trained to meet the requirements of this Section, or related assistance above and beyond Franchisor's usual training program and routinely scheduled visits is needed, then Franchisee shall pay all expenses incurred to have such individuals attend Basic Management Training, including, without limitation, reasonable training fees (currently $75.00 per day per individual) and other reasonable expenses. Payment for these services is due upon demand.

6.3     If any trainee fails to satisfactorily complete Basic Management Training by passing the Basic Management Training test with a score of at least seventy-five percent

(75%), Franchisor may elect to terminate this Agreement and retain all the fees collected pursuant to this Agreement.

6.4   Franchisee and/or Franchisee's manager and other employees shall also attend such additional courses, seminars and other training programs as Franchisor may reasonably require from time to time, but not more often than twice per year.

6.5     With Franchisor's prior written approval, the completion of the Basic Management Training Program shall enable franchisees and their employees to train new employees in the Basic Management Training Program and to certify their completion thereof.

6.6     All training programs shall be at such times and places as may be designated by Franchisor. For all required initial and additional, training courses, seminars, and programs, as referenced in section 6.2 above, Franchisor shall provide, at

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no charge to Franchisee, instructors and training materials; and Franchisee or its employees shall be responsible for any and all other expenses incurred by them in connection with any such-courses, seminars and programs, including, without limitation, the costs of transportation, lodging, meals and wages.

7. DUTIES OF FRANCHISES

7.1 Franchisee understands and acknowledges that every detail of the Franchised Business is important to Franchisee, Franchisor and other franchisees in order to develop and maintain high operating standards, to increase the demand for the products sold by all franchised businesses operating under the System and to protect Franchisor's reputation and goodwill.

7.2 Franchisee is solely responsible for selecting the site of Franchisee's Franchised Business. However, Franchisor may assist Franchisee in site selection and lease negotiations as provided in this Agreement.

7.2.1      If a site for the Franchised Business has not been selected prior to the Effective Date, Franchisee must complete the acquisition and construction if a building is to be constructed or renovation if an existing building is to be improved, or lease arrangements for the Premises located in the Approved Location, at Franchisee's expense within ninety (90) days of the Effective Date. Franchisor shall not unreasonably withhold approval of any site meeting Franchisor's site selection criteria referred to in Section 3.8 and any other standards Franchisor may consider relevant in approving or disapproving a site. Franchisor shall review site approval on a first-in basis. If Franchisor does not approve the selected site, Franchisee has ninety (90) days from the date Franchisor specifies that the site will not be approved to submit a new site. If a site has not been submitted within such ninety (90) day period, Franchisor may terminate this Agreement and retain the Initial Franchise Fee.

7.2.2      If Franchisee intends to purchase the site, the purchase agreement shall be submitted to Franchisor for its written approval. Franchisee is solely responsible for securing any necessary acquisition, construction, permanent or other financing of the site and Premises.

7.2.3     Any lease or sublease by Franchisee of the Premises must be approved by Franchisor. Franchisee must deliver a copy of the signed lease or sublease to Franchisor within

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fifteen (15) days of its signing. Franchisee must agree not to sign or agree to any modification of the lease or sublease that would adversely affect Franchisor without Franchisor's written approval.

7.3     Franchisee shall use the Premises solely for the operation of the business franchised hereunder; shall keep the Franchisee Business open and in normal operation for such minimum hours and days as Franchisor may specify; shall refrain from using or permitting the use of the Premises for any other purpose or activity at any time without first obtaining the written consent of Franchisor; and shall operate the Franchised Business in strict conformity with such methods, standards and specifications as Franchisor may from time to time prescribe in the Manual or otherwise in writing. Franchisee shall refrain from deviating from such methods, standards and specifications without Franchisor's prior written consent. Franchisee shall not allow Catering to exceed fifty percent (50%) of Franchisee's Gross Sales.

7.4     To ensure that the highest degree of quality and service is maintained, Franchisee agrees:

7.4.1     To maintain in sufficient supply (as Franchisor may prescribe in the Manual or otherwise in writing) , and to use at all times, only such fixtures, furnishings, equipment, signs, menu items, ingredients, products, materials, supplies and paper goods that conform with Franchisor's standards and specifications, and to refrain from deviating therefrom by the use of nonconforming items, without Franchisor's prior written consent.

7.4.2     To sell or offer for sale only such menu items, products and services as have been expressly approved for sale in writing by Franchisor; to sell or offer for sale all types of menu items, products and services specified by Franchisor; to refrain from any deviation from Franchisor's standards and specifications without Franchisor's prior written consent; and to discontinue selling and offering for sale any menu items, products or services which Franchisor may, in its sole discretion, disapprove in writing at any time.

7.4.3     To use in the preparation of food products, ingredients and recipes meeting the quality standards and specifications as prescribed by Franchisor. Franchisee may purchase or lease equipment, supplies, inventory, advertising materials, construction services or other products or services from manufacturers, contractors and other suppliers ("Suppliers")

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other than those currently authorized, but only in accordance with Section 7.6 of this Agreement.

7.4.4     To use and display only the standard format menu provided by Franchisor, as the same may be revised by Franchisor from time to time. Any changes in the menu format, except prices charged by Franchisee to its customers, must be approved in writing by Franchisor prior to use.

7.4.5     To purchase and install, at Franchisee's expense, all fixtures, furnishings, equipment, decor, supplies and signs as Franchisor may reasonably direct from time to time in the Manual or otherwise in writing; and to refrain from installing or permitting to be installed on or about the Premises, without Franchisor's prior written consent, any fixtures, furnishings, equipment, signs or other items not previously approved as meeting Franchisor's standards and specifications.

7.4.6     To refrain from selling, or offering for sale, any alcoholic beverages.

7.5 Franchisee shall purchase and install, at Franchisee's expense, equipment (including, without limitation, a telecopy machine, telephone, Internet access/e-mail communication system and cash register or point-of-sale recording system} as Franchisor may reasonably direct from time to time,- and shall refrain from installing or permitting to be installed on or about the Premises, without Franchisor's prior written consent, any equipment not previously approved as meeting Franchisor's standards and specifications. Franchisee shall record all sales at or from the Franchised Business only on cash registers dedicated solely to the recordation of sales at or from the Franchised Business ("Cash Register(s)"}. Franchisee shall report in writing to Franchisor, and obtain Franchisor's written approval of, the make, model and serial number of each Cash Register prior to the use of such Cash Register by Franchisee. Cash Registers shall meet Franchisor's specifications which may include, among other things, the reset, that it have a back-up system for memory storage in the event of a power loss and that the Cash Register have a modem capacity to permit Franchisor to gain access to the information stored in the Cash Register during and after business hours. The provisions of this section, other than the requirement that Franchisee not allow installation of non-approved equipment, shall not apply to Fair/Festival franchises.

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7.6     All products sold or offered for sale at the Franchised 3usiness shall meet Franchisor's then-current standards and specifications as established in the Manual or otherwise in writing. Franchisee shall purchase all products solely from Suppliers who demonstrate to Franchisor's continuing reasonable satisfaction the ability to meet Franchisor's standards and specifications, who possess adequate quality controls and capacity to supply Franchisee's needs promptly and reliably, and who have been approved by Franchisor in the Manual or otherwise in writing.

7.6.1     If Franchisee desires to purchase products from other than approved Suppliers, Franchisee must submit samples of the Supplier's products to Franchisor together with such evidence of conformity with Franchisor's specifications as Franchisor may reasonably require. Franchisor shall have the right to require that its representatives be permitted to inspect the Supplier's facilities, and that samples from the Supplier be delivered for evaluation and testing either to Franchisor or to an independent testing facility designated by Franchisor. A charge not to exceed the reasonable cost of the evaluation and testing shall be paid by Franchisee. Franchisor shall, within thirty (30) days after its receipt of such completed request and completion of such evaluation and testing (if required by Franchisor), notify Franchisee in writing of its approval or disapproval of the proposed Supplier. Approval shall not be unreasonably withheld. Approval of a Supplier may be conditioned on numerous requirements and may be temporary, pending Franchisor's additional evaluation of the Supplier.

7.6.2     Franchisee shall not sell or offer for sale any products of the proposed Supplier until Franchisor's written approval of the proposed Supplier is received. Franchisor may from time to time revoke its approval of particular products of Suppliers when Franchisor determines, in its sole discretion, that such products or Suppliers no longer meet Franchisor's standards or specifications. Upon receipt of written notice of such revocation, Franchisee shall cease to sell any disapproved products and cease to purchase from any disapproved Supplier. Franchisee agrees that it shall use products purchased from approved Suppliers solely for the purpose of operating the Franchised Business and not for any other purpose, including, without limitation, resale.

7.7     At the time the Franchised Business opens, Franchisee shall stock and display the initial inventory of products and supplies prescribed by Franchisor in the Manual or otherwise in writing. Thereafter, Franchisee shall stock and

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maintain all types of approved products in quantities sufficient to meet reasonably anticipated customer demand.

7.8     Franchisee shall permit Franchisor and its agents to enter the Premises at any time during normal business hours for the purpose of conducting inspections; shall cooperate with representatives of Franchisor in such inspections by rendering such assistance as they may reasonably request; and, upon notice from Franchisor or its agents, and without limiting Franchisor's other rights under this Agreement, shall take such steps as may be necessary to correct immediately any deficiencies detected during any such inspection. Should Franchisee, for any reason, fail to correct such deficiencies within a reasonable time as determined by Franchisor, Franchisor shall have the right, but not the obligation, to correct any deficiencies which may be susceptible to correction by Franchisor and to require Franchisee to reimburse Franchisor for Franchisor's expenses in so acting, payable by Franchisee upon demand. The foregoing shall be in addition to such other remedies Franchisor may have.

7.9     Franchisee shall ensure that all advertising and promotional materials, signs, decorations and other items specified by Franchisor bear the Proprietary Marks in the form, color, location and manner prescribed by Franchisor.

7.10     Franchisee shall maintain the Premises (including adjacent public areas) in a clean, orderly condition and in excellent repair; and, in connection therewith, Franchisee shall, at its expense, make such additions, alterations, repairs and replacements thereto (but no others without Franchisor's prior written consent) as may be required for that purpose, including, without limitation, such periodic repainting or replacement of obsolete signs, furnishings, equipment and decor as Franchisor may reasonably direct.

7.11     At Franchisor's request, but not more often than once every five (5} years (unless sooner required by Franchisee's lease), Franchisee shall refurbish the Premises, at its expense, to conform to the building design, trade dress, color schemes and presentation of the Proprietary Marks in a manner consistent with the then-current image for new franchised businesses. Such refurbishment may include, without limitation, structural changes, installation of new equipment, remodeling, redecoration and modifications to existing improvements.

7.12     Each of Franchisee's Franchised Businesses shall at all times be under the direct supervision of a qualified manager. Each Franchised Business shall have at least one qualified

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manager. Franchisee shall maintain a competent, conscientious, trained staff, including at least one fully trained manager (who may be the Franchisee) . Franchisee shall take such steps as are necessary to ensure that its employees preserve good customer relations; render competent, prompt, courteous and knowledgeable service; and meet such minimum standards as Franchisor may establish from time to time in the Manual. Franchisee and its employees shall handle all customer complaints, refunds, returns and other adjustments in a manner that will not detract from the name and goodwill of Franchisor. Franchisee shall be solely responsible for all employment decisions and functions of the Franchised Business, including, without limitation, those related to hiring, firing, training, wage and hour requirements, recordkeeping, supervision and discipline of employees.

7.13     Franchisee shall not implement any change, amendment or improvement to the System without the express prior written consent of Franchisor. Franchisee shall provide Franchisor advance written notice of any change, amendment or improvement in the System which Franchisee proposes to make and shall provide to Franchisor such information as Franchisor requests regarding the proposed change, amendment or improvement. Franchisee acknowledges and agrees that Franchisor shall have the right to incorporate the proposed change, amendment or improvement into the System and shall thereupon obtain all right, title and interest therein without compensation to Franchisee.

7.14     Franchisee shall comply with all terms of its lease or sublease, and all other agreements affecting the operation of the Franchised Business; shall undertake best efforts to maintain a good and positive working relationship with its landlord and/or lessor; and shall refrain from any activity which may jeopardize Franchisee's right to remain in possession of, or to renew the lease or sublease for, the Premises.

7.15     Franchisee shall meet and maintain the highest health standards and ratings applicable to the operation of the Franchised Business. Franchisee shall furnish to Franchisor, within five (5) days after receipt thereof, a copy of every health inspection report related to the Franchised Business.

7.16     Franchisee will maintain a competent, conscientious staff and employ the minimum number of employees necessary to meet the anticipated volume of business and to achieve the goals of the System. Franchisee will take all steps necessary to ensure that his or her employees meet all employment criteria, maintain a neat appearance and comply with the dress code required by Franchisor. Franchisee is solely responsible for the

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terms of their employment and compensation and, except for training required under this Agreement, for the proper training of the employees in the operation of the Franchise. Franchisee is solely responsible for all employment decisions and functions, including hiring, firing, establishing wage and hour requirements, disciplining, supervising and record keeping. Franchisee will not recruit or hire any employee of Franchisor or a Dippin' Dots® Franchise operated by another Franchisee without obtaining the employer's written permission.

7.17 DDF, now and in the future, may receive rebates or other payments from approved suppliers, or from other suppliers, including equipment and kiosk suppliers, manufacturers, distributors, packagers or o~her service providers based on sales to DDF's franchisees and DDF's owned stores. Such rebates or payments will not exceed fifteen (15%) percent of the ongoing purchases of equipment, supplies, ingredients and other items used or sold in your franchise.

S. PROPRIETARY MARKS

8.1     Franchisor represents with respect to the Proprietary Marks that: Franchisor has the right to use, and to license others to use, the Proprietary Marks. The Proprietary Marks are licensed to Franchisor by Dippin' Dots, Inc., an Illinois corporation ("DDI"). These marks include, but are not limited to: DIPPIN' DOTS® and Design, and Logo; and DIPPIN' DOTS ICE CREAM OF THE FUTUF.B® and Design, and Logo.

8.2     With respect to Franchisee's use of the Proprietary Marks, Franchisee agrees that:

8.2.1     Franchisee shall use only the Proprietary Marks designated by Franchisor, and shall use them only in the manner authorised and permitted by Franchisor; "Proprietary Property" means the trademarks and other intellectual property that the franchisor designates as Proprietary Property.

8.2.2     Franchisee shall use the Proprietary Marks only for the operation of the Franchised Business and only at the Approved Location, or in advertising for the Franchised Business that is approved by Franchisor;

8.2.3     Unless otherwise authorized or required by Franchisor, Franchisee shall operate and advertise the Franchised Business only under the name "DIPPIN1 DOTS®", and shall use all Proprietary Marks without prefix or suffix. Franchisee shall not

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use the Proprietary Marks as part of its corporate or other legal name;

8.2.4     Franchisee shall identify itself as the owner of the Franchised Business (in the manner required by Franchisor) in conjunction with any use of the Proprietary Marks, including, but not limited to, on invoices, order forms, receipts and business stationery, as well as at such conspicuous locations as Franchisor may designate in writing at the Premises and on any delivery vehicles used in the operation of the Franchised Business;

8.2.5     Franchisee's right to use the Proprietary Marks is limited to such uses as are authorized under this Agreement and any unauthorized use thereof shall constitute an infringement of rights of Franchisor and/or DDI;

8.2.6     Franchisee shall not use the Proprietary Marks to incur any obligation or indebtedness on behalf of Franchisor and/or DDI;

8.2.7     Franchisee shall execute any documents deemed necessary by Franchisor and/or DDI to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability;

8.2.8     Franchisee shall promptly notify Franchisor of any suspected unauthorized use of the Proprietary Marks, any challenge to the validity of the Proprietary Marks, any challenge to DDI' s ownership of, or Franchisor's right to use and to license others to use the Proprietary Marks. Franchisee acknowledges that Franchisor has the sole right to direct and control any administrative proceeding or litigation, but not the obligation to take action against uses by others that may constitute infringement of the Proprietary Marks. Franchisor shall defend Franchisee against any third-party claim, suit or demand arising out of Franchisee's use of the Proprietary Marks. If Franchisor, in its sole discretion, determines that Franchisee has used the Proprietary Marks in accordance with the Agreement, the cost of such defense, including the cost of any judgment or settlement, shall be borne by Franchisor. If Franchisor, in its sole discretion, determines that Franchisee has not used the Proprietary Marks in accordance with this Agreement, the cost of such defense, including the cost of any judgment or settlement, shall be borne by Franchisee. In the event of any litigation relating to Franchisee's use of the Proprietary Marks, Franchisee shall execute any and all documents and do such acts as may, in the opinion of Franchisor, be necessary to carry out such defense

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or prosecution, including, but not limited to, becoming a nominal party to any legal action. Except to the extent that such litigation is the result of Franchisee's use of the Proprietary Marks in a manner inconsistent with the terms of this Agreement, Franchisor agrees to reimburse Franchisee for its out-of-pocket expenses in doing such acts.

