SAMPLE OF THE EXCLUSIVE DISTRIBUTOR AGREEMENT

THIS AGREEMENT is entered into this ___ day of the month of ______ of the year of 20__, by Gift Shops International, Inc. dba Kids’ Korner Gift Shoppes® U.S.A., (THE COMPANY) and, of ____________    (the “Distributor”). The purpose of this Agreement is to appoint THE DISTRIBUTOR, an independent contractor, as a distributor for THE COMPANY.

Statement

WHEREAS, because of its operating experience and of the expenditure of time, effort and money THE COMPANY has acquired and developed unique and special skills, techniques and knowledge with reference to the development, opening and operating of a in-school Gift Shop known as “KIDS’ KORNER GIFT SHOPPE®”; and

WHEREAS, THE COMPANY, has devised a standard, unique and uniform system for the establishment, operating and development of an in-school Gift Shop marketing business with distinctive features in the product, services, produc­tion and distribution, which system is identified by the Mark, “KIDS’ KORNER GIFT SHOPPEÒ” hereinafter referred to as the “PRINCIPAL MARK”; and certain other ancillary marks to with:  “THE KIDS’ SHOPä”, “THE KIDS’ CHOICEä’, HEREINAFTER REFERRED TO AS “ancillary marks”; and

WHEREAS, THE COMPANY is the sole and exclusive owner of the entire right, title and interest, together with all the good will connected therewith, in and to the PRINCIPAL MARK; and THE COMPANY claims other ownership rights and good will as to the ANCILLARY MARKS and other service and/or trademarks, if any, used in the “KIDS’ KORNER GIFT SHOPPEÒ” program; and

WHEREAS, The Company, by maintenance of uniformity and high standards of quality and service, established a national reputation, demand and good will for its in-school Gift Shop under such system and under its name and using the PRINCIPAL MARK and ANCILLARY MARKS; and

WHEREAS, it is understood that each of the “KIDS’ KORNER GIFT SHOPPE®” Distributor operations is depen­dent on each of the others to establish and maintain the good will necessary for a successful operation, and that ills therefore, of benefit to, as well as an obligation of, each Distributor to conform strictly to the terms and conditions of the EXCLUSIVE DISTRIBUTOR AGREEMENT, and

WHEREAS, all of the foregoing have a distinctive and valuable significance to the public and THE DISTRIBUTOR being cognizant thereof, it desirous of obtaining from THE COMPANY an Exclusive Distributorship and the license to use THE COMPANY’s PRINCIPAL MARK and ANCILLARY MARKS and the benefits of the merchandising system and operat­ing services related thereto; and

WHEREAS, THE DISTRIBUTOR seeks to act as the exclusive distributor of “KIDS’ KORNER GIFT SHOPPE®” program for THE COMPANY in the territory stated in Exhibit “A” attached hereto, and

WHEREAS, this Agreement is not a franchise and no fees are paid to THE COMPANY for the

right to be an exclusive distributor,

NOW, THEREFORE, in consideration of the mutual undertakings hereinafter set forth, it is agreed as follows:

1.         Appointment.

(a) Subject to and upon the terms and conditions of this agreement, THE COMPANY hereby appoints THE DISTRIBUTOR to act as the exclusive distributor for only the “KIDS’ KORNER GIFT SHOPPE®” program within the territory stated in Exhibit “A” attached hereto (the “Territory”). Subject to the terms hereof and for as long as this agreement remains in effect, THE COMPANY shall not authorize any other party to act as its distributor in connection with the sale of “KIDS’ KORNER GIFT SHOPPE®” programs in the Territory. THE DISTRIBUTOR hereby accepts the grant of exclusive authority upon the terms hereof.

(b) THE COMPANY hereby grants unto THE DISTRIBUTOR a personal license to use the PRINCIPAL MARK and ANCILLARY MARKS and the right and privilege to use the established “KIDS’ KORNER GIFT SHOPPE®” in the operation of In-School Gift Shop business, pursuant to the specific conditions herein set forth, in THE DISTRIBUTORS Exclusive Territory as defined in Exhibit “A” attached hereto. The license hereby granted shall not be transferable without written permission from THE COMPANY.

