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Franchise Disclosure Document (2010) PHX 329,224,856v4

FRANCHISE DISCLOSURE DOCUMENT

Bikram, Inc. A Delaware corporation

11500 W. Olympic Blvd. Suite 150

Los Angeles, CA 90064

Phone: (310) 854-5800

Fax: (310) 854-6200

E-Mail: [email protected]

Website: www.bikramyoga.com

Bikram, Inc. offers a franchise for the operation of a yoga studio featuring a unique form of hatha yoga instruction that is taught in a room with specific temperature and humidity conditions.

The total investment necessary to begin operation of a Bikram Yoga franchise ranges from $235,350 to $527,700 for new franchisees or $2,300 to $33,700 for converting licensees who operated under Affiliation Arrangements (defined in Item 1). This includes an amount ranging from $22,000 to $27,000 that must be paid to us and our affiliate for new franchisees or $0 to $11,500 for converting licensees who operated under Affiliation Arrangements.

This Disclosure Document summarizes certain provisions of your franchise agreement and other information in plain English. Read this Disclosure Document and all accompanying agreements carefully. You must receive this Disclosure Document at least 14 calendar days before you sign a binding agreement with, or make any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no government agency has verified the information contained in

this document.

The terms of your contract will govern your franchise relationship. Don’t rely on the Disclosure Document alone to understand your contract. Read all of your contract carefully. Show your contract and this Disclosure Document to an advisor, like a lawyer or accountant.

Buying a franchise is a complex investment. The information in this Disclosure Document can help you make up your mind. More information on franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use this Disclosure Document, is available from the Federal Trade Commission (the “FTC”). You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, DC 20580. You can also visit the FTC’s home page at www.ftc.gov for additional information. Call your state agency or visit your public library for other sources of information on franchising.

There may also be laws on franchising in your state. Ask your state agencies about them.

Issuance Date: March 18, 2010; Amended March 24, 2010


State Cover Page

Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.

Call the state franchise administrator listed in EXHIBIT "A" for information about the franchisor, or about franchising in your state.

MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.

Please consider the following RISK FACTORS before you buy this franchise:

1. THERE IS NO EXCLUSIVE TERRITORY ASSOCIATED WITH THIS FRANCHISE.

THEREFORE, WE AND OTHER BIKRAM YOGA FRANCHISEES MAY DIRECTLY

COMPETE WITH YOU.

2. THE FRANCHISE AGREEMENT REQUIRES THAT ALL DISAGREEMENTS BE

SETTLED BY MEDIATION OR LITIGATION IN CALIFORNIA. OUT-OF-STATE

MEDIATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS

FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO

MEDIATE OR LITIGATE WITH US IN CALIFORNIA THAN IN YOUR HOME

STATE.

3. THE FRANCHISE AGREEMENT STATES THAT CALIFORNIA LAW GOVERNS THE

AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS

AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

4. THE FRANCHISOR HAS ONLY JUST BEGUN TO OFFER FRANCHISES.

THEREFORE, THERE IS ONLY A BRIEF OPERATING HISTORY TO ASSIST YOU

IN JUDGING WHETHER TO MAKE THIS INVESTMENT.

5. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Effective Date: March 18, 2010; Amended March 24, 2010

Franchise Disclosure Document (2010)

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TABLE OF CONTENTS

ITEM 1 FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES........ 1 ITEM 2 BUSINESS EXPERIENCE ............................................................................................ 3 ITEM 3 LITIGATION.................................................................................................................. 4 ITEM 4 BANKRUPTCY ............................................................................................................. 4 ITEM 5 INITIAL FEES ............................................................................................................... 4 ITEM 6 OTHER FEES ............................................................................................................... 5 ITEM 7 ESTIMATED INITIAL INVESTMENT........................................................................ 7 ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES....................... 12 ITEM 9 FRANCHISEE’S OBLIGATIONS .............................................................................. 14 ITEM 10 FINANCING ................................................................................................................ 15 ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND

TRAINING ................................................................................................................... 15 ITEM 12 TERRITORY................................................................................................................ 21 ITEM 13 TRADEMARKS........................................................................................................... 22 ITEM 14 PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION...................... 23 ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

FRANCHISE BUSINESS ............................................................................................ 25 ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ............................... 25 ITEM 17 RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION ........ 26 ITEM 18 PUBLIC FIGURES....................................................................................................... 28 ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ............................................ 28 ITEM 20 OUTLETS AND FRANCHISEE INFORMATION .................................................... 29 ITEM 21 FINANCIAL STATEMENTS...................................................................................... 31 ITEM 22 CONTRACTS............................................................................................................... 31 ITEM 23 RECEIPT ...................................................................................................................... 32 EXHIBIT "A" STATE AGENCIES AND ADMINISTRATORS EXHIBIT "B" FRANCHISORS AGENT FOR SERVICE OF PROCESS EXHIBIT "C" FRANCHISE AGREEMENT (STANDARD FORM) EXHIBIT "D" FRANCHISE AGREEMENT (CONVERTING FRANCHISEES) EXHIBIT "E" GENERAL RELEASE EXHIBIT "F" TABLE OF CONTENTS OF OPERATING MANUALS EXHIBIT "G" STATE ADDENDUM EXHIBIT "H" LIST OF FRANCHISEES EXHIBIT "I" FINANCIAL STATEMENTS FOR BIKRAM, INC. EXHIBIT "J" FRANCHISEE DISCLOSURE QUESTIONNAIRE EXHIBIT "K" RECEIPTS


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ITEM 1 FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES

To simplify the language in this Disclosure Document, we use “we,” “us” and “the Company” to mean Bikram, Inc. - the franchisor. “You” means the person who buys a Bikram Yoga franchise - the franchisee, and includes your partners if you are a partnership, your shareholders if you are a corporation, and your members if you are a limited liability company. All references to “owners” include both active and passive owners (i.e., silent partners) of the franchise or the entity that owns the franchise.

Corporate Information

Bikram, Inc. is a Delaware corporation that was organized on May 7, 2008. Our principal business address is 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064 and our telephone number is (310) 854-5800. Our agent for service of process is disclosed in EXHIBIT "B" to this Disclosure Document. We do not do business under any names other than “Bikram, Inc.,” “Bikram’s Yoga College of India” and “Bikram Yoga”.

Business History

We began offering franchises in March of 2009. We are not engaged in any business other than the offering of Bikram Yoga franchises as described in this Disclosure Document. We do not offer franchises in any other line of business. We have not operated a business similar to the Bikram Yoga studio being offered under this franchise. However, our principal member has operated a business similar to the business being offered under this franchise since 1973 as further discussed below.

Parents, Affiliates and Predecessors

We do not have a parent company. We are owned and controlled by our principal members, Bikram Choudhury and his wife Rajashree Choudhury. Since 1973, Mr. Choudhury has operated yoga schools under the name “Bikram’s Yoga College of India” that are similar to the franchise offered under this Disclosure Document. Mr. Choudhury operated these schools as a sole proprietorship, which is our predecessor. Our predecessor’s principal business address is the same as ours. Our predecessor has never offered franchises in this or any other line of business. However, our predecessor has entered into approximately 500 licensed affiliation arrangements throughout the world (“Affiliation Arrangements”). Under an Affiliation Arrangement, the affiliated company is granted the right to operate a Bikram Yoga studio. However, the affiliated company does not pay any initial or ongoing fee and our predecessor does not provide many of the support services that we offer to our franchisees. Our predecessor ceased offering Affiliation Arrangements in October of 2008.

Our only affiliate is Bikram’s Yoga College of India, L.P. (“BYCI”), which is a California limited partnership. BYCI has operated 2 company-owned Bikram Yoga studios in California since 1976. BYCI provides the instructor certification and recertification training programs that all Bikram Yoga instructors must successfully complete as a condition to teaching Bikram Yoga. All owners of a Bikram Yoga franchise must also complete the instructor certification taught by BYCI. BYCI also sells certain inventory items to our franchisees, as further discussed in Item 8 of this Disclosure Document. BYCI has never offered franchises in this or any other line of business. BYCI’s principal business address is the same as ours.

Description of Franchised Business

Under your Bikram Yoga franchise, you will establish and operate a yoga studio featuring a unique form of hatha yoga instruction (referred to in this Disclosure Document as your “Business” or your “Studio”). The yoga is taught in a precise sequence using a prescribed dialogue. All Bikram Yoga


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classes are taught in a room that must meet the temperature and humidity conditions that we prescribe. You will also sell various items such as branded apparel, water, yoga mats, towels, books and CDs.

We will grant you a license to use certain trademarks, service marks, logos and trade names, including the service marks “Bikram Yoga,” “Bikram’s Yoga College of India” and the logo shown on the cover (collectively, the “Marks”) in the operation of your Studio. You will be required to sign a franchise agreement (the “Franchise Agreement”) and operate your Studio in accordance with the terms of the Franchise Agreement. The form of Franchise Agreement is attached to this Disclosure Document as EXHIBIT "C".

We have developed a distinct system (the “System”) for the operation of a yoga studio. Distinctive characteristics of the System include logo, trade secrets, copyrights, style and trade dress, confidential operations manuals, Yoga techniques and teaching methods, specific room conditions and operating system. The operational aspects of a Bikram Yoga franchise are contained within our confidential Operating Manual (the “Manual”). You will operate your Bikram Yoga franchise as an independent business using the Marks, the System, the Bikram Yoga name, as well as the support, guidance and other methods and materials provided or developed by us.

Conversion from Affiliation Arrangement to Franchise Arrangement

If you currently operate a licensed studio under an Affiliation Arrangement, you will have the right to convert that studio to the franchise system. If you convert from an Affiliation Arrangement to the franchise system within 60 days of being offered the franchise, you will sign the form of Franchise Agreement that is attached as EXHIBIT "D" (the “Conversion Franchise Agreement”). The Conversion Franchise Agreement includes the following favorable terms:

FEE NEW FRANCHISEES AND LICENSEES

WHO CONVERT AFTER 60 DAYS LICENSEES WHO CONVERT WITHIN 60

DAYS

Initial Franchise Fee

$10,000 Waived for initial term.

Royalty Fee Greater of (i) 5% of gross revenues or (ii) $1,000 per month

Waived during first 12 months. 1% of Gross Revenues for remainder of initial term.

Advertising Fund Fee (if fund established)

Not to exceed greater of (i) 2% of Gross Revenue or (ii) $200 per month

Waived for initial term.

Technology Fee

$100 per month Waived for initial term.

In addition, a licensee who signs the Conversion Franchise Agreement will not be required to: (i) upgrade or remodel their studio before they renew or transfer their franchise; (ii) spend any minimum amount on local advertising (unless the studio is not operating at full capacity); or (iii) utilize any software or website that we specify. However, a licensee who signs a Conversion Franchise Agreement may be required to make additional investments as part of the franchise program. See Item 7 of this Disclosure Document for additional information. If you currently operate a licensed studio under an Affiliation Arrangement and you convert to the franchise system more than 60 days after being offered the franchise, you must sign the standard form of Franchise Agreement and you will be subject to the same terms and conditions offered to new franchisees.


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If you renew or transfer your Franchise Agreement, you (or the transferee) must sign our then current form of Franchise Agreement, which may not include these favorable terms. The Conversion Franchise Agreement may only be used for studios that are operating under Affiliation Arrangements. Therefore, any new studio that you open will not qualify for the Conversion Franchise Agreement, even if you operate another studio under an Affiliation Arrangement that does qualify for the Conversion Franchise Agreement.

Market and Competition

Although competitive, we believe that the market for yoga classes is still developing. The target market for Bikram Yoga students includes females between the ages of 25 and 40 who are in the upper income brackets. The demand for Bikram Yoga classes can fluctuate depending on the season, with a decrease in demand during warmer summer months due to the warmth of the rooms in which Bikram Yoga classes are taught.

The market for yoga classes is competitive. You will primarily compete with other independent or franchised yoga schools (including other Bikram Yoga franchisees), as well as regional and national fitness center outlets offering yoga instruction or other alternative fitness programs. A Bikram Yoga franchisee may also compete with businesses that offer programs other than yoga, such as pilates, dance, athletics, self defense, weightlifting, conditioning, exercise and other fitness, health and lifestyle programs.

Laws and Regulations

You must comply with all federal and state licensing and other regulatory requirements relating to the operation of your Studio. In certain states, health clubs are subject to special laws and regulations and some of these laws may be applicable to a Bikram Yoga studio. Among other things, these laws and regulations may impose requirements relating to the consumer contracts that your students will sign. The federal Truth in Lending Act may also require you to provide certain disclosures in these consumer contracts to the extent that you offer financing. There may be other local, state and/or federal laws or regulations pertaining to your Studio with which you must comply.

ITEM 2 BUSINESS EXPERIENCE

Bikram Choudhury - President

Bikram Choudhury has served as our President since we began offering franchises in February of 2009. From 1972 through the present, Mr. Choudhury has also served as President of our affiliate, BYCI, in Los Angeles, California.

Rajashree Choudhury - Vice President

Rajashree Choudhury has served as our Vice President since we began offering franchises in February of 2009. From 1982 through the present, Ms. Choudhury has also served as Vice President of our affiliate, BYCI, in Los Angeles, California.


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Allison Butash - Director of Franchise Operations

Allison Butash has served as our Director of Franchise Operations since July of 2009. From December of 2008 through June of 2009, Ms. Butash was independently researching the operational business practices of real estate development in the Bahamas. From February of 2006 through November of 2008, Ms. Butash was employed by Novus Franchising, Inc. as a Franchising Paralegal in Savage, Minnesota. From July of 2004 through January of 2006, Ms. Butash was employed by The Musicland Group in Minnetonka, Minnesota as a Real Estate Paralegal.

ITEM 3 LITIGATION

No litigation is required to be disclosed in this Disclosure Document.

ITEM 4 BANKRUPTCY

No bankruptcies are required to be disclosed in this Disclosure Document.

ITEM 5 INITIAL FEES

You will pay a $10,000 franchise fee for your franchise (the “Initial Franchise Fee”). The entire Initial Franchise Fee is payable in full at the time you sign the Franchise Agreement. Portions of the Initial Franchise Fee will be used by us to cover our expenses incurred for marketing and advertising, as well as the costs associated with the initial training program and providing our pre-opening support. The Initial Franchise Fee is not refundable under any circumstances. All Initial Franchise Fees are uniform and fully earned, except we intend to waive the Initial Franchise Fee for anyone who operates a licensed Bikram Yoga studio under an Affiliation Arrangement and who signs a Conversion Franchise Agreement within 60 days after being offered the franchise.

We do not offer franchises to anyone who has not been a certified Bikram Yoga instructor for at least a 6 month period unless we receive approval of the candidate from BYCI. All owners of the franchise must have successfully completed the certification program. Each owner must pay BYCI a $10,500 fee to complete the 9 week certification training. This fee includes the cost of the program and includes hotel accommodations. You are responsible for all food and travel costs. This fee is non-refundable unless you cancel your enrollment in the training program at least 30 days before it begins, in which case you will receive a refund of all but $100. This fee is uniformly imposed on all trainees. If you operate a licensed Bikram Yoga studio under an Affiliation Arrangement and you convert to the franchise system, we do not anticipate that you will need to complete any additional certification training or incur any additional fee for certification (although you will need to complete recertification training as further described in Item 6 of this Disclosure Document).

Before you open your Studio, you must purchase certain inventory items from BYCI, including books, CDs and marketing materials. We estimate that the cost of these purchases will range from $500 to $1,500 depending on the quantity of these items that you order. Payments that you make for inventory items are non-refundable. The amount BYCI charges franchisees for inventory items is uniform. If you operate a licensed Bikram Yoga studio under an Affiliation Arrangement and you already have these inventory items, you will not incur this additional cost.

Before you open your Studio, we will provide approximately 2 days of on-site training at your Studio. We do not charge you a separate fee to provide this service, but you must reimburse us for expenses that we incur (including travel, meals and lodging). We estimate that the amount of this reimbursement obligation will range from $1,000 to $5,000, and will vary significantly depending on the


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location of your Studio. You must reimburse us for these costs within 10 days after we invoice you for these amounts. These cost reimbursements are nonrefundable and are uniformly imposed on all franchisees. However, we do not intend to provide this service (or charge for reimbursement of our costs) for anyone who operates a licensed Bikram Yoga studio under an Affiliation Arrangement and who chooses to convert to the franchise system.

ITEM 6 OTHER FEES

TYPE OF FEE AMOUNT DUE DATE REMARKS

Royalty Fee 1, 2 Greater of (i) 5% of monthly Gross Revenues or (ii) $1,000 per month

Payable on or before 5th day of month for prior month’s operations

“Gross Revenues” means all gross sums collected or billed by you for all services provided and goods sold from your Studio, but excluding sales and use taxes. You must provide us with monthly reports of your Gross Revenue.

Instructor Certification and Re-certification Fee 1

Up to $10,500 per instructor for certification and up to $275 for re-certification

Payable before training occurs

See Note 3

Advertising Fund Fee 1, 2

Upon 60 days’ notice from us, up to greater of (i) 2% of Gross Revenue or (ii) $200 per month

Payable on the 5th day of month for prior month’s operations

See Note 4

Purchase of Inventory and Marketing Materials 1

We will give you our current price list before you sign the Franchise Agreement

At time of order We may sell you marketing materials and products for resale at your Studio. See Items 5, 7 and 8 for additional information.

Technology Fee 1, 2

Varies (currently $100 per month)

10 days after billing See Note 5

Refresher Training Fee 1

Up to $1,000 per trainee per day

Payable before training occurs

Attendance at refresher training is optional. See Note 6 for additional information.

On-site Training Fee 1

Up to $1,000 per day plus expenses

Payable on 5th day of month for assistance provided during prior month

Upon your request, we may (but need not) provide on-site training at a mutually convenient time. If we agree to do so, you must pay us the On-Site Training Fee plus our travel, lodging and other expenses that we incur in providing the requested training to you.

Relocation Fee 1 $500 10 days after billing You must pay us this fee if we allow you to relocate your Studio. See Item 12 for additional information.

Successor Fee 1 $5,000 At time you sign Successor Agreement

None

Transfer Fee 1 $3,000 Prior to consummation of transfer

Payable when you transfer or sell your franchise. No charge if franchise transferred to an entity that you control.


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TYPE OF FEE AMOUNT DUE DATE REMARKS

Audit Fee 1 Actual cost of audit; you must also pay travel and lodging expenses for the audit team

Upon completion of audit

Payable only if we find, after an audit, that you have understated any amount due us by at least 2% for any monthly period, or the examination or audit is made necessary by your failure to furnish required information or reports to us in a timely manner.

Late Fee 1 Lesser of 10% of amount past due or highest rate allowed by applicable law

10 days after billing Due on all overdue amounts under the Franchise Agreement; if no due date is stated, interest begins to accrue 10 days after billing. If there are sufficient funds in your designated checking account to cover all amounts due us as such amounts become due and you provide us with reports of Gross Revenue on a timely basis, you will not be charged a late fee.

Insufficient Funds Fee 1

$25 per occurrence Immediately upon demand

Payable if we debit your designated checking account and there are insufficient funds or if any check you give us is returned due to insufficient funds in your account.

Indemnification 1 Will vary with circumstances

As incurred You must reimburse us if we are sued for claims relating to the operation of your Studio or for damages that we incur due to your breach of the Franchise Agreement.

New Product or Supplier Testing 1

Varies (our out of pocket expenses we incur in reviewing supplier or product)

As incurred This covers the costs of testing new products or inspecting new suppliers you propose.

NOTES:

(1) All fees are imposed by and are payable to us. All fees are non-refundable. Except as otherwise stated in Note 2 below, all fees are uniformly imposed on franchisees. During the prior fiscal year, we charged a Refresher Training Fee of $10,000 per trainee and an On-site Training Fee of $10,000 per day. These fees have been reduced to those referenced in the table above. You will be required to sign an ACH Authorization Form (attached to the Franchise Agreement as ATTACHMENT "E"), permitting us to electronically debit your designated bank account for payment of all fees payable to us (other than the Initial Franchise Fee) as well as any amounts that you owe to us or our affiliates for the purchase of goods or services. You must deposit all Gross Revenues into the bank account and ensure that there are sufficient funds available for withdrawal before each due date. You must pay us all taxes that are imposed upon us or that we are required to collect and pay by reason of the furnishing of products, intangible property (including trademarks) or services to you.

(2) If you operate a licensed Bikram Yoga studio under an Affiliation Arrangement and you choose to convert to the franchise system within 60 days of being offered the franchise by signing the Conversion Franchise Agreement, then we will: (i) waive the Advertising Fund Fee and Technology Fee for the initial term of your Franchise Agreement; and (ii) waive the Royalty Fee for the first 12 month period after you sign the Franchise Agreement and charge you a reduced monthly Royalty Fee equal to 1% of Gross Revenues for the remainder of the term.


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(3) All individuals who teach Bikram Yoga classes must first complete a teacher certification program provided by our affiliate, BYCI. These instructors may be employees of yours, or you may engage these individuals to teach Bikram Yoga classes at your Studio on an independent contractor basis (subject to applicable laws). All owners of the franchise must also complete the teacher certification program. You (or the instructor trainee) are responsible for all costs incurred while attending a certification program. The certification lasts for a period of 3 years. Between the 2nd and 3rd year of their certification period, all franchise owners and class instructors must attend a re-certification program and pay the associated fee. The fee listed above includes the cost of the program as well as hotel accommodations. You are responsible for all food and travel costs.

(4) We may, but need not, establish and maintain one or more advertising funds (the “Advertising Fund”) for marketing, advertising and promotional materials, public and consumer relations, publicity, and such other programs as we may deem necessary or appropriate in our sole discretion. You will have no voting rights pertaining to the administration of the Advertising Fund, the creation and placement of the marketing materials or the amount of the Advertising Fund Fee. See Item 11 of this Disclosure Document for additional information regarding the Advertising Fund.

(5) We reserve the right to enter into a master license agreement with any software or technology supplier and sublicense the software or technology to you, in which case we may charge you for all amounts that we must pay to the licensor based on your use of the software or technology. We also reserve the right to create proprietary software that must be used by Bikram Yoga franchisees, in which case you must enter into a license agreement with us and pay us reasonable initial and ongoing licensing, support and maintenance fees. Before you open, we give you a domain name and website for your Studio and we charge you a monthly license fee of up to $100 per month. If you sign a Conversion Franchise Agreement, you will not be required to use any software that we specify. See Item 11 of this Disclosure Document for additional information regarding your computer requirements.

(6) We will provide our initial training program for your owners at no additional charge. From time to time, we may offer refresher or advanced franchise training courses. These courses will be optional. If you choose to attend, you must pay us the Refresher Training Fee and you will be responsible for all expenses and costs incurred by you or your employees in attending the training, including wages, travel and living expenses. See Item 11 of this Disclosure Document for additional information regarding the training program.

ITEM 7 ESTIMATED INITIAL INVESTMENT

A. The following chart includes the estimated initial investment for a new franchisee who is not

converting a licensed studio operated under an Affiliation Arrangement:

YOUR ESTIMATED INITIAL INVESTMENT

(NEW STUDIO; NOT CONVERSION)

TYPE OF EXPENDITURE AMOUNT 1

METHOD OF

PAYMENT WHEN DUE

TO WHOM

PAYMENT IS TO

BE MADE

Initial Franchise Fee $10,000 Lump Sum Upon signing of Franchise Agreement

Us


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(NEW STUDIO; NOT CONVERSION)


METHOD OF

PAYMENT WHEN DUE

TO WHOM

PAYMENT IS TO

BE MADE

Food, Lodging & Travel for Initial Training Program (2 people)

$300 to $5,000 As incurred During training Hotels, restaurants and airlines

Reimbursement of Costs for On-Site Portion of Initial Training Program 2

$1,000 to $5,000 As invoiced 10 days after billing

Us

CPR Training 3 $0 to $200 As incurred Prior to opening Suppliers

Instructor Certification Training Plus Food & Travel (1 person) 4

$0 to $17,000 Lump Sum Prior to opening BYCI, restaurants and airlines

Initial Rent and Security Deposit5

$7,000 to $49,000 Lump Sum Prior to opening Landlord

Build Out, Improvements, Furniture & Fixtures 6

$150,000 to $300,000

As incurred Prior to opening Architects, contractors, suppliers

Office Equipment & Supplies 7 $1,000 to $5,000 Lump Sum Prior to opening Suppliers

Initial Supply of Inventory 8 $1,000 to $8,000 Lump Sum Prior to opening Suppliers and BYCI

Signage $500 to $3,000 Lump Sum Prior to opening Suppliers

Grand Opening 9 $2,500 to $10,000 Lump Sum Within 90 days after opening

Newspaper, Yellow Pages, ad printers, other media

Licenses and permits $500 to $3,500 As incurred Prior to opening Government agencies

Professional Fees $1,000 to $8,000 Lump Sum Prior to opening Accountants, lawyers & advisors

Insurance $550 to $4,000 Lump Sum Time and manner required by insurance companies

Insurance companies

Additional Funds – 3 months 10 $60,000 to $100,000

As incurred As incurred Suppliers and employees

Total Estimated Initial

Investment 11

$235,350 to $527,700

NOTES:

(1) We do not offer direct or indirect financing to franchisees for any of these items. A portion of the certification fee is refundable under the circumstances described in Item 5 of this Disclosure Document. None of the other fees payable to us are refundable. We are unaware of any fees payable to third party suppliers that are refundable, except that the security deposit paid to your


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landlord may be refunded if you do not default under your lease.