8.3 Franchisee expressly understands and acknowledges that:

8.3.1     DD1 is the owner of all right, title and interest in and to the Proprietary Marks and the goodwill associated with and symbolized by them, and that DDI and Franchisor have the right to use, and license others to use, the Proprietary Marks;

8.3.2     The Proprietary Marks are valid and serve to identify the System and those who are authorized to operate under the System;

8.3.3     During the term of this Agreement and after its expiration or termination, Franchisee shall not directly or indirectly contest the validity of, DDI's ownership of, or the right of DDI and Franchisor to use and to license others to use, the Proprietary Marks;

8.3.4     Franchisee's use of the Proprietary Marks does not give Franchisee any ownership interest or other interest in or to the Proprietary Marks;

8.3.5     Any and all goodwill arising from Franchisee's use of the Proprietary Marks shall inure solely and exclusively to the benefit of DDI and/or Franchisor, and upon expiration or termination of this Agreement, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Proprietary Marks;

8.3.6     Except as specified herein, the license of the Proprietary Marks granted hereunder to Franchisee is nonexclusive, and thus Franchisor and DDI each have and retain the rights, among others: (a) to use the Proprietary Marks itself in connection with selling products and services; (b) to grant other licenses for the Proprietary Marks; and (c) to develop and establish other systems using the Proprietary Marks, similar Proprietary Marks or any other Proprietary Marks, and to grant licenses thereto without providing any rights therein to Franchisee; and

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8.3.7 Franchisor reserves the right to substitute different Proprietary Marks for use in identifying the System and the businesses operating thereunder at Franchisor's sole discretion. Franchisor shall bear the costs of modifying Franchisee's signs and advertising materials to conform to Franchisor's new Proprietary Marks, but shall otherwise have no obligation or liability to Franchisee as a result of such-substitution.

9 . OPERATING MANUAL

9.1     In order to protect the reputation and goodwill of Franchisor and to maintain high standards of operation under the System, Franchisee shall operate the Franchised Business in accordance with the standards, methods, policies and procedures specified in Franchisor's Confidential Operating Manual (the "Manual")/ one copy of which Franchisee shall receive on loan from Franchisor for the term of this Agreement no later than the commencement of the initial training program described above in Section 6 by the first representative of Franchisee to take such program.

9.2     Franchisee shall treat the Manual, any other materials created for or approved for use in the operation of the Franchised Business and the information contained therein, as CONFIDENTIAL, and shall use all reasonable efforts to maintain such information as secret and confidential. Franchisee shall not copy, duplicate, record or otherwise reproduce any of the foregoing materials, in whole or in part, or otherwise make the same available to any unauthorized person, and shall not use any of such materials except for the purposes specified herein.

9.3     The Manual shall remain the sole property of Franchisor and shall be kept in a secure place on the Premises.

9.4     Franchisor may from time to time revise the contents of the Manual, and Franchisee expressly agrees to comply with the Manual as revised.

9.5     Franchisee shall ensure that the Manual is kept current at all times. In the event of any dispute as to the contents of the Manual, the terms of the master copy maintained by Franchisor at Franchisor's home office shall be controlling.

9.6     In the event the Manual should become lost, stolen or damaged so as to render it, in Franchisor's sole determination, unusable, Franchisee shall pay a replacement fee

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of not less than two hundred ($200.00) dollars.

10. CONFIDENTIAL INFORMATION

10.1 Franchisee shall not, during the term of this Agreement or thereafter, communicate, divulge or use for the benefit of any other person, partnership, association or corporation any confidential information, knowledge or know-how concerning the methods of operation of the business franchised hereunder which may be communicated to Franchisee or of which Franchisee may be apprised by virtue of Franchisee's operation under the terms of this Agreement. Franchisee shall divulge such confidential information only to such of its employees as must have access to it in order to operate the Franchised 3usiness. Any and all information, knowledge, know-how, techniques and other data which Franchisor designates as confidential shall be deemed confidential for purposes of this Agreement.

10.2 At Franchisor's request, Franchisee shall require its manager and any personnel having access to any confidential information of Franchisor to execute covenants that they wTill maintain the confidentiality of information they receive in connection with their employment by Franchisee at the Franchised Business. Such covenants shall be in a form satisfactory to Franchisor, including, without limitation, specific identification of Franchisor as a third party beneficiary of such covenants with the independent right to enforce them.

11. ACCOUNTING AND RECORDS

11.1 Franchisee shall record all sales on a computer-based, point-of-sale record keeping and control system designated by Franchisor, or on any other equipment specified by Franchisor in the Manual or otherwise in writing. Franchisee shall prepare, and shall preserve for at least three (3) years from the date of their preparation, complete and accurate books, records and accounts in accordance with generally accepted accounting principles and in the form and manner prescribed by Franchisor from time to time in the Manual or otherwise in writing.

11.2 All Gross Sales, and all sales tax and other charges collected on behalf of third parties, shall be recorded by Franchisee in accordance with the procedures prescribed in the Manual and on such cash register or point-of-sale recording

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system as Franchisor may specify.

11.3     Franchisee shall, at Franchisee's expense, submit to Franchisor in the form prescribed by Franchisor, the following reports, financial statements and other data:

11.3.1     No later than Wednesday of each week, a report accurately reflecting all Gross Sales during the preceding week that ended on Saturday;

11.3.2     Upon request of Franchisor, financial statements, audited by an independent certified public accountant reasonably acceptable to Franchisor, showing the results of operations of the Franchised Business during any fiscal year during the term of this Agreement; and

11.3.3     Such other forms, reports, records, information and data as Franchisor may reasonably designate.

11.4     Franchisor and its designated agents shall have the right at all reasonable times to examine and copy, at Franchisor's expense, the books, records, accounts and sales tax returns of Franchisee. Franchisor shall also have the right, at any time, to have an independent audit made of the books of Franchisee. If an examination or audit should reveal that any amounts payable to Franchisor have been understated in any report to Franchisor, then Franchisee shall immediately pay to Franchisor the amount understated upon demand, in addition to interest from the date such amount was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less. If an examination or audit discloses an understatement in any report of five percent (5%) or more, Franchisee shall, in addition to repayment of monies owed with interest, reimburse Franchisor for any and all costs and expenses connected with any such examination or audit (including, without limitation, travel, lodging and wages expenses and reasonable accounting, auditing and legal costs). The foregoing remedies shall be in addition to any other remedies Franchisor may have.

12 . ADVERTISING AND PROMOTION

12.1     Franchisor shall have the right to establish, at any time, the Advertising Fund and/or a regional advertising fund, as described in this Section 12.

12.2     For each month during the term of this Agreement, Franchisee shall, beginning January 1, 2006, contribute to the

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Advertising Fund in an amount which, in the aggregate of both the Advertising Fund and all regional Advertising Funds, is equal to two percent (2%) of Franchisee's Gross Sales during the preceding week, to advertise and promote the Franchised Business (the "Advertising Contribution"). The Advertising Contribution shall be paid by Franchisee in the manner required pursuant to Section 12.3 below.

12.3     Franchisee's Advertising Contribution shall be divided in such proportions as may be designated by Franchisor in its sole discretion among the following: (a) payments to the Advertising Fund; (b) payments to any regional advertising fund; or (c) expenditures on Local advertising and promotion.

12.4     The Advertising Fund shall be maintained and administered by Franchisor or its designee, as follows:

12.4.1     Franchisor or its designee shall direct all advertising programs, with sole discretion over the concept, materials and media used in such programs and the placement and allocation thereof. Franchisee agrees and acknowledges that the Advertising Fund is intended to maximize general public recognition, acceptance and use of the System; and that Franchisor and its designee are not obligated, in administering the Advertising Fund, to make expenditures for Franchisee which are equivalent or proportionate to Franchisee's contribution, or to ensure that any particular franchisee benefits directly or pro rata from expenditures by the Advertising Fund.

12.4.2     The Advertising Fund, all contributions thereto and any earnings thereon, shall be used exclusively to meet any and all costs of maintaining, administering, directing, conducting and preparing advertising, marketing, public relations and/or promotional image of the System, including, among other things, the costs of preparing and conducting media advertising campaigns; direct mail advertising and/or public relations agencies to assist therein; purchasing promotional items and conducting and administering visual merchandising, point of sale and other merchandising programs; and providing promotional and other marketing materials and services to the Franchised Businesses operated under the System. The Advertising Fund may also be used to provide rebates or reimbursements to Franchisees for local expenditures on products, services or improvements, approved in advance by Franchisor, which products, services or improvements Franchisor deems, in its sole discretion, will promote general public awareness and favorable support for the System.

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12.4.3           Franchisee shall contribute to the Advertising Fund at such times and by such means as are required pursuant to Section 4.4 hereof. Amounts paid by Franchisee to the Advertising Fund shall be maintained in an account separate from the other monies of Franchisor and shall not be used to defray any of Franchisor's expenses, except for such reasonable costs and overhead, if any, as Franchisor may incur in activities reasonably related to the direction and implementation of the Advertising Fund and advertising programs for franchisees and the System, including, among other things, costs of personnel for creating and implementing advertising, merchandising, promotional and marketing programs . The Advertising Fund and its earnings shall not otherwise inure to the benefit of Franchisor. Franchisor or its designee shall maintain separate bookkeeping accounts for the Advertising Fund.

12.4.4           The Advertising Fund is not and shall not be an asset of Franchisor. A statement of the operations of the Advertising Fund as shown on the books of Franchisor shall be prepared annually by Franchisor and shall be made available to all Franchisees.

12.4.5           Although the Advertising Fund is intended to be of perpetual duration, Franchisor maintains the right to terminate the Advertising Fund. The Advertising Fund shall not be terminated, however, until all monies in the Advertising Fund have been expended for advertising and/or promotional purposes .

12.5          Any regional advertising pertaining to the

Franchised Business shall be conducted by and through a regional advertising fund ("Regional Fund") established by Franchisor for that purpose. Franchisor shall have the right, in its discretion, to designate any geographical area for purposes of establishing a Regional Fund. If a Regional Fund for the geographic area in which the Franchised Business is located has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Regional Fund. If a Regional Fund for the geographic area in which the Franchised Business is located is established during the term of this Agreement, Franchisee shall become a member of such Regional Fund within thirty (3 0) days after the date on which the Regional Fund commences operation. The following provisions shall apply to each such Regional Fund:

12.5.1           Each Regional Fund shall be organized and governed in a form and manner, and shall commence operations on a date, approved in advance by Franchisor in writing.

12.5.2           Each Regional Fund shall be organised for

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the exclusive purpose of administering regional advertising programs and developing, subject lo Franchisor's approval, standardized promotional materials for use by the members in Local advertising and promotion.

12.5.3     No advertising or promotional plans or materials may be used by a Regional Fund or furnished to its members without the prior approval of Franchisor, pursuant to the procedures and terms as set forth herein.

12.5.4     Franchisee shall submit its required contributions, which shall not exceed two (2%) percent of Gross Sales, to the Regional Fund at such times as are required pursuant to Section 4 hereof, together with such other statement or reports as may be required by Franchisor, or by the Regional Fund with Franchisor's prior written approval.

12.5.5     Although once established, each Regional Fund is intended to be of perpetual duration, Franchisor maintains the right to terminate any Regional Fund. A Regional Fund shall not be terminated, however, until all monies in that Regional Fund have been expended for advertising and/or promotional purposes.

12.6     All Local advertising and promotion by Franchisee shall be in such media, and of such type and format, as Franchisor may approve; shall be conducted in a dignified manner; and shall conform to such standards and requirements as Franchisor may specify. Franchisee shall not use any advertising or promotional plans or materials unless and until Franchisee has received written approval from Franchisor, pursuant to the procedures and terms set forth herein.

12.7     Franchisor shall make available to Franchisee from time to time, at Franchisee's expense, advertising plans and promotional materials developed by Franchisor for Local Advertising or promotions, including newspaper slicks, coupons, merchandising materials, sales aids, point-of-purchase materials, special promotions, direct mail materials, community relations programs and similar advertising and promotional materials.

12.8     For all advertising and promotional plans which require Franchisor's approval prior to use, Franchisee or the Regional Fund, where applicable, shall submit samples of such plans and materials to Franchisor {by means described in Section 22 hereof) for Franchisor's prior written approval (except with respect to prices to be charged). If written approval is not received by Franchisee or the Regional Fund from Franchisor of

25


such samples or material, Franchisor shall be deemed to have disapproved them.

12.9     Franchisee understands and acknowledges that the required contributions and expenditures are minimum requirements only, and that Franchisee may, and is encouraged by Franchisor to, expend additional funds for Local Advertising and promotion.

12.10     As used in this Agreement, the term "Local Advertising and Promotion" shall consist only of the direct costs of purchasing advertising materials (including, but not limited to, camera-ready advertising and point-of sale materials), media (space or time), production, promotion and those direct out-of-pocket expenses related to costs of advertising and sales promotion; the parties expressly agree that the term "Advertising and Promotion" shall not include costs or expenses incurred by or on behalf of Franchisee in connection with any of the following:

12.10.1     Salaries and expenses of any employees of Franchisee, including salaries or expenses for attendance at advertising meetings or activities, or incentives provided or offered to such employees, including discount coupons ,-

12.10.2     Charitable, political or other contributions or donations;

12.10.3     The value of discounts provided to consumers;

12.10.4     The cost of food items, including sampling costs; and

12 .10.5 Specialty items (e.g. cups, banners, t-shirts, and premiums), unless such items are a part of a system-wide advertising and sales promotion program and only to the extent that the cost of such items is not recovered by the promotion.

13. INSURANCE

13.1 Franchisee shall procure, prior to the commencement of any operations under this Agreement, and shall maintain in full force and effect at all times during the term of this Agreement, at Franchisee's expense, an insurance policy or policies protecting Franchisee, Franchisor and DDI, as well as their respective officers, directors, partners, agents and employees against any demand or claim with respect to personal

26


injury, death or property damage, or any loss, liability, or expense whatsoever arising or occurring upon or in connection with the Franchised Business, including, but not limited to, comprehensive general liability insurance, property and casualty-insurance, statutory workers' compensation insurance, employer's liability insurance, product liability insurance and business interruption insurance. Such policy or policies shall be written by a responsible carrier or carriers acceptable to Franchisor, shall name Franchisor and DDI as an additional insured thereunder (in such manner as may be specified by Franchisor), shall provide at least the types of coverage specified in the Manual and in the amount of not less than One Million Dollars ($1,000,000.00) per occurrence and Two Million Dollars ( $2,000,000.00)in the aggregate and contain a waiver by Franchisee and its insurers of their subrogation rights against Franchisor and its affiliates and their respective shareholders, directors, employees and agents.

13.2     Franchisee's obligation to obtain and maintain the policy or policies in the amount of Two Million Dollars

($2,000,000.00) shall not be limited in any way by reason of any insurance which may be maintained by Franchisor, nor shall Franchisee's performance of that obligation relieve it of liability under the indemnity provisions set forth herein.

13.3      Franchisee shall obtain at least one quote for the required insurance from Peel & Holland, Paducah, Kentucky. Franchisee may obtain as many other quotes for required insurance in its discretion provided that all such quotes shall be for the same or similar required insurance policies as those obtained from Peel & Holland. Franchisee may select its insurance carrier in its sole discretion, subject to the minimum coverage required by this Agreement.

13.4     Prior to the commencement of any operations under this Agreement, and thereafter at least twenty (20) days prior to the expiration of any policy, Franchisee shall deliver to Franchisor Certificates of Insurance evidencing the proper types and minimum amounts of coverage. All Certificates shall expressly provide that no less than thirty (3 0) days' prior written notice shall be given Franchisor in the event of material alteration to or cancellation of the coverage evidenced by such Certificates.

13.5     Should Franchisee, for any reason, fail to procure or maintain the insurance required by this Agreement, as such requirements may be revised from time to time by Franchisor in the manual or otherwise in writing, Franchisor shall have the right and authority (but not the obligation) to procure such

27


insurance and to charge the same to Franchisee, which charges shall be payable by Franchisee immediately upon notice. The foregoing remedies shall be in addition to any other remedies Franchisor may have.

14. TRANSFER OF INTEREST

14.1     Franchisee understands and acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee, and that Franchisor has granted this franchise in reliance on Franchisee's (or, if Franchisee is a corporation or partnership, its principal's) business skill, financial capacity and personal character. Accordingly, neither Franchisee nor any immediate or remote successor to any part of Franchisee's interest in this Agreement, nor any individual, partnership, corporation or other legal entity which directly or indirectly owns any interest in Franchisee or in all or substantially all of the assets of the Franchised Business shall sell, assign, transfer, convey, pledge, mortgage, encumber, merge or give away any direct or indirect interest in this Agreement, in Franchisee or in all or most of the assets of the Franchised Business (collectively, a "Transfer") without the prior written consent of Franchisor required by this Section pursuant to the conditions of this Section 14.1, et seq.; and such transfer shall be null and void and shall constitute a material breach of this Agreement, for which Franchisor may immediately terminate without opportunity to cure pursuant to Section 15 of this Agreement.

