What are Canine Dimensions' specifications and standards for supplier approval?

You must establish and operate your Franchised Business in compliance with your Franchise Agreement and the standards and specifications contained in the confidential Manual ("Manual") loaned to you by us. We will communicate our standards and specifications to you in writing through the Manual.

In order to maintain our standards of consistent, high quality products and services, customer recognition, advertising support, value and uniformity in Canine Dimensions Businesses, you must purchase all of your required inventory, goods, equipment, supplies, forms, products, services, and advertising materials used in or sold through your Franchised Business, per our specifications and standards, only from us or our approved or designated suppliers and distributors. You will be permitted to carry only the specific items of inventory approved by us. We will provide you with a list of approved suppliers following execution of the Franchise Agreement.

If we do not authorize a product, service, or supplier, you are prohibited from using it in your Franchised Business. It is a material breach of your Franchise Agreement if you buy products, equipment, supplies, inventory, goods or services from anyone other than our designated or approved suppliers and distributors (which may include us or our affiliates) without our prior written approval.

We formulate and modify our standards and specifications based on the market for dog training and behavior modification businesses in general, as well as competitive and economic conditions, based on the experience of our affiliate's operation of a Canine Dimensions Business. We do not provide any material benefits to you based upon your use of approved suppliers.

Supplier Approvals

If you want to purchase or lease any products, equipment, supplies, forms, marketing, supplies, advertising or services from a supplier, other than from us or our authorized supplier, you must first notify us and obtain our written approval. We will provide you with our specifications and standards for approval. We will review your request and we will respond to you in writing (typically by e-mail) regarding our approval or disapproval of the alternative supplier within 60 days after we have had the opportunity to test the item or supplier. We have no obligation to approve any request for a new supplier, product, or service, but we will not unreasonably withhold our approval if the item, product, or service is not one that we require you to purchase or obtain from our existing suppliers.

You will be required to pay our costs of testing. If the supplier proposed by you meets our criteria, we will permit you to contract with that approved supplier. We reserve the right to re-inspect the facilities and to retest the product of any approved supplier and to revoke any approval if the supplier fails to continue to meet our high standards. Our approval will be revoked if we determine, in our reasonable discretion, that an approved supplier has not continued to meet our standards. In that case, we will inform you in writing of our decision to revoke our approval, and you will be required to cease contracting with that supplier immediately after your receipt of our notice of revocation. Other than our costs of testing (which will not be less than $250), we do not charge a fee for approval.

We do not make our criteria for selecting approved suppliers available to our franchisees, nor do we make our specifications known to suppliers. We do not issue specifications and standards to franchisees or approved suppliers. Generally, supplier approval might depend on product quality, delivery frequency and reliability, service standards, financial capability, customer relations, concentration of purchases with limited suppliers to obtain better prices and service, and/or a supplier's willingness to pay us or our affiliates for the right to do business with our System.

In evaluating an exclusive supplier, we may take into account, among other things, the uniqueness of the product; the projected price and required volume of the product; the investment required and the ability of the supplier to meet the required quality and quantity of the product; the availability of qualified, alternative suppliers; the duration of the exclusivity; and the desirability of competitive bidding.

Required Purchases or Leases

Logo-Bearing Materials

You are required to purchase branded materials, such as marketing materials, workbooks, car wraps, brochures, business cards, and uniforms, from us or our affiliates. We or our affiliates are the only approved suppliers of logo-bearing materials.

Inventory

Generally, you must purchase all of your inventory items from suppliers approved by us, which may include us or our affiliate(s). We or our affiliate(s) may be the only approved suppliers of inventory items for your Franchised Business. We or our affiliate(s) are the only approved suppliers of client workbooks and the initial inventory package that you must purchase from us. We reserve the right to be the

only approved suppliers of other inventory items, but presently, we are not the only approved supplier of inventory items.

Insurance

You must obtain and maintain, at your own expense, such insurance coverage that we require from time to time. We may regulate the types, amounts, terms and conditions of insurance coverage required for your Franchised Business and standards for underwriters of policies providing required insurance coverage; our protection and rights under such policies as an additional named insured; required or impermissible insurance contract provisions; assignment of policy rights to us;

Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 14–17)