(2) Before you open your Studio, we will provide approximately 2 days of on-site training at your Studio. You must reimburse us for our costs in providing this training. See Item 5 of this Disclosure Documents for additional information.

(3) Before opening, you and all of your instructors must successfully complete training in a cardiovascular pulmonary resuscitation course approved by the American Heart Association or American Red Cross. You must ensure that you and your instructors complete refresher training at intervals specified by us or by the American Heart Association or American Red Cross. Occasionally, these courses are provided free of charge. The low end estimate assumes a free course.

(4) All owners of the franchise and all individuals who teach Bikram Yoga classes at your Studio must complete the teacher certification program. All owners of the franchise must have completed the teacher certification program before we will offer them a franchise. Therefore, the low estimate assumes the owners of the franchise will be the only initial class instructors, in which case no additional investment is required since the costs were incurred prior to being offered the franchise. The high end estimate assumes you will send 1 additional employee to complete the certification program before you open your Studio. This estimate includes the $10,500 cost of the program (which includes hotel accommodations) plus an estimate of $6,500 for food and travel costs.

(5) These figures presume that you will be leasing your premises. A Bikram Yoga studio typically ranges in size from 3,000 to 8,000 square feet of floor space. The expense of leasing will vary, depending upon the size of the premises, its location and the requirements of individual landlords. Generally, the rent will range from $0.50 to $2.00 per month, although your actual rent may vary significantly above or below this range depending on your area and the local market conditions. Monthly lease payments usually range from $1,500 to $12,000, but may be higher, particularly in large metropolitan areas. Landlords typically require security deposits equal to 1 or 2 months’ rent and may, in addition, require payment in advance of the first and/or last (or more) month’s rent. The total estimated initial investment shown in the chart above includes 1 months’ security plus 4 month’s rent, together with $1,000 for utilities and tax deposits. Some franchisees prefer to own their studio. The costs of purchasing a studio vary so widely that we cannot reasonably estimate them.

(6) The cost of leasehold improvements and build out will vary widely depending upon the size and condition of the premises, whether or not there are any existing and comparable leasehold improvements on the premises, the extent and quality of improvements desired by you, landlord’s cash contribution to the cost of the improvements, and the like. The amount above includes our estimated costs of renovation and leasehold improvements, including build out, flooring, painting, heating system, mirrors, carpeting and security system. See Item 11 of this Disclosure Document for additional information regarding the requirements for your Studio.

(7) You must purchase certain office equipment and supplies that you will need to operate your Studio, including a computer system, copy machine, fax machine, stationery, forms, business cards, brochures, related paper items and miscellaneous supplies. See Item 11 of this Disclosure Document for additional information about the computer and software requirements.

(8) You must offer for sale at your Studio all goods that we specify. Your initial inventory will consist of a supply of branded clothing, water products, yoga mats, towels, books and CDs. You


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are required to maintain a reasonable supply of these items at your Studio at all times. The estimate in the chart above represents the cost for an initial supply of these items. A portion of this amount must be paid to BYCI as further discussed in Item 5 of this Disclosure Document.

(9) During the first 90 days after you open your Studio, you must spend a total of at least $2,500 on advertising and other marketing activities. After the first 90 days, you are required to spend a monthly amount equal to the greater of $400 or 2% of your Gross Revenues (less amounts you pay to the Advertising Fund) on local advertising. See Item 11 of this Disclosure Document for additional information on advertising requirements.

(10) This estimates your expenses during the first 3 months of operation. These expenses include payroll costs (excluding any wage or salary paid to you), website license fees, other miscellaneous expenses and working capital.

(11) These figures are estimates based on our principal Bikram Choudhury’s 30 years of experience in operating businesses similar to the Bikram Yoga franchise offered under this Disclosure Document. We have also relied upon the experience of our affiliate, BYCI, in operating its 2 company owned studios in California. You may have additional expenses starting your Studio. Your costs will depend on a variety of factors, including how closely you follow our methods and procedures, your management skills, experience and knowledge, the local real estate market, the prevailing wage rate, competition, and the sales level achieved during the initial period. We strongly recommend that you have independent estimates on all of your start up and continuing operation costs for your Studio.

B. The following chart includes the estimated initial investment for a franchisee who converts

a licensed studio operated under an Affiliation Arrangement:


(CONVERTED STUDIO)


METHOD OF

PAYMENT WHEN DUE

TO WHOM

PAYMENT IS TO

BE MADE

Initial Franchise Fee 2 $0 to $10,000 Lump Sum Upon signing of Franchise Agreement

Us

Food, Lodging & Travel for Initial Training Program (2 people) 3

$300 to $2,500 As incurred During training Hotels, restaurants and airlines

Reimbursement of Costs for On-Site Portion of Initial Training Program 4

$0 As invoiced 10 days after billing

Us

CPR Training 5 $0 to $200 As incurred Prior to opening Suppliers

Instructor Certification Training Plus Food & Travel (1 person) 6

$0 Lump Sum Prior to opening BYCI, restaurants and airlines

Initial Rent and Security Deposit 7

$0 Lump Sum Prior to opening Landlord

Build Out, Improvements, Furniture & Fixtures 7

$0 As incurred Prior to opening Architects, contractors, suppliers


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(CONVERTED STUDIO)


METHOD OF

PAYMENT WHEN DUE

TO WHOM

PAYMENT IS TO

BE MADE

Office Equipment & Supplies 8 $500 to $5,000 Lump Sum Prior to opening Suppliers

Initial Supply of Inventory 9 $0 to $8,000 Lump Sum Prior to opening Suppliers and Us

Signage 10 $500 to $3,000 Lump Sum Prior to opening Suppliers

Grand Opening 11 $0 Lump Sum Within 90 days after opening

Newspaper, Yellow Pages, ad printers, other media

Licenses and permits 12 $0 As incurred Prior to opening Government agencies

Professional Fees $1,000 to $5,000 Lump Sum Prior to opening Accountants, lawyers & advisors

Insurance 12 $0 Lump Sum Time and manner required by insurance companies

Insurance companies

Additional Funds 13 $0 As incurred As incurred Suppliers and employees

Total Estimated Initial

Investment 14

$2,300 to $33,700

NOTES:

(1) If you operate a studio under an Affiliation Arrangement, your costs to convert to the franchise program will be less than the costs for a new franchisee.

(2) If you convert to the franchise model within 60 days after being offered the franchise and you sign a Conversion Franchise Agreement, we will waive the Initial Franchise Fee.

(3) If you operate a studio under an Affiliation Arrangement, you may be required to attend the portion of the franchise training program that pertains to studio operations. We have not yet decided when or where these training sessions will be held.

(4) We will not provide the on-site portion of the initial training program if you operate a studio under an Affiliation Arrangement.

(5) Before opening, you and all of your instructors must successfully complete training in a cardiovascular pulmonary resuscitation course approved by the American Heart Association or American Red Cross. You must ensure that you and your instructors complete refresher training at intervals specified by us or by the American Heart Association or American Red Cross. Occasionally, these courses are provided free of charge. The low end estimate assumes a free course. We did not require our studio owners to complete this program if they were operating under an Affiliation Arrangement. If you and your instructors have not completed this program, you will be required to do so.


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(6) If you operate a studio under an Affiliation Arrangement, you and your instructors are already required to have completed instructor certification program. Therefore, you will not incur any additional expense.

(7) If you operate a studio under an Affiliation Arrangement, you will have no additional expenses in terms of your lease and security deposits. You will also not incur any additional expense for build-out, improvements, furniture and fixtures. We will not require you to remodel or modify your Studio (except to change signage) before you renew or transfer your franchise.

(8) You must purchase certain office equipment and supplies that you will need to operate your Studio, including a computer system, copy machine, fax machine, stationery, forms, business cards, brochures, related paper items and miscellaneous supplies. See Item 11 of this Disclosure Document for additional information about the computer and software requirements.

(9) You must offer for sale at your Studio all goods that we specify. Your initial inventory will consist of a supply of branded clothing, water products, yoga mats, towels, books and CDs. You are required to maintain a reasonable supply of these items at your Studio at all times. The estimate in the chart above represents the cost for an initial supply of these items. The low estimate assumes you already have an initial supply of these items.

(10) You will be required to purchase and use the signage that we specify. You may be required to remove your old signage that you used while operating under an Affiliation Arrangement.

(11) We do not require or anticipate that you will conduct a grand opening for your Studio that was previously operated under an Affiliation Arrangement.

(12) All studios operated under Affiliation Arrangements are required to maintain insurance and required licenses and permits. Therefore, you will not incur any additional expense for these items if you convert to the franchise model.

(13) The amount of working capital required for your Studio should be nearly identical to the working capital you have needed to operate your Studio under an Affiliation Arrangement. Therefore, you will not need any additional working capital to convert to the franchise model.

(14) These figures are estimates based on our principal Bikram Choudhury’s 30 years of experience in operating businesses similar to the Bikram Yoga franchise offered under this Disclosure Document. We have also relied upon the experience of our affiliate, BYCI, in operating its 2 company owned studios in California. You may have additional expenses starting your Studio. Your costs will depend on a variety of factors, including how closely you follow our methods and procedures, your management skills, experience and knowledge, the prevailing wage rate, competition, and the sales level achieved during the initial period. We strongly recommend that you have independent estimates on all of your start up and continuing operation costs for your Studio.

ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Currently, we require that you purchase the following source restricted goods and services for use relating to the development and ongoing operation of your Studio: signage, advertising and promotional materials, computer hardware and software, equipment, supplies, furnishings, fixtures, inventory and insurance policies. By “source restricted,” we mean that the good or service must meet our specifications or must be purchased from one or more approved or designated suppliers. We estimate that nearly 100%


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of the total purchases that will be required to establish and operate your Studio will consist of source restricted goods or services.

Our specifications and a list of approved and designated suppliers are in the Manual. We will notify you within 30 days of any changes to our specifications or our list of approved or designated suppliers. This notice may be disseminated to you by various means, including written or electronic correspondence, verbal or telephonic notification, amendments or updates to the Manual, bulletins, and similar means of communication.

The specifications for determining an approved supplier include standards for quality, delivery, performance, design, appearance and price of the product or service as well as the dependability, reputation and financial viability of the supplier. Upon your request, we will provide you with any objective specifications pertaining to our evaluation of a supplier, although certain important subjective criteria (e.g., product appearance, design, functionality, etc.) are important to our evaluation but cannot be reduced to writing. At our option, we may revoke our approval of a supplier upon the supplier’s failure to meet any of our then current minimum standards and specifications.

If you desire to purchase or lease any items from a non-approved supplier, you must submit to us a written request for approval that includes all information that we require regarding the supplier and the product. We may require that our representatives be allowed to inspect the facilities of the proposed supplier, and that samples from the proposed supplier be delivered, at no charge to us, either to us or to our designee for inspection. You must reimburse us for all out-of-pocket costs that we incur in reviewing a supplier that you propose. We may reject a supplier who does not: (i) satisfy our insurance, indemnification and non-disclosure requirements (which may include signing a confidentiality agreement); (ii) have the capacity to supply products or services meeting our specifications; (iii) sign a trademark license agreement and limit the sale of products bearing our marks to us and our franchisees; (iv) agree to provide duplicate purchase invoices for our records; and (v) agree to our periodic compliance audits. We will notify you in writing within 30 days of your request of our approval or disapproval of the proposed supplier. We may, at our option, re-inspect the facilities and products of any approved supplier and revoke our approval upon the supplier’s failure to meet any of our then current minimum standards and specifications.

Currently, we are not an approved or designated supplier for any items that you must purchase. However, we reserve the right to designate ourselves as an approved or designated supplier for certain items in the future.

Our affiliate BYCI is currently the designated supplier for the Bikram Yoga instructor certification courses that all franchise owners and Bikram Yoga instructors must successfully complete. BYCI is also the designated supplier for all books and CDs sold at your Studio as well as certain marketing materials (e.g., posters) that may be displayed at your Studio. BYCI is an approved supplier (but not the exclusive supplier) for certain other items, including branded clothing that you may sell at your Studio, bottled water, yoga mats and towels. Bikram and Rajashree Choudhury own a financial interest in us and in BYCI. There are no other approved or designated suppliers in which any of our officers owns an interest.

We may, but need not, establish relationships with certain suppliers to enable us and our franchisees to purchase certain goods that are required to be used or sold in all Bikram Yoga studios at discounted prices. If we succeed in these attempts, you will be able to purchase these items from the suppliers at the discounted prices that we negotiate (we may receive rebates from these suppliers). You do not receive any other material benefits for using designated or approved suppliers. There are no purchasing cooperatives although we may establish purchasing cooperatives in the future.


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We may receive rebates, payments or other material benefits from vendors based on franchisee purchases. At this time, we may use these funds for any purpose. However, we will deposit all of these funds into the Advertising Fund once it is established. During the fiscal year ended December 31, 2009, neither we nor BYCI received any revenues as a result of franchisee purchases from us, BYCI, or designated or approved suppliers.

ITEM 9 FRANCHISEE’S OBLIGATIONS

This table lists your principal obligations under the franchise and other agreements. It will

help you find more detailed information about your obligations in these agreements and other items

in this Disclosure Document.

OBLIGATION SECTION IN FRANCHISE AGREEMENT (“FA”) OR

CONVERSION FRANCHISE AGREEMENT (“CFA”) DISCLOSURE

DOCUMENT ITEM

a. Site selection and acquisition/lease

FA: Section 5.2

CFA: Section 2 Item 7 & 11

b. Pre opening purchases/leases FA: Section 5.2, 5.3, 5.7 & 5.15

CFA: Section 5.2, 5.5 & 5.13 Item 5, 7, 8 & 11

c. Site development and other pre opening requirements

FA: Section 5.2, 5.3, 5.11(c) & 5.15

CFA: Section 5.2 & 5.13

Item 6, 7 & 11

d. Initial and ongoing training FA: Section 3.1 & 3.2

CFA: Section 3.1 & 3.2 Item 6 & 11

e. Opening FA: Section 5.5

CFA: Not Applicable Item 11

f. Fees FA: Section 3.2, 3.4, 3.5, 5.1, 5.4, 5.10, 6.2, 8.3(e) & 9

CFA: Section 3.2, 5.1, 5.3, 6.2, 8.3(e) & 9

Item 5 & 6

g. Compliance with standards and policies/Operating Manuals

FA: Section 3.3, 4, 5.2, 5.3, 5.6, 5.9 & 5.11

CFA: Section 3.3, 4, 5.2, 5.4, 5.7 & 5.9

Item 11

h. Trademarks and proprietary information

FA: Section 4


i. Restrictions on products/services offered

FA: Section 5.6(a)

CFA: Section 5.4(a) Item 16

j. Warranty and client service requirements

Not Applicable Not Applicable

k. Territorial development and sales quotas

Not Applicable Item 12

l. Ongoing product/service purchases

FA: Section 5.7

CFA: Section 5.5 Item 8

m. Maintenance, appearance and remodeling requirements

FA: Section 5.3, 5.8 & 5.9

CFA: Section 5.2, 5.6 & 5.7

Item 11

n. Insurance FA: Section 5.15

CFA: Section 5.13 Item 6 & 7

o. Advertising FA: Section 3.5 & 5.11

CFA: Section 5.9

Item 6, 7 & 11


Page 15 PHX 329,224,856v4

OBLIGATION SECTION IN FRANCHISE AGREEMENT (“FA”) OR

CONVERSION FRANCHISE AGREEMENT (“CFA”) DISCLOSURE

DOCUMENT ITEM

p. Indemnification FA: Section 7

CFA: Section 7 Item 6

q. Owner’s participation/ management/staffing

FA: Section 5.6

CFA: Section 5.4 Item 11 & 15

r. Records/reports FA: Section 5.13 & 5.14

CFA: Section 5.11 & 5.12 Item 6

s. Inspections/audits FA: Section 6


t. Transfer FA: Section 8 CFA: Section 8

Item 17

u. Renewal FA: Section 9

CFA: Section 9

Item 17

v. Post termination obligations FA: Section 11


w. Non competition covenants Noncompetition Agreement (ATTACHMENT "D" to Franchise Agreement and ATTACHMENT "D" to Conversion Franchise Agreement)

Item 17

x. Dispute resolution FA: Section 12


ITEM 10 FINANCING

We do not offer direct or indirect financing. We do not guarantee any of your notes, leases or obligations.

ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND

TRAINING

Except as listed below, we are not required to provide you with any assistance.

Before you open your Studio, we will:

1. License you the Marks necessary to begin operating your Studio. (Section 2 of FA and CFA)

2. Approve the location, build-out and design of your Studio. See section below entitled “Studio Requirements” for additional information. (Section 5.2 of FA)

3. Provide you with written specifications for the goods and services you must purchase to establish your Studio, as well as a written list of approved and/or designated suppliers for purposes of acquiring these goods and services. We do not deliver or install any of the items that you are required to purchase. See Item 8 of this Disclosure Document for additional information regarding your purchase of these goods and services. (Section 3.3 & 5.3 of FA; Section 3.3 & 5.2 of CFA)


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4. Loan you 1 copy of the Manual. The Manual will contain, among other things, mandatory and suggested specifications, standards, and procedures pertaining to the services and products you will provide. The Manual is confidential and remains our property. We may modify the Manual at any time but the modification(s) will not alter your status and fundamental rights under the Franchise Agreement. We may provide updates or modifications to the Manual in electronic format. The Manual contains a total of 189 pages. Attached to this Disclosure Document as EXHIBIT "F" is a copy of the Table of Contents of the Manual. (Section 3.3 of FA and CFA)

5. Provide an initial training program. See the section below entitled “Initial Training Program” for additional information about the training program. (Section 3.1 of FA and CFA)

*** If you are a licensee operating under an Affiliation Arrangement and you convert to the franchise model, we may modify the type and amount of pre-opening training and support that we provide to you based upon our assessment of your qualifications, needs and your prior experience operating your Studio under the Affiliation Arrangement.

During the operation of your Studio, we will:

1. Provide optional periodic training programs. For additional information, see section below entitled “Ongoing Training”. (Section 3.2(a) of FA and CFA)

2. Maintain an Internet website that will include a list of all of the Bikram Yoga franchisees that are in good standing with us. We may modify the content of and/or discontinue the website at any time in our sole discretion. (Section 3.4 of FA and CFA)

3. Create a franchisee advisory council (the “Advisory Council”). For additional information, see section below entitled “Advisory Council”. (Section 3.6 of FA; Section 3.5 of CFA)

During the operation of your Studio, we may, but need not:

1. Establish and implement the Advertising Fund. See the sections below entitled “Advertising Fund” and “Local Advertising” for additional information regarding the Advertising Fund and your other advertising obligations. (Section 3.5 of FA)

2. Provide you with your own domain name and website that will be linked to our website. We may modify the content of and/or discontinue this website at any time in our sole discretion. (Section 3.4 of FA and CFA)

Initial Training Program (Section 3.1 of FA and CFA)

At no additional charge, we will provide an initial training program for all of your owners for a period of approximately 2 days that will take place at a hotel in Las Vegas, Nevada (we can change the location at any time). The trainees must include all owners of the franchise. Currently, we intend to offer the initial training program at least twice each year. In addition to the classroom portion of the training program, we will provide approximately 2 days of on-site training at your Studio before you open for business. We do not charge you a fee for this training, but you must reimburse us for our costs (i.e., travel, meals and lodging).


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The franchise initial training program consists of the following:

INITIAL TRAINING PROGRAM

SUBJECT HOURS OF CLASSROOM

TRAINING HOURS ON THE JOB

TRAINING* LOCATION

History/Philosophy of Bikram Yoga

0.25 0 Las Vegas, Nevada

Use of the Manual 0.25 0 Las Vegas, Nevada

Pre-Opening Procedures 1.5 0 Las Vegas, Nevada

Personnel 1.5 0 Las Vegas, Nevada

Training Employees 0 0.5 Your Studio

Advertising/Marketing 1.5 0 Las Vegas, Nevada

Sales Procedures - Sales Presentation, Handling

Inquiries, Etc.

1.5 2 Las Vegas, Nevada

Your Studio (OTJ Portion)

Franchise Reporting 0.5 0 Las Vegas, Nevada

Daily Operating Procedures

3 2 Las Vegas, Nevada

Your Studio (OTJ Portion)

Use of Software 0 1.5 Your Studio

Safety and Cleaning Procedures

0 1 Your Studio

Customer Service Procedures

0 1 Your Studio

Class Management Procedures - Scheduling,

Running, Etc.

0 2 Your Studio

*All of the on the job training will take place at your Studio as part of our on-site training.

For the classroom training, the training materials will consist of the Manual and lecture handouts. You will not be charged an additional fee for any of the training materials.

The instructors include Bikram Choudhury (more than 30 years of experience with Bikram Yoga and approximately 1 year of experience with us), Rajashree Choudhury (more than 20 years of experience with Bikram Yoga and approximately 1 year of experience with us), Craig Villani (10 years of experience with Bikram Yoga and approximately 1 year of experience with us), Emmy Cleaves (more than 30 years of experience with Bikram Yoga and approximately 1 year of experience with us), Jason Winn (10 years of experience with Bikram Yoga and approximately 1 year of experience with us) and Diane Busharme (10 years of experience with Bikram Yoga and approximately 1 year of experience with us). Craig, Emmy, Jason and Diane are all Bikram certified instructors who have worked with us for extended periods of time. They will instruct you on the proper method of teaching Bikram Yoga classes. Bikram and Rajashree are the founders of the Bikram Yoga and have operated the company owned Bikram Yoga studios for many years. In addition to instructing you on the proper method of teaching Bikram Yoga classes, they will also teach you about the other operational aspects of running a Bikram Yoga studio.

All of your owners must complete the classroom portion of the initial training program within 210 days after signing the Franchise Agreement. The on-the-job training must be completed before


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opening. The owners must complete the program but we do not require that (or determine whether) the owners “successfully” complete the program or complete the program “to our satisfaction.” If any of these individuals fails to complete the initial training program in the required time period, we have the option of terminating your Franchise Agreement. See Items 5, 6 and 7 of this Disclosure Document for a discussion of costs and expenses associated with the initial training program.

Ongoing Training (Section 3.2(a) of FA and CFA)

In order to maintain the uniformity and high standard of goods and services provided by Bikram Yoga franchisees or to change these goods and services, we may offer periodic advanced or refresher training courses. Attendance at these training programs is optional. If you choose to attend the training program, we may charge you a fee of up to $1,000 per day per attendee. In addition to the fee, you would be responsible for payment of all food, travel and lodging expenses incurred by you and your employees in attending any refresher training course.

Upon your request, we may (but need not) offer additional training at your Studio. If we agree to do so, we may charge you a fee of up to $1,000 per day. In addition to the fee, you must reimburse us for our expenses that we incur in providing the training (i.e., travel, lodging, meals, etc.).

Studio Requirements (Section 5.2, 5.3, 5.4, 5.8 & 5.9 of FA; Section 5.2, 5.3, 5.6 & 5.7 of CFA)

You must purchase or lease the premises from which you will operate your Studio. A Bikram Yoga studio typically ranges in size from 3,000 to 8,000 square feet. Your Studio must contain enough room so that the classroom space is at least half the square footage. Your Studio must also meet our standards for heating, lockers, showers, restroom, laundry and merchandising facilities.