14.2     Franchisee shall notify Franchisor in writing of any proposed Transfer of any direct or indirect interest in this Agreement, in Franchisee or in all or substantially all of the assets of the Franchised Business at least thirty (30) days before each Transfer is proposed to take place. Franchisor shall not unreasonably withhold its consent to any Transfer. Any such transfer shall be subject to the requirement that one person be designated as a controlling owner of Franchisee's entity, owning at least 51% of the Franchisee's partnership, limited liability company or corporation. If a Transfer, alone or together with other previous, simultaneous or proposed Transfers, would have the effect of changing control of Franchisee or substantially all of the assets of the Franchised Business, Franchisor may, in its sole discretion, require any or all of the following as conditions of its approval:

14.2.1 That the person to be designated as a controlling owner of the franchisee's entity owns and controls not less than fifty-one (51%) of the general partnership interest

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if a partnership, membership interests if a limited liability company, or shares if a corporation;

14.2.2    That the person to be designated as a controlling owner meet all of Franchisor's requirements for approval as a Franchisee;

14.2.3    That all franchisee's accrued monetary obligations and all other outstanding obligations to Franchisor and its affiliates have been satisfied;

14.2.4    That Franchisee is not in default of any provision of this Agreement, any amendment hereof or successor hereto or any other agreement between Franchisee and Franchisor or its affiliates;

14.2.5    That the transferor shall have executed a release, in a form satisfactory to Franchisor, of any and all claims against Franchisor, Franchisor's owner(s), affiliates and their respective officers, directors, agents and employees;

14.2.6    That the transferee (and, if the transferee is other than an individual, such owners of a beneficial interest in the transferee as Franchisor may request) enter into a written assignment, in a form satisfactory to Franchisor, assuming and agreeing to discharge all of Franchisee's obligations under this Agreement; and, if the obligations of Franchisee were guaranteed by the transferor, that the transferee guarantee the performance of all such obligations in writing in a form satisfactory to Franchisor;

14.2.7    That the transferee (and, if the transferee is other than an individual, such owners of a beneficial interest in the transferee as Franchisor may request} demonstrate to Franchisor's satisfaction that it (a) meets Franchisor's educational, managerial and business standards; (b) possesses a good moral character, business reputation and credit rating; (c) possesses the aptitude and ability to operate the Franchised Business {as may be evidenced by prior related business experience or otherwise); and, (d) has adequate financial resources and capital to operate the Franchised Business;

14.2.8    That the transferee execute for the Franchised Business, for a term ending on the expiration date of this Agreement and with such renewal provisions as are provided by this Agreement, the then-current form of franchise agreement and other ancillary agreements as Franchisor requires for a franchised business, which agreements shall supersede this

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Agreement in all respects;

14.2.9    That the transferee, at its expense, refurbish the Premises to conform to Franchisor's then-current standards and specifications and complete the refurbishing and other requirements within the time specified by Franchisor;

14.2.10   That Franchisee remain liable for all of the obligations to Franchisor in connection with the Franchised Business which arose prior to the effective date of the Transfer and execute any and all instruments reasonably requested by Franchisor to evidence such liability;

14.2.11   That the transferee (or, if the transferee is a corporation or partnership, a principal of the transferee acceptable to Franchisor) and the transferee's manager (if transferee or transferee's principal will not manage the Franchised Business}, at the transferee's expense, complete any training programs then in effect for franchisees and managers upon such terms and conditions as Franchisor may reasonably require;

14.2.12    Upon sale or other alienation of the franchise by Franchisee, the Franchisee will be required to pay a non-refundable transfer fee equal to the greater of Five Thousand Dollars ($5,000.00} or ten percent (10%) of the sales price, or total consideration, monetary and/or non-monetary, but not to exceed the then current Initial Franchise Fee (currently $12,500.00). Upon sale or other alienation of the franchise by Franchisee to another franchisee, the Franchisee will be required to pay a non-refundable transfer fee equal to ten percent (10%) of the sales price, or total consideration, monetary or nonmonetary, but not to exceed the current Initial Franchise Fee

(currently $12,500.00}. The transfer fee is for the training, supervision, administrative costs, overhead, counsel fees, accounting and other Franchisor expenses in connection with the transfer. Such fee shall be due at the time of Transfer. However, in the case of a Transfer to a corporation formed by Franchisee for the convenience of ownership, no such Transfer fee shall be required, if Franchisee owns 51% of the equity interests in such corporation.

14.3 If any party holding any direct or indirect interest in this Agreement, in Franchisee or in all or substantially all of the assets of the Franchised Business proposes to Transfer any interest in this Agreement, Franchisee or all or substantially all of the assets of the Franchised Business, the Transfer of which would have the effect of

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transferring such interest or assets, by accepting any bona fide offer from a third party to purchase such interest and/or assets, such party shall notify Franchisor in writing of each such offer, and shall provide such information and documentation relating to the offer as Franchisor may require. Franchisor shall have the right and option, exercisable within thirty (3 0) days after receipt of such written notification, to send written notice to the transferor that Franchisor intends to purchase the transferor's interest or the assets on the same terms and conditions offered by the third party. If Franchisor elects to purchase the transferor's interest or assets, closing on such purchase must occur within thirty (30) days from the date of the notice to the transferor of the election to purchase by Franchisor. Any material change in the terms of any offer prior to closing shall constitute a new offer subject to the same rights of first refusal by Franchisor as in the case of an initial offer. Failure of Franchisor to exercise the option afforded by this Section shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Agreement with respect to a proposed Transfer. If the consideration, terms and/or conditions offered by a third party are such that Franchisor may not reasonably be required to furnish the same consideration, terms and/or condition, then Franchisor may purchase the interest or assets proposed to be sold for the reasonable equivalent in cash. If the parties cannot agree within a reasonable time on the cash consideration, an independent appraiser shall be designated by Franchisor, and the determination of such appraiser shall be binding.

14.4 Upon the death or mental incapacity of any person with an interest in the Franchised Business, the Transfer of which would have the effect of transferring control of Franchisee, the executor, administrator or personal representative of such person shall transfer, within six (6) months after such death or mental incapacity, such interest to a third party approved by Franchisor. Such Transfers, including, without limitation, Transfers by devise or inheritance, shall be subject to the same conditions as any intervivos Transfer. However, in the case of Transfer by devise or inheritance, if the heirs or beneficiaries of any such person are unable to meet the conditions in this Section 14, the personal representative of the deceased shall have a reasonable time to dispose of the deceased's interest, which disposition shall be subject to all the terms and conditions for Transfers contained in this Agreement. If the interest is not disposed of within a reasonable time, not to exceed six months, Franchisor may terminate this Agreement.

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14.5     Franchisor's consent to a Transfer of any interest in this Agreement, in Franchisee or in all or substantially all of the assets of the Franchised Business shall not constitute a waiver of any claims it may have against the transferring party, nor shall it be deemed a waiver of Franchisor's right to demand exact compliance with any of the terms of this Agreement by the transferor or transferee.

14.6     All materials required for any offering of securities of Franchisee by federal or state law shall be submitted to Franchisor by the offeror for review prior to filing with any government agency; and any materials to be used in any exempt offering shall be submitted to Franchisor for review prior to their use. No offering shall imply, by use of the Proprietary Marks or otherwise, that Franchisor is participating in an underwriting, issuance or offering of any of its Proprietary Marks or other property; that Franchisor is participating in an underwriting, issuance or offering or securities of either Franchisee or Franchisor; and Franchisor's review of any offering shall be limited solely to the subject of the relationship between Franchisee and Franchisor. Franchisee and the other participants in the offering must fully indemnify Franchisor in connection with the offering. For each proposed offering, Franchisee shall pay to Franchisor a non-refundable fee of Five Thousand Dollars ($5,000.00} or such greater amount as may be necessary to reimburse Franchisor for its out-of-pocket costs and in connection with reviewing the proposed offering for its other reasonable costs expenses and materials, including, without limitation, legal and accounting fees. Franchisee shall give Franchisor written notice at least thirty (30) days prior to the date of commencement of any offering, filing or other transaction covered by this Section. Any such offering shall be subject to Franchisor's prior written consent and right of first refusal as provided herein.

14.7     If Franchisee is a corporation or partnership, Franchisee shall require each shareholder or partner (as the case may be) holding an interest in Franchisee to execute and deliver to Franchisor a covenant by which such person or entity agrees not to transfer any interest in Franchisee except in accordance with the terms and conditions of this Agreement. The organization documents of any Franchisee entity shall recite that they are subject to all restrictions contained in this Agreement. Franchisor shall also have the right to require, as a condition of any assignment of this Agreement that the owners enter into a Buy-Sell Agreement among themselves in a form and containing such terms as Franchisor prescribes for transfer of ownership in such

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entity.

14.8      Franchisee shall provide Franchisor with copies of all documents to be executed prior to any transfer of assignment of interest in this Agreement or Franchisee's entity. Franchisor shall use its reasonable efforts to approve or disapprove these within thirty (3 0) days of receipt.

14.9      If, for any reason, this Agreement is not terminated pursuant to Section 15 and it is contemplated that this Agreement will be assumed by or assigned to a person or entity who has made a bona fide offer to accept an assignment or assumption of this Agreement, pursuant to the U.S. Bankruptcy Code, then notice of such proposed assignment or assumption, setting forth (a) the name and address of the proposed assignee, and (b) all of the terms and conditions of the proposed assignment or assumption, shall be given to Franchisor within twenty (20) days after receipt of such proposed assignee's offer to accept assignment or assumption of this Agreement, and, in any event, within ten (10) days prior to the date that the application is made to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption, and Franchisor shall have the right and option, exercisable within 30 days after receipt of such notice, to accept an assignment of this Agreement to Franchisor itself, upon the same terms and conditions and for the same consideration, if any, as in the bona fide offer made by the proposed assignee, less any brokerage commissions which may be payable by Franchisee out of the consideration to be paid by such assignee for the assignment of this Agreement.

15. DEFAULT AND TERMINATION

15.1 Franchisee shall be deemed to be in default under this Agreement, and all rights granted to Franchisee herein shall automatically terminate without notice to Franchisee, if Franchisee shall become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee or such a petition is filed against and not opposed by Franchisee; if Franchisee is adjudicated bankrupt or insolvent; if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee; if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction,- if proceedings for a composition with creditors under any state or

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federal law should be instituted by or against Franchisee; if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a bond is filed); if Franchisee is dissolved; if execution is levied against Franchisee's business or property; if suit to foreclose any lien or mortgage against the Premises or equipment is instituted against Franchisee and not dismissed within thirty (30) days; or if the real or personal property of the Franchised Business shall be sold after levy-thereupon by any sheriff, marshall, constable, or the like.

15.2 Upon the occurrence of any of the following events of default, Franchisor may, at its option, terminate this Agreement and all rights granted hereunder, without affording Franchisee any opportunity to cure the default, effective immediately upon the provision of notice to Franchisee:

15.2.1     If Franchisee fails to locate an. .approved site or to construct and open the Franchised Business within the time limits provided in the Sire Selection Addendum or Section 5.3 of this Agreement;

15.2.2     If Franchisee and/or Franchisee's manager fails to satisfactorily complete the initial training program described in Section 6.1 hereof to Franchisor's satisfaction;

15.2.3     If Franchisee at any time ceases to operate or otherwise abandons the Franchised Business, or loses the right to possession of the Premises, or otherwise forfeits the right to do or transact business in the jurisdiction where the Franchised Business is located; provided, however, that if, through no fault of Franchisee, the Premises are damaged or destroyed by an event such that repairs or reconstruction cannot be completed within ninety (90) days thereafter, then Franchisee shall have thirty

(30) days after such event in which to apply for Franchisor's approval to relocate or reconstruct the Premises, which approval shall not be unreasonably withheld;

15.2.4     If Franchisee or any principal or officer of Franchisee is convicted of a felony, a crime involving moral turpitude or any other crime or offense that Franchisor believes is reasonably likely to have an adverse effect on the System, the Proprietary Marks, the goodwill associated therewith or Franchisor's interest therein;

15.2.5     If any purported assignment or Transfer of any direct or indirect interest in this Agreement, in Franchisee or in all or substantially all of the assets of the Franchised Business is made to any third party without Franchisor's prior

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written consent, contrary to the terms of Section 14 hereof;

15.2.6     If an approved Transfer is not effected within the time provided following death or mental incapacity, as required by Section 14 herein;

15.2.7     If Franchisee fails to comply with the covenants hereof or fails to obtain execution of the covenants required herein;

15.2.8     If, contrary to any covenant contained within this Agreement, Franchisee discloses or divulges or uses the contents of the manual or other confidential information provided to Franchisee by Franchisor;

15.2.9     If Franchisee knowingly maintains false books or records, or submits any false reports (including, without limitation, the application for this franchise) to Franchisor;

15.2.10     If Franchisee misuses or makes any unauthorized use of the Proprietary Marks or any other identifying characteristics of the System, or otherwise materially impairs the goodwill associated therewith or Franchisor's rights therein;

15.2.11     If Franchisee refuses to permit Franchisor to inspect the Premises, or the books, records or accounts of Franchisee in accordance with this Agreement;

15.2.12     If Franchisee, upon receiving a notice of default, fails to initiate immediately a remedy to cure such default; or

15.2.13     If Franchisee, after curing a default, commits the same default again within a two-year period, whether or not cured after notice.

15.3 Except as otherwise provided in Sections 15.1 and 15.2 of this Agreement, upon any other default of this Agreement by Franchisee, Franchisor may terminate this Agreement by giving written Notice of termination stating the nature of the default to Franchisee at least thirty (30) days prior to the effective termination by immediately initiating a remedy to cure such default, curing it to Franchisor's satisfaction and by promptly providing proof thereof to Franchisor within the thirty (3 0) day period. If any such default is not cured within the specified

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time, or such longer period as applicable law may require, this Agreement shall terminate without further notice to Franchisee, effective immediately upon the expiration of the thirty (30) day period or such longer period as applicable law may require. Defaults which are susceptible of cure hereunder include the following illustrative events:

15.3.1     If Franchisee fails to comply with any of the requirements imposed by this Agreement;

15.3.2     If Franchisee fails, refuses or neglects promptly to pay any monies owing to Franchisor or its affiliates when due, or to submit the financial or other information required by Franchisor under the Agreement or any franchising agreement between Franchisor and Franchisee,-

15.3.3     If Franchisee fails to maintain or observe any of the standards or procedures prescribed by Franchisor in this Agreement, the Manual or otherwise in writing;

15.3.4     Except as provided in Section 15.2 hereof, if Franchisee fails, refuses or neglects to obtain Franchisor's prior written approval or consent as required by this Agreement;

15.3.5     If Franchisee acts, or fails to  act, in any manner which is inconsistent with or contrary to its  lease or sublease for the Premises, or in any way jeopardizes   its right to renewal of such lease or sublease; or

15.3.6     If Franchisee engages in any business or markets any service product under a name or mark which, in Franchisor's opinion, is confusingly similar to the Proprietary Marks;

15.3.7     If a threat or danger to public health or safety results from the construction, maintenance or operation of the Franchised Business.

16. OBLIGATIONS UPON TERMINATION OR EXPIRATION

Upon termination or expiration of this Agreement, all rights granted hereunder to Franchisee shall forthwith terminate, and:

16.1 Franchisee shall immediately cease to operate the Franchised Business, and shall not thereafter, directly or indirectly, represent to the public or hold itself out as a

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present or former franchisee of Franchisor.

15.2     Franchisee shall immediately and permanently cease to use, in any manner whatsoever, any confidential methods, procedures and techniques associated with the System, the Proprietary Mark DIPPIN' DOTS® and all other Proprietary Marks and distinctive forms, slogans, signs, symbols and devices associated with the System. In particular, Franchisee shall cease to use, without limitation, all signs, advertising materials, displays, stationery, forms, products and any other articles which display the Proprietary Marks.

16.3     Franchisee shall take such action as may be necessary to cancel any assumed name registration or equivalent registration obtained by Franchisee which contains the mark DIPPIN DOTS® or any other Proprietary Marks, and Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor of compliance with this obligation within five (5) days after termination or expiration of this Agreement.

16.4     Franchisee shall, at Franchisor's option, assign to Franchisor any interest which Franchisee has in any lease or sublease for the Premises. If Franchisor does not elect or is for whatever reason unable to exercise its option to acquire the lease or sublease for the Premises, Franchisee shall make such modifications or alterations to the Premises immediately upon termination or expiration of this Agreement as may be necessary to distinguish the appearance of the Premises from that of franchised businesses operating under the System, and Franchisee shall make such specific additional changes thereto as Franchisor may reasonably request for that purpose. If Franchisee fails or refuses to comply with the requirements of this Section, Franchisor shall have the right to enter upon the Premises, without being guilty of making or causing to be made such changes as may be required, at the expense of Franchisee, which expense Franchisee agrees to pay upon demand.

