Does the Hydrodog 'System' include signs?

1.1 The HydroDog System. We, our affiliates and our predecessor have expended considerable time and effort developing retail businesses offering, on a mobile basis, pet grooming services (the "Products" and/or the "Services"), in a distinctive and innovative environment (each a "HydroDog Business"). HydroDog Businesses utilize our approved vehicles (the "HydroDog Vehicles") and operate in accordance with our standards and specifications (our "System Standards"). A key to the development, operation, franchising and success of the HydroDog Businesses is the use of our System. The "System" includes, but is not limited to, distinctive designs, layouts, color schemes and signs, equipment, inventory, marketing methods, service requirements, standards and specifications, products, inventory, and suppliers; rules; training and assistance; and other methods and procedures relating to the establishment and operation of a HydroDog Business.

System Standards may regulate any one or more of the following with respect to your HydroDog Business:

• (a) design, layout, decor, appearance, make, model, condition, equipment and outfitting of the vehicle and all equipment set to provide products and services of your HydroDog Vehicle, regular maintenance, cleaning and sanitation; regular remodeling; replacement of obsolete or worn-out HydroDog Vehicle, parts, furnishings, equipment and

signs; regular painting; and use of interior and exterior signs, emblems, lettering and logos, and illumination;

• 11.2 Compliance with System Standards. You acknowledge and agree that your operation and maintenance of your HydroDog Business in accordance with System Standards are essential to preserve the goodwill of the Marks and all the HydroDog Businesses.

Therefore, at all times during the term of this Agreement, you agree to operate and maintain your HydroDog Business in accordance with each and every System Standard, as we periodically modify and supplement them during the term of this Agreement.

• 11.3 Modification of System Standards. We may periodically modify System Standards, which may accommodate regional or local variations as we determine.

Such modifications may obligate you to invest additional capital in your HydroDog Business ("Capital Modifications") and/or incur higher operating costs.

However, such modifications will not alter your fundamental status and rights under this Agreement.

We agree to give you at least ninety (90) days to comply with Capital Modifications we require.

You are obligated to comply with all modifications to System Standards, including Capital Modifications, within the time period we specify.

Your failure to comply with any System Standards or Capital Modifications within the specified time period will result in: (a) a non-compliance fee as stated in Section 6.16 (Non-Compliance Fee); (b) mandatory remedial training at your expense; (c) suspension of your rights under this Agreement until compliance is achieved; and/or (d) termination of this Agreement, as we determine in our sole discretion.

Source: Item 23 — RECEIPTS (FDD pages 43–166)