What is the purpose of the Degree Wellness marketing fund?

roups that may have additional costs to you should you decide to participate.

Advertising by Us – Brand Fund

We currently administer a brand development fund (the "Fund") for the benefit of the entire System of Studio. We use the Fund to meet certain costs related to maintaining, administering, directing, conducting and preparing advertising, marketing, public relations, and/or promotional programs and materials, and any other activities which we believe will enhance the image of the System. We require all Degree Wellness Studios to contribute 1% of their gross revenues to the Fund. All Degree Wellness Studio will be required to contribute to the Fund on the same basis as you, respectively, unless prohibited by law. Your required Fund contribution may be increased to

an amount equal to up to two percent (2%) of the gross revenues generated by your Studio upon 60 days' prior written notice of such an increase via the Manuals or otherwise in writing. Other franchised and affiliate-owned Studio will contribute to the Fund in the same amount and manner as franchised Studio subject only to limitations under applicable law.

We will administer and direct all programs financed by the Fund, and will have sole discretion over the creative concepts, materials, endorsements and media used by the Fund, and the geographic, market, and allocation of the Fund. We have the right to determine, in our sole discretion, the composition of all geographic territories and market areas for the development and implementation of such programs. The Fund may be used to pay any and all costs of maintaining, administering, directing, and preparing national, regional or local advertising materials, programs, research, development, creative and marketing activities, including, without limitation, (a) costs for preparing and conducting television, radio, magazine, billboard, newspaper, internet and other media programs and activities, (b) costs associated with conducting marketing research, (c) costs associated with website development, maintenance, hosting and marketing, including without limitation, search engine optimization and social media, (d) administering regional and multiregional advertising programs, including, without limitation, purchasing direct mail and other media advertising, (e) employing advertising, program and marketing agencies, and vendors providing marketing services, (f) development, implementation and maintenance of online asset management tools, (g) marketing and advertising training programs and materials, and (h) costs for providing promotional brochures and advertising templates and materials to Degree Wellness Studio franchises. Advertising materials developed or produced by the Fund may include video, audio, and written advertising materials, which will be prepared by our in-house marketing department. The Fund will furnish you with approved advertising materials at its direct cost of producing those advertising materials. Amounts contributed to the Fund may be used to place advertising in television, radio, newspaper, or other media as solely determined by us. We will use 0% of the Fund contributions for advertising that is principally a solicitation for the sale of franchises.

The Fund will be accounted for separately from our other funds and will not be used to pay any of our general operating expenses, except for salaries, administrative costs, and overhead that we incur in activities reasonably related to the administration of the Fund and its marketing programs, including preparing advertising and marketing materials, and collecting and accounting for contributions to the Fund. We may spend in any fiscal year an amount greater or less than the aggregate contributions to the Fund in that year, and the Fund may borrow from us or other lenders to cover the Fund's deficits or invest any surplus for future use by the Fund. We will prepare an annual unaudited statement of monies collected and costs incurred by the Fund and will provide it to you upon written request. A franchisee may request an annual report of general category spending of the Fund. This report may be requested in writing and will be provided in the manner we determine no more than one time per year and only after March 1 for the prior year. There is no history of a prior fiscal year to disclose in this disclosure document.

We may cause the Fund to be incorporated or operated through an entity separate from us when we deem appropriate, and the entity will have the same rights and duties as we do under your Franchise Agreement. The Fund will be intended to enhance recognition of the Marks and the goodwill and patronage of Studio franchises.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 32–42)