16 . 5 Franchisee agrees, if it continues to operate or subsequently begins to operate any other business, not to use any reproduction, copy or colorable imitation of the Proprietary Marks, either in connection with such other business or the promotion thereof, which, in Franchisor's sole discretion, is likely to cause confusion, mistake or deception, or which is likely to dilute Franchisor's rights in and to the Proprietary Marks. Franchisee further agrees not to utilize any designation or origin, description or representation (including but not limited to reference to Franchisor, the System, or the Proprietary Marks} which, in Franchisor's sole discretion, suggests or represents a present or former association or

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connection with Franchisor, the System or the Proprietary Marks.

16.6     Franchisee shall promptly pay all sums owing to Franchisor and its affiliates. In the event of termination for any default of Franchisee, such sums shall include all damages, costs and expenses, including reasonable attorney's fees, incurred by Franchisor as a result of the default, which obligation shall give rise to and remain, until paid-in-full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment, signs, fixtures and inventory owned by Franchisee and on the Premises operated hereunder at the time of default.

16.7     Franchisee shall immediately deliver to Franchisor the Manual and all other records, correspondence and instructions containing confidential information relating to the operation of the Franchised Business, all of which are acknowledged to be the property of Franchisor.

16. 8 Franchisor shall have the option, to be exercised within thirty (3 0) days after termination, to purchase from Franchisee any or all of the furnishings, equipment, signs and fixtures related to the operation of the Franchised Business at fair market value and to purchase any or all supplies and inventory of the Franchised Business at Franchisee' s cost. If the parties cannot agree on the price of any such items within a reasonable time, an independent appraisal shall be conducted, at Franchisor's sole discretion, and the appraiser's determination shall be binding. If Franchisor elects to exercise any option to purchase herein provided, it shall have the right to set off all amounts due from Franchisee, and the cost of the appraisal, if any, against any payment thereof.

16.9     Franchisee shall assign to Franchisor any interest which Franchisee may have in and to the telephone number (s) of the Franchised Business, and Franchisee must immediately cease use of said telephone number(s).

16.10     Franchisee shall comply with the covenants contained in Section 17.3 of this Agreement.

17. COVENANTS

17.1 Franchisee covenants that, during the term of this Agreement, except as otherwise approved in writing by Franchisor, Franchisee (or, if Franchisee is a corporation or partnership, a principal or general partner of Franchisee} or Franchisee's

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fully-trained manager shall devote full time and best efforts to the management and operation of the Franchised Business.

17.2     Franchisee specifically acknowledges that, pursuant to this Agreement, Franchisee will receive valuable, specialised training and confidential information, including, without limitation, information regarding the operational, sales, promotional and marketing methods and techniques of Franchisor and the System. Franchisee covenants that during the term of this Agreement, except as otherwise approved in writing by Franchisor, Franchisee shall not, either directly or indirectly, for itself, or through, on behalf of or in conjunction with any person or legal entity:

17.2.1     Divert or attempt to divert any present or prospective business or customer of any Franchised Business to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks or the System; or

17.2.2     Employ or seek to employ any person who is at that time employed by Franchisor or by any other franchisee of Franchisor, or otherwise directly or indirectly induce such person to leave his or her employment.

17.3      Franchisee covenants that, except as otherwise approved in writing by Franchisor, Franchisee shall not, during the Term of the Franchise Agreement and for a continuous uninterrupted period of two (2) years commencing upon the date of: (a) a Transfer permitted under Section 14 of this Agreement; (b) expiration of this Agreement; (c) termination of this

Agreement (regardless of the cause for termination) ; (d) a final order of a duly authorized arbitration, panel or arbitrators for a court of competent jurisdiction (after all appeals have been taken} with respect to any of the foregoing or with respect to enforcement of this Section 17.3; or (e) any or all of the foregoing; either directly or indirectly, for itself, or through, on behalf of or in conjunction with any person or legal entity, own, maintain, operate, engage in, be employed by, provide assistance to or have any interest in (as owner or otherwise} any business that: (x) features the sale of ice cream, yogurt or frozen flavored water; and (y) is, or is intended to be, located at or within a six (6) mile radius of the Approved Location or of any other franchised business then-operating under the System.

17.4     Sections 17.2.2 and 17.3 shall not apply to ownership by Franchisee of a less than five (5%) percent

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ownership in a corporation which has securities registered under the Securities Exchange Act of 1934.

17.5     Franchisee expressly agrees that the existence of any claims it may have against Franchisor, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by Franchisor of the covenants in this Section 17. Franchisee agrees to pay all costs and expenses (including, without limitation, reasonable attorneys' fees) incurred by Franchisor in connection with the enforcement of this Section 17, or any other provision of this Franchise Agreement.

17.6     At Franchisor's request, Franchisee shall obtain and furnish to Franchisor executed covenants similar in substance to those set forth in Section 10 and this Section 17 (including covenants applicable upon the termination of a person's relationship with Franchisee and the provisions of Section 16 of this Agreement as modified to apply to an individual) from any or all of the following person: (a) all managers of Franchisee and any other personnel employed by Franchisee who have received or will receive training from Franchisor; (b) all officers, directors and holders of a beneficial interest of five percent

(5%) or more of the securities of Franchisee and of any corporation directly or indirectly controlling, controlled by or under common control with Franchisee, if Franchisee is a corporation; and (c) the general partners and any limited partners (including any corporation, and the officers, directors and holders of a beneficial interest of one percent (1%) or more of the securities of any corporation which controls, directly or indirectly, any general or limited partner), if Franchisee is a partnership. Every covenant required by this Section shall be in a form approved by Franchisor, including, without limitation, specific identification of Franchisor as a third party beneficiary of such covenants with the independent right to enforce them.

18. CORPORATE OR PARTNERSHIP FRANCHISEE

18.1 If Franchisee is a corporation, Franchisee shall comply with the following requirements:

18.1.1 Franchisee shall be duly organized and its charter shall at all times provide that its activities are confined exclusively to operating the Franchised Business or such other businesses as have been fully described and approved in writing by Franchisor.

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18.1.2     Franchisee shall maintain a current list of all owners of record and all beneficial owners of any class of voting securities or securities convertible into voting securities of Franchisee and shall furnish the list to Franchisor upon request.

18.1.3     Franchisee shall maintain stop-Transfer instructions against the Transfer on its records of any equity securities, and each stock certificate of Franchisee shall have conspicuously endorsed upon its face a statement in a form satisfactory to Franchisor that is held subject to, and that further assignment or Transfer thereof is subject to, all restrictions imposed upon assignments and other Transfers by this Agreement; provided, however, that the requirements of this Section 18.1.3 shall not apply to a publicly-held corporation.

18.2 If Franchisee or any successor to or assignee of Franchisee is a partnership, it shall comply with the following requirements:

18.2.1     Franchisee shall furnish Franchisor with a copy of its partnership agreement as well as such other documents as Franchisor may reasonably request, and any amendments thereto.

18.2.2     Franchisee shall prepare and furnish to Franchisor, upon request, a list of all general and limited partners in Franchisee.

19. TAXES, PERMITS AND INDEBTEDNESS

19.1     Franchisee shall promptly pay when due all taxes levied or assessed, including, without limitation, unemployment and sales taxes, and all accounts and other indebtedness of every kind incurred by Franchisee in the operation of the Franchised Business. Franchisee shall pay to Franchisor an amount equal to any sales tax, gross receipts tax or similar tax {other than income tax) imposed on Franchisor with respect to any payments to Franchisor required under this Agreement, unless the tax is credited against income tax otherwise payable by Franchisor.

19.2     in the event of any bona fide dispute as to Franchisee's liability for taxes assessed or other indebtedness, Franchisee may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law, but in no event shall Franchisee permit a tax sale or seizure by levy or execution or similar writ or warrant, or attachment by a creditor, to occur against the

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Premises, or any improvements thereon.

19.3     Franchisee shall comply with all federal, state and local laws, rules and regulations, and shall timely obtain any and all permits, certificates or licenses necessary for the full and proper conduct of the Franchised Business, including, without limitation, licenses to do business, fictitious name registrations, sales tax permits and fire clearances.

19.4     Franchisee shall immediately notify Franchisor in writing of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality, which may adversely affect the operation or financial condition of the Franchised Business or Franchisee.

20. INDEPENDENT CONTRACTOR AND INDEMNIFICATION

20.1 It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship, that Franchisee shall be an independent contractor and that nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venture, partner, employee, or servant of the other for any purpose whatsoever.

2 0.2 During the term of this Agreement, Franchisee shall hold itself out to the public as an independent contractor operating the Franchised Business pursuant to a franchise agreement from Franchisor. Franchisee agrees to take such action as may be necessary to do so, including, without limitation exhibiting a notice of that fact in a conspicuous place at the Premises, the content of which Franchisor reserves the right to specify.

20.3 Nothing in this Agreement authorizes Franchisee to make any contract, agreement, warranty or representation on Franchisor's behalf, or to incur any debt or other obligation in Franchisor's name; and Franchisor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action; nor shall Franchisor be liable by reason of any act or omission of Franchisee in its operation of the business franchised hereunder or for any claim or judgment arising therefrom against Franchisee or Franchisor. Franchisee shall indemnify and hold Franchisor, and Franchisor's officers, directors and employees harmless against any claims, losses, costs, expenses, liabilities and damages arising directly or indirectly from, as a result of or in connection with

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Franchisee's operation of the Franchises Business, as well as the costs, including, without limitation, attorneys' fees, of the indemnified party in defending against them.

21. APPROVALS AND WAIVERS

21.1     Whenever this Agreement requires the prior approval or consent of Franchisor, Franchisee shall make a timely written request to Franchisor therefore, and such approval or consent must be obtained in writing.

21.2     Franchisor makes no warranties or guarantees upon which Franchisee may rely, and assumes no liability or obligation to Franchisee, by providing any waiver, approval, consent or suggestion to Franchisee in connection with this Agreement, or by reason of any neglect, delay or denial of any request therefore.

21.3     No failure of Franchisor to exercise any power reserved to it by this Agreement, or to insist upon strict compliance by Franchisee with any obligation or condition hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Franchisor's right to demand exact compliance with any of the terms thereof. Waiver by Franchisor of any particular default of Franchisee shall not affect or impair Franchisor's rights with respect to any subsequent default of the same, similar or different nature; nor shall any delay, forbearance or omission of Franchisor to exercise any power or right arising out of any breach of default by Franchisee of any of the terms, provisions or covenants hereof, affect or impair Franchisor's right to execute the same; nor shall such constitute a waiver by Franchisor of any right hereunder, or of the right to declare any subsequent breach or default and to terminate this Agreement prior to the expiration of its term. Subsequent acceptance by Franchisor of any payments due to it hereunder shall not be deemed to be a waiver by Franchisor of any preceding breach by Franchisee of any terms, covenants or conditions of this Agreement.

22. NOTICES

Any and all notices that are required or permitted under this Agreement shall be in writing and shall be personally delivered, sent by certified mail or sent by other means which affords the sender evidence of delivery or rejected delivery, to the respective parties at the addresses designated on the signature page of this Agreement, unless and until a different

43


address has been designated by written notice to the other party. Any notice by means which affords the sender evidence of delivery or rejected delivery shall be deemed to have been given and or rejected delivery shall be deemed to have been given and received at the date and time of receipt or rejected delivery.

23 . ENTIRE AGREEMENT

23.1     This Agreement, the attachments hereto and the documents referred to herein constitute the entire Agreement between Franchisor and Franchisee concerning the subject matter hereof, and supersedes any prior agreements (whether oral or written),and no other representations have induced Franchisee to execute this Agreement. Except for those permitted to be made unilaterally by Franchisor hereunder, no amendment, change or variance from this Agreement shall be binding on either party unless mutually agreed to by the parties and executed by their authorized officers or agents in writing.

23.2     This Agreement supersedes all prior agreements, promises, arrangements or obligations by and between Franchisee and Franchisor.

24. SEVERABILITY AND CONSTRUCTION

24.1     If, for any reason, any section, part, term, provision and/or covenant herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency having valid jurisdiction, such shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, terms, provisions and/or covenants of this Agreement as may remain otherwise intelligible; and the latter shall continue to be given full force and effect and bind the parties hereto; and said invalid portions, sections, parts, terms, provisions and/ or covenants shall be deemed to be a part of this Agreement.

24.2     Any provision or covenant in this Agreement which expressly or by its nature imposes obligations beyond the expiration, termination or assignment of this Agreement (regardless of cause for termination) shall survive such expiration, termination or assignment.

24.3     Except as expressly provided to the contrary herein, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than

44


Franchisee, Franchisor, Franchisor's officer, directors, shareholders, agents and employees, any rights or remedies under or by reason of this Agreement.

24.4 Franchisee expressly agrees to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision hereof, as though it were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions hereof any portion or portions which a court or agency having valid jurisdiction may hold to be unreasonable and unenforceable in an unappealed final decision to which Franchisor is a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court or agency order.

25. APPLICABLE LAW

25.1     This Agreement shall be interpreted and construed exclusively under the laws of the Commonwealth of Kentucky. In the event of any conflict of law, the laws of Kentucky shall prevail without regard to the application of Kentucky conflict-of-law rules; except that all issues relating to arbitrability or the enforcement of the agreement to arbitrate herein contained shall be governed by the U.S. Arbitration Act, 9 U.S.C. 1, et seq. , and the federal common law of arbitration.

25.2    Except as otherwise provided in this Agreement, such as the arbitration described below, any claim or controversy arising out of or related to this Agreement, or the making, performance, breach, interpretation, or termination thereof, except for any actions brought with respect to i) issues concerning the alleged violations of any applicable trade or franchise regulation law; ii) the right to indemnification or the manner in which it is exercised; iii) the Proprietary Marks or other intellectual property of Franchisor; or iv) for any actions of collection of an uncontested balance due from Franchisee, shall first be subject to one (1) day of non-binding meaningful mediation in Paducah, Kentucky. Any claim brought under any provision of this Agreement, whether Mediation, Arbitration, or litigation, by Franchisee, shall be brought within two (2) years of the claim arising.

25.2.1 No litigation shall be commenced on any claim which is the subject to mediation under section 25.2 above, except those excluded in that Section, prior to the Mediation Termination Date, as defined in subsection 25.2.4 below, whether

45


or not the mediation has been commenced. Mediation is not intended to alter or suspend the rights or obligations of the parties under this Agreement or to determine the validity or effect of any provision of this Agreement, but is intended to furnish the parties an opportunity to resolve disputes amicably, expeditiously, and in a cost-effective manner on mutually acceptable terms .

25.2.2    Either party desiring mediation shall commence mediation by contacting the other party at the address contained herein. The request shall specify with reasonable particularity the matters for which mediation is sought and propose a date for the mediation, which shall be at least ten

(10) business days after notice is given to the other party.

25.2.3    Mediation shall be conducted by a mediator or mediation program designated by the Franchisor in writing. The Franchisor shall identify a mediator and a street address for the mediation. The party receiving the request for mediation shall respond to the notice within five (5) business days.

25.2.4    Mediation shall be concluded within thirty (30) days of the issuance of the request, or such longer period as may be agreed upon by the parties in writing ("Mediation Termination Date"). All aspects of the mediation process shall be treated as confidential, shall not be disclosed to others, and shall not be offered or admissible in any other proceeding or legal action whatsoever. The parties shall bear their own costs of mediation, and shall share equally in the cost of the mediator and/or mediation service.

25.3 If any dispute, claim or controversy should arise out of, or related to, this Agreement, or the offer, making, breach, performance or interpretation thereof, the parties will attempt to settle such dispute or controversy by mutual agreement; however, if a settlement cannot be concluded, then any such dispute or controversy shall be finally settled by arbitration in accordance with the terms hereof, pursuant to the Commercial Arbitration Rules of the American Arbitration Association ("AAA").

25.3.1 Such arbitration shall be initiated by either Party by serving upon the other notice at the address contained herein. The request shall specify with reasonable particularity the matters for which arbitration is sought and propose a date for the arbitration, which shall be at least ten (10) business days after notice is given to the other party. Arbitration shall

46


be by one arbitrator appointed in accordance with the Commercial Arbitration Rules of the American Arbitration Association (\AAA"). All arbitration proceedings shall take place in Paducah, Kentucky and the laws applicable to the arbitration procedure shall be the laws of the Commonwealth of Kentucky.

25.3.2    The award of the arbitrator shall be the sole and exclusive remedy between the parties regarding any claims, counterclaims, issues or accountings presented or pled to the arbitrator; shall be made and shall promptly be payable free of any tax, deduction or offset; and any costs, fees or taxes incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement.

25.3.3    Judgment upon the award of the arbitrator may be entered in any court having jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award or an order of enforcement. Any right to either party to judicial action on any matter subject to arbitration hereunder is waived, except for suit to enforce the arbitration award. No claim submitted to arbitration is heard by a jury and no claim may be brought as a class action or as a private attorney general . You do not have the right to act as a class representative or participate as a member of a class of claimants with respect to any claim. This Arbitration section applies to all claims not in existence or that may arise in the future. This Arbitration section shall survive the termination of your Franchise Agreement as well as any voluntary payment of

the debt in full by you, any bankruptcy by you or sale of the debt by us.

