ment/non-disclosure | 16, | | | covenants | 17.8 of FA | |

Item 10

FINANCING

The financing described in this Item 10 is only provided by DW Financial. We do not offer any other direct or indirect financing.

General Equipment Financing

Degree Financial has no obligation to provide you any financing, but it may agree to finance a portion of the required equipment for qualified prospective franchisees under specified terms and conditions. Its decision to finance any equipment will be based, in part, on your creditworthiness, the collateralization of the equipment and other collateral you have available to secure the financing and our then-current financing policies.

Degree Financial limits the amount that it will finance. Its standard financing is up to $151,000 if you meet certain requirements. We may elect not to approve a transfer, including a transfer to a corporation or other entity wholly owned by you, if you do not pay any loans payable to us and or Degree Financial in full.

You must qualify to purchase a franchise, meet our credit standards and be otherwise eligible for financing to qualify. Degree Financial currently charges a variable interest rate of Prime + 7%. If it agree to finance a portion of the required equipment, you must sign a promissory note when you sign your franchise agreement and pay the balance in monthly installments. Degree Financial does not require any money down.

You must make note payments by automatic bank draft. Some banks and other financial institutions may charge a fee for electronic transfers. Monthly payments will begin approximately 1 month after you complete Training. The length of the repayment term may be negotiable up to a maximum of 5 years.

Degree Financial requires a security interest in the Studio franchise. You must sign a security agreement granting it a security interest in all your assets, including after acquired property and it will file a UCC financing statement with the appropriate governmental authority. It has the right to require additional forms of security.

You may prepay the note at any time without penalty. If you default, Degree Financial may declare the entire remaining amount due. If you do not pay our them the entire balance, and any accrued, unpaid interest, you may be responsible for the court costs and attorneys' fees Degree Financial incurs in collecting the debt from you. We may terminate your franchise agreement if you do not pay Degree Financial.

You must waive your rights to certain notices of a collection action in our promissory note, security agreement and guaranty but there are no waivers of defense in the promissory note, security agreement or guaranty. If you are a legal entity, your shareholders, members, partners and/or owners must personally guarantee the debt and agree to pay the entire debt and all collection costs. Degree Financial has the right to require a spouse's personal guaranty.

Our Degree Financial may sell, assign or discount any promissory note or other obligation arising out of the franchise agreement to a third party. If it sells or assigns your promissory note, it will not affect our obligation to provide the services to you that are described in the franchise agreement but the third party may be immune under the law to any defenses to payment you may have against our affiliate.

We may periodically agree with third-party lenders to make financing available to our qualified franchisees and we may, in our sole discretion, refer you to a third-party lender for financing. We have no control over whether financing will be offered to you by any third-party lender. The lender is not obligated to provide financing to you or to any other franchisee that the lender finds does not meet its credit requirements and loan criteria. If we refer you to a third-party lender for financing, we may agree to take a short-term promissory note (in a form we provide to you) until your financing is arranged. You must use the proceeds from the lender to pay any promissory note to us.

We do not currently derive income from referrals or placement of financing with any thirdparty lender. However, we may require payment from you or other persons for the placement of financing in the future. If we charge for placing financing in the future, we expect to use the payments to offset our expenses in doing so.

We do not guarantee your obligations to third parties.

Source: Item 10 — Financing (FDD pages 31–32)