What obligation does an Aerus franchisee have regarding operating in accordance with the System?

rus" Mark.

We have developed a distinctive and proprietary system (the "System") for establishing and operating businesses that offer and sell the Products. The distinguishing characteristics of the System include, among other things: identification by the Marks; distinctive exterior and interior design, decor, color scheme and furnishings, fixtures and other trade dress elements; proprietary products; standards, specifications, policies and procedures for construction, management and operations; quality, distinctiveness and uniformity of products and services; standards, specifications, procedures and automated, software driven administrative systems for customer, lead, inventory, sales and financial management and control; sales, recruiting and lead generation programs; training and assistance; and advertising and promotional programs all as are more

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particularly described and designated in the Manuals (as defined below) and all of which we may change, improve, and further develop at our sole option from time to time.

"Manuals" refer to our confidential operations manuals, including the Policies and Procedures, and other manuals and written materials (including electronically stored or communicated materials) developed by us for use in the operation of Aerus Businesses. Our "Policies and Procedures" include those policies, procedures, practices, rules and regulations developed by us for use in the operation of Aerus Businesses. We refer to businesses which operate under the Standard and Associate Programs (each defined below) as "Aerus Businesses," and to the specific business that you will operate as the "Franchised Business."

The Franchise Offered

We grant to third parties the license and right to operate under 1 of 2 franchise programs, known as (i) the standard franchise program (the "Standard Program") and (ii) the associate franchise program (the "Associate Program"); each of which offer and sell certain of the Products, are identified by certain of the Marks and use certain elements of the System, all as determined from time to time by us.

The type of businesses operated under each of these programs possess each of the four following characteristics: (i) they are identified by the Marks, (ii) they are primarily engaged in the offer and sale of the Products, to either (a) non-commercial, residential buyers of the Products, or (b) commercial buyers who are not designated in the Manuals as "national accounts" and who are not engaged, and not anticipated to be engaged, in the sale of any cleaning, purification, health improvement or other consumer products or services, who, in either case, are purchasing the Products for such customer's use or consumption and not for re-sale ("Approved Customers"), (iii) they operate from one or more pre-authorized physical locations that serve as retail locations, service centers, recruiting and training centers (each, an "Approved Location"), and (iv) they operate in accordance with the System.

Although the type of businesses operated under each of the programs are similar, there are key and important differences in the programs. Associate Program franchisees may only operate from a single approved location, while Standard Program franchisees may, with our approval, open additional locations. Whether a franchisee is under the Association Program or Standard Program affects the prices at which the franchisee may sell consigned products, with Standard Program franchisees entitled to more favorable pricing. Some of the additional key differences between the programs are summarized below and are noted throughout this Disclosure Document. Unless otherwise noted in this Disclosure Document, the programs are similar.

Source: Item 1 — The Franchisor and any Parents, Predecessors, and Affiliates (FDD pages 9–15)