25.3.4    In proceeding with the arbitration provided for herein, and in making determinations thereunder, the arbitrator shall not extend, modify or suspend any of the terms of the Agreement or the reasonable standards of business performance and operations established by the Franchisor in good faith. A notice or request or demand for arbitration will not operate to stay, postpone, or rescind the effectiveness of any termination.

25.4 Franchisor and Franchisee irrevocably waive trial by jury in any action, proceeding or counterclaim, whether at law or in equity, brought by either of them against the other, or in equity, brought by either of them against the other, whether or not there are other parties in such action or proceeding. Any and all claims and actions arising out of or relating to this Agreement, the relationship of Franchisee and Franchisor or of

47


Franchisee's operation of the Franchised Business, brought by any party hereto against the other, shall be commenced within one (1) year from the occurrence of the fact giving rise to such claim or action, or such claim or action shall be barred.

25.5    Nothing herein contained (including, without limitation, to Section 25.2 above regarding mediation and 25.3 regarding arbitration) shall bar Franchisor's right to obtain injunctive relief against threatened conduct that will cause it loss or damage, under the usual equity rules, including the applicable rules for obtaining specific performance, restraining orders and preliminary injunctions.

25.6     Franchisee shall pay to Franchisor all damages, costs and expenses, including all court costs, arbitration costs and reasonable attorney's fees, incurred by Franchisor in successfully enforcing any provision of this Agreement, including, but not limited to the obtaining of injunctive relief.

25.7    In the event of any dispute between the parties to this Agreement, the parties agree that neither party shall seek nor be liable to the other party for punitive damages.

25.8    With respect to class action suits, both parties agree that they will not participate in any class action against the other party.

26. ACKNOWLEDGEMENTS

26.1     Franchisee acknowledges that Franchisee has conducted an independent investigation of the business franchised hereunder, and recognizes that the business venture contemplated by this Agreement involves business risks and that its success will be largely dependent upon the ability of Franchisee (or, if Franchisee is a corporation or partnership, the ability of its principals} as an independent businessperson. Franchisor expressly disclaims the making of, and Franchisee acknowledges that it has not received, any warranty or guarantee, express or implied, as to the potential volume, profits or success of the business venture contemplated by this Agreement.

26.2     Franchisee acknowledges that Franchisee received a complete copy of this Agreement, the attachments hereto and agreements relating thereto, if any, at least ten (10) business days prior to the date on which this Agreement was executed. Franchisee further acknowledges that Franchisee received the disclosure document, the Uniform Franchise Offering Circular (the

48


"UFOC"), required by the Trade Regulation Rule of the Federal Trade Commission entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" at least ten (10) business days prior to the date on which this Agreement was executed.

26.3 Franchisee acknowledges that Franchisee has read and understood this Agreement, the attachments hereto and agreements relating thereto, if any, and that Franchisor has accorded Franchisee ample time and opportunity to consult with advisors of Franchisee's own choosing about the potential benefits and risks of entering into this Agreement.

27. DDF FRANCHISEE COUNCIL, INC.

27.1     The DDF Franchisee Council, Inc. (the "Council") was formed to serve as an advisory board to Franchisor on advertising, marketing, operations, new product and service suggestions and other matters concerning the System. Franchisor will seek the advice of the Council, its officers and committees.

27.2    While the Franchised Business remains in operation in accordance with this Agreement, Franchisee is required to be a member with full privileges of the Council. All other franchisees of the System and Franchisor will also be members of the Council. All members of the Council will be entitled to one (1) vote on all matters that members are authorized to vote on under this Agreement and the By-Laws of the Council.

27.3 Membership dues for the Council are $100 annually per franchisee. Membership dues may be increased or decreased by the Council as needed to meet the requirements of the annual budget. Franchisee agrees to execute an authorization for DDF to debit the membership dues from Franchisee's bank account by Automated Clearing House (ACH) for the benefit of the Council.

28. ACKNOWLEDGEMENT OF RISK

28.1 Franchisee agrees to the following:

28.1.1 FRANCHISEE'S SUCCESS IN OWNING AND OPERATING THE DIPPIN' DOTS® FRANCHISED BUSINESS IS SPECULATIVE AND DEPENDS ON MANY FACTORS INCLUDING, TO A LARGE EXTENT, FRANCHISEE'S INDEPENDENT BUSINESS ABILITY. NO REPRESENTATIONS, PROMISES OR OTHER STATEMENTS, EXPRESS OR IMPLIED, HAVE BEEN MADE BY

49


FRANCHISOR OR ANY OF FRANCHISOR'S EMPLOYEES, BROKERS OR REPRESENTATIVES, TO INDUCE FRANCHISEE TO ENTER INTO THIS AGREEMENT EXCEPT AS SPECIFICALLY INCLUDED IN THIS AGREEMENT OR THE DISCLOSURE DOCUMENT REFERENCED IN SECTION 26.2 HEREOF. NO OFFICER, DIRECTOR, EMPLOYEE, BROKER OR REPRESENTATIVE HAS BEEN AUTHORIZED TO DO OTHERWISE OR, IF ANY STATEMENT WERE MADE, FRANCHISEE HAS NOT RELIED ON ANY OF THEM.

28.1.2 FRANCHISEE AGREES THAT IN ALL OF HIS OR HER DEALINGS WITH FRANCHISOR, ITS OFFICERS, DIRECTORS, EMPLOYEES, WORKERS (IF ANY) AND OTHER REPRESENTATIVES ACT ONLY IN A REPRESENTATIVE CAPACITY AND NOT IN AN INDIVIDUAL CAPACITY. FRANCHISEE AGREES THAT THIS AGREEMENT, AND ALL BUSINESS DEALINGS BETWEEN FRANCHISEE AND ANY INDIVIDUALS AS A RESULT OF THIS AGREEMENT, ARE ONLY BETWEEN FRANCHISEE AND FRANCHISOR.

2 8.1.3 IN ADDITION, FRANCHISOR MAKES NO WARRANTY AS TO FRANCHISEE'S ABILITY TO OPERATE THE DIPPIN' DOTS® FRANCHISED BUSINESS, OR IN THE MANNER IN WHICH IT IS TO BE OPERATED. IF LEGISLATION ENACTED BY, OR REGULATION OF, ANY GOVERNMENTAL BODY PREVENTS FRANCHISEE FROM, OR RESTRICTS FRANCHISEE IN, OPERATING THE DIPPIN' DOTS® FRANCHISEE, FRANCHISOR IS NOT LIABLE FOR DAMAGES NOR REQUIRED TO INDEMNIFY FRANCHISEE OR TO RETURN ANY MONIES RECEIVED FROM FRANCHISEE.

50


IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed by their duly authorized representatives, in duplicate, on the date first written above.

_______________________________ Dippin' Dots Franchising, Inc.

FRANCHISEE                                                       FRANCHISOR

3y:____________________________ By:___

Name:__________________________ Name:_

Title:_________________________ Title:

Address for Notice to Franchisee: Address for Franchisor:

_______________________________ Dippin' Dots Franchising, Inc.

1640 McCracken Blvd.,Suite 100 _______________________________ Paducah, Kentucky 42 001

Fax: (270) 575-6997

Fax:

51


EXHIBIT A

APPROVED LOCATION*S)


EXHIBIT B

GENERAL RELEASE

OF

DIPPIN' DOTS FRANCHISING, INC.

This GENERAL RELEASE is entered into by and between Dippin' Dots Franchising, Inc., a Kentucky Franchisor with its principal office at 1640 Mccracken Blvd., Suite 100, Paducah, Kentucky

42001 ("Franchisor"} and _________________________ (*Franchisee")

uhis _____ day of _________________, 2 0__

Now therefore, for good and valuable consideration, the receipt and sufficiency which is hereby acknowledged, Franchisor and Franchisee agree as follows:

Franchisee hereby releases and discharges Franchisor, its respective agents, successors, assigns, officers, directors, shareholders, employees, attorneys, guarantors, sureties, and insurers and any persons acting on its or their behalf from any and all injuries, losses, damages, liabilities, defenses, claims, actions, causes of action, suits, debts, promises, demands, or agreements, of whatever nature or kind, known and unknown, whether based in law or in equity, including any claim for punitive or exemplary damages, that Franchisee ever had or now has or that anyone claiming through or under Franchisee may have or claim to have which was raised or asserted or could have been raised or asserted by Franchisee against Franchisor at any time prior to the execution of this release, including but not limited to any and all claims arising out of, by reason of, or in any way related to the subject matter of the Franchise Agreement dated

_______________ between Franchisee and Franchisor, it being

expressly understood that this Release is entered into as part of the renewal, expiration, termination, or cancellation of said Franchise Agreement.

Wherefore, Franchisee and Franchisor have entered into this General Release on the date first set for above.

Franchisee:                                          Franchisor:

Dippin' Dots Franchising, Inc.

Name:

Title:_______________________ Name:

Title:


EXHIBIT C FRANCHISEE INFORMATION SHEET

Franchisee Name:

Contact Person: Franchisee Address: Telephone Number: Protected Territory: Approved Location:

Dippin' Dots Franchising Inc. Franchisee

By:                                                                      By:

Its:


EXHIBIT D DEFINITIONS

As used in this agreement:

nACH DEBIT" refers to the Automated Clearing House financial network run by the Federal Reserve to transfer funds electronically. Franchisee must instruct its bank to accept an ACK Debit. The Franchisee's bank will withdraw funds from Franchisee's bank account for payment to the Franchisor's bank account. The banks will not initiate an ACH Debit without the Franchisee's personal identification number in order to safeguard the transaction and prevent unauthorized transactions from the account.

"ADVERTISING CONTRIBUTION" means the fees paid by Franchisee to the Advertising Fund established exclusively to advertise and promote the Franchised Business and franchised businesses of other franchisees, including salaries or pro rata salaries for personnel dedicated to advertising and promotions.

"ADVERTISING FEE" means the fee payable by Franchisee pursuant to Section 12 of the Agreement.

"ADVERTISING FUND" means a fund established by Franchisor for the purpose of advertising and promoting the Franchised Business and products sold by them.

"AGREEMENT" refers to the Franchise Agreement (including all Exhibits and Addenda thereto) and all amendments thereto or any successor thereto.

"AIRLINE" means any organization in the business of providing transportation by air.

"AIRPORT" means any passenger service with more than 2,000,000 people per year arriving or departing via an Airline.

"AMUSEMENT CENTER" means any facility designed for and operated primarily for recreational activities. These may include, but are not limited to: amusement parks, such as Six Flags; theme parks, such as Knottsberry Farm; child-oriented entertainment businesses, such as Discovery Zone®; museums; aquariums; zoos; or any commercially operated enterprise having various devices for entertainment in excess of 25,000 square feet under roof.


"APPROVED LOCATION" means the location specified in Section 1.2 of this Agreement. For Fair/Festival locations, an Approved Location will include an annual temporal restriction.

"ARENA/STADIUM" means any indoor or outdoor facility used for cultural or distinct business, religious or civic events with a seating capacity in excess of 10,000, or for professional or NCAA Division I or IAA. sporting events.

"BASIC MANAGEMENT TRAINING" means the initial training program as

established and conducted by Franchisor or its affiliates for the operation of the Franchised Business.

"CATERING" means bulk sales of an approved product to one company for further distribution at a group event without collecting money from the individual attendees.

"COMPANY CAFETERIA" means any company facility which provides food for employees of that company with a seating capacity in excess of one hundred (100) people.

"FAIR/FESTIVAL" means any annual exposition (of goods, farm products, livestock) or any program of cultural events which may include exhibition of works in the arts whether dedicated to a solitary artist or a unique genre, or whether held to celebrate a particular season, anniversary of an event or notable person(s), except for the New York State Fair, the Kentucky State Fair and the Dade County (Florida) Youth Fair. A Fair/Festival does not include locations within 3 0 feet of a Dippin' Dots, Inc. National Account Service Provider. If a Dippin' Dots, Inc. National Account Service Provider is operating within any facility located within a Fair or Festival, then a Franchisee may not have rights to operate a Franchised Business within that specific facility located in that particular Fair or Festival, in the event that National Account location is within 30 feet of the planned Franchised Business. However, Franchisee may operate its Franchised Business at any Fair/Festival, even if a DDI National Account Service Provider is located within a specific facility at the Fair/Festival, if the Franchised Business is outside a 30 foot radius of the National Account Service Provider location.

"FRANCHISED BUSINESS" means the business conducted at the Approved Location in the operation of a Dippin1 Dots® Franchise.

"FRANCHISEE" means the person or company that is granted a franchise by Franchisor pursuant to this Agreement.

"GROSS SALES" means the entire amount of all your revenues from


the ownership or operation of the Franchised Business or any business at or about the Premises which is attributable to the ownership or operation of the Dippin' Dots Franchise including, without limitation, the proceeds of any business interruption insurance and any revenues received from the lease or sublease of a portion of the Premises, whether the revenues are evidenced by cash, credit, checks or gift certificates (unless exempted in writing by Franchisor), services, property or other means of exchange, excepting only the amount of any sales taxes that are collected and paid to the taxing authority. Gross Sales shall only include gift certificates either when sold or when redeemed by Franchisee, but shall not include both the sale and redemption of a gift certificate. Franchisees owning or operating a Franchised Business in conjunction with or at the same Premises as another business must account for the pro rata amount of their revenues attributable to the ownership or operation of the Franchised 3usiness only, including, without limitation, business interruption insurance and any revenues received from the lease or sublease of a portion of the Premises. Cash refunded and credit given to customers and receivables uncollectible from customers may be deducted by Franchisee in computing Gross Sales to the extent that the cash, credit or receivables represent amounts previously included in Gross Sales on which Royalty Fees and Advertising Contributions were paid. Gross Sales are deemed received at the time the goods, products, merchandise or services exchanged from which they derive are delivered or rendered or at the time the relevant sale takes place, whichever occurs first. Gross Sales consisting of property or services (for example, "bartering" or "trade outs") are valued at the prices applicable, at the time the exchange occurs.

"HOTELS AND RESORTS" means all temporary lodging facilities, excluding the Grand Wailea Resort Hotel located in Wailea, Hawaii.

"INITIAL FRANCHISE FEE" means the fee payable by Franchisee pursuant to Section 4.1 of this Agreement.

"MALL" means any structure consisting of four (4) or more businesses operating under the same roof in which a franchisee may operate the Franchised Business. This definition shall not include a second location for a franchisee within the same Mall operated on a temporary basis of up to sixty (60) days.

"MANUAL" means Franchisor's Confidential Operating Manual described in Section 9 of this Agreement.

"MOVIE THEATER" means an indoor building or facility for public presentation of motion pictures .


"PROMOTIONAL MATERIAL" means any item used to advertise or publicize the sale of Franchisee's or Franchisor's products or services.

"PROPRIETARY MARKS" means all words or symbols having a spatial association with goods or services such that consumers perceive it as a signal communicating information about the Franchisor and its products, such marks belonging to or pertaining to Franchisor or its affiliates having exclusive rights to, but not limited to, any distinctive forms, slogans, signs, symbols, and devices associated with the System.

"PROTECTED TERRITORY" means the area within the radius specified in Section 1.3.1 of the Agreement.

"REGIONAL ADVERTISING FUND" means a fund established exclusively to advertise and promote the Franchised Business (the "Advertising Contribution") within a defined geographical area as demarcated by the Franchisor.

"ROYALTY FEE" means the fee payable by Franchisee pursuant to Section 4.3 of this Agreement.

"SCHOOL" means any public or private educational facility at or below the high school level located outside the following Kentucky counties of McCracken County; Marshall County; Lyon County; Livingston County; Graves County; Calloway County; Carlisle County; Hickman County; Caldwell County; Crittenden County; Ballard County; and Massac County, or Pulaski County in Illinois.

"SCHOOL EVENT" means individual school-sponsored organizations, activities, programs, and clubs, including but not limited to, sports teams, concessions, booster clubs, honor societies, band, orchestra, and choral organizations, academic teams, DECA, FFA, FKA, and other groups.

"STAND ALONE STORE" means any structure consisting of three (3) or fewer businesses operating under the same roof in which a franchisee may operate a Franchised Business for sixty (60) days or more.

"SYSTEM" means the entire method of operations, promotion, and sales developed by Franchisor and its affiliates including, without limitation, the sale of ice cream, yogurt and frozen ice; distinctive design, decor, color scheme, fixtures, and furnishings; standards and specifications for products,


equipment, materials, and supplies,- uniform standards, specifications, and procedures for operations' procedures for inventory and management control; training and assistance; and advertising and promotional programs identified by means of certain trade names, service marks, trademarks, logos, emblems, and indicia of origin.

"WORLDWIDE WEB" means any electronic computer-mediated-communication including network information retrieval systems designed for disseminating Internet resources through servers ana retrieving hypermedia resources through browsers.


Exhibit E

Location Size:

ADDITIONAL LOCATION/ EACH UNIT

RENEWAL FEE FOR EACH UNIT

Mall (More than 1 million scj. ft.)