Before opening your Studio, we must approve the location, build-out and design of your Studio. Your Studio must be located within the geographic area identified in Attachment B to the Franchise Agreement and must conform to our minimum site selection criteria. You agree to submit to us a complete site report (containing such demographic, commercial and other information, photographs and video tapes as we may reasonably require) for the site that you propose for your Studio. We will approve or reject your proposed location within 30 days after you submit to us all information regarding the location that we require. In reviewing a proposed location, we will consider factors such as parking, size, traffic counts, general location, existence and location of competitive businesses and general character of the neighborhood. Our review and approval of your site does not constitute a representation that you will succeed from the location. Instead, our approval only indicates that your site meets our minimum standards. We do not review the terms of your lease.

You must purchase or lease an approved location within 120 days after signing the Franchise Agreement. Your failure to secure an approved location within the required time period constitutes an event of default under the Franchise Agreement.

After you purchase or lease your approved site, you must construct and equip the premises to the specifications contained in the Manual. You must also install the equipment, fixtures, signs and other items that we require. You must remodel and make all improvements and alterations to your Studio that we reasonably require from time to time to reflect our then-current image, appearance and facility specifications. There are no limitations on the cost or frequency of these remodeling obligations. However, if you sign a Conversion Franchise Agreement, we will not require that you remodel your Studio (except to change signage) before you transfer or renew your franchise. You may not remodel or significantly alter your premises without our prior approval.


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Computer System (Section 5.3, 5.7 & 6.1 of FA; Section 5.2, 5.5 & 6.1 of CFA)

You are required to purchase a computer system (your “Computer System”) that consists of the following items: (i) a late model computer with high speed Internet access; (ii) a fax machine; and (iii) a copy machine. At this time, we do not have any specifications for your Computer System. We estimate that the cost of your Computer System will range from $1,000 to $3,000. We have no obligation to provide ongoing maintenance, repairs, upgrades or updates to your Computer System. Since you may purchase your Computer System from any supplier that you choose, we do not know whether any third party will have any obligation to provide ongoing maintenance, repairs, upgrades or updates to your Computer System. We also do not know whether there are any optional or required maintenance, updating, upgrading or support contracts that come with your Computer System (or the annual cost associated with such contracts).

At this time, we do not have independent access to the information and data entered into your Computer System. However, we have the right to review this information and data as part of an inspection. If we require you to use new software in the future, we may have independent and unlimited access to the information and data entered into your Computer System.

You must maintain the Computer System and other equipment in good working order, at your cost. During the term of your franchise, you may be required to change, upgrade or update your Computer System and/or software to conform to our then-current specifications. There are no contractual limitations on the frequency or cost of these changes, updates or upgrades. However, if you sign a Conversion Franchise Agreement, we will not require you to use any specific software program that we designate for use by other franchisees.

Advertising Fund (Section 3.5 of FA)

We may, but need not, establish and implement the Advertising Fund described in Item 6. The Advertising Fund will be used for local, regional or national advertising, sales promotion and promotional materials, public and consumer relations, publicity, and any other programs that we deem necessary or appropriate. We may also use the Advertising Fund to pay for marketing materials that we make available to our franchisees for local marketing purposes.

Advertising Fund Fees will be kept in a separate account and revenues received will be accounted for separately from our other funds and will not be used to defray any of our general operating expenses, except for such reasonable salaries, administrative costs and overhead as we may incur in activities reasonably related to the administration or direction of the Advertising Fund and its local, regional or national advertising programs (which may include, without limitation: conducting market research, preparing and conducting television, radio, magazine, billboard, Internet, newspaper and other media programs and activities and employing advertising agencies to assist therewith, collecting and accounting for contributions to the Advertising Fund, and paying for the preparation and distribution of financial statements and marketing materials). None of the Advertising Fund Fees will be used for advertisements principally directed at selling additional franchises. All funds deposited into the Advertising Fund that are not used in the fiscal year in which they accrue will be utilized in the following fiscal year. Any surplus of funds in the Advertising Fund may be invested and we may lend money to the Advertising Fund if there is a deficit. During the fiscal year ended December 31, 2009, we did not collect or use any Advertising Fund Fees.

We will deposit into the Advertising Fund all: (i) Advertising Fund Fees paid by you and other franchisees; and (ii) rebates or other payments we receive from suppliers based on franchisee purchases (but only rebates and payments received after we establish the Advertising Fund). Any company-owned


Page 20 PHX 329,224,856v4

Bikram Yoga studio will contribute to the Advertising Fund on the same basis as our franchisees. However, if we modify the amount or timing of the contributions that must be made to the Advertising Fund, any company-owned Bikram Yoga studio that is established or acquired after the modification may contribute to the Advertising Fund utilizing the modified amount or timing. Except as stated in this paragraph, we have no obligation to expend our own funds or resources for any marketing activities in your area.

Our administration of the Advertising Fund is intended to maximize general public recognition and patronage of the Bikram Yoga system for the benefit of us and all Bikram Yoga franchisees and we will use our best efforts to apportion advertising to obtain the greatest benefit for all franchisees. We will direct and have complete control and discretion over all advertising programs, including the creative concepts, materials, endorsements and media used for the programs, and the placement and allocation of the programs. Except as otherwise expressly provided in the Franchise Agreement, we assume no direct or indirect liability or obligation to you with respect to the maintenance, direction or administration of the Advertising Fund. The Advertising Fund will not be a trust and we will have no fiduciary obligations with respect to our administration of the Advertising Fund. An unaudited financial statement of the operations of the Advertising Fund will be prepared annually and made available to you upon request.

Local Advertising (Section 5.11 of FA: Section 5.9 of CFA)

With the exception of your initial 90 day period of operations, we require that you spend on a monthly basis an amount equal to the greater of $400 or 4% of your Gross Revenues on local advertising. If we establish a national and/or regional Advertising Fund, we may require that you pay us up to half of this amount each month (i.e., the greater of $200 or 2% of Gross Revenues), which we will deposit into the Advertising Fund. You must spend at least $2,500 on your grand opening marketing during your first 90 days of operation. We may sell you marketing materials, including newspaper layout, radio and television commercial tapes, and other promotional and marketing materials. Alternatively, we may enter into relationships with approved or designated suppliers who will create advertising or marketing materials that must be purchased and utilized by Bikram Yoga franchisees.

You will also have an opportunity to create advertising for your own use, provided we approve it in advance. You may not use any advertising materials that have not been approved by us. You must submit to us any advertising materials prepared by you, and we will have 30 days to review and either approve or reject the materials. Our failure to reject any advertising materials within the 30 day period will constitute our approval of the materials. We may provide you with your own domain name and website, which we would own. You may use your own website as long as (i) we approve your website and (ii) your website conforms to all of our website requirements. See Items 6 & 7 of this Disclosure Document for additional information regarding advertising and marketing materials and the costs associated with such materials.

If you operate a studio under an Affiliation Arrangement and you convert to the franchise model, we will waive the obligation that you spend a minimum amount on local advertising as long as you are operating your Studio at full capacity, as determined by us in our commercially reasonable discretion. If we determine that you are not operating your Studio at full capacity, then we may require that you comply with the minimum expenditure obligation.

Advertising Cooperatives

We have not established, and do not require that you participate in, local or regional advertising cooperatives.


Page 21 PHX 329,224,856v4

Advisory Council (Section 3.6 of FA; Section 3.5 of CFA)

We will create an Advisory Council for the purpose of serving as an advisory council to us with respect to advertising, marketing, operations, new service suggestions and other matters relating to the System. The Advisory Council serves in an advisory capacity only and we retain the exclusive right to make all decisions after taking into account any suggestions by the Advisory Council. The Advisory Council will be established and operated according to rules and regulations we periodically approve. Except at any time that you are in default under your Franchise Agreement or any other agreement with us, you have the right to be a member of the Advisory Council. As a member, you have all voting rights and privileges granted to other members of the Advisory Council. Any Bikram Yoga studio operated by us or our affiliates will also be a member of the Advisory Council. Each member is granted 1 vote for each studio that it owns and operates on all matters on which members are authorized to vote. We reserve the power to form, change or dissolve the Advisory Council in our discretion.

Opening Requirements (Section 5.5 of FA)

You may not begin operating your Studio until we have provided our written acknowledgment that the Studio is properly equipped, the initial trainees have completed the initial training program and you have complied with your other pre-opening obligations. We anticipate that a typical Bikram Yoga franchisee will open his or her Bikram Yoga studio within 9 months after signing the Franchise Agreement. Some of the factors that may affect this time are identification of a suitable location, financing, the extent to which an existing location must be upgraded or remodeled, delayed installation of equipment and fixtures, completion of training, obtaining insurance, and complying with local laws and regulations. Unless we agree to the contrary, your Studio must be opened within 1 year after you sign the Franchise Agreement. Your failure to open within the 1 year period constitutes an event of default under your Franchise Agreement.

ITEM 12 TERRITORY

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.

Each Franchise Agreement grants you the right to operate a single Studio at a single location that must be approved by us in advance. You will be required to identify a location for your Studio within the geographic area described in your Franchise Agreement. You may not relocate your Studio without our prior written approval. In order to relocate, you must find an approved alternative location within the Territory (or if you sign a Conversion Franchise Agreement, the county in which your old Studio was located), construct and develop the Studio to comply with our then current specifications, pay us the Relocation Fee, and resume operations within 90 days after closing your original Studio.

We reserve the right to open additional company or affiliate owned Bikram Yoga studios that operate under the Marks at any location. We also reserve the right to sell or license others to sell competitive or identical goods or services (whether under the Marks or under different trademarks) through alternative channels of distribution. You are not entitled to any compensation for sales that take place through alternative channels of distribution.

Currently, neither we nor any affiliate of ours intends to operate or franchise another business under a different trademark that sells products or services similar to the products or services offered at a Bikram Yoga studio. However, we reserve the right to do so in the future.


Page 22 PHX 329,224,856v4

You are not permitted to sell through alternative channels of distribution. There are no restrictions on your right to solicit customers from outside your area. You are not granted any options, rights of first refusal or similar rights to acquire additional territories or franchises.

ITEM 13 TRADEMARKS

Our principal owner, Bikram Choudhury, registered the following trademarks on the United States Patent and Trademark Office principal register:

MARK REGISTRATION NUMBER REGISTRATION DATE

(RENEWAL DATE)

BIKRAM’S YOGA COLLEGE OF INDIA

2,718,899 May 27, 2003

BIKRAM YOGA 2,746,346 August 5, 2003

BIKRAM’S BEGINNING YOGA CLASS

2,829,135 April 6, 2004

2,775,407 October 21, 2003

All required affidavits for the registered Marks have been filed.

On February 1, 2009, we entered into a License Agreement (the “License Agreement”) with Mr. Choudhury. Under the terms of the License Agreement, Mr. Choudhury granted us the right to use the Marks in the Bikram Yoga System and to sublicense the Marks to our franchisees. The term of the License Agreement automatically renews annually, unless it is terminated in accordance with its terms. Mr. Choudhury is permitted to terminate the License Agreement only if we declare bankruptcy or become insolvent or if we and Mr. Choudhury mutually agree to terminate the License Agreement. If the License Agreement is terminated, the agreement states that all sublicenses granted by us to our franchisees will continue in full force and effect until the expiration or termination of the applicable franchise agreement. Except as discussed above, no agreements limit our right to use or sublicense the use of the Marks.

We grant you the right to operate a franchise under the name “Bikram Yoga” shown on the cover page of this Disclosure Document. We or our affiliates may apply for or adopt additional trademarks and those may be licensed to you during the term of the franchise relationship. By trademark, we mean trade names, trademarks, service marks, and logotypes used to identify your Bikram Yoga franchise or the products or services sold at your Studio.

You must follow our rules when using the Marks. You cannot use our name or mark as part of a corporate name or with modifying words, designs, or symbols unless you receive our prior written consent. You may not use the Bikram Yoga name in connection with the sale of any product or service that is not previously authorized by us in writing.

You must notify us immediately when you learn about an infringing or challenging use of the Marks. We will take the action we think appropriate, but we are not required to take any action if we do not feel it is warranted. We may require your assistance, but you are not permitted to control any


Page 23 PHX 329,224,856v4

proceeding or litigation relating to our Marks. If we require you to modify or discontinue using any of our Marks, you must comply with our instructions. If we are required to modify or discontinue use of any Mark as a result of litigation, we will reimburse you for your tangible costs of compliance (e.g., changing brochures, business cards, etc.). We have no other obligation to indemnify you for any expenses or damages arising from any proceeding or litigation involving our Marks. You must not directly or indirectly contest our or Mr. Choudhury’s right to the Marks.

There are no currently effective material determinations of the Patent and Trademark Office, the Trademark Trial and Appeal Board, the trademark administrator of any state or any court; no pending infringements, oppositions or cancellations; and no pending material litigation involving any of the Marks.

We do not know of any infringing uses that could materially affect your use of the Marks. However, it is our belief that a number of individuals who have completed the Bikram Yoga teacher certification program are currently using our Marks in an unauthorized manner by advertising and teaching Bikram Yoga from studios that we do not own and that we have not licensed or franchised. A studio that we own or have licensed or franchised is referred to as an “Authorized Studio.” We intend to contact these individuals, notify them of their infringing use, and give them the option of becoming re-certified according to our current certification terms. Under our current certification terms, certified instructors are only permitted to teach the Bikram’s Beginning Yoga Class from Authorized Studios. Our certification terms prohibit instructors from using any of our Marks, although we may permit individuals to use the Bikram name in a non-trademark manner to identify themselves as being certified (or having formerly been certified) by Bikram. If an infringing user does not become certified and comply with our requirements for authorized use of our Marks, then we will consider commencing litigation against that individual to prevent them from continuing to use our Marks. Although we do intend to commence litigation against a number of individuals if they do not comply with our terms, we are under no obligation to litigate against any specific infringing user.

ITEM 14 PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION

No patents are material to the franchise. Our principal member, Bikram Choudhury, registered the following copyrights that are material to the franchise:

COPYRIGHT REGISTRATION

NUMBER REGISTRATION DATE DURATION

Bikram’s Beginning Yoga Class

(book - 1979)

TX 179-160 January 17, 1979 Life of Bikram Choudhury plus 70

years


(book - 2000)

TX 5-259-325 September 1, 2000 Life of Bikram Choudhury plus 70

years


(audio tape)

TX 5-499-662 April 18, 2002 Life of Bikram Choudhury plus 70

years


(Bikram’s sequence of 26 poses)

TX 5-624-003 October 24, 2002 Life of Bikram Choudhury plus 70

years


Page 24 PHX 329,224,856v4

COPYRIGHT REGISTRATION

NUMBER REGISTRATION DATE DURATION

Bikram Yoga

(book - 2007)

TX 6-555-860 April 7, 2007 Life of Bikram Choudhury plus 70

years

Bikram’s Beginning Yoga Class Dialogue

(instructor script)

TXu 1-022-657 March 4, 2002 Life of Bikram Choudhury plus 70

years

Yoga for Pregnancy*

(videocassette)

PA 1-053-335 February 26, 2002 Expires 70 years after later to occur of death of Bikram Choudhury or

death of Rajashree Choudhury

Bikram’s Advance Yoga Class

(Bikram’s sequence of 86 poses)

TXu 1-323-218 October 25, 2006 Life of Bikram Choudhury plus 70

years

* This copyright was registered by both Bikram and Rajashree Choudhury.

You will sell the copyrighted books, audio tapes and cassettes as part of your Studio. You and your instructors will utilize the Bikram’s Beginning Yoga Class Dialogue to teach the Bikram Beginning Yoga Class. You and your instructors will also use the Bikram’s Beginning Yoga Class sequence of 26 poses to teach the Bikram Beginning Yoga Class. Bikram does not own the rights to each pose, but instead owns the rights to the specific sequence of poses. Your students will perform each of the poses as part of the class. If you are given written approval by Bikram and comply with his other requirements (such as specialized training), you may teach the Bikram Advanced Yoga Class. If you are authorized to teach this class, you will use the sequence of 86 poses to teach the advanced class.

With one exception (the Bikram’s Beginning Yoga Class Dialogue), all of our registered copyrights were registered after 1978. Under federal law, copyrights registered after 1978 are not subject to renewal. There are no material determinations of the United States Copyright Office or a court regarding our copyrights.

You will also receive for your use during the course of the Franchise Agreement the proprietary information contained within the Manual. This proprietary information may include know-how in the form of trade secrets, operating methods, specifications, techniques, and information pertaining to the operation and marketing of a Bikram Yoga studio and any products or merchandise that we have or may develop. Although we have not filed an application for copyright registration for the Manual, we do claim a copyright to the Manual and further claim that the information contained in the Manual is proprietary. The Manual is described more fully in Item 11 of this Disclosure Document. You are required to maintain the confidentiality of all of our proprietary materials and use them only in strict accordance with the terms of the Franchise Agreement and Manual.

You must immediately notify us when you learn about unauthorized use of our proprietary information or copyrights. We will take the action we think appropriate, but we are not required to take any action if we do not feel it is warranted. We may require your assistance, but you are not permitted to control any proceeding or litigation alleging the unauthorized use of any of our proprietary information or copyrights. If we require you to modify or discontinue using any of our copyright items, you must comply


Page 25 PHX 329,224,856v4

with our instructions. If we are required to modify or discontinue use of any copyrighted item as a result of litigation, we will reimburse you for your tangible costs of compliance (e.g., changing inventory, etc.). We have no other obligation to indemnify you for any expenses or damages arising from any proceeding or litigation involving our proprietary information or copyrights. You must not directly or indirectly contest our or Mr. Choudhury’s right to the copyrights.

We are not aware of any infringements relating to the copyrights, the Manual or our proprietary information that could materially affect your use of these items. However, it is our belief that a number of individuals who have completed the Bikram Yoga teacher certification program are currently using our copyrights in an unauthorized manner by advertising and teaching Bikram Yoga from locations that are not Authorized Studios. We intend to follow the same process described in Item 13 above by contacting these individuals, notifying them of their infringing use, and giving them the option of becoming re-certified according to our current certification terms. Under our current certification terms, certified instructors are prohibited from using any of our copyrights except for purposes of teaching the Bikram’s Beginning Yoga Class from an Authorized Studio. If an infringing user does not become certified and comply with our requirements for authorized use of our copyrights, then we will consider commencing litigation against that individual to prevent them from continuing to use our copyrights. Although we do intend to commence litigation against a number of individuals if they do not comply with our terms, we are under no obligation to litigate against any specific infringing user.

ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE

FRANCHISE BUSINESS

Under the Franchise Agreement, all owners of the franchise must be directly involved in the day-to-day management, supervision and operation of your Studio. You are permitted to hire an individual (a “Studio Director”) to assist the owners with the daily management of your Studio, but only if: (i) the Studio Director successfully completes any training program that we require for studio directors; and (ii) the owners agree to assume full responsibility for the supervision and operation of your Studio if the Studio Director is unable to perform his or her duties due to death, disability, termination of employment, or for any other reason, until such time that you obtain a suitable replacement Studio Director. A Studio Director must: (i) be a certified Bikram Yoga instructor with a minimum of six (6) months of teaching experience; (ii) have obtained a college degree; (iii) have prior experience in business management and administration and customer service; (iv) be proficient with the use of computers; and (v) complete any training that we require for Studio Directors. We must approve any individual that you hire to act as a Studio Director. We do not require that the Studio Director own any equity interest in the franchise.

If you are an entity, each individual owner (i.e., each person holding an ownership interest in you) must also agree to be bound by the terms of the Franchise Agreement or Conversion Franchise Agreement, as applicable. All owners of the franchise must also sign the Noncompetition, Nondisclosure and Nonsolicitation Agreement, the form of which is attached to the Franchise Agreement and Conversion Franchise Agreement as ATTACHMENT "D".

ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL

We require that all goods and services sold at your Studio be approved by us in advance. You must offer all goods and services that we require. You may not sell any goods or services that we have disapproved. We have the unrestricted right to change the goods and/or services that you are required to sell at your Studio at any time in our sole discretion, and you must comply with any such change. You will have the sole right to determine the prices charged for goods and services that you sell. Suggested prices will be made available for your consideration. You may not sell through alternative channels of distribution.


Page 26 PHX 329,224,856v4

ITEM 17 RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION

This table lists certain important provisions of the franchise and related agreements. You

should read these provisions in the agreements attached to this Disclosure Document.

THE FRANCHISE RELATIONSHIP

PROVISION SECTIONS IN FA

OR CFA SUMMARY

a. Length of the franchise term

FA: Section 9 CFA: Section 9

Term is equal to 10 years under Franchise Agreement. If you sign a Conversion Franchise Agreement, your initial term will be equal to the term remaining on your lease.

b. Renewal or extension of the term

FA: Section 9

CFA: Section 9 If you are in good standing, you can enter into a successor franchise agreement for 2 additional consecutive 5 year successor terms.

c. Requirements for you to renew or extend

FA: Section 9

CFA: Section 9 You must: (i) not be in default; (ii) give us notice in the manner required by the Franchise Agreement; (iii) sign our then current form of franchise agreement and related documents (e.g., personal guaranty, noncompetition agreement, etc.); (iv) sign a general release; (v) pay the Successor Fee; and (vi) remodel or upgrade your Studio to comply with our then-current standards and specifications. If you renew, you may be required to sign a contract with materially different terms and conditions than the original contract.

d. Termination by you FA: Section 10.1

CFA: Section 10.1 You can terminate only if we fail to cure a material default or if you and we mutually agree to terminate.

e. Termination by us without cause

Not Applicable We may not terminate without cause.

f. Termination by us with cause

FA: Section 10.2 & 10.3


We can terminate only if you default or if you and we mutually agree to terminate.

g. “Cause” defined - curable defaults

FA: Section 10.3

CFA: Section 10.3 You have 30 days to cure any default other than defaults described below under “non-curable defaults.”


Page 27 PHX 329,224,856v4



OR CFA SUMMARY

h. “Cause” defined - non-curable defaults

FA: Section 10.2

CFA: Section 10.2 The following defaults cannot be cured: (i) insolvency or bankruptcy; (ii) failure to pay us or affiliate within 5 days after receipt of demand for payment; (iii) underreporting of any amount due us by at least 2% after previous underreporting occurred and was cured; (iv) conviction of certain types of crimes or subject of certain administrative actions; (v) operation of your Studio in a manner presenting a safety hazard; (vi) material misrepresentations; (vii) unauthorized transfers; (viii) misuse of Mark or Copyright or violation of Noncompetition Agreement; or (ix) termination of any other agreement between you and us or you and one of our affiliates due to your default. In addition, the following pre-opening defaults under the Franchise Agreement cannot be cured: (i) any owner fails to complete training in the time and manner required by the Franchise Agreement; (ii) you fail to find and lease an approved Studio within 120 days after signing the Franchise Agreement; or (iii) you fail to open within 1 year after signing the Franchise Agreement.

i. Your obligations on termination/non renewal

FA: Section 11

CFA: Section 11 Obligations include complete deidentification, return of Manuals and all branded materials, assignment of telephone numbers, listings and domain names, cancellation of fictitious names, and payment of amounts due (also see “r”, below).

j. Assignment of contract by us

FA: Section 8.1

CFA: Section 8.1 No restriction on our right to assign.

k. “Transfer” by you – definition

FA: Section 8.2

CFA: Section 8.2 Includes transfer of contract or assets, or ownership change.

l. Our approval of transfer by you

FA: Section 8.2 & 8.3


If certain conditions are met, you may transfer to a newly-formed entity owned by you without our approval. We have the right to approve all other transfers but will not unreasonably withhold approval.

m. Conditions for our approval of transfer

FA: Section 8.3

CFA: Section 8.3 Transferee must meet our qualifications, complete training, and sign a new franchise agreement for the remainder of the term. You must be current on all your payments, assign your lease, if applicable, remodel the Studio to current standards (or get a commitment from transferee to undertake the remodeling), pay us the Transfer Fee and sign a general release.

n. Our right of first refusal to acquire your business

Not Applicable We do not have a right of first refusal to acquire your Business.

o. Our option to purchase your business

Not Applicable We do not have an option to purchase your Business on the expiration or termination of the Franchise Agreement.

p. Your death or disability FA: Section 8.4

CFA: Section 8.4 Within 6 months, franchise must be assigned by estate to an assignee in compliance with conditions for other transfers.