(c) THE COMPANY expressly reserves the right to sell to other distributors outside the Territory.

(d) This Agreement will become effective only upon acceptance of the offer in Sumner, Washington, in the form of execution by authorized officers of THE COMPANY.

2.         Products. For the purposes of this agreement, the terms “Products” shall mean those items supplied by Approved “KIDS’ KORNER GIFT SHOPPE®” suppliers. The Approved “KIDS’ KORNER GIFT SHOPPE®” Suppliers are listed in Exhibit “B” attached hereto. THE DISTRIBUTOR recognizes that it is essential to the proper marketing of the “KIDS’ KORNER GIFT SHOPPEÒ” program and to the preservation and promotion of its reputation and acceptance by the public at large, that uniform standards of quality and of appearance be maintained and that size, quality, texture, strength, finish and appearance of items displaying THE COMPANY’S PRINCIPAL MARK or ANCILLARY MARKS, or services promoted under such marks, shall be uniform. THE DISTRIBUTORS therefore agrees, as part of the consideration for this agreement, that they shall not sell or offer for sale any goods in a “KIDS’ KORNER GIFT SHOPPE®” not supplied by an Approved “KIDS’ KORNER GIFT SHOPPEÒ” Supplier, without THE COMPANY’s prior written consent, which may be withheld for any reason in THE COMPANY’s sole discretion.

3.         Purchase Requirements.

(a) The “KIDS’ KORNER GIFT SHOPPE®” Approved Suppliers shall sell and THE DISTRIBUTOR shall purchase the products at the prices and terms as the individual Approved Supplier shall, in its sole discretion, from time to time establish. All prices shall be quoted F.O.B. Approved Suppliers warehouse. Title shall pass F.O.B. Approved Suppliers’ warehouse. THE DISTRIBUTOR shall pay all invoices for the products according to the terms published by the Approved Suppliers from time to time and shall furnish information as may be reasonably required by the Approved Suppliers for the purpose of credit evaluation. An Approved Supplier may require payment in advance of shipment if, in its sole discre­tion, it shall deem itself insecure with respect to THE DISTRIBUTOR’s ability to pay for the products ordered. THE DIS­TRIBUTOR shall resell for its own account and THE COMPANY shall have no responsibility for invoicing, collection or credit risks of THE DISTRIBUTOR’s customers.

(b)       THE COMPANY shall establish minimum annual quantitative purchase requirements from Approved Suppliers as stated below:

            YEAR OF                                MINIMUM PURCHASE REQUIRED PER MILLION
            AGREEMENT                         POPULATION IN EXCLUSIVE TERRITORY

1^st YEAR                                 $15,000.00 PER MILLION POPULATION

2^nd YEAR                                $25,000.00 PER MILLION POPULATION

            3^rd to 10^th YEAR                      $50,000.00 PER MILLION POPULATION

(c) THE DISTRIBUTOR’s exclusive right to operate its Distributorship within “The Exclusive Territory” is dependent upon achievement of the minimum purchases listed in Section 3 (b) above during each year, commencing one (1) year after the effective date of this agreement.

(d) In the event that THE DISTRIBUTOR does not show intent to purchase such minimum quantities for any such annual period by 15th day of April of said calendar year, THE COMPANY shall have the right to terminate this agree­ment, pursuant to section 6 (d) hereof.

4.         Order Procedures.  THE DISTRIBUTOR is to place all orders for Products with THE COMPANY on such forms and in accordance with such procedures, as THE COMPANY shall establish from time to time. THE DISTRIBUTOR shall take all orders subject to acceptance and confirmation by THE COMPANY.

5.         Distributor’s Obligations.

(a) THE DISTRIBUTOR agrees to use its best efforts to market the “KIDS’ KORNER GIFT SHOPPE®” Program within the Territory in accordance with the terms of this agreement and as THE COMPANY may direct from time to time, and shall devote adequate financial resources, time skill and attention, and use its full organizations and sales staff in its best endeavor to maximize sales of “KIDS’ KORNER GIFT SHOPPEÒ” Programs. THE DISTRIBUTOR agrees to assume the obligations of being continuously active in the Territory on behalf of THE COMPANY, to represent THE COMPANY in a professional and ethical manner, and generally to perform conscientiously and efficiently its obligations hereunder.

