How are contributions and earnings from the Dermani Medspa System Marketing Fund used?

earliest commercially reasonable time and to execute any and all instruments required to do so.

The System Marketing Fund

We have established and currently maintain a System Marketing Fund for the enhancement and protection of the dermani MEDSPA® brand and Marks. You will be required to pay a System Marketing Fee each Week in an amount we specify up to 2% of your Gross Revenue, and we or our designee will maintain and administer the System Marketing Fund as follows (Franchise Agreement, Section 9.2):

• 1. The System Marketing Fund, all contributions thereto and any earnings from the System Marketing Fund shall be used exclusively (except as otherwise provided below), in our sole discretion, to meet any and all costs of maintaining, administering, directing, conducting, creating and/or otherwise 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, including, without limitation, the costs of preparing and/or conducting: media advertising campaigns; social media and search campaigns; direct mail advertising; marketing surveys and other public relations activities; employing advertising and/or public relations agencies to assist therein; brand research and development; developing and hosting marketing, brand development and enhancement, and customer engagement seminars for franchisees; purchasing promotional items; developing new or modified trade dress and marks; point-of-purchase (POP) materials; design and photographs; conducting and administering visual merchandising, and other merchandising programs; purchasing media space or time (including all associated fees and expenses); administering regional and multi-regional marketing and advertising programs; market research and customer satisfaction surveys; developing and implementing customer membership, loyalty and gift card programs; customer retention programs; customer surveys and mystery shopper programs; the creative development of, and actual production associated with, premium items, giveaways, promotions, contests, public relation events, and charitable or non-profit events; developing, implementing and maintaining an electronic commerce website and/or related strategies; maintaining and developing one or more Websites devoted to the System, the Proprietary Marks and/or the "dermani MEDSPA®®" brand; and providing promotional and other marketing materials and services to the Franchised Businesses or dermani MEDSPA®s operated under the System. The System Marketing Fund may also be used to provide rebates or reimbursements to franchisees for local expenditures on products, services, or improvements, approved in advance by us, which products, services, or improvements we shall have the right to determine will promote general public awareness and favorable support for the System.
• 1. We will account for the System Marketing Fund separately from our other funds and monies and not use the System Marketing Fund for any of our general operating expenses. However, we may use the System Marketing Fund to pay administrative costs of the System Marketing Fund including managing the advertising, marketing, and promotional programs and payment of outside suppliers utilized by the System Marketing Fund, and we may use the System Marketing Fund to pay the reasonable salaries and benefits of personnel (including our personnel) who manage and administer the System Marketing Fund. We may use the System Marketing Fund to pay for other administrative costs, travel expenses of personnel while they are on System Marketing Fund business, meeting costs, overhead concerning System Marketing Fund business, and other expenses that we incur in activities reasonably related to administering or directing the System Marketing Fund and its programs. We may use money from the System Marketing Fund for collecting the System Marketing Fee (including attorneys', auditors' and accountants' fees and other expenses incurred in connection with collecting any System Marketing Fee). If we use a portion of the System Marketing Fund toward the cost to develop and maintain one or more

Websites (as defined in this Item 11 below), any of them may have a section relating to our franchise opportunity, and all advertising and promotional materials may reflect the availability of dermani MEDSPA® franchises. Otherwise, we do not use System Marketing Fund monies for advertising that is principally a solicitation for the sale of franchises.

• 1. The System Marketing Fund will not be our asset. Although the System Marketing Fund is not a trust, we will hold all System Marketing Fund contributions for the benefit of the System, the dermani MEDSPA® brand, and the contributors, and use contributions only for the purposes described in the Franchise Agreement. We do not owe any fiduciary obligation to you for administering the System Marketing Fund or any other reason. The System Marketing Fund may spend in any fiscal year more or less than the total System Marketing Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We will use all interest earned on System Marketing Fund contributions to pay costs before using the System Marketing Fund's other assets.
• 1. We will prepare an annual, unaudited statement of System Marketing Fund collections and expenses. The statement is available for your review upon written request 120 days after our fiscal year end. We may have the System Marketing Fund audited annually, at the System Marketing Fund's expense, by an independent certified public accountant. We may incorporate the System Marketing Fund or operate it through a separate entity whenever we deem appropriate. The successor entity will have all of the rights and duties specified in this Section.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 31–43)