Page 28 PHX 329,224,856v4



OR CFA SUMMARY

q. Non-competition covenants during the term of the franchise

Noncompetition Agreement (Attachment D to FA and CFA)

No involvement in competing business; comply with non-solicitation and non-disclosure covenants.

r. Non competition covenants after the franchise is terminated or expires

Noncompetition Agreement (Attachment D to FA and CFA)

No involvement for 2 years in competing business within 25 miles of your Studio; comply with non-solicitation and non-disclosure covenants; cease use of know-how and trade secrets.

s. Modification of the agreement

FA: Section 13.7

CFA: Section 13.7 Requires writing signed by both parties. Other modifications primarily to comply with various states laws.

t. Integration/merger clause

FA: Section 13.7

CFA: Section 13.7 Only the terms of the Franchise Agreement and attachments to Franchise Agreement are binding (subject to state law). Other promises may not be enforceable.

u. Dispute resolution by arbitration or mediation

FA: Section 12

CFA: Section 12 Except for certain claims, all disputes must be mediated in county where we maintain our principal place of business (currently, Los Angeles County) at time dispute arises (except as otherwise disclosed in EXHIBIT "G" to this Disclosure Document).

v. Choice of forum FA: Section 12

CFA: Section 12 All disputes must be litigated or mediated in county where we maintain our principal place of business (currently, Los Angeles County) at time dispute arises (except as otherwise disclosed in EXHIBIT "G" to this Disclosure Document).

w. Choice of law FA: Section 13.1

CFA: Section 13.1 California law (except as otherwise disclosed in EXHIBIT "G" to this Disclosure Document).

ITEM 18 PUBLIC FIGURES

We do not use any public figures to promote our franchise.

ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the Disclosure Document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the Federal Trade Commission, the appropriate state regulatory agencies, and our management by contacting our Franchise Department by mail at 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064 or by phone (310) 854-5800.


Page 29 PHX 329,224,856v4

ITEM 20 OUTLETS AND FRANCHISEE INFORMATION

TABLE 1 - SYSTEM-WIDE OUTLET SUMMARY

FOR YEARS 2007 TO 20091

Outlet Type Year Outlets at the Start of

the Year

Outlets at the End of

the Year

Net Change

2007 0 0 0

2008 0 0 0

Franchised

2009 0 1 +1

2007 2 2 0

2008 2 2 0

Company-Owned

2009 2 2 0

2007 2 2 0

2008 2 2 0

Total Outlets

2009 2 3 +1

TABLE 2 - TRANSFERS OF OUTLETS FROM FRANCHISEES TO NEW OWNERS (OTHER THAN THE FRANCHISOR)


State Year Number of Transfers

2007 0

2008 0

Total

2009 0

TABLE 3 - STATUS OF FRANCHISED OUTLETS


State Year Outlets at

Start of

Year

Outlets

Opened

Termin-

ations

Non-

Renewals

Reacquired

by

Franchisor

Ceased

Operations

- Other

Reasons

Outlets at

End of

Year

2007 0 0 0 0 0 0 0

2008 0 0 0 0 0 0 0

California

2009 0 1 0 0 0 0 1

2007 0 0 0 0 0 0 0

2008 0 0 0 0 0 0 0

Totals

2009 0 1 0 0 0 0 1

1 Our fiscal year ends on December 31st. All references to years in these tables refers to December 31 of that year.


Page 30 PHX 329,224,856v4

TABLE 4 - STATUS OF COMPANY-OWNED OUTLETS


State Year Outlets at

Start of Year

Outlets

Opened

Outlets

Reacquired

From

Franchisee

Outlets

Closed

Outlets Sold

to Franchisee

Outlets at

End of Year

2007 2 0 0 0 0 2

2008 2 0 0 0 0 2

California

2009 2 0 0 0 0 2

2007 2 0 0 0 0 2

2008 2 0 0 0 0 2

Totals

2009 2 0 0 0 0 2

TABLE 5 - PROJECTED OPENINGS AS OF DECEMBER 31, 2009

State Franchise Agreements

Signed But Outlet Not

Opened

Projected New Franchised

Outlets in the Next Fiscal

Year

Projected New Company-

Owned Outlets in the Next

Fiscal Year

Arizona 0 4 0

California 0 30 2

Colorado 0 5 0

Connecticut 0 4 0

Florida 0 12 0

Georgia 0 2 0

Hawaii 0 4 0

Illinois 0 5 0

Indiana 0 1 0

Kansas 0 1 0

Kentucky 0 1 0

Maine 0 1 0

Maryland 0 3 0

Massachusetts 0 6 0

Michigan 0 2 0

Minnesota 0 3 0

Missouri 0 2 0

Montana 0 1 0

Nevada 0 3 0

New Hampshire 0 2 0

New Jersey 0 3 0

New Mexico 0 1 0

New York 0 15 0

North Carolina 0 2 0


Page 31 PHX 329,224,856v4

TABLE 5 - PROJECTED OPENINGS AS OF DECEMBER 31, 2009

State Franchise Agreements

Signed But Outlet Not

Opened

Projected New Franchised

Outlets in the Next Fiscal

Year

Projected New Company-

Owned Outlets in the Next

Fiscal Year

Oregon 0 4 0

Pennsylvania 0 2 0

Rhode Island 0 1 0

Tennessee 0 1 0

Texas 0 7 0

Utah 0 1 0

Vermont 0 2 0

Virginia 0 3 0

Washington, D.C. 0 4 0

Washington 0 6 0

Wisconsin 0 1 0

Total 0 145* 2

* We expect the vast majority of these franchisees to consist of licensees who previously operated under an Affiliation Arrangement and who choose to convert to the franchise system. See Item 1 for more information.

A list of all current Bikram Yoga franchisees is attached to this Disclosure Document as EXHIBIT "H" (Part A), including their names and the addresses and telephone numbers of their outlets as of December 31, 2009. In addition, EXHIBIT "H" (Part B) lists the name, city and state, and the current business telephone number (or, if unknown, the last known home telephone number) of every franchisee who had an outlet terminated, canceled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the franchise agreement during our most recently completed fiscal year or who has not communicated with us within 10 weeks of the issuance date of this Disclosure Document. If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system.

There are no franchisees that have signed confidentiality clauses with us during the last 3 fiscal years. There are no: (i) trademark-specific franchisee organization associated with the franchise system being offered that we have created, sponsored or endorsed; or (ii) independent franchisee organizations that have asked to be included in this Disclosure Document.

ITEM 21 FINANCIAL STATEMENTS

Audited financial statements of Bikram, Inc. for the fiscal years ended December 31, 2009 and December 31, 2008 are attached to this Disclosure Document as EXHIBIT "I".

ITEM 22 CONTRACTS

Attached to this Disclosure Document (or the Franchise Agreement or Conversion Franchise Agreement attached to this Disclosure Document) are copies of the following franchise and other contracts or agreements proposed for use or in use in this state:


Page 32 PHX 329,224,856v4

Exhibits to Disclosure Document

EXHIBIT "C" Franchise Agreement EXHIBIT "D" Conversion Franchise Agreement EXHIBIT "E" General Release EXHIBIT "J" Franchisee Disclosure Questionnaire

Attachments to Franchise Agreement

ATTACHMENT "C" ACH Authorization Form ATTACHMENT "D" Noncompetition, Nondisclosure and Nonsolicitation Agreement

Attachments to Conversion Agreement

ATTACHMENT "C" ACH Authorization Form ATTACHMENT "D" Noncompetition, Nondisclosure and Nonsolicitation Agreement

ITEM 23 RECEIPT

EXHIBIT "K" to this Disclosure Document are detachable receipts. You are to sign both, keep one copy and return the other copy to us.


EXHIBIT "A"

TO DISCLOSURE DOCUMENT

STATE AGENCIES AND ADMINISTRATORS

CALIFORNIA Commissioner of Corporations Department of Corporations 320 West 4th Street, #750 Los Angeles, CA 90013 (213) 576-7500

1-866-275-2677 HAWAII Commissioner of Securities of the State of Hawaii 335 Merchant Street, Room 203 Honolulu, Hawaii 96813 (808) 586-2722 ILLINOIS Illinois Attorney General Chief, Franchise Division 500 South Second Street Springfield, IL 62706 (217) 782-4465 INDIANA Secretary of State Securities Division Room E-111 302 West Washington Street Indianapolis, IN 46204 (317) 232-6681 MARYLAND Office of the Attorney General Securities Division 200 St. Paul Place Baltimore, Maryland 21202 (410) 576-6360

MICHIGAN Franchise Administrator Consumer Protection Division 670 Law Building Lansing, MI 48913 (517) 373-7117 MINNESOTA Department of Commerce Director of Registration 85 Seventh Place East, #500 St. Paul, MN 55101-3165 (651) 296-4026 NEW YORK New York Attorney General Investor Protection & Securities Bureau Franchise Section 120 Broadway, 23rd Floor New York, NY 10271 (212) 416-8236 NORTH DAKOTA North Dakota Securities Department State Capitol, Fifth Floor, Dept 414 600 East Boulevard Avenue Bismarck, North Dakota 58505-0510 (701) 328-4712

RHODE ISLAND Department of Franchise Regulation 1511 Pontiac Avenue

John O. Pastore Complex, Bldg 69-1

Cranston, Rhode Island 02920 (401) 462-9527 SOUTH DAKOTA Director, Division of Securities

445 East Capitol Ave.

Pierre, South Dakota 57501

(605) 773-4823

VIRGINIA State Corporation Commission Division of Securities and Retail Franchising Ninth Floor 1300 East Main Street Richmond, VA 23219 (804) 371-9051 WASHINGTON Department of Financial Institutions Securities Division 150 Israel Road SW Tumwater, WA 98501 (360) 902-8760 WISCONSIN Department of Financial Institutions Division of Securities 345 West Washington Avenue 4th Floor Madison, WI 53703 (608) 266-3364

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EXHIBIT "B"


FRANCHISOR’S AGENT FOR SERVICE OF PROCESS

James Ullman, Attorney at Law Greenberg Traurig

2375 East Camelback Road, Suite 700 Phoenix, Arizona 85016

In states listed in EXHIBIT "A", the additional agent for Service of Process is listed in EXHIBIT "A"


EXHIBIT "C"


FRANCHISE AGREEMENT

(For New Franchisees Who are Not Converting from an Affiliation Arrangement)

[See Attached]

(Standard Form - New Franchisee) PHX 329,224,856v4

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BIKRAM YOGA FRANCHISE AGREEMENT

This Bikram Yoga Franchise Agreement (this “Agreement”) is entered into this ___ day of _______________, 201__ (the “Effective Date”) between Bikram, Inc., a Delaware corporation (“we” or “us”), with principal offices at 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064 and the franchisee signing this Agreement below (“you”).

1 DEFINITIONS. Certain capitalized terms used throughout this Agreement are defined in ATTACHMENT "A" to this Agreement.

2 GRANT OF FRANCHISE. We hereby grant you a nonexclusive license to own and operate a Bikram Yoga studio (your “Studio”) using the System, the Copyrights and the Marks from a single location that we approve in writing within the geographic area identified in ATTACHMENT "B" (the “Franchise Area”). You do not have an exclusive or protected territory. We reserve all rights not expressly granted to you under this Agreement.

3 FRANCHISOR ASSISTANCE

3.1 Initial Training Program. We will provide an initial training program for all of your owners. The franchise owners agree to complete: (i) the classroom portion of the initial training program within 210 days after the Effective Date; and (ii) the on-site portion of the initial training program (which will last for approximately two days) before opening the Studio. We will not charge you a fee to attend the initial training program. However, within 10 days after we send you an invoice, you agree to reimburse us for all reasonable costs that we incur in providing the on-site training, including costs for travel, meals and lodging. You are also responsible for all travel, meals, lodging and other expenses you and your owners incur to attend the initial training program.

3.2 Ongoing Training.

(a) Advanced/Refresher Training. We may offer periodic advanced or refresher training courses. Attendance at these training programs is optional. If you elect to attend an advanced or refresher training course, we may charge you a fee of up to $1,000 per day for each individual who attends. This fee will be due and payable immediately prior to training. You will be responsible for all travel, meals, lodging and other expenses that you and your employees incur to attend any refresher or advanced training course.

(b) On-Site Assistance or Training. Upon your written request, we may but need not provide on-site assistance or training to you at your Studio at a mutually convenient time. If we agree to provide such on-site assistance or training, you agree to pay us a fee of up to $1,000 for each day that we are at your Studio. You also agree to reimburse us for our costs to provide the training (i.e., travel, meals and lodging expenses that we incur). The on-site training fee and related expense reimbursements are due and payable on the fifth (5th) day of the month for all on-site assistance provided during the prior month.

3.3 Operating Manual. We will lend you our confidential Operating Manual in text or electronic form (the “Manual”) for the duration of the Term. The Manual will contain mandatory and suggested specifications, operating procedures, and quality standards for products, services and procedures that we prescribe from time to time for Bikram Yoga franchisees. We can modify the Manual at any time. The modifications will become binding 30 days after we send you notice of the modification. All mandatory provisions contained in the Manual (whether they are included now or in the future) become part of this Agreement as if fully set forth in it. All information in the Manual is confidential and proprietary and constitutes our trade secrets. Information contained within the Manual may not be disclosed to third parties without our prior written approval. You agree to take all reasonable


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and necessary precautions to prevent any third party from viewing or otherwise obtaining information contained in the Manual.

3.4 Bikram Website. We will maintain an Internet Website for Bikram Yoga franchisees that will include information about your Studio that we deem appropriate. We may modify the content of and/or discontinue the Website at any time. We also may, but need not, provide you with your own domain name and website, which would be linked to our website. We would own the website and domain name but allow you to use them during the Term in exchange for a monthly license fee of up to $100 per month. We would have the right to control the content of your website.

3.5 Advertising Fund. Recognizing the value of uniform advertising and promotion to the goodwill and public image of the Bikram Yoga System, we may, but need not, establish and maintain one or more advertising funds (the “Advertising Fund”). The Advertising Fund would be used for marketing, advertising, sales promotion and promotional materials, public and consumer relations, publicity, and any other programs that we deem necessary or appropriate (“Advertising Campaigns”). We will provide you with 60 days’ advance written notice before we establish the Advertising Fund and conduct Advertising Campaigns, at which time you agree to begin paying us a monthly advertising fund fee equal to the greater of 2% of your Gross Revenues or $200 (or such lesser amount that we specify). The advertising fund fee will be due and payable on the fifth (5th) day of each month for the prior month’s operations. We have sole discretion in determining the content, concepts, materials, media, endorsements, frequency, placement, location and all other matters pertaining to any Advertising Campaign. Advertising fund fees will not be used to defray any of our general operating expenses, except for such reasonable salaries, administrative costs and overhead as we may incur in activities reasonably related to the administration or direction of the Advertising Fund and the Advertising Campaigns (which may include, without limitation: conducting market research, preparing and conducting television, radio, magazine, billboard, newspaper and other media programs and activities and employing advertising agencies, collecting and accounting for contributions to the Advertising Fund, and paying for the preparation and distribution of financial accountings and marketing materials). Any surplus of funds in the Advertising Fund may be invested and we may lend money to the Advertising Fund if there is a deficit. The Advertising Fund is not a trust and we have no fiduciary obligations to you with respect to our administration of the Advertising Fund. A financial accounting of the operations of the Advertising Fund, including deposits into and disbursements from the Advertising Fund, will be prepared annually and made available to you upon request.

3.6 Franchise Advisory Council. We will create a franchise advisory council (the “Advisory Council”) to serve as an advisory council to us with respect to advertising, marketing, operations, new service suggestions and other matters relating to the System. We will consider all suggestions from the Advisory Council in good faith, but we are not bound by any such suggestions. The Advisory Council will be established and operated according to rules and regulations we periodically approve. Except at any time that you are in default under this Agreement, you will have the right to be a member of the Advisory Council, and as a member, you will be entitled to all voting rights and privileges granted to other members of the Advisory Council. Each member will be granted one vote for each studio that it owns and operates on all matters on which members are authorized to vote.

4 INTELLECTUAL PROPERTY. You acknowledge that we and Bikram Choudhury are the sole and exclusive owners of the Marks, the Copyrights and the Know-How sublicensed to you under this Agreement and the goodwill associated with the Marks. You may only use our Marks, Copyrights, and Know-How in connection with the operation of your Studio and in strict compliance with this Agreement, the Manual, and all applicable standards, specifications, restrictions and operating procedures that we prescribe from time to time during the Term. The Manual may contain detailed requirements and limitations regarding your use of our intellectual property and you agree to comply with all such requirements and limitations. Any unauthorized use of the Marks, Copyrights or Know-How constitutes an infringement of our rights. At any time, we may change the Marks, Copyrights


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and/or Know-How that we license you to use and you agree to comply with any such instructions from us. You agree to implement all reasonable procedures that we prescribe from time to time to prevent unauthorized use of any of the Marks, Copyrights or Know-How. You agree that you will not disclose the Know-How to any person other than the owners of the franchise. If we are required to modify or discontinue use of any Mark or Copyright as a result of litigation, we will reimburse you for your tangible costs of compliance (e.g., changing inventory, signage, etc.). Neither of us is required to mediate any claim relating to the subject matter of this Section 4.

5 YOUR RESPONSIBILITIES.

5.1 Initial and Ongoing Fees.

(a) Initial Franchise Fee. You agree to pay us a non-recurring, non-refundable initial franchise fee in the amount of $10,000 in one lump sum upon execution of this Agreement.

(b) Royalty Fee. You agree to pay us a monthly royalty fee equal to the greater of 5% of your Gross Revenues or $1,000. The royalty fee will be due and payable on the fifth (5th) day of each month for the prior month’s operations.

(c) Other Fees. To the extent applicable, you agree to pay us the other fees referenced in this Agreement in the time and manner specified in this Agreement.

(d) Late Fee and ISF Fee. You agree to pay us a late fee equal to the lesser of 10% per annum (pro rated on a daily basis) or the highest rate permitted by your State’s law on any amounts that are not paid to us when due. In addition to the late fee, you also agree to pay us an insufficient funds fee of $25 for each instance where either: (i) we debit your Account (defined below) and there are insufficient funds; or (ii) a check from you is dishonored by your bank due to insufficient funds in your Account.

(e) Method of Payment. You agree to sign and send us an ACH Authorization Form allowing us to electronically debit a banking account that you designate (your “Account”) for: (i) all fees payable to us pursuant to this Agreement; and (ii) any amounts that you owe to us or any of our affiliates for the purchase of goods or services. Our current form of ACH Authorization Form is attached to this Agreement as ATTACHMENT "C". You also agree to sign and deliver to us any other documents that we or your bank may require from time to time to authorize us to debit your Account for such amounts. You agree to ensure there are sufficient funds in your Account available for withdrawal by electronic transfer before each due date. If there are insufficient funds in your Account to cover all amounts owed by you, any excess amounts owed by you will be payable upon demand, together with any amounts imposed under Section 5.1(d).

5.2 Developing Your Studio. You agree to locate, obtain our approval of, and either purchase or lease the premises for your Studio within 120 days after the Effective Date. The premises for your Studio shall be located within the Franchise Area and conform to the minimum site selection criteria that we establish from time to time. You agree to submit to us a complete site report (containing such demographic, commercial and other information, photographs and video tapes as we may reasonably require) for the site that you propose for your Studio. We have the right to accept or reject all proposed sites in our commercially reasonable judgment. We will have 30 days after receipt of the requisite materials to approve or disapprove a proposed site. You do not need our approval of the terms of your lease, but you agree to promptly send us a signed copy. At your sole expense, you agree to make changes necessary to conform the premises to the specifications and requirements contained in the Manual, including, but not limited to, specifications pertaining to square footage, flooring, mirrors, bathrooms and shower space, lockers, retail space, heating systems and lighting.


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5.3 Fixtures, Furnishings, Equipment and Supplies. In the development, construction and continuing operation of your Studio, you agree to purchase and use such equipment, fixtures, maintenance and repair items, computer hardware and software, signs, and other equipment and operating supplies that we have approved as meeting our specifications and standards for quality, delivery, performance, design, appearance and price of the product. We will maintain the sole list of approved or designated suppliers for these items, if we require that any such items be purchased from approved or designated suppliers. You may propose the use of an alternative supplier in accordance with Section 5.7.

5.4 Relocation. You may relocate your Studio with our prior approval, which we will not unreasonably withhold. If we allow you to relocate, you agree to: (i) pay us a relocation fee of $500, which will be due ten (10) days after invoicing; (ii) obtain our prior approval of the layout and location of your new Studio, which shall be located within the Franchise Area; (iii) pay all expenses and liabilities to terminate the lease and move; (iv) develop your new Studio to comply with all of our then existing studio specifications and standards; and (v) complete the relocation and resume operations within 90 days.

5.5 Opening. You agree to notify us of your proposed opening date at least ten (10) days before opening so we can inspect your Studio (either in person or through a review of photographs or video) to ensure that it complies with our specifications. If we notify you of any problems with your Studio, you agree to postpone the opening of your Studio until you fix the problems. You agree to open your Studio to the public within one (1) year after the Effective Date.

5.6 Operation of the Studio.

(a) Generally. You agree to offer all goods and services that we require from time to time in our commercially reasonable discretion. You will not offer (or allow any third party to offer) any other goods or services at your Studio without our permission. You agree to operate your Studio: (i) in a manner that will promote the goodwill of the Marks; and (ii) in full compliance with our standards and all other terms and conditions of this Agreement and the Manual. All Bikram Yoga classes shall be taught in strict conformance with all of our policies, procedures and requirements, including, but not limited to, method of instruction, room conditions, lighting and all other matters pertaining to a Bikram Yoga class. Bikram Yoga classes may only be taught by instructors who meet the instructor qualifications described in Section 5.6(b).

(b) Instructor Qualifications. All owners and Bikram Yoga instructors shall successfully complete the Bikram Yoga teacher certification program and comply with all re-certification requirements throughout the Term and pay the then-applicable fee for certification and re-certification, as applicable. The failure of any owner to maintain his or her certified status shall constitute a material default of this Agreement. All owners and Bikram Yoga instructors shall also successfully complete training in a cardiovascular pulmonary resuscitation course approved by the American Heart Association or American Red Cross. You are responsible for ensuring that your owners and instructors complete refresher training at intervals specified by us or by the American Heart Association or American Red Cross.

(c) Minimum Number of Classes. Unless caused by events beyond your control (such as when your Studio is unusable because of fire, utility service failure or other such events), you agree to offer at least three (3) Bikram Yoga classes each day at your Studio, Monday through Friday.

(d) Student Contracts. You agree to use all forms of student contracts that we may prescribe from time to time. You are responsible for ensuring that all forms and agreements that you cause your students to sign conform with all applicable state, federal and local laws and regulations.


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(e) Advanced Yoga Class. You may not teach the Bikram’s Advanced Yoga Class without our prior written approval. In order to teach an advanced class, you may be required to attend additional specialized training and you may be prohibited from charging students who attend this class. If we allow you to teach the Bikram’s Advanced Yoga Class, we will also grant you a license to use the Bikram’s Advance Yoga Class sequence of 86 poses in connection with such training. In such an event, all references to Copyrights shall include the copyright for the Bikram’s Advance Yoga Class sequence of 86 poses.

(f) Management. You agree that your owners will dedicate their full time efforts to the day to day management, supervision and operation of the Studio. Your owners will teach the Bikram Yoga classes unless you hire or engage the services of one or more other individuals who are certified Bikram Yoga instructors. You may hire an individual to assist the owners with the day-to-day management and supervision of your Studio (a “Studio Director”). Your Studio Director shall: (i) meet our qualifications; (ii) be approved by us; and (iii) successfully complete the studio director training program (if we require any such training). At least one of the owners of the franchise shall agree to assume responsibility for the daily management and supervision of your Studio if the Studio Director is unable to perform his or her duties due to death, disability, termination of employment, or for any other reason, until such time that you obtain a suitable replacement Studio Director. If you do not hire a Studio Director, you agree to designate one of your owners to serve as Studio Director.

5.7 Suppliers and Purchasing. You agree to purchase or lease all products, supplies, equipment and other items specified in the Manual from time to time. If required by the Manual, you agree to purchase certain goods and services only from suppliers designated or approved by us (which may include us or our affiliates). If you want us to approve a supplier that you propose, you will need to send us a written notice specifying the supplier’s name and qualifications and any additional information that we request. We will approve or reject your request within 30 days after we receive your notice and all additional information (and samples) that we request. You agree to reimburse us for all out-of-pocket costs that we incur in reviewing the supplier within ten (10) days after we invoice you. If we establish the Advertising Fund, we will deposit into the Advertising Fund all rebates and other monetary consideration that we receive from suppliers based upon franchisee purchases. At any time that there is no Advertising Fund, we have the right to retain volume rebates, markups and other benefits from suppliers and we have no obligation to pass any such amounts on to you or to use any such amounts for your benefit.