(b) THE DISTRIBUTOR agrees to insert and pay for a Trade Name listing or trademark listing in the white pages of telephone directory or directories covering its exclusive territory.

(c) THE DISTRIBUTOR agrees to provide written progress reports to THE COMPANY from time to time on forms specified by THE COMPANY.

(d) THE DISTRIBUTOR agrees to not market or promote “KIDS’ KORNER GIFT SHOPPEÒ” Programs outside their assigned Exclusive Territory.

(e)       THE DISTRIBUTOR agrees to use promotional material and campaigns without alteration as prepared or approved by THE COMPANY. THE DISTRIBUTOR agrees to mail no fewer than four (4) promotional programs desig­nated by THE COMPANY to each and every public and private elementary school in THE DISTRIBUTOR’S EXCLUSIVE TERRITORY by THE DISTRIBUTOR in each twelve (12) month period. The foregoing provisions shall not apply where materials or campaigns are prepared or approved by THE COMPANY are contrary to law, or are incompatible with THE DISTRIBUTOR’s methods of operation or promotion.

(f)        THE DISTRIBUTOR agrees to submit to THE COMPANY for written approval, prior to printing or use, any advertising or promotional material which is part of a “KIDS’ KORNER GIFT SHOPPEÒ” campaign not developed by THE COMPANY. The approval of THE COMPANY shall not be unreasonably withheld.

(g)       THE DISTRIBUTOR agrees to establish and keep current a customers’ mailing list for THE DISTRIBUTOR’S exclusive territory.

(h)       THE DISTRIBUTOR agrees to refrain from or modifying advertising which, in THE COMPANY’s judg­ment, conflicts with national policies of THE COMPANY or is not in keeping with high standards or ethical business con­duct.

(i)         THE DISTRIBUTOR agrees to cooperate and participate in, and pay a proportionate share of the cost of all National Educational Conference shows and promotional campaigns subscribed to by a simple majority of THE DISTRIBUTOR’S. THE DISTRIBUTOR’s share shall be an equal portion to that of the other “KIDS’ KORNER GIFT SHOPPE®” Distributors in the United States.

(j)         THE DISTRIBUTOR agrees to cooperate and participate in, and pay a proportionate share of the cost of all State Educational Conference shows. THE DISTRIBUTOR’s share will be based on the percentage of the state’s population served by THE DISTRIBUTOR.

(k)        THE DISTRIBUTOR agrees to provide an Instructional Handbook for each “KIDS’ KORNER GIFT SHOPPEÒ” customer serviced by THE DISTRIBUTOR.

(I)         THE DISTRIBUTOR agrees that all expenses incurred by THE DISTRIBUTOR for the purchase, sale or promotion of the Products shall be borne solely by THE DISTRIBUTOR, and THE DISTRIBUTOR shall not be entitled to reimbursement for any part thereof, except as may otherwise be agreed between the parties in writing from time to time.

(m) THE DISTRIBUTOR agrees to advise THE COMPANY immediately of actual or anticipated changes in ownership, majority interest, business addresses and phone numbers.

(n)       THE DISTRIBUTOR agrees to comply with any and all City, County, Federal and State laws, ordinances, rules and regulations now in effect, or which hereafter may be enacted, pertaining to the conduct of its business.

(o)       THE DISTRIBUTOR agrees they will not have any interest, direct or indirect, in the ownership, manage­ment, control or financing of any other In-School Gift Shop program, unless such interest shall be consented to in writing by THE COMPANY.

6.         Terms and Termination.

(a)       Subject to earlier termination as provided in this Agreement, the term hereof shall be for a period of ten (10) years from the date stated herein.

