What is a Local Advertising Cooperative for Extreme Art Studio, as defined in the Franchise Agreement?

we terminate the Brand Fund, we will distribute all unspent monies to our franchise owners, and to us and our affiliates, in proportion to their, and our, respective Brand Fund Contributions during the preceding 12-month period.

9.4 LOCAL ADVERTISING COOPERATIVE.

• 9.4.1 Subject to the terms and conditions of this Section 9.4, you agree that we or our affiliates or designees may establish or direct the establishment of a local advertising cooperative ("Local Advertising Cooperative") in geographical areas (as determined by us) in which two or more Extreme Art Studio Businesses are operating. We will require that each Local Advertising Cooperative that exceeds five franchisee members be organized and governed by written documents. Such written documents will be available for participating Local Advertising Cooperative franchise owners to review. We may change, dissolve and merge Local Advertising Cooperatives. Each Local Advertising Cooperative's purpose is, with our approval, to administer advertising programs and develop advertising, marketing and promotional materials for the area that the Local Advertising Cooperative covers. If, as of the time you sign this Franchise Agreement, we have established a Local Advertising Cooperative for the geographic area in which the Franchised Business is located, or if we establish a Local Advertising Cooperative in that area during this Franchise Agreement's term, you agree to sign the documents we require to become a member of the Local Advertising Cooperative and to participate in the Local Advertising Cooperative as those documents require.
• 9.4.2 If we establish a Local Advertising Cooperative in your geographic area pursuant to this Section 9.4, you agree to participate and contribute your share, as determined by the members of the Local Advertising Cooperative, to such Local Advertising Cooperative for each Extreme Art Studio Business that you own that exists within the Local Advertising Cooperative's area. Your contributions to a Local Advertising Cooperative will be credited to your Local Advertising Requirement described in Section 9.2, and payable within five days after the end of the calendar month (or as we designate). Your contributions to a Local Advertising Cooperative may also be capped based on the provisions of the bylaws adopted by the Local Advertising Cooperative, subject to our approval. You will pay these monies to us electronically, and we will remit them periodically to the Local Advertising Cooperative. Extreme Art Studio Businesses owned by us or our affiliates will contribute to their respective Local Advertising Cooperative on the same basis as our franchise owners. Members of the cooperative will be responsible for administering the cooperative, including determining the amount of contributions from each member.
• 9.4.3 Each Extreme Art Studio Business contributing to a Local Advertising Cooperative will have one vote on matters involving the activities of the particular Local

Advertising Cooperative. The Local Advertising Cooperative may not use any advertising, marketing, or promotional plans or materials without our prior written consent. We agree to assist in the formulation of marketing plans and programs which will be implemented under the direction of the Local Advertising Cooperative. You acknowledge and agree that, subject to our approval and subject to availability of funds, the Local Advertising Cooperative will have discretion over the creative concepts, materials and endorsements used by it. You agree that the Local Advertising Cooperative assessments may be used to pay the costs of preparing and producing video, audio and written advertising and direct sales materials for Extreme Art Studio Businesses in your area; purchasing direct mail and other media advertising for Extreme Art Studio Businesses in your area; implementing direct sales programs; and employing marketing, advertising and public relations firms to assist with the development and administration of marketing programs for Extreme Art Studio Businesses in your area.

• 9.4.4 The monies collected by us on behalf of a Local Advertising Cooperative will be accounted for separately by us from our other funds and will not be used to defray any of our general operating expenses. You agree to submit to us and the Local Advertising Cooperative any reports that we or the Local Advertising Cooperative require. Each cooperative must prepare annual unaudited financial statements, and such statements will be provided for review to each member of such cooperative.
• 9.4.5 You understand and acknowledge that the Franchised Business might not benefit directly or in proportion to its contribution to the Local Advertising Cooperative from the development and placement of advertising and the development of marketing materials. Local Advertising Cooperatives for Extreme Art Studio Businesses will be developed separately, and no cooperative will be intended to benefit the others. We will have the right, but not the obligation, to use collection agents and to institute legal proceedings to collect amounts owed to the Local Advertising Cooperative on behalf of and at the expense of the Local Advertising Cooperative and to forgive, waive, settle and compromise all claims by or against the Local Advertising Cooperative. Except as expressly provided in this Section 9.4, we assume no direct or indirect liability or obligation to you with respect to the maintenance, direction or administration of the Local Advertising Cooperative.

9.5 SYSTEM WEBSITE.

• 9.5.1 We have established a website to advertise, market and promote Extreme Art Studio Businesses;

Source: Item 22 — CONTRACTS (FDD page 49)