5.8 Equipment Maintenance and Changes. You agree to: (i) maintain all equipment used in connection with your Studio in good condition; and (ii) promptly replace or repair any equipment that is damaged, worn-out or obsolete. We may require substantial changes to your equipment, which may require you to make additional investments. You acknowledge that our ability to require our franchisees to make significant changes to their equipment is critical to our ability to administer and change the System and you agree to comply with any such required change within the time period that we reasonably prescribe.

5.9 Studio Remodeling and Maintenance. You agree to remodel and make all improvements and alterations to your Studio that we reasonably require from time to time to reflect our then-current image, appearance and studio specifications. You may not remodel or significantly alter your premises without our prior written approval. You agree to repair and maintain your Studio and keep the same in good order and condition, reasonable wear and tear excepted, and make all necessary repairs, including replacements, renewals and alterations, at your sole expense, to comply with our standards and specifications. You agree to comply with any maintenance, cleaning or facility upkeep schedule that we prescribe from time to time.

5.10 Software License Agreement; Technology Fees. At any time, we may develop proprietary software for Bikram Yoga studios. If this occurs, you agree to enter into a software license


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agreement with us (or an affiliate of ours) and pay us (or our affiliate) commercially reasonable licensing, support and maintenance fees. The terms of the software license agreement will govern the terms pursuant to which you may utilize this software. We also may enter into a master software or technology license agreement with a third party licensor and then sublicense the software or technology to you, in which case we may charge you for all amounts that we pay to the licensor based on your use of the software or technology. Pursuant to Section 3.4, we may grant you a license to use a Bikram website that will be linked to our website and you agree to pay us the monthly license fee. All fees referenced in this Section are collectively referred to as the “Technology Fee.” The Technology Fee will be due and payable ten (10) days after invoicing.

5.11 Local Advertising.

(a) Local Advertising. On a monthly basis, you agree to spend a minimum amount equal to the greater of $400 or 4% of Gross Revenues on local advertising. If we establish an Advertising Fund, we may require that you pay us up to half of this amount (i.e., greater of $200 or 2% of Gross Revenues), which we will deposit into the Advertising Fund. We will not require that you contribute more than the greater of $200 or 2% of your Gross Revenues on a monthly basis to the Advertising Fund. The advertising expenditure requirements described in this Section 5.11(a) shall commence immediately after the expiration of the 90 day period after you open your Studio. You agree to obtain our approval of all local advertising and promotional materials that we have not prepared or previously approved (including any materials that we have prepared or approved but that you modify) before you use them. If we do not disapprove the materials within 30 days, we shall be deemed to have approved them. You may not use any advertising or promotional materials that we have disapproved (including materials that we previously approved).

(b) Website. You agree to obtain our approval of any website that you use. We will not unreasonably withhold our approval. If we allow you to operate a website, your website shall conform to all of our website requirements, whether set forth in the Manual or otherwise. If you wish to modify your approved site, all proposed modifications shall also receive our prior approval. You agree to obtain our prior approval for any Internet domain name and/or home page address.

(c) Grand Opening. During the first 90 days after you open your Studio, you agree to spend a total of at least $2,500 on advertising and other marketing activities. You agree to obtain our approval of all such advertising in accordance with Section 5.11(a).

5.12 Franchisee as Entity. If you are a corporation, partnership, limited liability company or other form of association (collectively referred to as an “Entity”), you agree to provide us with a list of all of your owners. All owners of the Entity (whether direct or indirect) are jointly and severally responsible for the Entity’s performance of this Agreement and each individual owner is bound by all of the terms of this Agreement.

5.13 Books and Records. You agree to: (i) prepare and maintain at your Studio for at least three (3) years after their preparation complete and accurate books, records, accounts and tax returns pertaining to your Studio; (ii) send us copies of your books and records within seven (7) days of our request; and (iii) maintain, and upon our request, furnish to us by e-mail, mail or facsimile, a written list of all of your students, student attendance records, student cards sold, classes offered, and any other information about your classes and students that we specify in the Manual.

5.14 Reports and Financial Statements.

(a) Gross Revenues. You agree to prepare and provide to us a monthly statement of Gross Revenues for your Studio no later than the 5th day of each month for the prior month’s operations. Within 30 days after the close of each calendar year (or partial calendar year during the last year of the Term if the Term ends on a date other than December 31), you agree to provide to us,


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in the format that we require, an annual statement of Gross Revenues (with a monthly breakdown of Gross Revenues). You agree to provide any other report that we require from time to time in the form and manner that we prescribe.

(b) Advertising Reports. You agree to prepare and provide to us a monthly statement of your expenditures on local advertising required by Section 5.11(a) and Section 5.11(c) no later than the fifth (5th) day of each month for all such expenditures incurred during the prior month. The foregoing statements shall be accompanied by copies of receipts for the advertising expenditures.

(c) Financial Statements. Within 90 days after the end of each calendar year, you agree to prepare: (i) an annual statement of profit and loss and source and application of funds for your franchised business; and (ii) a balance sheet for your franchised business as of the end of the calendar year. You agree to send us your financial statements upon our request. All financial statements shall be: (i) signed by you certifying to us that the information contained in the financial statement is true, complete, and accurate; (ii) submitted in any format that we reasonably prescribe from time to time; and (iii) prepared in accordance with Generally Accepted Accounting Principles, unless we specify otherwise.

(d) Disclosure of Statements. You hereby authorize us to disclose the financial statements, reports, and operating data to prospective franchisees, regulatory agencies and others at our discretion, provided such disclosure is not prohibited by applicable law.

5.15 Insurance. For your protection and ours, you agree to maintain the following insurance policies issued by carriers approved by us: (i) “all risk” property insurance coverage on all assets, including inventory, furniture, fixtures, equipment, supplies and other property used in the operation of your Studio, which must include coverage for fire, vandalism and malicious mischief and have coverage limits of at least full replacement cost; (ii) comprehensive general liability insurance against claims for bodily and personal injury, death and property damage caused by or occurring in conjunction with the operation of your Studio, containing minimum liability protection of $1,000,000 combined single limit per occurrence, and $2,000,000 in the aggregate; (iii) worker’s compensation insurance and employer’s liability insurance as required by law; and (iv) any other insurance that we specify in the Manual from time to time. You agree to provide us with proof of coverage on demand. You agree to obtain these insurance policies from insurance carriers rated A or better by Alfred M. Best & Company, Inc. All carriers shall be licensed and admitted in the state in which you operate your Studio. All insurance policies that we require shall: (i) name us (and our members, officers, directors, and employees) as additional insureds; (ii) contain a waiver by the insurance carrier(s) of all subrogation rights against us; and (iii) provide that we receive ten (10) days prior written notice of the termination, expiration, cancellation or modification of any such policy. If any of your insurance companies fail to give us notice as required in this Section, then we may disapprove the policy of that company. In that event, you agree to immediately find additional coverage with an alternative carrier satisfactory to us.

5.16 Compliance with Laws. You agree to secure and maintain in force all required licenses, permits and regulatory approvals relating to the operation of your Studio and operate and manage your Studio in full compliance with all applicable laws.

6 INSPECTIONS AND AUDITS

6.1 Inspections. To ensure compliance with this Agreement, we or our representatives will have the right to enter your Studio, evaluate your operations and inspect or examine your books, records, accounts and tax returns. Our evaluation may include watching or participating in your Bikram Yoga classes and contacting your landlord, students and/or employees. We may conduct our evaluation at any time and without prior notice. During the course of our evaluations, we and our representatives will use reasonable efforts to minimize our interference with the operation of your Studio, and you and


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your employees will cooperate and not interfere with our inspection. You consent to us accessing your computer system and retrieving any information that we deem appropriate in conducting the inspection.

6.2 Audit. We have the right, at any time, to have an independent audit made of your books and financial records. You agree to fully cooperate with us and any third parties that we hire to conduct the audit. If an audit reveals an understatement of the Gross Revenues of your Studio, you agree to immediately pay to us any additional fees that you owe us together with any late fee payable pursuant to Section 5.1(d). Any audit will be performed at our cost and expense unless the audit: (i) is necessitated by your failure to provide the information requested or to preserve records or file reports as required by this Agreement; or (ii) reveals an understatement of your Gross Revenues by at least two percent (2%) over the period of the audit, in which case you agree to pay us our actual cost of the audit or inspection, including without limitation, reasonable accounting and attorneys’ fees and travel and lodging expenses incurred by us or our representatives in conducting the audit. All audit cost reimbursements will be due ten (10) days after invoicing.

7 INDEMNIFICATION. You agree to indemnify and hold harmless the Indemnified Parties for, from and against any and all Losses and Expenses incurred by any of the Indemnified Parties as a result of or in connection with any of the following Claims: (i) any Claim asserted against you and/or any of the Indemnified Parties arising from the marketing, use or operation of your Studio or your alleged performance and/or nonperformance of any of your obligations under this Agreement; (ii) any other Claim arising from alleged violations of your relationship with and responsibility to us; or (iii) any Claim relating to taxes or penalties assessed by any governmental entity against us that are directly related to your failure to pay or perform functions required of you under this Agreement. This provision shall continue in full force and effect subsequent to and notwithstanding the expiration, termination, assignment or transfer of this Agreement.

8 ASSIGNMENT/TRANSFER OR OTHER DISPOSITION OF THE BUSINESS

8.1 By Us. This Agreement and the franchise is fully assignable by us (without prior notice to you) and shall inure to the benefit of any assignee(s) or other legal successor(s) to our interest in this Agreement, provided that we shall, subsequent to any such assignment, remain liable for the performance of our obligations under this Agreement up to the effective date of the assignment. We may also delegate some or all of our obligations under this Agreement to one or more persons.

8.2 You May Not Assign Without Our Approval; Exceptions. You do not need our approval and do not need to pay us a transfer fee: (i) to assign this Agreement to an Entity in which you own and control 100% of the equity and voting power; or (ii) to transfer ownership interests in you among existing owners of the Entity or to the Entity (“Permitted Transfers”). You agree to notify us of any Permitted Transfer at least 10 days prior to the transfer. Except for the Permitted Transfers, neither the franchise nor your Studio (or any interest therein) nor any part or all of the ownership interest in you (if you are an Entity), may be directly or indirectly, voluntarily or involuntarily (including by judicial award, order or decree), assigned, sold, sublicensed or otherwise transferred (any of the foregoing shall be referred to herein as a “Transfer”) without our prior approval. Any Transfer without our approval will be void.

8.3 Conditions for Approval of a Transfer. We will not unreasonably withhold our approval of a Transfer, provided that the proposed transferee meets all of our then applicable standards for franchisees, and further provided that the following conditions are met prior to or concurrently with the Transfer date:

(a) Debts and Obligations. All your obligations incurred in connection with this Agreement and any other agreements between you and us have been discharged or assumed by the transferee and you have paid all amounts owed by you to us that are then due and unpaid;


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(b) Completion of Initial Training. The transferee’s owners are all certified Bikram Yoga instructors who have completed the initial franchise training program and satisfy all other criteria that we consider in evaluating a new franchisee;

(c) Lease. Your landlord, if applicable, consents to your assignment of the lease to the transferee, or the transferee is diligently pursuing an approved substitute location within the Franchise Area;

(d) New Agreement. The transferee and its owners sign a new franchise agreement and agreed to be bound by the form of franchise agreement and such ancillary agreements as are then customarily used by us in the grant of franchises for Bikram Yoga franchises, except that the transferee need not pay a separate initial franchise fee;

(e) Transfer Fee. You or the transferee pay us a transfer fee equal to $3,000 to defray expenses that we incur in connection with the Transfer;

(f) General Release. You and your owners sign a General Release of any and all claims against us and our members, managers, officers, directors, employees and agents arising prior to or contemporaneously with the Transfer; and

(g) Additional Actions. You and the transferee satisfy any other conditions we reasonably require as a condition to our approval of the Transfer.

Our consent to a Transfer shall not constitute a waiver of any claims we may have against the transferor, nor shall it be deemed a waiver of our right to demand exact compliance with any of the terms or conditions of the franchise by the transferee.

8.4 Your Death or Disability. Upon the death or permanent disability of you (if you are an individual) or an owner of you (if you are an Entity), the executor, administrator, conservator or other personal representative of such individual shall assign such individual’s interest in you and/or the franchise, as applicable, to a third party approved by us within a reasonable time. Such assignments (including, without limitation, transfers by bequest or inheritance) will be subject to the same conditions as any other assignment under this Agreement and if such heirs or beneficiaries are unable to meet the conditions of Section 8.3 above, such personal representative shall have a reasonable time, not to exceed 180 days, plus extensions agreed to by us, from the date of such individual’s death or permanent disability, to dispose of such individual’s interest.

9 TERM AND SUCCESSOR AGREEMENTS. The initial term of this Agreement will begin on the Effective Date and expire ten (10) years thereafter (the “Initial Term”). If you meet the conditions specified below, you may enter into a successor Bikram Yoga franchise agreement (a “Successor Agreement”) at the expiration of the Initial Term and at the expiration of each renewal term. The Successor Agreement shall be the current form of Bikram Yoga franchise agreement that we use in granting Bikram Yoga franchises as of the date of the expiration of the Term. Each renewal term will consist of a five (5) year period. For purposes of clarity, the term of this Agreement, whether it be the Initial Term or a renewal term, shall be referred to as the “Term”. In order to enter into a Successor Agreement, you shall: (i) give us written notice of your intent to enter into the Successor Agreement not less than 90 days nor more than 180 days prior to the expiration of the Term; (ii) sign the Successor Agreement as well as all ancillary documents that we require Bikram Yoga franchisees to sign in connection with the purchase of a Bikram Yoga franchise as of the date of the expiration of the Term; (iii) sign our then current form of General Release of claims in our favor and cause all of your owners to also sign the General Release; (iv) remodel your Studio to comply with all of our then current standards and specifications; (v) pay us a $5,000 renewal fee; and (vi) take such additional action as we reasonably require. Also, in order to renew, you understand that you cannot be in default under this Agreement.


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10 TERMINATION OF THE FRANCHISE

10.1 By You. You may terminate this Agreement if you are in compliance with this Agreement and we materially breach this Agreement and fail to cure such breach within 90 days after you deliver to us a written notice specifying the nature of the breach. If you terminate this Agreement, all of your post-termination obligations described in Section 11 will not be waived and you agree to strictly adhere to those obligations and comply with all other provisions of this Agreement that survive the expiration or termination of this Agreement.

10.2 Termination By Us Without Cure Period. We may, in our sole discretion, terminate this Agreement upon five (5) days’ written notice, without opportunity to cure, for any of the following reasons, all of which constitute material events of default under this Agreement:

(i) If any owner fails to complete the initial training program in the time and manner required by Section 3.1;

(ii) If you fail to purchase or lease a suitable premises that we have approved in the time and manner required by Section 5.2;

(iii) If you fail to open your Studio in the time required by Section 5.5;

(iv) If you become insolvent by reason of your inability to pay your debts as they become due, you file a voluntary petition in bankruptcy or any pleading seeking any reorganization, liquidation, dissolution or composition or other settlement with creditors under any law, or are the subject of an involuntary bankruptcy (which may or may not be enforceable under the Bankruptcy Act of 1978);

(v) If you fail or refuse to pay any amount owed to us or an affiliate of ours within five (5) days after receipt of a demand for payment;

(vi) If you underreport any amount owed to us by at least two percent (2%), after having already committed such a breach that had been cured in accordance with Section 10.3;

(vii) If you or any of your owners are convicted of or plead no contest to a felony, a crime involving moral turpitude or any other crime or offense, or are subject to any administrative disciplinary action, that is in our sole discretion likely to adversely affect the reputation of the System or the goodwill associated with Bikram Yoga studios or the Marks;

(viii) If you manage or operate your Studio in a manner that presents a health or safety hazard to your students, employees or the public;

(ix) If you or any of your owners make any material misrepresentation to us, whether occurring before or after being granted the franchise;

(x) If you or any of your owners make an unauthorized Transfer;

(xi) If you misuse or make an unauthorized use of the Marks or Copyrights or commit any act which can be reasonably expected to materially impair the goodwill associated with the Marks;

(xii) If you or any owner violates the terms of a Noncompetition Agreement (defined in Section 11.2); or

(xiii) If we terminate any other agreement between you and us or if any affiliate of ours terminates any agreement between you and such affiliate because of your default.

10.3 Additional Conditions of Termination. We may, in our sole discretion, terminate this Agreement upon 30 days' written notice if you fail to comply with any other provision of this


11

Agreement (other than the defaults listed in Section 10.2 above) or any other agreement with us, or any mandatory specification, standard or operating procedure prescribed by us, unless such default is cured, as determined by us in our sole discretion, within such 30-day notice period. If we deliver a notice of default to you pursuant to this Section 10.3, we may suspend performance of any of our obligations under this Agreement until such time that you have fully cured the breach.

11 TERMINATION, EXPIRATION OR TRANSFER OF AGREEMENT

11.1 Your Responsibilities. You agree that after the termination, expiration or Transfer of this Agreement you will:

(i) Pay us all amounts that you owe us;

(ii) Not use any Marks, any colorable imitation thereof or other insignia of a Bikram Yoga studio in any manner or for any purpose, or utilize for any purpose any trade name, trade or service mark or other commercial symbol that suggests or indicates a connection or association with us;

(iii) Not directly or indirectly at any time or in any manner replicate, disclose or otherwise use the System in connection with any other business or in any other capacity;

(iv) Return to us all copies of the Manual loaned to you, or any portions thereof, as well as all signs, sign faces, brochures, advertising and promotional materials, forms, and any other materials bearing or containing any of the Marks, Copyrights or other identification relating to a Bikram Yoga studio, unless we allow you to transfer such items to an approved transferee;

(v) Take such action as may be required to cancel all fictitious or assumed names or equivalent registrations relating to your use of any of the Marks;

(vi) Make such modifications and alterations to the premises that are necessary or that we require to prevent any association between us or the System and any business subsequently operated by you or any third party at the premises; provided, however, that this subsection shall not apply if your franchise is transferred to an approved transferee;

(vii) Cease all use of the domain name and website that we allowed you to use during the Term; and

(viii) Notify all telephone companies, listing agencies and domain name registration companies (collectively, the “Agencies”) of the termination or expiration of your right to use: (a) the telephone numbers and/or domain names, if applicable, related to the operation of your Studio; and (b) any regular, classified or other telephone directory listings associated with the Marks. You hereby authorize the Agencies to transfer such telephone numbers, domain names and listings to us. You hereby authorize us, and appoint us and any officer we designate, as your attorney-in-fact, to direct the Agencies to transfer the telephone numbers, domain names and listings to us should you fail or refuse to do so.

11.2 Restrictive Covenants. Concurrently with the execution of this Agreement, you and each individual that directly or indirectly holds an ownership interest in you shall sign a Nondisclosure, Nonsolicitation, and Noncompetition Agreement (a “Noncompetition Agreement”), in the form attached hereto as ATTACHMENT "D".

11.3 Continuing Obligations. All obligations that expressly or by their nature survive the termination, expiration or transfer of this Agreement shall continue in full force and effect subsequent to and notwithstanding its termination, expiration or transfer and until they are satisfied in full or by their nature expire.


12

12 DISPUTE RESOLUTION. Except as otherwise specified in Section 4, before any litigation takes place, the parties agree to submit any claim, dispute or disagreement, including any matter pertaining to the interpretation of this Agreement or issues relating to the offer and sale of the franchise or the relationship between the parties (a “Dispute”) to mediation before a mutually-agreeable mediator. Any mediation shall take place in the county in which we maintain our principal place of business at the time the Dispute arises (currently, Los Angeles County, California). If the parties fail to resolve the Dispute by mediation or the dispute relates to a breach of Section 4, either party may file a lawsuit in any state or federal court of general jurisdiction in the county in which we maintain our principal place of business at the time the Dispute arises (currently, Los Angeles County, California) and we and you irrevocably submit to the jurisdiction of such court and waive any objection either of us may have to either the jurisdiction or venue of such court. WE AND YOU IRREVOCABLY WAIVE: (i) TRIAL

BY JURY; AND (ii) THE RIGHT TO LITIGATE ON A CLASS ACTION BASIS, IN ANY

ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,

BROUGHT BY EITHER OF THE PARTIES.

13 GENERAL PROVISIONS.

13.1 Governing Law. This Agreement and the franchise relationship shall be governed by the laws of the State of California (without reference to its principles of conflicts of law), provided that any law of the State of California that regulates the offer and sale of franchises or business opportunities or governs the relationship of a franchisor and its franchisee will not apply unless its jurisdictional requirements are met independently without reference to this Section.

13.2 Relationship of the Parties. You understand and agree that nothing in this Agreement creates a fiduciary relationship between you and us or is intended to make either party a general or special agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose.

13.3 Severability. Each section, subsection, term and provision of this Agreement, and any portion thereof, shall be considered severable.

13.4 Approvals. Whenever this Agreement requires our prior approval or consent, you agree to make a timely written request for it, and such approval must be obtained in writing in order to be effective and binding on us. Except as otherwise expressly provided herein, if we fail to approve or reject any request of yours within the period of time specified therefor, we shall be deemed to have disapproved your request.

13.5 Force Majeure. Neither we nor you shall be liable for loss or damage or deemed to be in breach of this Agreement if our or your failure to perform our or your obligations results from any event of force majeure. Any delay resulting from an event of force majeure will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable under the circumstances.

13.6 Binding Effect. This Agreement is binding upon the parties to this Agreement and their respective executors, administrators, heirs, assigns and successors in interest. Nothing in this Agreement is intended, nor shall be deemed, to confer any rights or remedies upon any person or legal entity not a party to this Agreement; provided, however, that the Indemnified Parties and the additional insureds listed in Section 5.15 shall be intended third party beneficiaries under this Agreement.

13.7 Integration. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CHANGED EXCEPT BY A WRITTEN DOCUMENT SIGNED BY BOTH PARTIES. The attachment(s) are part of this Agreement, which constitutes the entire understanding and agreement of the parties, and there are no other oral or written understandings or agreements between us and you relating to the subject matter of this Agreement. As referenced above, all mandatory provisions in the Manual are part of this Agreement. Any


13

representations not specifically contained in this Agreement or the Franchise Disclosure Document made prior to entering into this Agreement do not survive subsequent to the execution of this Agreement. Nothing in this Agreement is intended to disclaim any of the representations we made in the Franchise Disclosure Document.

13.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.

13.9 Notice. All notices to be given under this Agreement are to be in writing, delivered by hand, telegram or first class mail, to the following addresses (which may be changed by written notice):

YOU: As set forth below your signature on this Agreement

US: Bikram, Inc. 11500 W. Olympic Blvd., Suite 150 Los Angeles, California 90064

WITH A COPY TO: James A. Ullman Greenberg Traurig LLP 2375 East Camelback Road, Suite 700 Phoenix, Arizona 85016

Notices of changes of addresses shall be given at least ten (10) business days in advance of any notification contemplated under this provision or the prior address on file shall be deemed valid. Notice shall be considered given at the time delivered by hand, or one (1) business day after sending by telegraph or comparable electronic or computer system, or three (3) business days after placed in the mail, postage prepaid, by certified mail with a return receipt requested.

14 REPRESENTATIONS AND ACKNOWLEDGEMENTS. YOU HEREBY REPRESENT THAT: (i) YOU HAVE NOT RECEIVED OR RELIED UPON ANY WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS CONTEMPLATED BY THIS AGREEMENT, EXCEPT FOR ANY INFORMATION DISCLOSED IN THE FRANCHISE DISCLOSURE DOCUMENT; (ii) YOU HAVE NO KNOWLEDGE OF ANY REPRESENTATIONS BY US OR ANY OF OUR OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR REPRESENTATIVES ABOUT THE BUSINESS CONTEMPLATED BY THIS AGREEMENT THAT ARE CONTRARY TO THE TERMS OF THIS AGREEMENT OR THE FRANCHISE DISCLOSURE DOCUMENT; (iii) YOU RECEIVED (1) AN EXACT COPY OF THIS AGREEMENT AND ITS ATTACHMENTS AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT IS EXECUTED; AND (2) OUR FRANCHISE DISCLOSURE DOCUMENT AT THE EARLIER OF (A) TEN (10) BUSINESS DAYS BEFORE YOU SIGNED A BINDING AGREEMENT OR PAID ANY MONEY TO US OR OUR AFFILIATES OR (B) AT SUCH EARLIER TIME IN THE SALES PROCESS THAT YOU REQUESTED A COPY; AND (iv) YOU ARE AWARE OF THE FACT THAT OTHER PRESENT OR FUTURE FRANCHISEES OF OURS MAY OPERATE UNDER DIFFERENT FORMS OF AGREEMENT AND CONSEQUENTLY THAT OUR OBLIGATIONS AND RIGHTS WITH RESPECT TO OUR VARIOUS FRANCHISEES MAY DIFFER MATERIALLY IN CERTAIN CIRCUMSTANCES.