(b)       THE DISTRIBUTOR shall have the option of renewing this Agreement for an additional term of ten (10) years at the end of the initial terms, provided that:

(i)   THE DISTRIBUTOR notifies THE COMPANY, in writing, at least ninety (90) days prior to the expiration of the current term that they intend to renew this Agreement;

(ii)  THE DISTRIBUTOR is not at the time of exercise of such option, nor at the time of the commencement of the renewal term, in default hereunder.

(c)       THE COMPANY shall have the right to terminate this agreement upon thirty days notice to THE DIS­TRIBUTOR in the event THE DISTRIBUTOR fails to satisfy the minimum quantitative purchase requirements for the Products for any period, as set forth in paragraph 3(b) hereof.

(d)       THE COMPANY shall have the right to terminate this agreement immediately upon written notice to THE DISTRIBUTOR upon the happening of any of the following:

(i)   the failure of THE DISTRIBUTOR to comply with one or more of the Distributor’s Obligations as outlined in Section 5 of this agreement.

(ii)  the failure of THE DISTRIBUTOR to pay for the Products when due;

(iii) any material adverse change in the business or financial affairs of THE DISTRIBUTOR;

(iv) any substantial adverse judgment being entered against THE DISTRIBUTOR.

(v)  the bankruptcy or insolvency of THE DISTRIBUTOR, or the failure of THE DISTRIBUTOR to pay its debts as they become due, or the termination of the active business or existence of THE DISTRIBUTOR;

(vi) THE DISTRIBUTOR or any of its officers, directors or shareholders, if applicable, is convicted of a felony or other crime which substantially impairs the good will associated with THE COMPANY’s PRINCIPAL MARK and/or ANCILLARY MARKS or other trademarks or service marks used in the “KIDS’ KORNER GIFT SHOPPEÒ” business.

(vii) the breach by THE DISTRIBUTOR of any material term of this agreement.

(e)       Upon termination of this agreement, THE COMPANY shall have the sole right to cancel all orders for the Products then unshipped; provided, however, that no termination shall affect THE COMPANY’s or the Approved Supplier’s rights to receive timely payments for the Products shipped prior to that date. In the event of termination THE DISTRIBU­TOR shall not be entitled to any additional compensation for the performance of its responsibilities as a distributor hereun­der. In the event of termination, THE COMPANY shall have the right, in its sole discretion, to repurchase at cost any and all Products which THE DISTRIBUTOR may have on hand, provided such Products are in good and merchantable condi­tion in THE COMPANY’s sole discretion.

7.         Indemnification.   THE DISTRIBUTOR shall indemnify and hold THE COMPANY and the Approved Suppliers harmless from any and all claims, suits actions or proceeding for loss, injury, damages or liability including reasonable attorney’s fees, resulting from or arising out of the distribution and sale of the Products by THE DISTRIBUTOR, unless such loss, injury, damage or liability results from the negligence or culpable conduct of THE COMPANY or an Approved Supplier.

8.         Trademarks.   THE DISTRIBUTOR agrees not to make or cause to be made any application for registra­tion of any trademark owned by THE COMPANY, Inc., anywhere in the world and to forthwith assign ownership of any such trademark to THE COMPANY. This obligation shall survive termination of this agreement and shall be enforceable by THE COMPANY at any time or place. THE DISTRIBUTOR shall not dispute THE COMPANY’s title to any such trademark and THE DISTRIBUTOR expressly acknowledges that any right or good will to such trademarks, which may occur by operation of this agreement, shall accrue solely to THE COMPANY. THE COMPANY shall not dispute THE DISTRIBUTOR’s title to any trademark or service mark currently employed by THE DISTRIBUTOR, except to the extent that such trademarks or service marks are owned or used by THE COMPANY.

9.         Confidential Distributor Handbook.   In order to protect the reputation and good will associated with “KIDS’ KORNER GIFT SHOPPEÒ” program and with the PRINCIPAL MARK and ANCILLARY MARKS, and to maintain the uniform standards, of operation there under, THE DISTRIBUTOR shall conduct its Exclusive Distributorship, to the extent reasonably possible, in accordance with THE COMPANY’S “Confidential Distributor Handbook”, if same has been provided.