$10,000.00

$2,500.00

Mall/Stand Alone

Store

(Less than 1

million sq. ft.}

$8,000.00

$2,000.00

Fair/ Festival *

(More than 1

million- in

attendance)

$3,000.00

$1,000.00

Fair/ Festival * (Less than 1

million but more

than 99,999 in

attendance)

$1,500.00

$500.00

* Multiple locations may be opened at any single Fair/Festival without payment of an additional franchise fee.

Cost for Purchases of Multiple Franchises at One Time*

Number of Franchise Units Purchased and/or Renewed:

Percentage Discount of

Franchise Fee or

Renewal Fee

10-24

20%

25-49

30%

50 or more

40%

* The fee for the first Franchised Business purchased is the Franchisee Fee provided in Franchise Agreement. The quantity discounts in this Exhibit E apply to renewals and/or new purchases by Franchisees paid at one time.


Exhibit F

Confidentiality Agreement

(A)  Standards of conduct

Franchisee shall diligently devote himself/herself in the business of a franchisee and shall be faithful to Franchisor in ail transactions relating to Franchisor and its business and shall give, whenever required, a true account to the Franchisor as the case may be, of all business transactions arising out of or connected with Franchisor or its business, and shall not, without first obtaining the written consent of the Franchisor, devote either his/her interest in the franchise or his/her interests in this agreement or credit of Franchisor for any purposes.

(B)  Confidential information

Franchisee recognizes that he/she has access to a variety of confidential information concerning the Franchisor; therefore, Franchisee agrees that he/she will not, either during his/her term as Franchisee or any time after the termination of his/her Franchise Agreement with the Franchisor, divulge or reveal to any person, firm or corporation, any information, directly or indirectly, if that information might be used in any way to injure or interfere with the Franchisor's business or trade or to alienate customers or employees from the Franchisor or to cause discontent or dissatisfaction among the Franchisor's customers or employees.

(C)  Trade secrets

Franchisee shall not, at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, firm or corporation, in any manner whatsoever, any information concerning any matters affecting or relating to Franchisor or its respective businesses, including, without limiting the generality of the foregoing, any information concerning any of its customers, or any other information concerning any of its businesses, its manner of operation, its plans, process or other data, without regard to whether all or any part of the foregoing matters will be deemed confidential, material or important, as the parties hereto stipulate that as between them the same are important, material, and confidential and gravely affect the effective and successful conduct of the business and goodwill of Franchisor, and that any breach of the terms of this paragraph shall be a substantial and material breach of the Franchise Agreement. All terms of this paragraph shall remain in full force and effect after the termination of the Franchise Agreement and of this Agreement. Franchisee


acknowledges that it is necessary and proper that Franchisor preserve and protect its proprietary rights and unique, confidential and special information and goodwill, and the confidential nature of its respective businesses and of the affairs of its customers, and that it is therefore appropriate that Franchisor prevent Franchisee from engaging in any breach of the provisions of this paragraph. Franchisee, therefore, agrees that a violation by Franchisee of the terms of this paragraph would result in irreparable and continuing injury to Franchisor, for which there might well be no adequate remedy at law. Therefore, in the event Franchisee shall fail to comply with the provisions of this paragraph, Franchisor shall be entitled to such injunctive and other relief as may be necessary or appropriate to cause Franchisee to comply with the provisions of this paragraph, and to recover, in addition to such relief, its reasonable costs and attorney fees incurred in obtaining same. Such right to injunctive relief shall be in addition to, and not in lieu of, such rights to damages or other remedies as Franchisor shall be entitled to receive.

(D) Assignment of patent rights,- protection of trade secrets

(1) Franchisor's business

For the purpose of this Agreement the business of Franchisor shall be deemed to include:

(a) The developing, perfecting, inventing and improving of:

(i) Processes or methods of manufacturing, distributing, selling, promoting and developing ice cream, frozen yogurt and ice products:

(ii) Articles of manufacture, fabrications and parts thereof which Franchisor is now making or selling or undertaking to make or sell and those which Franchisor, during the continuance of this agreement, may make or sell or undertake to make or sell; and

(iii) Machines, apparatus, appliances, appurtenances and devices applicable especially for use in connection with any or all of the aforesaid processes or methods; and

(b) The granting to others of rights, privileges and licenses in, to, and under any or all of the inventions, improvements or discoveries relating to the subject matter recited in above paragraphs, which during the continuance of this


Agreement may be owned or controlled by said Franchisor or under which it is licensed.

(2)  Secrecy of plant

Franchisor's business is carried on by means of an organization, plant, equipment, resources and goodwill which are the property of the Franchisor and the plant is operated as a secret plant and Franchisor desires to maintain and continue to operate it as such.

(3) Assignment of patents and rights

Franchisee hereby sells, assigns, transfers and sets over to Franchisor the entire right, title and interest of the Franchisee in and to each of all inventions, discoveries and improvements, applications for letters patent therefore and the letters patent that may be granted therefore, in the United States and all foreign countries, which inventions, discoveries or improvements, applications for letters patent, and letters patent relate or pertain to or are capable of use in or in connection with said business of the Franchisor, and which Franchisee may wholly or in part make or secure during the period in which he/she serves or agrees to serve the Franchisor in any capacity either hereunder or under any other agreement or arrangement now or hereafter made by him/her with the Franchisor, the same to be held and enjoyed by Franchisor as fully and entirely as each or all of them would have been held and enjoyed by Franchisee had this Agreement and assignment not been entered into.

(4)  Franchisee delivering records, etc., to Franchisor

Franchisee hereby covenants and agrees for himself/herself, his/her heirs and legal representatives that both during the term of his/her Franchise Agreement with Franchisor, whether under this Agreement or otherwise, and at all times thereafter he/she will promptly execute and deliver to Franchisor without further compensation any and all necessary papers for preparing, filing and prosecuting applications for letters patent and for reissue letters patent of any and all countries relating to any or all of the aforesaid inventions, discoveries or improvements wholly or in part made by Franchisee, which Franchisor may deem it advisable to have prepared and filed; and promptly to execute any and all papers necessary to specifically identify and separately assign, transfer and set over to Franchisor, all of his/her title and interest in and to each and all of the said inventions, discoveries or improvements and in and to any and all said applications for letters patent therefor, and in and to any and all letters patent that may be granted upon said applications in the United States and foreign countries, it being understood and agreed that the Franchisor shall meet and pay any and all


expenses arising because of or in carrying out any of the provisions of this article.

(5)  Conflicting interests

Franchisee covenants and warrants that he/she has not executed and is not now a party to any agreement or assignment in conflict herewith and that he/she will not enter into or execute any agreement or assignment in conflict herewith; and that, during the period in which he/she serves or agrees to serve the Franchisor in any capacity either hereunder or under any other agreement or arrangement now or hereafter made by him/her with Franchisor, he/she will not knowingly or intentionally aid or assist any person, firm or corporation other than said Franchisor to manufacture, use or sell any of the processes or methods, forms or mixtures of matter, articles of manufacture, fabrications and parts thereof, and machines, apparatus, appliances, appurtenances and devices, or any of them, embraced by said business of the Franchisor.

(6)   Notification of inventions, etc.

Franchisee further covenants and agrees that, during the terms stipulated in the Franchise Agreement, the Franchisor in any capacity either hereunder or under any other agreement or arrangement now or hereafter made by him/her with the Franchisor, he/she will immediately notify and fully inform the Franchisor of any and all inventions, discoveries and improvements wholly or in part made or secured by him/her relating or pertaining to or which are capable of use in or in connection with the business of said Franchisor.

(7)  Confidential information

Franchisee further covenants and agrees that, at all times while he/she is a Franchisee of the Franchisor, he/she will hold in secrecy, as trustee or custodian for Franchisor and for its exclusive benefit and use, and faithfully do all in his/her power to assist said Franchisor in holding in secrecy:

(a)  Each and all of Franchisor's trade secrets, including secret processes, secret machines, secret formulas and secret devices, now known to Franchisee and those disclosed or divulged to Franchisee by Franchisor, or any of its representatives, agents or employees, or otherwise learned or acquired by Franchisee during the continuance of this Agreement; and

(b)  Each and all of the aforesaid inventions, discoveries and improvements wholly or in part made by Franchisee; and that he/she will not disclose or divulge,


directly or indirectly, to any person or persons at any time the trade secrets and secret inventions, discoveries and improvements, or any information relating to the same, without the express written consent and approval in writing of Franchisor, or until the same have been: (i) patented, or (ii) published by Franchisor, and that he/she will not at any time practice or use, other than for Franchisor, or assist any person or persons to practice or use, the said trade secrets and secret inventions, discoveries and improvements, or any of them, without the express written consent and approval of Franchisor.

Date:_______________

DIPPIN' DOTS FRANCHISING, INC

Franchisee                                                      Franchisor

Title                                                                 Title

Version 13.7


GENEKAL RELEASE

OF

DIFFIN' DOTS FRANCHISING, INC.

This GENERAL. P3LFA3H is entered into by and between Dippir.' Dots Franchising, Inc., a Kentucky Franchisor wirh ics principal office - 1640 Mccracken Blvd., Suite 100, Paducah, Eenrucky

42 001 (*?ranchisor") and ___________________________ (vFranchisee"

this _____ day of _______________          ^<r'

Now therefore, for good and valuable consideration, the receipt and sufficiency which is hereby acimowledged, Franchisor and Franchisee e^gree as fellows:

Franchisee hereby releases and discharges Franchisor, its respective agenhs, successors, assigns, officers, directors, shareholders , employees, attorneys, guarantors , sureties, and insurers and any persons acting on its or their behalf from any and all injuries, losses, damages, liabilities, defenses, claims, actions, causes of action, suits, debts, promises, demands, or agreements, of whatever nature or kind, known and unknown, whether based in law or in equity, including any claim for punitive or exemplary damages, that Franchisee ever had or now has or that anyone claiming through cr under Franchisee may have or claim to hsve which was raised or asserted or could have been raised or asserted by Franchisee against Franchisor at any time prior to the execution of this release, including but not limited to any and all claims arising out of, by reason of, or in any way releted to the subject matter of the Franchise Agreement dated

_________________ between Franchisee and Franchisor, it being

expressly understood that this Release is entered into as part of the renewal, expiration, termination, or cancellation of said Franchise Agreement.

Wherefore, Franchisee and Franchisor have entered into this General Release on the dene first set for above.

Franchisee:                                             Franchisor:

Dippin' Dots Franchising, Inc.

Name:___________________________ ______

Title:__________________________ Name:.

Title:


DIPPIN' DOTS, INC.

5101 CHARTER OAK DRIVE

PADUCAH, KENTUCKY 42001

Phone (270) 443-8994

Fax (270) 443-8997

Customer Agreement

This Agreement entered into the _____ day of ___

_____, by and between Dippin' Dots, Inc. (an Illinois

Corporation), hereinafter called Seller, and ________

, hereinafter called Customer.

Whereas, Seller is the manufacturer of certain products which Customer wishes to sell at retail.

Now, therefore, it is mutually agreed:

1. Customer's Orders

(a)  Customer warrants with each order that it is a bona fide franchisee, in good standing of Dippin' Dots Franchising, Inc.

(b)  Customer shall submit orders to Seller for acceptance as defined by Seller in the Customer Guidelines {Addendum A).

2.  Customer Prices

(a)  Established Prices. Customer shall pay Seller for each shipment of said products, at the then current prices, together with a shipping and handling charge, which shall include reimbursement to Seller for any tax on said products.

(b)  Right to Change Prices. Upon thirty days notice, Seller shall have the right to change prices, discounts, terms and provisions affecting said products and to issue new applicable price lists.

3.  Payment

(a) Payment for said products purchased by Customer shall be made at the time of delivery unless previous arrangements have been made with the Financial


Department of Dippin' Dots, Inc. Receipt of any check or draft will not constitute payment until Seller has received cash in the full amount thereof. Customer shall pay all collection charges, including Seller's reasonable attorney's fees.

4. Title

(a) Title to said products shall be and remain with Seller until receipt by Seller in cash of the full purchase price thereof. Seller shall have the right to retake possession of and resell said products until title thereto shall have passed to Customer. Customer shall be responsible for the care of all products in Customer's possession. Any damage or loss occurring to the product while it is in Customer's possession shall be the sole responsibility of Customer.

5.  Shipments

(a) Product pricing is F.O.B. Paducah, KY, or other shipping point requested by customer. Seller will endeavor, whenever practicable, to follow Customer's requests with regard to route and method of shipment, but reserves the right to ship said products purchased by Customer hereunder by whatever mode of transportation, it may select (see Addendum A).

6. Warranties

(a) Seller warrants that product is produced in compliance with the Kentucky Milk and Milk Products Act of 1972 and the rules and regulations based thereon. The manufacturing plant permit no. is P21-240-2. There are no other warranties, expressed or implied, made by Seller to Customer on said products furnished hereunder.

7. Conditions of Sale

(a)  Change of Design. Seller may change the design or specifications of any of said products at any time without notice.

(b)  Failure to Fill Orders. Seller shall not be liable for failure or delay in filling orders of Customer, which have been accepted by Seller, whether or not such failure is due to any fault or negligence of Seller.

(c) No Transshipment. DDI sells only directly to approved Customer franchises for resale by them only to


end users at approved locations. Resale or transshipment of our frozen products to an unauthorized location or to another business or person is expressly prohibited, violates the terms and conditions of sale covered by this Agreement and may result in non-shipment and/or termination of the Customer's business relationship with DDI. Sales to schools by a Franchisee, with the intent to resell is excluded from the definition of transshipment. Further, sales to caterers are exempt provided the sale is limited to a one-time bulk re-sale, and there is no direct charge to the ultimate consumer.

Written Agreement

(a) All agreements relating to the subject matter of this agreement are in writing, and signed by both parties, and supersede all oral agreements except as specifically stated herein.

Indemnification by Customer

(a) Customer hereby indemnifies and holds Seller and each of its officers, directors, servants, agents and employees, harmless from and agrees to defend each of them from and against all and any manner of liabilities, suits, claims, damages and expenses arising out of or in connection with this Agreement or the customer's operations.

Trade Secrets {a} Customer acknowledges that during the course of its business relationship with DDI that it may be made aware of trade secret information that is proprietary to DDI. Customer specifically agrees to maintain the confidentiality of any trade secret material obtained during the -course of the business relationship with DDI.

Severability (a) If any provision of this Agreement is deemed to be invalid or unenforceable or is prohibited by the laws of the state or place where it is to be performed, this Agreement shall be considered divisible. The remaining provisions of this Agreement will be valid and binding and of like effect as though such provisions were not included herein.


No waiver (a) The delay of enforcement by either party shall not be deemed a waiver of the rights of that party.

Applicable law

(a)  This Agreement is to be governed by and construed according to the laws of the Commonwealth of Kentucky.

(b) Notwithstanding any provision of state or local law to the contrary, and except for any controversy or claim arising out of the non-payment of amounts owed under this Agreement, the parties hereto agree that any controversy or claim arising out of or relating to this Agreement shall be settled by arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seg., in accordance with the Commercial Arbitration Rules of the American Arbitration Association and following the laws of the Commonwealth of Kentucky. The parties hereto further agree that the arbitrators are not authorized to award any punitive damages in connection with any controversy or claim settled by arbitration hereunder. The decision of the arbitrators shall be final and binding upon the parties and judgment upon the award may be entered in any court having jurisdiction thereof in the Commonwealth of Kentucky. The arbitration shall take place in Kentucky and the expenses of the arbitration shall be paid by the losing party. Customer acknowledges that this clause concerning arbitration, and in particular the place of arbitration, is a vital part of this Agreement; and upon which Seller has relied upon in entering into this A.greement.

In the event of any dispute between the parties to this Agreement, the parties agree that neither party shall seek nor be liable to the other party for punitive damages.

Any claim brought under any provision of the Agreement, whether by Mediation, Arbitration, or litigation, by Franchisee, shall be brought within two (2) years of the claim arising.

With respect to class action suits, both parties agree that they will not participate in any class action against the other party.


14. Notices

(a) All notices shall be sent Certified Mail, to the following addresses:

If to Seller:                         If to Customer:

Curt D. Jones President Dippin ' Dots, inc. 5101 Charter Oak Drive Paducah, KY 42 001

In witness whereof, Seller and Customer have executed this Agreement as of the day and year first written above.

Seller:                                               Customer:

DIPPIN' DOTS, INC.                         Company Name.

bv Curt D. Jones, President Custome:


Addendum A

2005 CUSTOMER GUIDELINES

Effective Date April 11, 2005

TO:                ALL FRANCHISEES

FROM:           DIPPIN'DOTS, INC.