[SIGNATURE PAGE FOLLOWS]


14

The parties to this Agreement have executed this Agreement effective as of the Effective Date first above written.

FRANCHISOR:

Bikram, Inc., a Delaware corporation

By: Name: Its:

YOU (If you are an entity):

______________________________________, a(n)___________________________________

By:________ Name: Its:

*By signing below, each individual owner of a

direct or indirect interest in the franchisee

entity agrees to be bound by all of the terms

and conditions of the Franchise Agreement.

YOU (If you are not an entity):

_________________________________________ Name:____________________________________

_________________________________________ Name: ___________________________________

_________________________________________ Name: ___________________________________

_________________________________________ Name: ___________________________________

_______________________________________ Name:__________________________________

_______________________________________ Name: _________________________________

_______________________________________ Name: _________________________________

_______________________________________ Name:__________________________________

Principal Business Address: _________________________________________ _________________________________________ _________________________________________ _________________________________________

Principal Business Address: _______________________________________ _______________________________________ _______________________________________ _______________________________________

* All individual owners of an interest in the franchise, or the entity that is the franchisee, must

sign this agreement, regardless of whether they are active owners or passive owners/ silent

partners.


ATTACHMENT "A"

TO BIKRAM YOGA FRANCHISE AGREEMENT

DEFINED TERMS

“Claim” means any and all claims, actions, demands, assessments, litigation, or other form of regulatory or adjudicatory procedures, claims, demands, assessments, investigations, or formal or informal inquiries.

“Copyrights” means the copyrights owned by Bikram Choudhury to the following items: advertisements and promotional materials; Bikram’s Beginning Yoga Class; Bikram’s Dialogue; Bikram’s Sequence of 26 Poses and 2 Breathing Exercises; and any other materials that we hereafter designate for use in connection with a Bikram Yoga studio.

“Gross Revenues” means all gross sums collected or billed for goods and services sold in connection with a Bikram Yoga studio, together with any other revenue related to or derived from the operation of a Bikram Yoga studio, including the proceeds of any business interruption insurance. Gross Revenues does not include any sales or use taxes.

“Indemnified Parties” means us and each of our past, present and future owners, members, officers, directors, employees and agents, as well as our parent companies, subsidiaries and affiliates, and each of their past, present and future owners, members, officers, directors, employees and agents.

“Know-how” means all of our trade secrets and other proprietary know-how, including training methods and techniques, specifications, procedures, routines, student lists, marketing strategies, information comprising the System and the Manual, as well as information pertaining to the design and operation of a Bikram Yoga studio.

“Losses and Expenses” means all compensatory, exemplary, and punitive damages; fines and penalties; attorneys’ fees; experts’ fees; court costs; costs associated with investigating and defending against Claims; settlement amounts; judgments; compensation for damages to our reputation and goodwill; and all other costs, damages, liabilities and expenses associated with any of the foregoing losses and expenses or incurred by the indemnified party as a result of a Claim.

“Marks” means the trademarks, service marks and logotypes now or hereafter involved in the operation of a Bikram Yoga studio, including “Bikram Yoga,” “Bikram Yoga College of India” and any other trademarks, service marks or trade names that we hereafter designate for use in connection with a Bikram Yoga studio.

“System” means our system that we developed for the operation a yoga studio featuring a unique form of hatha yoga instruction, the distinctive characteristics of which include logo, trade secrets, copyrights, style and trade dress, confidential operations manuals, Yoga techniques and teaching methods, specific room conditions and operating system.


ATTACHMENT "B"


FRANCHISE AREA

The Franchise Area referenced in the Franchise Agreement shall consist of the following geographic area:

______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


ATTACHMENT "C"


ACH AUTHORIZATION FORM

[See Attached]


AUTOMATED CLEARING HOUSE PAYMENT AUTHORIZATION FORM

Franchisee Information:

Franchisee Name Business No.

Franchisee Mailing Address (street) Franchisee Phone No.

Franchisee Mailing Address (city, state, zip)

Contact Name, Address and Phone number (if different from above)

Franchisee Fax No. Franchisee E-mail Address

Bank Account Information:

Bank Name

Bank Mailing Address (street, city, state, zip)

Checking Savings Bank Account No. (check one) Bank Routing No. (9 digits)

Bank Mailing Address (city, state, zip) Bank Phone No.

Authorization:

Franchisee hereby authorizes Bikram, Inc. (“Franchisor”) to initiate debit entries to Franchisee’s account with the Bank listed above and Franchisee authorizes the Bank to accept and to debit the amount of such entries to Franchisee’s account. Each debit shall be made from time to time in an amount sufficient to cover any fees payable to Franchisor pursuant to any agreement between Franchisor and Franchisee as well as to cover any purchases of goods or services from Franchisor or any affiliate of Franchisor. Franchisee agrees to be bound by the National Automated Clearing House Association (NACHA) rules in the administration of these debit entries. Debit entries will be initiated only as authorized above. This authorization is to remain in full force and effect until Franchisor has received written notification from Franchisee of its termination in such time and in such manner as to afford Franchisor and the Bank a reasonable opportunity to act on it. Franchisee shall notify Franchisor of any changes to any of the information contained in this authorization form at least 30 days before such change becomes effective.

Signature: Date:

Name:

Its:______________________________________________ Federal Tax ID Number:

NOTE: FRANCHISEE MUST ATTACH A VOIDED CHECK RELATING TO THE BANK ACCOUNT.


ATTACHMENT "D"


NONDISCLOSURE, NONSOLICITATION AND NONCOMPETITION AGREEMENT

[See Attached]

1 PHX 329,224,856v4

NONDISCLOSURE, NONSOLICITATION

AND NONCOMPETITION AGREEMENT

This Agreement is entered into by the undersigned Franchisee and its owners, if any (collectively referred to as “you”) with Bikram, Inc., a Delaware corporation (“us” or “we”). All capitalized terms that are not defined in this Agreement have the meanings given to them in the Franchise Agreement (defined below).

1. Background. You may gain knowledge of our System and Know-how as the result of your operation of a Bikram Yoga studio (the “Studio”) under your franchise agreement with us of _______, 20__ (the “Franchise Agreement”). You understand that protecting our System, Copyrights and Marks is vital to our success and that of our franchisees and that you could seriously jeopardize our entire franchise system if you were to unfairly compete with us. In order to avoid such damage, you agree to comply with the terms of this Agreement.

2. Our Know-How. You agree: (i) you will not use the Know-how in any business or capacity other than the business operated by you under the Franchise Agreement; (ii) you will maintain the confidentiality of the Know-how at all times; (iii) you will not make unauthorized copies of documents containing any Know-how; (iv) you will take such reasonable steps as we may ask of you from time to time to prevent unauthorized use or disclosure of the Know-how; and (v) you will stop using the Know-how immediately if your franchise ends or you, as one of the Franchisee’s owners, cease being an owner.

3. While You Are a Franchisee. You agree not to unfairly compete with us during the term of the Franchise Agreement. Examples of such unfair competition include the following (“Prohibited Activities”):

(i) owning, operating or having any other interest (as an owner, partner, director, officer, employee, manager, consultant, shareholder, creditor, representative or agent) in any business that derives at least 50% of its revenue from providing yoga classes and/or selling yoga related products anywhere within the United States (a “Competitive Business”), other than owning an interest of five percent (5%) or less in a publicly traded Competitive Business;

(ii) diverting or attempting to divert any business from us (or one of our affiliates or franchisees); or

(iii) inducing (a) any of our employees or managers (or those of our affiliates or franchisees) to leave their position or (b) any student of ours (or of one of our affiliates or franchisees) to transfer their business to you or to any other person that is not then a franchisee of ours.

4. After Your Franchise Ends. During the two (2) year period, or if a court determines that two years is too long to be enforced, one (1) year period, immediately following the date you cease to be one of our franchisees or own an interest in the Franchisee (the “Restricted Post-Term Period”), you agree not to engage in any Prohibited Activity. However, you may have an interest in a Competitive Business during the Restricted Post-Term Period if that Competitive Business does not operate within 25 miles of your Studio, or if a court determines that 25 miles is too broad to be enforced, within ten miles of your Studio. If you engage in any Prohibited Activity during the Restricted Post-Term Period, then you agree that your Restricted Post-Term Period will be extended by the period of time during which you were in engaging in the Prohibited Activity.

5. Immediate Family Members. You acknowledge that you could circumvent the purpose of this Agreement by disclosing Know-How to an immediate family member (i.e., spouse, parent, sibling, child, or grandchild). You also acknowledge that it would be difficult for us to prove whether you disclosed the Know-How to family members. Therefore, you agree that you will be presumed to have violated the terms of this Agreement if any member of your immediate family engages in any Prohibited Activities or uses or discloses

2 PHX 329,224,856v4

the Know-How in any manner you are precluded from doing under this Agreement, though you may furnish evidence that conclusively rebuts this presumption.

6. Covenants Reasonable. You acknowledge and agree that: (i) the terms of this Agreement are reasonable both in time and in scope of geographic area; (ii) our use and enforcement of covenants similar to those described above with respect to other Bikram Yoga franchisees benefits you in that it prevents others from unfairly competing with your Studio; and (iii) you have sufficient resources and business experience and opportunities to earn an adequate living while complying with the terms of this Agreement. YOU HEREBY

WAIVE ANY RIGHT TO CHALLENGE THE TERMS OF THIS AGREEMENT AS BEING OVERLY BROAD,

UNREASONABLE OR OTHERWISE UNENFORCEABLE.

7. If You Breach This Agreement. You agree that your failure to comply with the terms of this Agreement will cause substantial and irreparable damage to us, the Franchisee and/or other Bikram Yoga franchisees for which there is no adequate remedy at law. Therefore, you agree that any violation of the terms of this Agreement will entitle us to injunctive relief. None of the remedies available to us under this Agreement are exclusive of any other, but may be combined with others under this Agreement, the Franchise Agreement or at law or in equity, including injunctive relief, specific performance and recovery of monetary damages. Any claim, defense or cause of action that you may have against us or against Franchisee, regardless of cause or origin, cannot be used as a defense against our enforcement of this Agreement.

8. Miscellaneous.

(a) If we hire an attorney or file suit against you because you have breached this Agreement and prevail against you, you agree to pay our reasonable attorneys’ fees and costs in doing so.

(b) This Agreement will be governed by, construed and enforced under the laws of the state in which the Studio is located and the courts in that state shall have jurisdiction over any legal proceedings arising out of this Agreement.

(c) Each section of this Agreement, including each subsection and portion thereof, is severable. In the event that any section, subsection or portion of this Agreement is unenforceable, it shall not affect the enforceability of any other section, subsection or portion; and each party to this Agreement agrees that the court may impose such limitations on the terms of this Agreement as it deems in its discretion necessary to make such terms reasonable in scope, duration and geographic area.

EXECUTED on the date stated below.

Franchisee (if other than an individual):

__________________________________ Name of Entity

By: _________________________________

Date: ______________, 20__

Typed or Printed Name & Title: _________________________________________________________

3 PHX 329,224,856v4

I witnessed the execution of the foregoing document this ____ day of ____________, 20___.

Date__________________________ _________________________________ Signature of Witness

_________________________________ Typed or Printed Name

You (Individual Owners):

Date__________________________ _________________________________ Signature of Owner










(Conversion Agreement) PHX 329,224,856v4

ATTACHMENT "E"

TO FRANCHISE AGREEMENT

STATE ADDENDUM

None.

PHX 329,224,856v4

EXHIBIT "D"


FRANCHISE AGREEMENT

(For Franchisees Who Are Converting from an Affiliation Arrangement Within 60 Days)

[See Attached]


1

BIKRAM YOGA FRANCHISE AGREEMENT

This Bikram Yoga Franchise Agreement (this “Agreement”) is entered into this ___ day of _______________, 201__ (the “Effective Date”) between Bikram, Inc., a Delaware corporation (“we” or “us”), with principal offices at 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064 and the franchisee signing this Agreement below (“you”).

1 DEFINITIONS. Certain capitalized terms used throughout this Agreement are defined in ATTACHMENT "A" to this agreement.

2 GRANT OF FRANCHISE. We hereby grant you a nonexclusive license to own and operate a Bikram Yoga studio (your “Studio”) at the address listed in ATTACHMENT "B" using the System, the Copyrights and the Marks. You do not have an exclusive or protected territory. We reserve all rights not expressly granted to you under this Agreement.

3 FRANCHISOR ASSISTANCE

3.1 Initial Training Program. Based upon our assessment of your qualifications, needs and prior experience operating your licensed Studio under an Affiliation Arrangement, we may provide certain training to your owners regarding studio operations. Alternatively, your owners have the right to attend the initial training program we offer to new studio owners. If we provide any on-site training to you, you agree to reimburse us for all reasonable costs that we incur in providing the on-site training, including costs for travel, meals and lodging. You are also responsible for all travel, meals, lodging and other expenses you and your owners incur to attend the initial training program.

3.2 Ongoing Training.

(a) Advanced/Refresher Training. We may offer periodic advanced or refresher training courses. Attendance at these training programs is optional. If you elect to attend an advanced or refresher training course, we may charge you a fee of up to $1,000 per day for each individual who attends. This fee will be due and payable immediately prior to training. You will be responsible for all travel, meals, lodging and other expenses that you and your employees incur to attend any refresher or advanced training course.

(b) On-Site Assistance or Training. Upon your written request, we may but need not provide on-site assistance or training to you at your Studio at a mutually convenient time. If we agree to provide such on-site assistance or training, you agree to pay us a fee of up to $1,000 for each day that we are at your Studio. You also agree to reimburse us for our costs to provide the training (i.e., travel, meals and lodging expenses that we incur). The on-site training fee and related expense reimbursements are due and payable on the fifth (5th) day of the month for all on-site assistance provided during the prior month.

3.3 Operating Manual. We will lend you our confidential Operating Manual in text or electronic form (the “Manual”) for the duration of the Term. The Manual will contain mandatory and suggested specifications, operating procedures, and quality standards for products, services and procedures that we prescribe from time to time for Bikram Yoga franchisees. We can modify the Manual at any time. The modifications will become binding 30 days after we send you notice of the modification. All mandatory provisions contained in the Manual (whether they are included now or in the future) become part of this Agreement as if fully set forth in it. All information in the Manual is confidential and proprietary and constitutes our trade secrets. Information contained within the Manual may not be disclosed to third parties without our prior written approval. You agree to take all reasonable


2

and necessary precautions to prevent any third party from viewing or otherwise obtaining information contained in the Manual.

3.4 Bikram Website. We will maintain an Internet Website for Bikram Yoga franchisees that will include information about your Studio that we deem appropriate. We may modify the content of and/or discontinue the Website at any time. We also may, but need not, provide you with your own domain name and website, which would be linked to our website. We would not require that you use this website or domain name. We would own the website and domain name but allow you to use them during the Term, subject to our approval of its content.

3.5 Franchise Advisory Council. We will create a franchise advisory council (the “Advisory Council”) to serve as an advisory council to us with respect to advertising, marketing, operations, new service suggestions and other matters relating to the System. We will consider all suggestions from the Advisory Council in good faith, but we are not bound by any such suggestions. The Advisory Council will be established and operated according to rules and regulations we periodically approve. Except at any time that you are in default under this Agreement, you will have the right to be a member of the Advisory Council, and as a member, you will be entitled to all voting rights and privileges granted to other members of the Advisory Council. Each member will be granted one vote for each studio that it owns and operates on all matters on which members are authorized to vote.

4 INTELLECTUAL PROPERTY. You acknowledge that we and Bikram Choudhury are the sole and exclusive owners of the Marks, the Copyrights and the Know-How sublicensed to you under this Agreement and the goodwill associated with the Marks. You may only use our Marks, Copyrights, and Know-How in connection with the operation of your Studio and in strict compliance with this Agreement, the Manual, and all applicable standards, specifications, restrictions and operating procedures that we prescribe from time to time during the Term. The Manual may contain detailed requirements and limitations regarding your use of our intellectual property and you agree to comply with all such requirements and limitations. Any unauthorized use of the Marks, Copyrights or Know-How constitutes an infringement of our rights. At any time, we may change the Marks, Copyrights and/or Know-How that we license you to use and you agree to comply with any such instructions from us. You agree to implement all reasonable procedures that we prescribe from time to time to prevent unauthorized use of any of the Marks, Copyrights or Know-How. You agree that you will not disclose the Know-How to any person other than the owners of the franchise. We agree to take commercially reasonable actions with respect to a select number of individuals or businesses that are infringing our Marks, Copyrights or Know-How, although you agree we have no obligation to pursue any particular infringing party and we are not required to pursue all infringing parties. We have sole discretion to decide which infringing party or parties we will pursue. If we are required to modify or discontinue use of any Mark or Copyright as a result of litigation, we will reimburse you for your tangible costs of compliance (e.g., changing inventory, signage, etc.). Neither party is required to mediate any claim relating to the subject matter of this Section 4.

5 YOUR RESPONSIBILITIES.

5.1 Initial and Ongoing Fees.

(a) Royalty Fee. You agree to pay us a monthly royalty fee equal to 1% of your Gross Revenues. The royalty fee will be due and payable on the fifth (5th) day of each month for the prior month’s operations. We waive the royalty fee for the first 12 months after the Effective Date.

(b) Other Fees. To the extent applicable, you agree to pay us the other fees referenced in this Agreement in the time and manner specified in this Agreement.


3

(c) Late Fee and ISF Fee. You agree to pay us a late fee equal to the lesser of 10% per annum (pro rated on a daily basis) or the highest rate permitted by your State’s law on any amounts that are not paid to us when due. In addition to the late fee, you also agree to pay us an insufficient funds fee of $25 for each instance where either: (i) we debit your Account (defined below) and there are insufficient funds; or (ii) a check from you is dishonored by your bank due to insufficient funds in your Account.

(d) Method of Payment. You agree to sign and send us an ACH Authorization Form allowing us to electronically debit a banking account that you designate (your “Account”) for: (i) all fees payable to us pursuant to this Agreement; and (ii) any amounts that you owe to us or any of our affiliates for the purchase of goods or services. Our current form of ACH Authorization Form is attached to this Agreement as ATTACHMENT "C". You also agree to sign and deliver to us any other documents that we or your bank may require from time to time to authorize us to debit your Account for such amounts. You agree to ensure there are sufficient funds in your Account available for withdrawal by electronic transfer before each due date. If there are insufficient funds in your Account to cover all amounts owed by you, any excess amounts owed by you will be payable upon demand, together with any amounts imposed under Section 5.1(c).

5.2 Fixtures, Furnishings, Equipment and Supplies. You agree to purchase and use such equipment, fixtures, maintenance and repair items, computer hardware and software, signs, and other equipment and operating supplies that we have approved as meeting our specifications and standards for quality, delivery, performance, design, appearance and price of the product. We will maintain the sole list of approved or designated suppliers for these items, if we require that any such items be purchased from approved or designated suppliers. You may propose the use of an alternative supplier in accordance with Section 5.5.

5.3 Relocation. You may relocate your Studio with our prior approval, which we will not unreasonably withhold. If we allow you to relocate, you agree to: (i) pay us a relocation fee of $500, which will be due ten (10) days after invoicing; (ii) obtain our prior approval of the layout and location of your new Studio, which shall be located within the same county in which your old Studio was located; (iii) pay all expenses and liabilities to terminate the lease and move; (iv) develop your new Studio to comply with all of our then existing studio specifications and standards; and (v) complete the relocation and resume operations within 90 days.

5.4 Operation of the Studio.

(a) Generally. You agree to offer all goods and services that we require from time to time in our commercially reasonable discretion. You will not offer (or allow any third party to offer) any other goods or services at your Studio without our permission. You agree to operate your Studio: (i) in a manner that will promote the goodwill of the Marks; and (ii) in full compliance with our standards and all other terms and conditions of this Agreement and the Manual. All Bikram Yoga classes shall be taught in strict conformance with all of our policies, procedures and requirements, including, but not limited to, method of instruction, room conditions, lighting and all other matters pertaining to a Bikram Yoga class. Bikram Yoga classes may only be taught by instructors who meet the instructor qualifications described in Section 5.4(b).

(b) Instructor Qualifications. All owners and Bikram Yoga instructors shall successfully complete the Bikram Yoga teacher certification program and comply with all re-certification requirements throughout the Term and pay the then-applicable fee for certification and re-certification, as applicable. The failure of any owner to maintain his or her certified status shall constitute a material default of this Agreement. All owners and Bikram Yoga instructors shall also successfully complete training in a cardiovascular pulmonary resuscitation course approved by the


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American Heart Association or American Red Cross. You are responsible for ensuring that your owners and instructors complete refresher training at intervals specified by us or by the American Heart Association or American Red Cross.

(c) Minimum Number of Classes. Unless caused by events beyond your control (such as when your Studio is unusable because of fire, utility service failure or other such events), you agree to offer at least three (3) Bikram Yoga classes each day at your Studio, Monday through Friday.

(d) Student Contracts. You agree to use all forms of student contracts that we may prescribe from time to time. You are responsible for ensuring that all forms and agreements that you cause your students to sign conform with all applicable state, federal and local laws and regulations.

(e) Advanced Yoga Class. You may not teach the Bikram’s Advanced Yoga Class without our prior written approval. In order to teach an advanced class, you may be required to attend additional specialized training and you may be prohibited from charging students who attend this class. If we allow you to teach the Bikram’s Advanced Yoga Class, we will also grant you a license to use the Bikram’s Advance Yoga Class sequence of 86 poses in connection with such training. In such an event, all references to Copyrights shall include the copyright for the Bikram’s Advance Yoga Class sequence of 86 poses.

(f) Management. You agree that your owners will dedicate their full time efforts to the day to day management, supervision and operation of the Studio. Your owners will teach the Bikram Yoga classes unless you hire or engage the services of one or more other individuals who are certified Bikram Yoga instructors. You may hire an individual to assist the owners with the day-to-day management and supervision of your Studio (a “Studio Director”). Your Studio Director shall: (i) meet our qualifications; (ii) be approved by us; and (iii) successfully complete the studio director training program (if we require any such training). At least one of the owners of the franchise shall agree to assume responsibility for the daily management and supervision of your Studio if the Studio Director is unable to perform his or her duties due to death, disability, termination of employment, or for any other reason, until such time that you obtain a suitable replacement Studio Director. If you do not hire a Studio Director, you agree to designate one of your owners to serve as Studio Director.

5.5 Suppliers and Purchasing. You agree to purchase or lease all products, supplies, equipment and other items specified in the Manual from time to time. If required by the Manual, you agree to purchase certain goods and services only from suppliers designated or approved by us (which may include us or our affiliates). If you want us to approve a supplier that you propose, you will need to send us a written notice specifying the supplier’s name and qualifications and any additional information that we request. We will approve or reject your request within 30 days after we receive your notice and all additional information (and samples) that we request. You agree to reimburse us for all out-of-pocket costs that we incur in reviewing the supplier within ten (10) days after we invoice you. We have the right to retain volume rebates, markups and other benefits from suppliers in connection with purchase made by Bikram Yoga franchisees and we have no obligation to pass any such amounts on to you or to use any such amounts for your benefit.

5.6 Equipment Maintenance and Changes. You agree to: (i) maintain all equipment used in connection with your Studio in good condition; and (ii) promptly replace or repair any equipment that is damaged, worn-out or obsolete. We may require reasonable changes to your equipment, which may require you to make additional investments. You acknowledge that our ability to require our franchisees to make significant changes to their equipment is critical to our ability to administer and change the System and you agree to comply with any such required change within the time period that we reasonably prescribe.


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5.7 Studio Remodeling and Maintenance. You may not remodel or significantly alter your premises without our prior written approval. You agree to repair and maintain your Studio and keep the same in good order and condition, reasonable wear and tear excepted, and make all necessary repairs, including replacements, renewals and alterations, at your sole expense, to comply with our standards and specifications. You agree to comply with any maintenance, cleaning or facility upkeep schedule that we prescribe from time to time.