(a)       THE DISTRIBUTOR shall at all times, treat as confidential, and shall not at any time disclose, copy duplicate, record or otherwise reproduce, in whole or in part, or otherwise make available to any person, firm or corpora­tion, the contents of said “Confidential Distributor Handbook”, without the prior written approval of THE COMPANY, except as the same may include representative documents distributed publicly by THE COMPANY or intended by THE COM­PANY to be so distributed by THE DISTRIBUTOR.

(b) The “Confidential Distributor Handbook”, when provided, shall at all times remain the sole property of THE COMPANY and shall promptly be returned to THE COMPANY upon expiration or other termination of this Agreement.

10.       Relationship of the Parties.  THE DISTRIBUTOR is an independent contractor and no employee or agent of THE DISTRIBUTOR shall be deemed to be an employee or agent of THE COMPANY. Nothing herein contained shall be construed to create a partnership or joint venture and no party hereto shall be liable for the debts or obligations of the other. THE DISTRIBUTOR, its agents or employees, shall have no right or authority to enter into any contract or to bind THE COMPANY in any way without the prior written consent of THE COMPANY.

11.       Assignment.   THE DISTRIBUTOR shall not assign this agreement or any of the rights and privileges hereunder to any party without the written approval of THE COMPANY, which shall not unreasonably be withheld. THE DISTRIBUTOR shall not sell a majority interest in itself or change ownership altogether without the written approval of THE COMPANY, which shall not unreasonably be withheld.

12.       Benefit.   All rights and obligations under this Agreement shall inure to the benefit of the successors and assigns of the parties. Except as herein otherwise stated, the rights of the parties under this Agreement are not transfer­able and shall not be sold, pledged, hypothecated, assigned, or transferred.

13.       Entire Agreement.   This agreement constitutes the complete and exclusive understanding and agree­ment between the parties and supersedes and terminates all prior to contemporaneous arrangements, understanding and agreements, whether verbal or written. This agreement may not be amended modified or rescinded except by a written instrument executed by the parties hereto.

14.       Notices.   Notices, requests, demands, or other communications under this agreement shall be in writing and shall be deemed to be duly given if delivered by hand or mailed first class, registers or certified mail, return receipt requested, postage and fees prepaid address: 

                  If to THE COMPANY:                    Gift Shoppes International, Inc.
                                                                        dba Kids’ Korner Gift Shoppes®
                                                                        P. O. Box 1206
                                                                        Sumner, WA 98390
                                                                        Attention: Don Fisher

If to THE DISTRIBUTOR:

15.       EXCUSE FOR NON-PERFORMANCE.   Neither THE COMPANY nor THE DISTRIBUTOR shall be liable to perform any of its obligations under this Agreement if such failure to perform is due to strikes, lockouts, work stoppages, accidents, transportation delays, war, government regulations or acts of God or other causes beyond the reasonable control of the parties, and the happening of any such cause or delay shall extend the time of performance by a period equal to the lost time occasioned by any such cause or delay. Nothing in this section shall be construed to relieve THE DISTRIBUTOR of its obligations to pay all amounts due THE COMPANY and/or THE APPROVED SUPPLIERS, maintain prescribed levels of insurance, or operate it Distributorship in accordance with the reasonable standards and regulations prescribed in the Exclusive Distributor Handbook.

16.       Waiver.   No delay or omission by either party in exercising any of its rights or remedies under this agree­ment or under any applicable law on any one occasion shall be deemed a waiver of, or bar to, the exercise of such right or remedy or any other right or remedy upon any other occasion. In the event that any part of this agreement shall be held to be indefinite, invalid or otherwise unenforceable, the entire agreement shall not fail on account thereof and the balance of the agreement shall continue in full force and effect.

17.       Confidentiality.  The parties agree that any information exchanged between them, shall be treated as confidential and shall not be disclosed to any third party without the written consent of the other, unless required by law. Neither party shall use any information obtained pursuant to this agreement except for purposes of fulfilling their respective obligations under this agreement or enforcing this agreement.

18.       Counterparts. This agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date above written.