5101 CHARTER OAK DRIVE PADUCAH KENTUCKY 42001

PRODUCT: DIPPIN' DOTS ICE CREAM, YOGURT. SHERBET, AND FLAVORED ICE

DATE:            2005


Ordering Procedures:

a.   For product to be picked up at the plant

Franchisee shall submit orders .to the Customer Call Center a minimum of 3 days in advance of pick-up date. Seller will not be responsible for product once Buyer takes possession. Pick up orders will not be available on Mondays from May 1 thru September 1.

b.   For product to be shipped via the Pallet Reefer® system:

All Franchisees using this system must cal! or fax the Customer Call Center by 11:00 AM (CST), each weekday for placing orders. All orders received by 11:00 AM (CST) each weekday will be processed for shipment. Orders processed one week may not necessarily be delivered that same week, although that will be the goal.

Delivery Procedures/Charges:

Container Sizes and Minimum Shipment Charges

Pallet Reefer

X-Large Breakdown Box

Large Breakdown Box

Small Breakdown Box

(40 case min) 444.00 (60 cases) S565.00

S305.00

S255.00

220.00

60 cases/-l20 PP cases

24 cases/-46 PP cases

18 cases/~36 PP cases

9 cases'-1S PP cases

a.        Delivery charges will be assessed at the iarger of either the per item charge or the minimum shipment charge for the size container.

b.        The shipping rates are S1.85 per gallon for bulk, $4.95 per case for pre-packs,

$10.02 per case for small pre-cups and $7.88 per case for large pre-cups. Due to the minimum shipment charges, orders of less than 40 cases of gallons would incur higher shipping costs on a per case basis. It may be more economical to order the maximum amount per size container when possible to alleviate excessive charges.

c.        An order with both bulk and pre-packs in the same shipment (if they exceed the minimum shipment charge) will pay shipping for both the exact number of bulk cases and the exact number of pre-pack cases at the appropriate rates for each.

d.        Shipments that include product for both franchised events and service provider events will be assessed a per case fee for the franchised product equivalent to the container size minimum fee divided by the number of cases ordered, (i.e. small breakdown box holds 9 cases bulk, 220/9 = $24.44/case)

Shipping C

harges for Combined Shipments

Pallet Reefer

X-Large Breakdown Box

Large Breakdown Box

Small Breakdown Box

/case /each

/case /each

/case /each

/case /each

Bulk

$11.10 S1.85

$12.71 S2.12

$14.17 $2.36

$24.44 $4.07

P re-Pack

$4.95

$6.35

$7,08

$12.22

Pre-Cup Small

S1O.02

$12.71

$14.17

$24.44

Pre-Cup Large

S7.88

S12.71

$14.17

$24.44

2005.DOC              2


e.         Customers who pick up product at the Paducah "Warehouse will not be assessed a shipping fee. Event types that have shipping included in their price wili be issued a credit equal to the shipping price per case for product. Customers who bring their own containers will be charged .30 per pound for dry ice. Otherwise, customers will be charged the following for breakdown boxes which includes 150 lbs of dry ice: 120 per extra-larger $110 per large, S100 per small or $110 per pallet reefer .per week. The shipping charge for the return of the pallet reefers via common carrier will be invoiced to the customer. Pick up orders will not be available on Mondays from May 1 thru September 1.

f.          Customers who pick up product at the Ontario, California Warehouse wili use the Ontario pricing structure below.

g.         Customers who pick up product at the Honolulu Warehouse will use the Honolulu pricing structure below.

Pick up at Warehouse Product Pricing

Unit

Paducah /Gallon

Ontario /Gallon

Honolulu /Gallon

Bulk Product

Ice Cream

6 aal/case

S10.75

$11.75

$15.15

Sherbet

6 qal/case

S10.75

$11.75

15.15

Flavored Ice

6 pa!/case

9.45

10.45

$13.85

Premium/Yopurt

6 pa I/case

$10.75

S11.75

15.15

No Suaar Added

6 pal/case

S11.25

12.25

15.65

Pre-Packaged Product

P re-Pack

50/case

S32.20

35.20

$40.70

Pre-Cuo Small

108/case

S36.92

$42.92

S44.28

Pre-Cup Larpe

65/case

S41.60I 44.60

$52.65

h. If an order is received after the cut off time of 11:00 AM (CST) and current day processing is required, a $75.00 special handling charge for rush orders will be assessed.

i.          Shipments scheduled for a residential delivery will be assessed a S55.00 fee to

cover additional costs if incurred by the common carrier.

j.          Saturday deliveries will be assessed an additional fee of 275.00.

k. A lift gate, if required, is an additional fee of S95.00.

I.          Delivery notification fee is S26.00.

m. Shipping charges for cups, spoons and other dry goods will be included in addition to the product shipping charge as a handling fee except when the product is picked up. Dry goods have an indefinite shelf life if stored in a dry, cool place. DDI cannot always guarantee immediate shipment of dry goods.

2005.DOC                3


Drv Goods Pricing

Item I Unit

Price

3.5 oz. Logo Cup - SD35T Delivery and ShiDpinQ

1000/csse case

$44.00 S4.25

5 oi. Logo Cup - SD5T Deiiverv and Shippinq

1000/case case

$44.00 4.25

B oz. Logo Cup - 3DST Delivery and Shippinq

10OO/case case

47.00 S4.75

12 oz. Logo Cup-SD12T Deiiverv and Shippina

1000/case case

53.00 10.00

12 oz. ParfaitCup- CP-12 Deiiverv and Shippinq

240/case case

S45.00 5.25

.5 oz. Sample Cup - P050 Deiiverv and Shippina

5000'case case

45.50 S4.25

Light Wt. Spoons - #101 59 Deiiverv and Shippinq

1000/case I 7.75 case i 1.75

Wrapped Spoons - #61070 Deiiverv and Shippinq

1000/case case

17.50 1.75

Parfait (float) Spoons - R15CLE Deiiverv and ShipDinq

1000/case case

24.00 1.75

Lids- 3.5 oz.-64-0TP Deiiverv and Shippinq

2500/case case

59.25 5.25

Lids - 5 & 8 oz. - 622TP Deiiverv and Shipping

1000/case case

S34.75 5.25

Lids- 12oz.-626TP Deiiverv' and Shippinq

1000/case case

S34.75 5.25

Drink Cup 12 oz. Solar Freeze -T12TA Deiiverv and ShipDinq

1000/C2se case

57.00 10.00

Drink Cup - 16 oz. PT Logo - 5000 Deiiverv and Shippinq

1000/case case

110.00 8.50

Drink Cup - 20 oz. PT Logo - 6000 Deiiverv and Shipping

1000/case case

70.00 8.50

Drink Cup -16 oz. DP Logo - DP-16T Delivery and Shipping

1000/case case

54.25 10.00

Drink Cup - 22 oz. DP Logo - DP-22T Delivery and Shipping

1200/case case

72.25 12.50

Drink Cup - 32 oz. Plastic Logo - D32WT Delivery and Shipping

300/case case

$44.75 $8.50

Drink Lid - Solar Freeze 12 oz. - 662TS Delivery and Shipping

1000/case case

$40.00 5.00

Drink Lid - 16 oz. PT Cup -T316R Delivery and Shipping

1000/case case

22.50 $5.00

Drink Lid - 20 oz. PT Cup - D9550 Delivery and Shipping

1000/case case

$24.50

5.00

Drink Lid - DP Series 16-22oz. - 668NS Delivery and Shipping

1000/case case

$33.25

$5.00

Drink Lid - DP Series X-Sbt 15-22oz. - 668TS Deiiverv and Shippinq

1000/case case

$34.75 $5.00

Drink Lid - 32 oz. Plastic - 636TR Delivery and Shipping

500/case case

24.66 $6.50

2005.DOC                4


Napkins-4000

6000/case

S65.0Q

■Delivery and ShioDtno

case

12.50

Non Drv Good Item

Smoothie Mix

1/2 gallon

14.75

(Order Min of 6}

Product Pricing. Delivery and Shipping

Unit

/Case

/Each

Bulk Product

Ice Cream

6 gal/case

64.50

10.75

Sherbet

6 aal/'case

S54.50

S 10.75

Flavored ice

6 aal/case

S56.70

9.45

Premium.'Yoaurt

6 gal/case j $64.50

10.75

No Suaar Added

6 gal/case

S67.50

11.25

Delivery and Shipping

/case

$11.10

1.B5

Pre-Packaged Product !

Pre-Packs

Delivery and Shipping

50/case /case

S32.20 S4.95

0.64

Pre-Cups Small Deliver and Shipping

10B/case /case

$36.92 $10.02

$0.34

Pre-Cups Large Delivery and Shiooing

65/case /case

$41.60 $7.83

$0.64

Dot Delicacies

Stan Up Kit

includes 3 of each cake flavor, 80 of each

Dotwich flavor plus ail required supplies

Delivery and Shipping

1 kit /kit

S300.00

$23.50

Dot Cake Kits Delivery and Shipping

3 kits/case /case

$18.00 5.75

$6.00

Dotwich Kits Delivery and Shipping

240 kits/case /case

$125.00 $11.05

S0.52

Dippin' Stix

Delivery and Shipping

24/case /case

$30.00 6.15

$1.25

Sales transactions to Franchisees on products and supplies are shipped F.O.B. Paducah Kentucky. The payment terms for ice cream and dry goods are 2% 10/net 30. All equipment orders in excess of S500 are C.O.D. and will require 50% of the order amount to be prepaid with the balance due upon delivery. A minimum of 14 days should be allowed for delivery of equipment. Longer lead times may be necessary during peak seasons, equipment on back order, or custom-built requirements.

All bulk orders must be received in case increments for each flavor. Refer to page 6 for all standard flavors. For the large variety of other flavors and flavors of the month that are in stock, please contact our Customer Call Center. A special handling fee and/or a minimum order may apply to a request for special flavors not currently in stock.

2005.DOC               5


Product information Bulk:

Product:                                              ice Cream, Yogurt, Sherbet and Flavored Ice

Container;                                          1-gallon bags packed 6 bags per case

Serving Size:                                     3.5, 5, 8, and 12 oz. logo cups

No of Standard Flavors                   12

Standard Ice Cream Flavors          Chocolate Vanilla, Strawberry, Banana Split, Mint

Chocolate, Peanut Butter Chip and Cookies 'n Cream

Standard Non-fat Yogurt Flavors   Strawberry Cheesecake

Standard Flavored Ice                     Rainbow

Standard Sherbet Flavors              Orange, Lemon/Lime, and Raspberry

Product Information Pre-Pack:

Product:                                              Ice Cream, Yogurt, and Flavored Ice

Container:                                          14 cup serving pre-packs in quantities of 50 per case

Serving Size:                                     14 cup serving size

No of Standard Flavors                   8

Standard Ice Cream Flavors          Chocolate, Vanilla, Strawberry, Banana Split, Mint

Chocolate and Cookies 'n Cream

Standard Non-fat Yogurt Flavors   Strawberry Cheesecake

Standard Flavored Ice                    Rainbow

Product Information Pre-Cup Large:

Product:                                              Ice Cream and Yogurt

Container:                                          5/8 cup serving pre-cups packed 65 per case

Serving Size:                                     5/8 cup serving size

No of Standard Flavors                   6

Standard Ice Cream Flavors          Chocolate, Vanilla, Strawberry, Banana Split and Mint

Chocolate Standard Non-fat Yogurt Flavors Strawberry Cheesecake

Product Information Pre-Cup Small:

Product:                                             Ice Cream

Container:                                         5/16 cup serving pre-cups packed 108 per case

Serving Size:                                    5/16 cup serving size

No of Standard Flavors                   3

Standard Ice Cream Flavors          Chocolate, Vanilla and Banana Split

Product Information Dot Cake Kits:

Product:                                             Dot Cake Kit

Container:                                         3 kits per case

Serving Size:                                    1 cake

No of Standard Flavors                  3

Standard Flavors                              Fudge Frenzy, Banana Split and Confetti

Product Information Dotwich Kits:

Product:                                             Dotwich Kit

Container:                                         Supplies to produce 240 per case

Serving Size:                                    1 dotwich

No of Standard Flavors                  3

Standard Flavors                             Vanilla Fudge, Mint Chocolate and Chocolate Chip

              6


Product information Oippirr Stix:

Product:

Diopin: Stix

Container:

24 per case

Servina Size:

1 box

No of Standard Flavors

1

Standard Flavors

Fudge

Equipment Pricing:

DPI must receive notice of approval from DDF on all equipment orders for franchise

locations. Please note menu boards are extra and priced when ordered.

a.    Modular A-3 10'x10!                                                                      $31,500

see section C-5-5 of your operations manual Includes:

Canopy

Solid/surface counter top

Laminate body

Modular construction for transportability

Three compartment sink

Hand sink

Footprint for kiosk, 10' x 10!

Electrical system, 40 Amp 220 Volt

Under cabinet storage

Sneeze guard package included

Sell-contained water system or hard-plumbed

Delivery included

b.  Modular A-3-W 101 x 10'                      Pricing is available by quotation.

Custom built to Mali Specifications

c.   Modular A-4 6' x 10! Standard with Freezer Wrap                         $24,500

Stand behind with canopy Includes:

Solid surface counter top

Laminate body

Modular construction for transportability

Three compartment sink

Hand sink

Footprint for kiosk, 6' x 10' unless specified otherwise

Electrical system, 30 Amp 110 volts unless specified otherwise

Self-contained water system or hard-plumbed

Choice of freezer wrap design

Sneeze guard package included

Delivery included

Modular A-4 6' x 10' Freezer and Sink Wrap                                 $26,000

Stand behind with canopy Includes:

All of the above with additional Sink Wrap allowing for more storage

2005.DOC                7


d.   "Ice Cream of the 'Future" stand, 8: x 10! Glassed-in                       S1&;500

Includes:

Fiberglass molded body

Formica -countertops

Smooth panel surface on floor and interior

Stainless steel hand sink and 3 compartment sink (NSF approved)

Self-contained water system

8r x 10' canopy w/lighting

Electrical system is 240 volts

Window unit air conditioner

Sneeze guard to cover serving freezer included

24" Dippin' Dots logo placard (front mount)

4" vinyl lettering for canopy apron

"Dippirr Dots - Ice Cream of the Future"® (2 sides)

"Ice Cream of the Future"® (2 sides) Delivery included

e.   "Ice Cream of the Future" stand, 8! x 10! Open Air                          $15,500

Includes:

Fiberglass panels

Formica countertops

Smooth panel surface on floor and interior

Stainless steel hand sink and 3 compartment sink (NSF approved)

Self-contained water system

8' x 10' canopy w/lighting

Electrical system is 110 Volts

Sneeze guard to cover serving freezer included

24" Dippin' Dots logo placard (front mount)

4" vinyl lettering for canopy apron

"Dippin' Dots - Ice Cream of the Future"© (2 sides)

"Ice Cream of the Future"® (2 sides) Delivery included

f.  "Ice Cream of the Future" stand, 4! x 6'                                    $8,750

Includes:

Fiberglass front, sides and countertop

Smooth panel surface on floor and interior

Hand sink

3J x 4' base, 4' x 6' canopy w/lighting

Chrome canopy poles

Sneeze guard included

24" Dippin' Dots logo placard (front mount)

4,! Vinyl lettering for canopy apron

"Dippin1 Dots - "!ce Cream of the Future"® (2 sides)

"Ice Cream of the Future" ® (2 sides) Delivery included

g.  Portable/Temporary Cart (59 day use limit)           Call for current pricing.

2002.DOC

8


For the following items, shipping costs will be added.

Item/Description

Unit

Price

Servina Items

E auart Round Containers

I each

6.00

8 auart Round Lid

each

S2.00

Acrvlic Scood

each

S4.00

8 quart Square Containers

each

SS.95

8 auart Sauare Lid

each

3.50

Sneeze guards I

Larae Sneeze Guard for 6' x 10' or 8' x 10' Open Air

each

$400.00

Small Sneeze Guard for 4' x 6'

each

S400.00

Nelson Sneeze Guard NF-45

each

$400.00

Vestfros* Sneeze Guard

each

$400.00

Sneeze Guard EL11

each

$185.00

Sneeze Guard EL21

each

400.00

Sneeze Guard EL21 Double Enclosure

each

$500.00

Sneeze Guard EL31

each

$500.00

Sneeze Guard EK35

each

$500.00

Freezers

EL51LT Ultra Low Storage Freezer - 90 qallon

each

$1,850.00

EL31 Storape Freezer - 60 gallon

each

$1.600.00

EL21 ST Storaqe Freezer - 40 gallon

each

$1,500.00

EL31 SE Servina Freezer -10 flavor liahted

each

$1,850.00

EL21 Servinp Freezer - 8 flavor w/o baskets

each

$1,650.00

EL11 Serving Freezer - 4 flavor w/baskets

each

$1,450.00

Elcold Counter Top Freezer

each

$1,850.00

Other

Vending Machine

each

$9,950.00

Nelson Pushcart Blue

each

$2,750.00

Nelson Pushcart

each

$2,750.00

Panels for Pushcart

set

$255.00

Pushcart Umbrella Blue

each

$195.00

Pushcart Umbrella

each

$195.00

Table Umbrellas

each

$195.00

Used equipment may be available for purchase upon request. Contact the CS Call Center for pricing.