5.8 Software License Agreement. At any time, we may develop proprietary software for Bikram Yoga studios. If you choose to use this software, you agree to enter into a software license agreement with us (or an affiliate of ours) although we will not charge you any fee. The terms of the software license agreement will govern the terms pursuant to which you may utilize this software. We also may enter into a master software or technology license agreement with a third party licensor and then sublicense the software or technology to you. We would not require that you use this software or technology and we would not charge you any fee.

5.9 Local Advertising.

(a) Local Advertising. As long as you are operating your Studio at full capacity as determined by us in our commercially reasonable discretion, you will not be required to spend any minimum amount on local advertising. If you fail to operate your Studio at full capacity, we may require that you spend a minimum amount equal to the greater of $400 or 4% of Gross Revenues on local advertising. You agree to obtain our approval of all local advertising and promotional materials that we have not prepared or previously approved (including any materials that we have prepared or approved but that you modify) before you use them, so we can protect the reputation and goodwill associated with the Marks and the System. If we do not disapprove the materials within 30 days, we shall be deemed to have approved them. You may not use any advertising or promotional materials that we have disapproved (including materials that we previously approved).

(b) Website. You agree to obtain our approval of any website that you use. We will not unreasonably withhold our approval. If we allow you to operate a website, your website shall conform to all of our website requirements, whether set forth in the Manual or otherwise. If you wish to modify your approved site, all proposed modifications shall also receive our prior approval. You agree to obtain our prior approval for any Internet domain name and/or home page address.

5.10 Franchisee as Entity. If you are a corporation, partnership, limited liability company or other form of association (collectively referred to as an “Entity”), you agree to provide us with a list of all of your owners. All owners of the Entity (whether direct or indirect) are jointly and severally responsible for the Entity’s performance of this Agreement and each individual owner is bound by all of the terms of this Agreement.

5.11 Books and Records. You agree to: (i) prepare and maintain at your Studio for at least three (3) years after their preparation complete and accurate books, records, accounts and tax returns pertaining to your Studio; (ii) send us copies of your books and records within seven (7) days of our request; and (iii) maintain, and upon our request, furnish to us by e-mail, mail or facsimile, a written list of all of your students, student attendance records, student cards sold, classes offered, and any other information about your classes and students that we specify in the Manual.

5.12 Reports and Financial Statements.

(a) Gross Revenues. You agree to prepare and provide to us a monthly statement of Gross Revenues for your Studio no later than the 5th day of each month for the prior month’s operations. Within 30 days after the close of each calendar year (or partial calendar year during


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the last year of the Term if the Term ends on a date other than December 31), you agree to provide to us, in the format that we require, an annual statement of Gross Revenues (with a monthly breakdown of Gross Revenues). You agree to provide any other report that we require from time to time in the form and manner that we prescribe.

(b) Advertising Reports. If you are required to comply with minimum advertising expenditure requirements under Section 5.9(a), you agree to prepare and provide to us a monthly statement of your expenditures on such local advertising no later than the fifth (5th) day of each month for all such expenditures incurred during the prior month. The foregoing statements shall be accompanied by copies of receipts for the advertising expenditures.

(c) Financial Statements. Within 90 days after the end of each calendar year, you agree to prepare: (i) an annual statement of profit and loss and source and application of funds for your franchised business; and (ii) a balance sheet for your franchised business as of the end of the calendar year. You agree to send us your financial statements upon our request. All financial statements shall be: (i) signed by you certifying to us that the information contained in the financial statement is true, complete, and accurate; (ii) submitted in any format that we reasonably prescribe from time to time; and (iii) prepared in accordance with Generally Accepted Accounting Principles, unless we specify otherwise.

(d) Disclosure of Statements. You hereby authorize us to disclose the financial statements, reports, and operating data to prospective franchisees, regulatory agencies and others at our discretion, provided such disclosure is not prohibited by applicable law.

5.13 Insurance. For your protection and ours, you agree to maintain the following insurance policies issued by carriers approved by us: (i) “all risk” property insurance coverage on all assets, including inventory, furniture, fixtures, equipment, supplies and other property used in the operation of your Studio, which must include coverage for fire, vandalism and malicious mischief and have coverage limits of at least full replacement cost; (ii) comprehensive general liability insurance against claims for bodily and personal injury, death and property damage caused by or occurring in conjunction with the operation of your Studio, containing minimum liability protection of $1,000,000 combined single limit per occurrence, and $2,000,000 in the aggregate; (iii) worker’s compensation insurance and employer’s liability insurance as required by law; and (iv) any other insurance that we specify in the Manual from time to time. You agree to provide us with proof of coverage on demand. You agree to obtain these insurance policies from insurance carriers rated A or better by Alfred M. Best & Company, Inc. All carriers shall be licensed and admitted in the state in which you operate your Studio. All insurance policies that we require shall: (i) name us (and our members, officers, directors, and employees) as additional insureds; (ii) contain a waiver by the insurance carrier(s) of all subrogation rights against us; and (iii) provide that we receive ten (10) days prior written notice of the termination, expiration, cancellation or modification of any such policy. If any of your insurance companies fail to give us notice as required in this Section, then we may disapprove the policy of that company. In that event, you agree to immediately find additional coverage with an alternative carrier satisfactory to us.

5.14 Compliance with Laws. You agree to secure and maintain in force all required licenses, permits and regulatory approvals relating to the operation of your Studio and operate and manage your Studio in full compliance with all applicable laws.

6 INSPECTIONS AND AUDITS

6.1 Inspections. To ensure compliance with this Agreement, we or our representatives will have the right to enter your Studio, evaluate your operations and inspect or examine your books, records, accounts and tax returns. Our evaluation may include watching or participating in your Bikram


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Yoga classes and contacting your landlord, students and/or employees. We may conduct our evaluation at any time and without prior notice. During the course of our evaluations, we and our representatives will use reasonable efforts to minimize our interference with the operation of your Studio, and you and your employees will cooperate and not interfere with our inspection. You consent to us accessing your computer system and retrieving any information that we deem appropriate in conducting the inspection.

6.2 Audit. We have the right, at any time, to have an independent audit made of your books and financial records. You agree to fully cooperate with us and any third parties that we hire to conduct the audit. If an audit reveals an understatement of the Gross Revenues of your Studio, you agree to immediately pay to us any additional fees that you owe us together with any late fee payable pursuant to Section 5.1(c). Any audit will be performed at our cost and expense unless the audit: (i) is necessitated by your failure to provide the information requested or to preserve records or file reports as required by this Agreement; or (ii) reveals an understatement of your Gross Revenues by at least two percent (2%) over the period of the audit, in which case you agree to pay us our actual cost of the audit or inspection, including without limitation, reasonable accounting and attorneys’ fees and travel and lodging expenses incurred by us or our representatives in conducting the audit. All audit cost reimbursements will be due ten (10) days after invoicing.

7 INDEMNIFICATION. You agree to indemnify and hold harmless the Indemnified Parties for, from and against any and all Losses and Expenses incurred by any of the Indemnified Parties as a result of or in connection with any of the following Claims: (i) any Claim asserted against you and/or any of the Indemnified Parties arising from the marketing, use or operation of your Studio or your alleged performance and/or nonperformance of any of your obligations under this Agreement; (ii) any other Claim arising from alleged violations of your relationship with and responsibility to us; or (iii) any Claim relating to taxes or penalties assessed by any governmental entity against us that are directly related to your failure to pay or perform functions required of you under this Agreement. This provision shall continue in full force and effect subsequent to and notwithstanding the expiration, termination, assignment or transfer of this Agreement.

8 ASSIGNMENT/TRANSFER OR OTHER DISPOSITION OF THE BUSINESS

8.1 By Us. This Agreement and the franchise is fully assignable by us (without prior notice to you) and shall inure to the benefit of any assignee(s) or other legal successor(s) to our interest in this Agreement, provided that we shall, subsequent to any such assignment, remain liable for the performance of our obligations under this Agreement up to the effective date of the assignment. We may also delegate some or all of our obligations under this Agreement to one or more persons.

8.2 You May Not Assign Without Our Approval; Exceptions. You do not need our approval and do not need to pay us a transfer fee: (i) to assign this Agreement to an Entity in which you own and control 100% of the equity and voting power; or (ii) to transfer ownership interests in you among existing owners of the Entity or to the Entity (“Permitted Transfers”). You agree to notify us of any Permitted Transfer at least 10 days prior to the transfer. Except for the Permitted Transfers, neither the franchise nor your Studio (or any interest therein) nor any part or all of the ownership interest in you (if you are an Entity), may be directly or indirectly, voluntarily or involuntarily (including by judicial award, order or decree), assigned, sold, sublicensed or otherwise transferred (any of the foregoing shall be referred to herein as a “Transfer”) without our prior approval. Any Transfer without our approval will be void.

8.3 Conditions for Approval of a Transfer. We will not unreasonably withhold our approval of a Transfer, provided that the proposed transferee meets all of our then applicable standards for franchisees, and further provided that the following conditions are met prior to or concurrently with the Transfer date:


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(a) Debts and Obligations. All your obligations incurred in connection with this Agreement and any other agreements between you and us have been discharged or assumed by the transferee and you have paid all amounts owed by you to us that are then due and unpaid;

(b) Completion of Initial Training. The transferee’s owners are all certified Bikram Yoga instructors who have completed the initial franchise training program and satisfy all other criteria that we consider in evaluating a new franchisee;

(c) Lease. Your landlord, if applicable, consents to your assignment of the lease to the transferee, or the transferee is diligently pursuing an approved substitute location within the same county in which your Studio is located;

(d) New Agreement. The transferee and its owners sign a new franchise agreement and agreed to be bound by the standard form of franchise agreement and such ancillary agreements as are then customarily used by us in the grant of franchises for new Bikram Yoga franchises, except that the transferee need not pay a separate initial franchise fee;

(e) Transfer Fee. You or the transferee pay us a transfer fee equal to $3,000 to defray expenses that we incur in connection with the Transfer;

(f) General Release. You and your owners sign a General Release of any and all claims against us and our members, managers, officers, directors, employees and agents arising prior to or contemporaneously with the Transfer; and

(g) Additional Actions. You and the transferee satisfy any other conditions we reasonably require as a condition to our approval of the Transfer.

Our consent to a Transfer shall not constitute a waiver of any claims we may have against the transferor, nor shall it be deemed a waiver of our right to demand exact compliance with any of the terms or conditions of the franchise by the transferee.

8.4 Your Death or Disability. Upon the death or permanent disability of you (if you are an individual) or an owner of you (if you are an Entity), the executor, administrator, conservator or other personal representative of such individual shall assign such individual’s interest in you and/or the franchise, as applicable, to a third party approved by us within a reasonable time. Such assignments (including, without limitation, transfers by bequest or inheritance) will be subject to the same conditions as any other assignment under this Agreement and if such heirs or beneficiaries are unable to meet the conditions of Section 8.3 above, such personal representative shall have a reasonable time, not to exceed 180 days, plus extensions agreed to by us, from the date of such individual’s death or permanent disability, to dispose of such individual’s interest.

9 TERM AND SUCCESSOR AGREEMENTS. The initial term of this Agreement will begin on the Effective Date and expire on _________________________ [Insert date current lease expires] (the “Initial Term”). If you meet the conditions specified below, you may enter into a successor Bikram Yoga franchise agreement (a “Successor Agreement”) at the expiration of the Initial Term and at the expiration of each renewal term. The Successor Agreement shall be the current form of Bikram Yoga franchise agreement that we use in granting Bikram Yoga franchises as of the date of the expiration of the Term. Each renewal term will consist of a five (5) year period. For purposes of clarity, the term of this Agreement, whether it be the Initial Term or a renewal term, shall be referred to as the “Term”. In order to enter into a Successor Agreement, you shall: (i) give us written notice of your intent to enter into the Successor Agreement not less than 90 days nor more than 180 days prior to the expiration of the Term; (ii) sign the Successor Agreement as well as all ancillary documents that we require Bikram Yoga franchisees to sign in connection with the purchase of a Bikram Yoga franchise as


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of the date of the expiration of the Term; (iii) sign our then current form of General Release of claims in our favor and cause all of your owners to also sign the General Release; (iv) remodel your Studio to comply with all of our then current standards and specifications; (v) pay us a $5,000 renewal fee; and (vi) take such additional action as we reasonably require. Also, in order to renew, you understand that you cannot be in default under this Agreement.

10 TERMINATION OF THE FRANCHISE

10.1 By You. You may terminate this Agreement if you are in compliance with this Agreement and we materially breach this Agreement and fail to cure such breach within 90 days after you deliver to us a written notice specifying the nature of the breach. If you terminate this Agreement, all of your post-termination obligations described in Section 11 will not be waived and you agree to strictly adhere to those obligations and comply with all other provisions of this Agreement that survive the expiration or termination of this Agreement.

10.2 Termination By Us Without Cure Period. We may, in our sole discretion, terminate this Agreement upon five (5) days’ written notice, without opportunity to cure, for any of the following reasons, all of which constitute material events of default under this Agreement:

(i) If you become insolvent by reason of your inability to pay your debts as they become due, you file a voluntary petition in bankruptcy or any pleading seeking any reorganization, liquidation, dissolution or composition or other settlement with creditors under any law, or are the subject of an involuntary bankruptcy (which may or may not be enforceable under the Bankruptcy Act of 1978);

(ii) If you fail or refuse to pay any amount owed to us or an affiliate of ours within five (5) days after receipt of a demand for payment;

(iii) If you underreport any amount owed to us by at least two percent (2%), after having already committed such a breach that had been cured in accordance with Section 10.3;

(iv) If you or any of your owners are convicted of or plead no contest to a felony, a crime involving moral turpitude or any other crime or offense, or are subject to any administrative disciplinary action, that is in our sole discretion likely to adversely affect the reputation of the System or the goodwill associated with Bikram Yoga studios or the Marks;

(v) If you manage or operate your Studio in a manner that presents a health or safety hazard to your students, employees or the public;

(vi) If you or any of your owners make any material misrepresentation to us, whether occurring before or after being granted the franchise;

(vii) If you or any of your owners make an unauthorized Transfer;

(viii) If you misuse or make an unauthorized use of the Marks or Copyrights or commit any act which can be reasonably expected to materially impair the goodwill associated with the Marks;

(ix) If you or any owner violates the terms of a Noncompetition Agreement (defined in Section 11.2); or

(x) If we terminate any other agreement between you and us or if any affiliate of ours terminates any agreement between you and such affiliate because of your default.

10.3 Additional Conditions of Termination. We may, in our sole discretion, terminate this Agreement upon 30 days' written notice if you fail to comply with any other provision of this


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Agreement (other than the defaults listed in Section 10.2 above) or any other agreement with us, or any mandatory specification, standard or operating procedure prescribed by us, unless such default is cured, as determined by us in our sole discretion, within such 30-day notice period. If we deliver a notice of default to you pursuant to this Section 10.3, we may suspend performance of any of our obligations under this Agreement until such time that you have fully cured the breach.

11 TERMINATION, EXPIRATION OR TRANSFER OF AGREEMENT

11.1 Your Responsibilities. You agree that after the termination, expiration or Transfer of this Agreement you will:

(i) Pay us all amounts that you owe us;

(ii) Not use any Marks, any colorable imitation thereof or other insignia of a Bikram Yoga studio in any manner or for any purpose, or utilize for any purpose any trade name, trade or service mark or other commercial symbol that suggests or indicates a connection or association with us;

(iii) Not directly or indirectly at any time or in any manner replicate, disclose or otherwise use the System in connection with any other business or in any other capacity;

(iv) Return to us all copies of the Manual loaned to you, or any portions thereof, as well as all signs, sign faces, brochures, advertising and promotional materials, forms, and any other materials bearing or containing any of the Marks, Copyrights or other identification relating to a Bikram Yoga studio, unless we allow you to transfer such items to an approved transferee;

(v) Take such action as may be required to cancel all fictitious or assumed names or equivalent registrations relating to your use of any of the Marks;

(vi) Make such modifications and alterations to the premises that are necessary or that we require to prevent any association between us or the System and any business subsequently operated by you or any third party at the premises; provided, however, that this subsection shall not apply if your franchise is transferred to an approved transferee;

(vii) Cease all use of the domain name and website that we allowed you to use during the Term; and

(viii) Notify all telephone companies, listing agencies and domain name registration companies (collectively, the “Agencies”) of the termination or expiration of your right to use: (a) the telephone numbers and/or domain names, if applicable, related to the operation of your Studio; and (b) any regular, classified or other telephone directory listings associated with the Marks. You hereby authorize the Agencies to transfer such telephone numbers, domain names and listings to us. You hereby authorize us, and appoint us and any officer we designate, as your attorney-in-fact, to direct the Agencies to transfer the telephone numbers, domain names and listings to us should you fail or refuse to do so.

11.2 Restrictive Covenants. Concurrently with the execution of this Agreement, you and each individual that directly or indirectly holds an ownership interest in you shall sign a Nondisclosure, Nonsolicitation, and Noncompetition Agreement (a “Noncompetition Agreement”), in the form attached hereto as ATTACHMENT "D".

11.3 Continuing Obligations. All obligations that expressly or by their nature survive the termination, expiration or transfer of this Agreement shall continue in full force and effect subsequent to and notwithstanding its termination, expiration or transfer and until they are satisfied in full or by their nature expire.


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12 DISPUTE RESOLUTION. Except as otherwise specified in Section 4, before any litigation takes place, the parties agree to submit any claim, dispute or disagreement, including any matter pertaining to the interpretation of this Agreement or issues relating to the offer and sale of the franchise or the relationship between the parties (a “Dispute”) to mediation before a mutually-agreeable mediator. Any mediation shall take place in the county in which we maintain our principal place of business at the time the Dispute arises (currently, Los Angeles County, California). If the parties fail to resolve the Dispute by mediation or the dispute relates to a breach of Section 4, either party may file a lawsuit in any state or federal court of general jurisdiction in the county in which we maintain our principal place of business at the time the Dispute arises (currently, Los Angeles County, California) and we and you irrevocably submit to the jurisdiction of such court and waive any objection either of us may have to either the jurisdiction or venue of such court. WE AND YOU IRREVOCABLY WAIVE: (i) TRIAL

BY JURY; AND (ii) THE RIGHT TO LITIGATE ON A CLASS ACTION BASIS, IN ANY

ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,

BROUGHT BY EITHER OF THE PARTIES.

13 GENERAL PROVISIONS

13.1 Governing Law. This Agreement and the franchise relationship shall be governed by the laws of the State of California (without reference to its principles of conflicts of law), provided that any law of the State of California that regulates the offer and sale of franchises or business opportunities or governs the relationship of a franchisor and its franchisee will not apply unless its jurisdictional requirements are met independently without reference to this Section.

13.2 Relationship of the Parties. You understand and agree that nothing in this Agreement creates a fiduciary relationship between you and us or is intended to make either party a general or special agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose.

13.3 Severability. Each section, subsection, term and provision of this Agreement, and any portion thereof, shall be considered severable.

13.4 Approvals. Whenever this Agreement requires our prior approval or consent, you agree to make a timely written request for it, and such approval must be obtained in writing in order to be effective and binding on us. Except as otherwise expressly provided herein, if we fail to approve or reject any request of yours within the period of time specified therefor, we shall be deemed to have disapproved your request.

13.5 Force Majeure. Neither we nor you shall be liable for loss or damage or deemed to be in breach of this Agreement if our or your failure to perform our or your obligations results from any event of force majeure. Any delay resulting from an event of force majeure will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable under the circumstances.

13.6 Binding Effect. This Agreement is binding upon the parties to this Agreement and their respective executors, administrators, heirs, assigns and successors in interest. Nothing in this Agreement is intended, nor shall be deemed, to confer any rights or remedies upon any person or legal entity not a party to this Agreement; provided, however, that the Indemnified Parties and the additional insureds listed in Section 5.13 shall be intended third party beneficiaries under this Agreement.

13.7 Integration. THIS AGREEMENT SUPERSEDES ANY PRIOR LICENSE OR AFFILIATION AGREEMENT AND CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CHANGED EXCEPT BY A WRITTEN DOCUMENT SIGNED BY BOTH PARTIES. The attachment(s) are part of this Agreement, which constitutes the entire


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understanding and agreement of the parties, and there are no other oral or written understandings or agreements between us and you relating to the subject matter of this Agreement. As referenced above, all mandatory provisions in the Manual are part of this Agreement. Any representations not specifically contained in this Agreement or the Franchise Disclosure Document made prior to entering into this Agreement do not survive subsequent to the execution of this Agreement. Nothing in this Agreement is intended to disclaim any of the representations we made in the Franchise Disclosure Document.

13.8 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.

13.9 Notice. All notices to be given under this Agreement are to be in writing, delivered by hand, telegram or first class mail, to the following addresses (which may be changed by written notice):

YOU: As set forth below your signature on this Agreement

US: Bikram, Inc. 11500 W. Olympic Blvd., Suite 150 Los Angeles, California 90064

WITH A COPY TO: James A. Ullman Greenberg Traurig LLP 2375 East Camelback Road, Suite 700 Phoenix, Arizona 85016

Notices of changes of addresses shall be given at least ten (10) business days in advance of any notification contemplated under this provision or the prior address on file shall be deemed valid. Notice shall be considered given at the time delivered by hand, or one (1) business day after sending by telegraph or comparable electronic or computer system, or three (3) business days after placed in the mail, postage prepaid, by certified mail with a return receipt requested.

14 REPRESENTATIONS AND ACKNOWLEDGEMENTS. YOU HEREBY REPRESENT THAT: (i) YOU HAVE NOT RECEIVED OR RELIED UPON ANY WARRANTY OR GUARANTEE, EXPRESS OR IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS CONTEMPLATED BY THIS AGREEMENT, EXCEPT FOR ANY INFORMATION DISCLOSED IN THE FRANCHISE DISCLOSURE DOCUMENT; (ii) YOU HAVE NO KNOWLEDGE OF ANY REPRESENTATIONS BY US OR ANY OF OUR OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES OR REPRESENTATIVES ABOUT THE BUSINESS CONTEMPLATED BY THIS AGREEMENT THAT ARE CONTRARY TO THE TERMS OF THIS AGREEMENT OR THE FRANCHISE DISCLOSURE DOCUMENT; (iii) YOU RECEIVED (1) AN EXACT COPY OF THIS AGREEMENT AND ITS ATTACHMENTS AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT IS EXECUTED; AND (2) OUR FRANCHISE DISCLOSURE DOCUMENT AT THE EARLIER OF (A) TEN (10) BUSINESS DAYS BEFORE YOU SIGNED A BINDING AGREEMENT OR PAID ANY MONEY TO US OR OUR AFFILIATES OR (B) AT SUCH EARLIER TIME IN THE SALES PROCESS THAT YOU REQUESTED A COPY; AND (iv) YOU ARE AWARE OF THE FACT THAT OTHER PRESENT OR FUTURE FRANCHISEES OF OURS MAY OPERATE UNDER DIFFERENT FORMS OF AGREEMENT AND CONSEQUENTLY THAT OUR OBLIGATIONS AND RIGHTS WITH RESPECT TO OUR VARIOUS FRANCHISEES MAY DIFFER MATERIALLY IN CERTAIN CIRCUMSTANCES.


13

The parties to this Agreement have executed this Agreement effective as of the Effective Date first above written.

FRANCHISOR:

Bikram, Inc., a Delaware corporation

By: Name: Its:

YOU (If you are an entity):

______________________________________, a(n)___________________________________

By:________ Name: Its:

*By signing below, each individual owner of a

direct or indirect interest in the franchisee

entity agrees to be bound by all of the terms

and conditions of the Franchise Agreement.

YOU (If you are not an entity):

_________________________________________ Name:____________________________________

_________________________________________ Name: ___________________________________

_________________________________________ Name: ___________________________________

_________________________________________ Name: ___________________________________

_______________________________________ Name:__________________________________

_______________________________________ Name: _________________________________

_______________________________________ Name: _________________________________

_______________________________________ Name:__________________________________

Principal Business Address: _________________________________________ _________________________________________ _________________________________________ _________________________________________

Principal Business Address: _______________________________________ _______________________________________ _______________________________________ _______________________________________

* All individual owners of an interest in the franchise, or the entity that is the franchisee, must

sign this agreement, regardless of whether they are active owners or passive owners/ silent

partners.


