In what form and manner will Dermani Medspa cooperatives be established, organized, and governed?

[Item 11: FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING]

You may be required under the Franchise Agreement to join and contribute to a regional advertising and marketing cooperative (a "Cooperative"), if one is formed for the area in which the dermani MEDSPA® is located. We may, in our discretion, create a Cooperative in any area, or we may approve the creation of such a Cooperative, and establish the rules and regulations for each Cooperative. Immediately upon our request, you must become a member of the Cooperative for the area in which some or all of your Territory is located. The Franchised Business will not be required to be a member of more than one Cooperative. The Cooperative must be governed in the manner we prescribe. The Cooperative may require each of its members to make contributions to it in an amount as agreed upon by the Cooperative members or as we may prescribe. You must contribute such amounts at the times and in the manner as determined by majority vote of the Cooperative members. Any funds contributed to a Cooperative will be credited against your local marketing obligation; provided, however, that if your contributions to a Cooperative are less than your local marketing requirement, you must still spend the difference locally. The following provisions apply to each Cooperative (if and when organized):

• 1. Cooperatives will be established, organized, and governed in the form and manner that we have approved in advance. Unless we specify otherwise, the activities carried on by each Cooperative will be decided by a majority vote of its members. Any dermani MEDSPA®s that we or our affiliates manage or operate in the region or area in which a Cooperative has been established will have the same voting rights as those dermani MEDSPA®s owned by franchisees. Each dermani MEDSPA® shall be entitled to cast one vote;
• 1. Cooperatives will be organized for the exclusive purpose of administering regional marketing programs and developing (subject to our approval) standardized promotional materials for use by the members in local advertising and promotion.
• 1. Cooperatives may not use marketing, promotional plans, or materials without our prior written approval, as described below.
• 1. Cooperative may require its members to periodically contribute to it in such amounts as it determines. dermani MEDSPA®s owned and operated by us or our affiliates that are members of the Cooperative shall contribute to the Cooperative in the same amount as other members;
• 1. You must submit your required contribution to the Cooperative at the same time as payments are required for royalties and the System Marketing Fee, together with the statements and reports that may be required by us or by the Cooperative, with our written approval. If requested by us in writing, you must submit your payments and reports for the Cooperative directly to us and we will distribute the money and reports to the Cooperative.
• 1. Although, if established, a Cooperative is intended to be of perpetual duration, we maintain the right to terminate any Cooperative. A Cooperative will not be terminated, however, until all monies in that Cooperative have been expended for marketing or promotional purposes. (Franchise Agreement, Section 9.5)

There are no Cooperatives currently in existence as of the issuance date of this disclosure document.

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