9


Equipment returns will not be accepted without written authorization from SELLER, i.e. DDI. BUYER may obtain authorisation by calling (270) 443-8994 and requesting a Return Authorization Form from the Accounting Department.

■Returned equipment received without written authorization will be refused and returned to the customer freight collect.

Authorized returns are to be shipped to SELLER, freight prepaid by the BUYER, except when returned on a DDI truck.

All returned equipment is subject to a fifteen (15) percent restocking charge, and must still be in the original packaging. Equipment out of original packaging is subject to a thirty (30) percent restocking charge.

Equipment Cleaning Materials:

CHEMCO Cleaning Pricing

Item

! Weight

Price/Kit

Kiosk Start-up Kil

! 23

S53.00

In-Line Store Start-up Kit

1 35#

77.00

CHEMCO Cleaning Pricinq - Reorders

Item

Weiqht

Quantity

Price/Box

Purple Tiger Concentrate

7#

(6) pints

S22.50

Glass Cleaner Concentrate

7#

(6) pints

S20.00

Chemocide Sanitizer (1/4 oz. per aallon)

18#

(2) aallons

20.00

Dirt Buster One

18#

(2) aallons

$16.75

Purple Tioer (Pre-mixed w/sprayers)

7#

(6) pints

$12.50

Glass Cleaner (Pre-mixeci w/sprayers)

7#

(6) pints

$11.00

Chem-Tabs

4#

(6) bottles

29.50

Antibacterial Hand Soap Kit (includes dispenser)

5#

(1) Unit

S13.00

Antibacterial Hand Soap Refills

13.5#

(6) 800ml.

35.00

Instant Foaming Hand Sanitizer

5#

(2) 32oz.

$12.00

Test Strips (25 packs w/40 strips)

1/2#

(25@40) packs

$43.75

Test Strips (1 pack w/40 strips)

(Dpack

$1.75

Signage:

Kiosks will include approved logo placards and trademark signage. Additional signage and menus may be ordered through Dippin' Dots. Any signage or kiosk modification provided by Franchisee must be approved for use by Dippin' Dots Franchising, Inc. Point of Sale Items/Signage are available through the DDI Merchandise Catalog, available upon request.

2005.DOC            1 0


Dippiri' iDots Wearables

Wearabies are processed through Dippin1 Dots, inc. and a separate price list is available in the DD1 Merchandise Catalog. All orders are C.O.D. and payments should 'be directed to Dippin' Dots Inc. For 8 copy of the catalog contact the Customer Call Center.

Discounts and Rebates

a.         If 500 gallons of bulk product is ordered per "'ship to address" a $.25 discount per gallon will be applied.

b.        A 10% discount on single item pallets of dry goods will be applied plus the actual shipping costs as rated by common carrier, (i.e. a pallet will hold 36 cases of 5 oz. cups, 30 cases of 8 oz. cups or 75 cases of lightweight spoons).

Palletized Dry Goods

Item

Number of Cases

Price/Case

5 oz. Logo Cup - SD5T

price does not include shippinq

36

$39.60

6 oz. Logo Cup - SD8T

price does nol include shipping

30

S42.30

Light Weight Spoons - S5BW price does not include shipning

75

S6.97

c. Customers that have multiple event types that use the same product, pay at the

highest type rate. They submit a Rebate Request Form for the product they use at an event with a lower pricing structure.

2005.DOC

11


Date

Paymentech, L.P.

1601 Eim Street, Suite 900

Dallas, Texas 75201

Attn: RexCache Implementation

RE: Dippin Dots Franchising. Inc.

Dear Paymentech:

We request and authorize you to process debit and credit Automated Clearing House ('ACK") transactions to our bank account listed below in accordance with instructions received by you from Dippin Dots Franchising. Inc;. These transactions will be initiated pursuant to an agreement between you and Dippin Dots Franchising, inc. and will only be for the purpose of settling stored value card sales and redemptions by us in connection with DDPs stored value card program (the "Program").

The bank account information is:

___[Name of Bank]

ABA Mo._______________________

Account No..___________________

Account Name:_________________

Reference:_____________________

We agree to indemnify and defend Paymentech for any claims, losses, or actions caused by or as a result of our activities pursuant to the Program. We further agree that Paymentech assumes no liability for acting in accordance with the requirements of the Program or instructions received by us or Dippin Dots Franchising ,inc.

Sincerely,

__Merchant Legal Name

Authorized Signature


STORED "VALUE CARP AGREEMENT

THIS STORED VALUE CARD AGREEMENT (this ' Agreement" i is

dated ai of _________________. 200_______ by and between

PAYMENTECH. LP. and its affiliates ('"Paymentech." "we", "our" or

' us" 1 and Pippin Dots Pranchisinr.. Inc._______________________

("Merchant." "you" or ':your'"i. Paymentech and Merchant agree to the following terms and conditions:

Services, You will tender to us al] your stored value and/or loyalty card ("Card") transactions according 10 our formats and procedures. You will not use the services of any other bank, corporation, entity or persoo for Card processing throughout the term of this Agreement. Paymentech will provide the services sei forth in Exhibi; A ("collectively, the "Services") in accordance with the terms of this Agreement and any user documentation thai it ma}- furnish to Merchani from time to time. The Services provide an electronic stored value payment instrument through the use of plastic cards encoded with 2 magnetic Snipe. The stored value card is used by the Merchant to issue spending credit to their customers. Popular uses for this stored value card include, but are not limited tc. an electronic version of paper gin certificates, merchandise return cards, and prepaid cards. The Merchant's customers are giver a magnetic smpt- card by the Merchant in exchange for money received, merchandise returned or other considerations. The card represents a dollar value thai the Merchant's customer can either use or give to another individual. There it- no security associated with the card itself. The actual record of the balance on the card is maintained on Paymentech"s Stored Value Card database. The card, the design and use of which is proprietary to the Merchant, is designed to be swiped through a POS terminal during each transaction at Merchant's location. When the customer gives the magnetic stripe card to the cashier, the cashier will press the appropriate keys, dependent upon the transaction type, swipe the card inic the terminal and ke\ in the amoum to be applied against the card's balance. This information will be immediately transmitted to Paymentech. and the appropriate approval response will be routed to the Merchant. .Associated with the program is a standard monthly reporting package detailing the Merchant's transactions and the outstanding balances on the individual cards. The Merchani will have access to neip desk support through Paymentech for their stored value card transactions. Cardholders will have access to an interactive voice response system CTVR"). via a toll free number, through which the}' ma}' receive some basic account information. Merchant's card program will be configured in the manner specified by Merchant to Paymeniech during enrollment, which will represent binding program rules relating to Merchants card program. Changes to such program requested by Merchani subsequeni to setup will be made ai Paymentech's sole discretion and in the time and manner which Paymentech shall determine. We will supply a detailed statement reflecting your Program activity. We will not be responsible for an}1 error that you do not bring to our attention within ninety days from date of such statement. Fees. You agree to pay us the fees sei forth in Exhibit A. all of which amounts are due and payable at the time the corresponding Services are rendered to you. .Ml fees and prices charged hereunder are exclusive of taxes. You will be responsible for any federal, state, or local sales, use. property, or other taxes which may be imposed as a result of the transactions contemplated by this Agreement (except taxes imposed upon our net income). You hereby authorize Paymentech 10 initiate electronic debit entries ai an}' time to the bank account designated by you from time to time for the payment of such fees. We will supply a statement reflecting the activity for your accounts). We will noi be responsible for any error that you do not bring to our attention within ninety days from the date of such statement.

Cards. You are Dot obligated to purchase Cards from us. If you elect to do so. we will arrange for the Card production and may. at our option, irjvoice you therefore, in lieu of electronically debiting your account. Any such invoice will be payable upon receipt. All production and delivery- timeframes and costs provided by us are estimates only and we do not guarantee any specific date of deliver}1 or price for Cards produced by third parties. You are responsible for all production costs and deliver;"

DD Stored Value Card Agreement Form 110105 (4)

charges for Cards. The form and content of all Cards will be subject to our approval.

Compliance. To the extent permitted by applicable law. you ma} provide for an expiration date or carrying charge for each Card. You are solely responsible for complying with all applicable laws relating to your Cards and you agree to indemnify and hold us harmless from any loss. damage or claim relating to or arising out of any failure to comply with applicable laws in connection with your Card program. Warranties. THE SERVICES .ARE PROVIDED WITHOUT WARRANTIES OF ANY KIND. EITHER EXPRESS OR IMPUED INCLUDING BIT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY .AND FITNESS FOR A PARTICULAR PURPOSE.          NEITHER THIS AGREEMENT NOR ANY

DOCUMENTATION FURNISHED UNDER FT IS INTENDED TO EXPRESS OR IMPLY .ANY WARRANTY BY US THAT THE SERVICES WILL FUNCTION WITHOUT INTERRUPTION OR ERRORS. .ANY SECURITY MECHANISMS INCORPORATED IN THE SERVICES HAVE INHERENT LIMITATIONS. .AND YOU . MUST INDEPENDENTLY DETERMINE THAT THE SUCH MECHANISMS ADEQUATELY MEET ITS SECURITY -AND RELIABILITY REQUIREMENTS. BY USING THE SERVICES. YOU REPRESENT THAT YOU HAVE SO DETERMINED. Limitation of Liability. We will, at our own expense, correct any data in which 1 and to the extent that.) errors have been caused by us, or by malfunctions of our software or machines. However, the expense of correcting Such dam will be our only responsibility in connection with such errors or in connection with am other performance or nonperformance by us under this Agreement. In the event thai an}- data error is noi correctible by us. or any data is permanently lost or destroyed by us. and as a result of such error, loss or destruction you incur any direci iosses. liabilities, costs, expenses (including, without limitation. reasonable attorneys" fees), claims, or damages i collectively. "Damages"), we will indemnify you and hold you harmless for the amount of such Damages up to a maximum amount equal to the total balance of all outstanding Cards at the time of such error, loss or destruction. Subject only to the foregoing, under no circumstances will Our financial responsibility for our failure of performance under this Agreement exceed the total fees paid to it under this Agreement for the six months prior to the lime the liability arose. IN NO EVENT WILL EITHER PARTY BE LIABLE HEREUNDER FOR SPECIAL. INCIDENTAL. CONSEQUENTIAL. OR PUNITIVE DAMAGES. Indemnity. You hereby releases and agrees to indemnify and hold us harmless from and againsi any loss, claim, demand, damages, liability, cost, expense, action or cause of action whatsoever to which we may become subject, arising oui of or relating to your negligence or intentional misconduct or your breach of this Agreement. In the event of an}' loss, theft, disappearance of or damage to data thai is transmitted electronically in connection with the Program, you agree 10 indemnify and hold harmless Paymentech with respect to such. You are solely responsible for monitoring the legal developments applicable to the operation of your Card program and ensuring thai your Card program complies fully with such requirements as in effect from time to time. Merchani acknowledges thai Paymentech cannot reasonably be expected to monitor and interpret the laws applicable to its diverse customer base, and has no responsibility to monitor or interpret laws applicable to Merchant's business.

Fraud. You hereby agree (i) that you are responsible for ensuring that all Cards require activation at the point of sale: (ii) to provide notification in writing to Paymentech of any fraud losses by type by fifteen days following the end of each calendar quarter: (iii) that you will be solely responsible for any and all value adding and fraud losses and expenses relating to or arising from your Card program: (iv) to discourage transportation of groups of sequentially numbered Cards: and (v) to deactivate or otherwise remove all value from Cards thai have been compromised. You shall be responsible for an}' fraudulent transactions involving your Cards, including, without limitation, the unauthorized

Rev. 7/nt


activation of Cards, reloading of existing Cards (whether pursuant .to.2 manual telephone order or otherwise) with additional value, or the unauthorized replication of Card* or Card data for fraudulent transactions, pavmentech provides a number of tools and options to helri Merchant reduce Merchant's risk of exposure for fraudulent transactions. We uree you to make use of any and all of such tools as we may offer iu order to help reduce the risk of such transactions. In particular, we recommend thai you utilize only those vendors that have been certified by Pavmentech as having appropriate security measures in place to reduce the risk of counterfeit Cards and the loss of sensitive Card information mat might result in unauthorized transactions, and prompt]} and frequently reconcile the transactioc reports we provide to you against your own internal transaction records, and to report an}' unauthorized transactions 10 your account representative at Pavmentech. Because manual Card transactions t'i.e. those involving the activation or reloading of cards over the telephone in cases where your terminals may be unavailable] pose a higher risk of potential fraud, we urge yoti to pay special attention to these Transactions and reconcile them on an even more frequent basis. In the event that you do no: reconcile your transaction reports and prompt!} repon any suspicious activity to us. Paymentecb may not be able to assist you in canceling fraudulently activated or reloaded cards, or in otherwise identifying the source of any fraud.

Term and Termination. Tnis Agreement takes effect on the date it is executed bv us and has an initial term expiring on the later of three years from thai date, or the date your payment card processing agreement with us expires or is terminated. Unless otherwise terminated by either party as provided in this Agreement, the Agreemem will automatical)}' extend for successive one-year terms. Either part} ma}' give notice of nonrenewal of this Agreement in writing no less than 30 days prior to any expiration date. W;e ma;1 terminate this Agreement at any time upon notice to you as a result of any of the following events: (i) the failure by you to pa\ when due any amount due hereunder, t'iij any other noncompliance bv vou with this Agreement that you fail to cure within 1? davs after we give you written notice thereof, or t'iii) any voluntary or involuntary bankruptcy or insolvency proceeding involving yoi! or an}' of your affiliated entities. Upon termination or expiration of this Agreement

for an}' reason, we will make electronic reports available to the you that contain all active Card account balances. It is you- soie responsibility to accomplish the conversioi.- of your Card processing business at termination or expiration.

Miscellaneous. This Agreement uncluding all exhibits attached hereto) embodies the parties" final, complete and exclusive agreement with respect to the subject matter. This Agreement supersedes all prior and contemporaneous agreements, understandings and representations. written or oral. Anv waiver, amendment, or modification of this Agreement or any of its terms must be in writing and signed by the part}' against whom such waive:', amendment or modification is sought to be enforced. We ma\. in our sole discretion, retain third parties to perform various functions in connection with the Services on our behalf: provided, that we will continue to be liable for the performance of our obligations hereunder. This Agreement will be governed by and construed in accordance with the laws of the State of Texas without reference to conflict of law provisions. Any action, proceeding, litigation or mediation relating to or arising from this Agreement must be brought by you against us exclusively hi Dallas Count}'. Dallas. Texas, and by us against vou in the counrv and state of your principal office, as indicated below. " THE PARTES HEREBY KNOWINGLY. VOLUNTARILY. AND INTENTIONALLY WAIVE ANY RIGHTS EITHER OF THEM MAY' HAVE TO A TRIAL BY JURY IN RESPECT OF ANY' LITIGATION BASED ON. ARISING OUT OF. OR IN' CONNECTION WITH THIS AGREEMENT. Except as otherwise provided in this Agreement, all notices must be given in writing and either hand delivered, faxed, or mailed first class, postage prepaid (and deemed tc be delivered when mailed) to the addresses set forth below or to such other address as either party may from time to time specify to the other parry in writing. Neither pan}' will be liable for delays in processing or other nonperformance caused by such events as fires, telecommunications or utility or power failures, equipment failures, labor strife, riots, war. nonperformance of our vendors or suppliers, acts of God. or other causes over which the respective part} has no reasonable control. You cannot assign or iransfei your rights or delegate your responsibilities under this Agreement without our prior written consent.

IN WITNESS WHEREOF. Pavmentech and Merchant have caused this Agreement to be executed by their duly authorized officers as of the date first written above.

PAYMENTECH: PAYMENTECH. L.P.

By: PT1 General Partner. LLC. its general partner

Print Name:

Title:_____

Date:_____

Address: 1601 Elm Street. Str Floor

Dallas. Texas 75201

Attn:______________________

MERCHANT:

B>"______

Print Name

Title:____

Address:

Attn:

DD Stored Value Card Agreement Form 110105 (4)

Rev. 7/05


EXHIBIT A

Few

Siorec Value Authorization Fee* Biocl; Activation Fee Stored Value Setup Fee Stored Value Only Fee Paper Report Delivery Monthly Service Fee

0 psr authorization

0 per activated card (if applicable!

0 per location

0 per location per month (if applicable)

0 per location per month (if applicable}

0 per location per month (if applicable)

ACH Services Fee (Inierstore or Central Account i 0 per location per month (if applicable)

For Paymentech Internal Use Fee Code OBB

Fee Code OB A

Fee Code M1F

Fee Code 31L

Fee Code 31L

Fee Code 31L

Fee Code 31L

Cards. Packaging and Poim-of-purchase marketing materials are available and priced or a psr run basis, based on curreni rates. Tnese rates are captured on the FiexCache Materials Order Form.

"A Stored Value Authorization Fee will he charged on each transaction generated ax the point of sale.

DD Stored Value Care! Agreement Form 110105 (4)

Rev.


The original documents were scanned as an image. The original file can be downloaded at the link above.