ATTACHMENT "A"


DEFINED TERMS

“Claim” means any and all claims, actions, demands, assessments, litigation, or other form of regulatory or adjudicatory procedures, claims, demands, assessments, investigations, or formal or informal inquiries.

“Copyrights” means the copyrights owned by Bikram Choudhury to the following items: advertisements and promotional materials; Bikram’s Beginning Yoga Class; Bikram’s Dialogue; Bikram’s Sequence of 26 Poses and 2 Breathing Exercises; and any other materials that we hereafter designate for use in connection with a Bikram Yoga studio.

“Gross Revenues” means all gross sums collected or billed for goods and services sold in connection with a Bikram Yoga studio, together with any other revenue related to or derived from the operation of a Bikram Yoga studio, including the proceeds of any business interruption insurance. Gross Revenues does not include any sales or use taxes.

“Indemnified Parties” means us and each of our past, present and future owners, members, officers, directors, employees and agents, as well as our parent companies, subsidiaries and affiliates, and each of their past, present and future owners, members, officers, directors, employees and agents.

“Know-how” means all of our trade secrets and other proprietary know-how, including training methods and techniques, specifications, procedures, routines, student lists, marketing strategies, information comprising the System and the Manual, as well as information pertaining to the design and operation of a Bikram Yoga studio.

“Losses and Expenses” means all compensatory, exemplary, and punitive damages; fines and penalties; attorneys’ fees; experts’ fees; court costs; costs associated with investigating and defending against Claims; settlement amounts; judgments; compensation for damages to our reputation and goodwill; and all other costs, damages, liabilities and expenses associated with any of the foregoing losses and expenses or incurred by the indemnified party as a result of a Claim.

“Marks” means the trademarks, service marks and logotypes now or hereafter involved in the operation of a Bikram Yoga studio, including “Bikram Yoga,” “Bikram Yoga College of India” and any other trademarks, service marks or trade names that we hereafter designate for use in connection with a Bikram Yoga studio.

“System” means our system that we developed for the operation a yoga studio featuring a unique form of hatha yoga instruction, the distinctive characteristics of which include logo, trade secrets, copyrights, style and trade dress, confidential operations manuals, Yoga techniques and teaching methods, specific room conditions and operating system.


ATTACHMENT "B"


STUDIO ADDRESS

The approved address for the Studio operated pursuant to the Franchise Agreement is:

____________________________________________________________________________________________________________________________________________________________________________________


ATTACHMENT "C"


ACH AUTHORIZATION FORM

[See Attached]


AUTOMATED CLEARING HOUSE PAYMENT AUTHORIZATION FORM

Franchisee Information:

Franchisee Name Business No.

Franchisee Mailing Address (street) Franchisee Phone No.

Franchisee Mailing Address (city, state, zip)

Contact Name, Address and Phone number (if different from above)

Franchisee Fax No. Franchisee E-mail Address

Bank Account Information:

Bank Name

Bank Mailing Address (street, city, state, zip)

Checking Savings Bank Account No. (check one) Bank Routing No. (9 digits)

Bank Mailing Address (city, state, zip) Bank Phone No.

Authorization:

Franchisee hereby authorizes Bikram, Inc. (“Franchisor”) to initiate debit entries to Franchisee’s account with the Bank listed above and Franchisee authorizes the Bank to accept and to debit the amount of such entries to Franchisee’s account. Each debit shall be made from time to time in an amount sufficient to cover any fees payable to Franchisor pursuant to any agreement between Franchisor and Franchisee as well as to cover any purchases of goods or services from Franchisor or any affiliate of Franchisor. Franchisee agrees to be bound by the National Automated Clearing House Association (NACHA) rules in the administration of these debit entries. Debit entries will be initiated only as authorized above. This authorization is to remain in full force and effect until Franchisor has received written notification from Franchisee of its termination in such time and in such manner as to afford Franchisor and the Bank a reasonable opportunity to act on it. Franchisee shall notify Franchisor of any changes to any of the information contained in this authorization form at least 30 days before such change becomes effective.

Signature: Date:

Name:

Its:______________________________________________ Federal Tax ID Number:

NOTE: FRANCHISEE MUST ATTACH A VOIDED CHECK RELATING TO THE BANK ACCOUNT.


ATTACHMENT "D"


NONDISCLOSURE, NONSOLICITATION AND NONCOMPETITION AGREEMENT

[See Attached]

1 PHX 329,224,856v4

NONDISCLOSURE, NONSOLICITATION

AND NONCOMPETITION AGREEMENT

This Agreement is entered into by the undersigned Franchisee and its owners, if any (collectively referred to as “you”) with Bikram, Inc., a Delaware corporation (“us” or “we”). All capitalized terms that are not defined in this Agreement have the meanings given to them in the Franchise Agreement (defined below).

1. Background. You may gain knowledge of our System and Know-how as the result of your operation of a Bikram Yoga studio (the “Studio”) under your franchise agreement with us of _______, 20__ (the “Franchise Agreement”). You understand that protecting our System, Copyrights and Marks is vital to our success and that of our franchisees and that you could seriously jeopardize our entire franchise system if you were to unfairly compete with us. In order to avoid such damage, you agree to comply with the terms of this Agreement.

2. Our Know-How. You agree: (i) you will not use the Know-how in any business or capacity other than the business operated by you under the Franchise Agreement; (ii) you will maintain the confidentiality of the Know-how at all times; (iii) you will not make unauthorized copies of documents containing any Know-how; (iv) you will take such reasonable steps as we may ask of you from time to time to prevent unauthorized use or disclosure of the Know-how; and (v) you will stop using the Know-how immediately if your franchise ends or you, as one of the Franchisee’s owners, cease being an owner.

3. While You Are a Franchisee. You agree not to unfairly compete with us during the term of the Franchise Agreement. Examples of such unfair competition include the following (“Prohibited Activities”):

(i) owning, operating or having any other interest (as an owner, partner, director, officer, employee, manager, consultant, shareholder, creditor, representative or agent) in any business that derives at least 50% of its revenue from providing yoga classes and/or selling yoga related products anywhere within the United States (a “Competitive Business”), other than owning an interest of five percent (5%) or less in a publicly traded Competitive Business;

(ii) diverting or attempting to divert any business from us (or one of our affiliates or franchisees); or

(iii) inducing (a) any of our employees or managers (or those of our affiliates or franchisees) to leave their position or (b) any student of ours (or of one of our affiliates or franchisees) to transfer their business to you or to any other person that is not then a franchisee of ours.

4. After Your Franchise Ends. During the two (2) year period, or if a court determines that two years is too long to be enforced, one (1) year period, immediately following the date you cease to be one of our franchisees or own an interest in the Franchisee (the “Restricted Post-Term Period”), you agree not to engage in any Prohibited Activity. However, you may have an interest in a Competitive Business during the Restricted Post-Term Period if that Competitive Business does not operate within 25 miles of your Studio, or if a court determines that 25 miles is too broad to be enforced, within ten miles of your Studio. If you engage in any Prohibited Activity during the Restricted Post-Term Period, then you agree that your Restricted Post-Term Period will be extended by the period of time during which you were in engaging in the Prohibited Activity.

5. Immediate Family Members. You acknowledge that you could circumvent the purpose of this Agreement by disclosing Know-How to an immediate family member (i.e., spouse, parent, sibling, child, or grandchild). You also acknowledge that it would be difficult for us to prove whether you disclosed the Know-How to family members. Therefore, you agree that you will be presumed to have violated the terms of this Agreement if any member of your immediate family engages in any Prohibited Activities or uses or discloses

2 PHX 329,224,856v4

the Know-How in any manner you are precluded from doing under this Agreement, though you may furnish evidence that conclusively rebuts this presumption.

6. Covenants Reasonable. You acknowledge and agree that: (i) the terms of this Agreement are reasonable both in time and in scope of geographic area; (ii) our use and enforcement of covenants similar to those described above with respect to other Bikram Yoga franchisees benefits you in that it prevents others from unfairly competing with your Studio; and (iii) you have sufficient resources and business experience and opportunities to earn an adequate living while complying with the terms of this Agreement. YOU HEREBY

WAIVE ANY RIGHT TO CHALLENGE THE TERMS OF THIS AGREEMENT AS BEING OVERLY BROAD,

UNREASONABLE OR OTHERWISE UNENFORCEABLE.

7. If You Breach This Agreement. You agree that your failure to comply with the terms of this Agreement will cause substantial and irreparable damage to us, the Franchisee and/or other Bikram Yoga franchisees for which there is no adequate remedy at law. Therefore, you agree that any violation of the terms of this Agreement will entitle us to injunctive relief. None of the remedies available to us under this Agreement are exclusive of any other, but may be combined with others under this Agreement, the Franchise Agreement or at law or in equity, including injunctive relief, specific performance and recovery of monetary damages. Any claim, defense or cause of action that you may have against us or against Franchisee, regardless of cause or origin, cannot be used as a defense against our enforcement of this Agreement.

8. Miscellaneous.

(a) If we hire an attorney or file suit against you because you have breached this Agreement and prevail against you, you agree to pay our reasonable attorneys’ fees and costs in doing so.

(b) This Agreement will be governed by, construed and enforced under the laws of the state in which the Studio is located and the courts in that state shall have jurisdiction over any legal proceedings arising out of this Agreement.

(c) Each section of this Agreement, including each subsection and portion thereof, is severable. In the event that any section, subsection or portion of this Agreement is unenforceable, it shall not affect the enforceability of any other section, subsection or portion; and each party to this Agreement agrees that the court may impose such limitations on the terms of this Agreement as it deems in its discretion necessary to make such terms reasonable in scope, duration and geographic area.

EXECUTED on the date stated below.

Franchisee (if other than an individual):

__________________________________ Name of Entity

By: _________________________________

Date: ______________, 20__

Typed or Printed Name & Title: _________________________________________________________

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You (Individual Owners):












ATTACHMENT "E"

TO FRANCHISE AGREEMENT

STATE ADDENDUM

None.


EXHIBIT "E"


GENERAL RELEASE

[See Attached]


1 PHX 329,224,856v4

WAIVER AND RELEASE OF CLAIMS

This Waiver and Release of Claims (the “Release”) is made as of __________ ___, 20___ by _________________________, a(n) ___________________ (“Franchisee”), and each individual holding an ownership interest in Franchisee (collectively with Franchisee, “Releasor”) in favor of Bikram, Inc., a Delaware corporation (“Franchisor,” and together with Releasor, the “Parties”).

WHEREAS, Franchisor and Franchisee have entered into a Franchise Agreement (the “Agreement”) pursuant to which Franchisee was granted the right to own and operate a Bikram Yoga studio;

WHEREAS, Franchisee has notified Franchisor of its desire to transfer the Agreement and all rights related thereto, or an ownership interest in Franchisee, to a transferee, [enter into a successor franchise

agreement] and Franchisor has consented to such transfer [agreed to enter into a successor franchise

agreement]; and

WHEREAS, as a condition to Franchisor’s consent to the transfer [Franchisee’s ability to enter into a

successor franchise agreement], Releasor has agreed to execute this Release upon the terms and conditions stated below.

NOW, THEREFORE, in consideration of Franchisor’s consent to the transfer [Franchisor entering

into a successor franchise agreement], and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, Releasor hereby agrees as follows:

1. Representations and Warranties. Releasor represents and warrants that it is duly authorized to enter into this Release and to perform the terms and obligations herein contained, and has not assigned, transferred or conveyed, either voluntarily or by operation of law, any of its rights or claims against Franchisor or any of the rights, claims or obligations being terminated and released hereunder. [_________________________] represents and warrants that he/she is duly authorized to enter into and execute this Release on behalf of Franchisee. Releasor further represents and warrants that all individuals that currently hold a direct or indirect ownership interest in Franchisee are signatories to this Release.

2. Release. Releasor and its subsidiaries, affiliates, parents, divisions, successors and assigns and all persons or firms claiming by, through, under, or on behalf of any or all of them, hereby release, acquit and forever discharge Franchisor, any and all of its affiliates, parents, subsidiaries or related companies, divisions and partnerships, and its and their past and present officers, directors, agents, partners, shareholders, employees, representatives, successors and assigns, and attorneys, and the spouses of such individuals (collectively, the “Released Parties”), from any and all claims, liabilities, damages, expenses, actions or causes of action which Releasor may now have or has ever had, whether known or unknown, past or present, absolute or contingent, suspected or unsuspected, of any nature whatsoever, including without limiting the generality of the foregoing, all claims, liabilities, damages, expenses, actions or causes of action directly or indirectly arising out of or relating to the execution and performance of the Agreement and the offer and sale of the franchise related thereto.

3. Nondisparagement. Releasor expressly covenants and agrees not to make any false representation of facts, or to defame, disparage, discredit or deprecate any of the Released Parties or otherwise communicate with any person or entity in a manner intending to damage any of the Released Parties, their business or their reputation.

4. Waiver of Statutory Rights. Releasor hereby acknowledges the provisions of Section 1542 of the Civil Code of California, which states that:


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“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

Releasor hereby (i) agrees that this Release extends to all claims that Releasor knows or suspects to exist in Releasor’s favor as of the date of this Release or believes may come into existence in the future, and (ii) waives, to the maximum extent permitted by law, the provisions of California Civil Code Section 1542. Releasor intends this Release to be a full and complete release in satisfaction of all claims, whether or not known or suspected by Releasor to exist in Releasor’s favor at the time of execution of this Release.

5. Miscellaneous.

a. Releasor agrees that it has read and fully understands this Release and that the opportunity has been afforded to Releasor to discuss the terms and contents of said Release with legal counsel and/or that such a discussion with legal counsel has occurred.

b. This Release shall be construed and governed by the laws of the State of California.

c. Each individual and entity that comprises Releasor shall be jointly and severally liable for the obligations of Releasor.

d. In the event that it shall be necessary for any Party to institute legal action to enforce or for the breach of any of the terms and conditions or provisions of this Release, the prevailing Party in such action shall be entitled to recover all of its reasonable costs and attorneys’ fees.

e. All of the provisions of this Release shall be binding upon and inure to the benefit of the Parties and their current and future respective directors, officers, partners, attorneys, agents, employees, shareholders and the spouses of such individuals, successors, affiliates, and assigns. No other party shall be a third-party beneficiary to this Release.

f. This Release constitutes the entire agreement and, as such, supersedes all prior oral and written agreements or understandings between and among the Parties regarding the subject matter hereof. This Release may not be modified except in a writing signed by all of the Parties. This Release may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same document.

g. If one or more of the provisions of this Release shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect or impair any other provision of this Release, but this Release shall be construed as if such invalid, illegal or unenforceable provision had not been contained herein.

h. The Parties agree to do such further acts and things and to execute and deliver such additional agreements and instruments as any Party may reasonably require to consummate, evidence, or confirm the Release contained herein in the matter contemplated hereby.

[Signature Page Follows]


3 PHX 329,224,856v4

IN WITNESS WHEREOF Releasor has executed this Release as of the date first written above.

FRANCHISEE

_________________________________________, a _________________________________________

By: ______________________________________ Name:____________________________________ Its:_______________________________________

FRANCHISEE’S OWNERS

Date _________________________________ _______________________________________ Signature

_______________________________________

Typed or Printed Name

STATE OF_______________________) ) ss. County of________________________)

The foregoing instrument was acknowledged before me this ____ day of ____________, by _____________________________________.

Notary Public

My commission expires: ____________________________


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Date _________________________________ _______________________________________

Signature

_______________________________________ Typed or Printed Name



Notary Public

My commission expires: ____________________________ Date _________________________________ _______________________________________

Signature

_______________________________________ Typed or Printed Name



Notary Public

My commission expires: ____________________________


EXHIBIT "F"


TABLE OF CONTENTS OF OPERATING MANUALS

[See Attached]


EXHIBIT "G"

STATE ADDENDUM

None.


EXHIBIT "H"


LIST OF FRANCHISEES

Part A (Current Franchisees)

State City Address Phone Owner Name(s)

California San Diego 2110 Hancock Street, Ste. 301

San Diego, California 92110

(619) 220-6811 James & Emma Kallett

(San Diego Yoga Schools, Inc.)

Part B (Former Franchisees Who Left System During Prior Fiscal Year)

Name(s) City State Current Business Phone or

Last Known Home Phone

NONE


EXHIBIT "I"


FINANCIAL STATEMENTS

Audited Financial Statements for Bikram, Inc. for the fiscal years ended December 31, 2009 and December 31, 2008.


EXHIBIT "J"


FRANCHISEE DISCLOSURE QUESTIONNAIRE

[See Attached]


FRANCHISEE DISCLOSURE QUESTIONNAIRE

As you know Bikram, Inc. (“we” or “us), and you are preparing to enter into a Franchise Agreement for the operation of a Bikram Yoga franchise. The purpose of this Questionnaire is to determine whether any statements or promises were made to you that we have not authorized or that may be untrue, inaccurate or misleading, to be certain that you have been properly represented in this transaction, and to be certain that you understand the limitations on claims you may make by reason of the purchase and operation of your franchise. You cannot sign or date this Questionnaire the same day as the Receipt for the Franchise

Disclosure Document but you must sign and date it the same day you sign the Franchise Agreement and pay your

franchise fee. Please review each of the following questions carefully and provide honest responses to each question. If you answer “No” to any of the questions below, please explain your answer on the back of this sheet.

Yes__ No__ l. Have you received and personally reviewed the Franchise Agreement and each attachment or schedule attached to it?

Yes__ No__ 2. Have you received and personally reviewed the Franchise Disclosure Document we provided?

Yes__ No__ 3. Did you sign a receipt for the Franchise Disclosure Document indicating the date you received it?

Yes__ No__ 4. Do you understand all the information contained in the Franchise Disclosure Document and Franchise Agreement?

Yes__ No__ 5. Have you reviewed the Franchise Disclosure Document and Franchise Agreement with a lawyer, accountant or other professional advisor?

Yes__ No__ 6. Have you discussed the benefits and risks of developing and operating a Bikram Yoga franchise with an existing Bikram Yoga franchisee?

Yes__ No__ 7. Do you understand the risks of developing and operating a Bikram Yoga franchise?

Yes__ No__ 8. Do you understand the success or failure of your franchise will depend in large part upon your skills, abilities and efforts and those of the persons you employ as well as many factors beyond your control such as competition, interest rates, the economy, inflation, labor and supply costs and other relevant factors?

Yes__ No__ 9. Do you understand all disputes or claims you may have arising out of or relating to the Franchise Agreement must be litigated in California, if not resolved informally or by mediation?

Yes__ No__ 10. Do you understand that you must satisfactorily complete the initial training course before we will allow your franchised business to open or consent to a transfer?

Yes__ No__ 11. Do you agree that no employee or other person speaking on our behalf made any statement or promise regarding the costs involved in operating a Bikram Yoga franchise that is not contained in the Franchise Disclosure Document or that is contrary to, or different from, the information contained in the Franchise Disclosure Document?

Yes__ No__ 12. Do you agree that no employee or other person speaking on our behalf made any statement or promise or agreement, other than those matters addressed in your Franchise Agreement, concerning advertising, marketing, media support, marketing penetration, training, support service or assistance that is contrary to, or different from, the information contained in the Franchise Disclosure Document?

Yes__ No__ 13. Do you agree that no employee or other person speaking on our behalf made any statement or

promise regarding the actual, average or projected profits or earnings, the likelihood of success, the amount of money you may earn, or the total amount of revenue a Bikram Yoga franchise will generate, that is not contained in the Franchise Disclosure Document or that is contrary to, or


different from, the information contained in the Franchise Disclosure Document?

Yes__ No__ 14. Do you understand that the Franchise Agreement and attachments to the Franchise Agreement contain the entire agreement between us and you concerning the franchise for the Bikram Yoga business, meaning any prior oral or written statements not set out in the Franchise Agreement or the attachments to the Franchise Agreement will not be binding?

YOU UNDERSTAND THAT YOUR ANSWERS ARE IMPORTANT TO US AND THAT WE WILL RELY ON THEM. BY SIGNING THIS QUESTIONNAIRE, YOU ARE REPRESENTING THAT YOU HAVE CONSIDERED EACH QUESTION CAREFULLY AND RESPONDED TRUTHFULLY TO THE ABOVE QUESTIONS.

Signature of Franchise Applicant


Name (please print)

Name (please print)

Dated Dated



Name (please print)

Name (please print)

Dated Dated

EXPLANATION OF ANY NEGATIVE RESPONSES [REFER TO QUESTION NUMBER]:


EXHIBIT "K"


RECEIPTS

[See Attached]


RECEIPT #1

(This copy is for the prospective franchise owner and must remain herein)

This Disclosure Document summarizes certain provisions of the franchise agreement and other information in plain language. Read this Disclosure Document and all agreements carefully. If Bikram, Inc. offers you a franchise, it must provide this Disclosure Document to you 14 days before you sign a binding agreement or make a payment with the franchisor or an affiliate in connection with the proposed franchise sale.

If Bikram, Inc. does not deliver this Disclosure Document on time, or if it contains a false or misleading statement or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington, DC 20580, and the appropriate state agency listed in EXHIBIT "A" to this Disclosure Document.

The franchise seller(s) involved with the sale of this franchise is/are:

(franchisee or franchise seller must check box next to individual(s) involved in sales process)

____ Bikram Choudhury; 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064; (310) 854-5800

____ Allison Butash; 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064; (310) 854-5800

____ [Name]________________;[Address]_________________________________[Phone]____________

Bikram, Inc.’s agent to receive service of process is listed in EXHIBIT "B" to this Disclosure Document.


I have received the Bikram Yoga Franchise Disclosure Document dated March 18, 2010 that included the following Exhibits:

EXHIBIT "A" State Agencies and Administrators EXHIBIT "B" Agent for Service of Process EXHIBIT "C" Franchise Agreement EXHIBIT "D" Conversion Franchise Agreement EXHIBIT "E" General Release EXHIBIT "F" Table of Contents of the confidential Operating Manuals EXHIBIT "G" State Addendum EXHIBIT "H" List of Franchisees EXHIBIT "I" Financial Statements of Bikram, Inc. EXHIBIT "J" Franchisee Disclosure Questionnaire EXHIBIT "K" Receipts

Print Name

Date (Signature) Prospective Franchise Owner

(This receipt should be executed in duplicate. Receipt #1 must be signed and remains in the Franchise Disclosure Document as the prospective franchise owner’s copy. Receipt #2 must be signed and returned to Bikram, Inc.)


RECEIPT #2

(This copy must be signed by the prospective franchise owner and returned to Bikram, Inc..)

This Disclosure Document summarizes certain provisions of the franchise agreement and other information in plain language. Read this Disclosure Document and all agreements carefully. If Bikram, Inc. offers you a franchise, it must provide this Disclosure Document to you 14 days before you sign a binding agreement or make a payment with the franchisor or an affiliate in connection with the proposed franchise sale.

If Bikram, Inc. does not deliver this Disclosure Document on time, or if it contains a false or misleading statement or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington, DC 20580, and the appropriate state agency listed in EXHIBIT "A" to this Disclosure Document.

The franchise seller(s) involved with the sale of this franchise is/are:

(franchisee or franchise seller must check box next to individual(s) involved in sales process)

____ Bikram Choudhury; 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064; (310) 854-5800

____ Allison Butash; 11500 W. Olympic Blvd., Suite 150, Los Angeles, CA 90064; (310) 854-5800

____ [Name]________________;[Address]_________________________________[Phone]____________

Bikram, Inc.’s agent to receive service of process is listed in EXHIBIT "B" to this Disclosure Document.


I have received the Bikram Yoga Franchise Disclosure Document dated March 18, 2010 that included the following Exhibits:

EXHIBIT "A" State Agencies and Administrators EXHIBIT "B" Agent for Service of Process EXHIBIT "C" Franchise Agreement EXHIBIT "D" Conversion Franchise Agreement EXHIBIT "E" General Release EXHIBIT "F" Table of Contents of the confidential Operating Manuals EXHIBIT "G" State Addendum EXHIBIT "H" List of Franchisees EXHIBIT "I" Financial Statements of Bikram, Inc. EXHIBIT "J" Franchisee Disclosure Questionnaire EXHIBIT "K" Receipts

Print Name

Date (Signature) Prospective Franchise Owner

(This receipt should be executed in duplicate. Receipt #1 must be signed and remains in the Franchise Disclosure Document as the prospective franchise owner’s copy. Receipt #2 must be signed and returned to Bikram, Inc.)

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