How should a Spray Net franchisee manage and operate the franchised business?

Franchisee shall only have the right to operate the Franchised Business and offer/provide the Approved Services and, if applicable, Ancillary Services, in connection with homes that are located within the designated territory as stated in Section 3 of the Data Sheet (the "Designated Territory").

If Franchisee is granted the right to operate the Franchised Business in more than one Designated Territory, the number of Designated Territories shall be set forth in Section 3 of the Data Sheet.

Franchisor may ask Franchisee to provide the Approved Services and/or Ancillary Services outside of the Designated Territory under certain circumstances.

If Franchisee agrees to provide such Approved Services and/or Ancillary Services outside of the Designated Territory upon Franchisor's request, Franchisor shall reimburse Franchisee for all actual costs related to providing such Approved Services and/or Ancillary Services upon receiving receipts for such costs from Franchisee.

• D. Rights Not Granted.

Franchisee acknowledges and agrees that this Agreement does not grant Franchisee any right or option to open any additional Franchised Businesses nor does this Agreement provide Franchisee with any right to sub-license or sub-franchise any of the rights granted hereunder.

Notwithstanding anything contained in this Agreement, Franchisor and its affiliates hereby reserve the exclusive right to: (i) own and operate franchised businesses at any location(s) outside of the Designated Territory under the Proprietary Marks, or to license others the right to own and operate Spray-Net businesses at any location(s) outside of the Designated Territory under the Proprietary Marks and System; (ii) the right to own and operate businesses under different marks at any location(s) inside or outside of the Designated Territory, or license to others the right to own and operate such businesses, under different marks at any location(s) inside or outside of the Designated Territory (such businesses will not primarily provide painting products and services); (iii) use the Proprietary Marks and System in connection with services and products, promotional and marketing efforts, or related items, or in alternative channels of distribution, including the sale of any Spray-Net products in wholesale and retail stores, via the Internet, and through mail order catalog, without regard to location; and (iv) use the Proprietary Marks and System, and license others to use the Marks and System to engage in any other activities not expressly prohibited in this Agreement.

• A. Taxes. Franchisee must promptly pay when due any and all federal, state, and local taxes, including without limitation, unemployment, workers' compensation, lodging, and sales taxes which are levied or assessed with respect to any services or products furnished, used, or licensed under this Agreement and all accounts or other indebtedness of every kind incurred by Franchisee in the operation of the Franchised Business.
• B. Debts and Obligations. Franchisee hereby expressly covenants and agrees to accept full and sole responsibility for any and all debts and obligations incurred in the operation of the Franchised Business.

Whenever this Agreement requires or Franchisee desires to obtain Franchisor's approval, Franchisee shall make a timely written request.

Unless a different period is specified in this Agreement, Franchisor shall respond with its approval or disapproval within fifteen (15) days of receipt of such request.

If Franchisor has not specifically approved a request within such fifteen (15) day period, such failure to respond shall be deemed as a disapproval of any such request.

• 1. Marketing Kit and Other Inventory Purchases.
  • a. Upon signing this Agreement, Franchisee must pay Franchisor five thousand dollars ($5,000) to eight thousand dollars ($8,000) for the initial package of business supplies such as uniforms, marketing brochures, letterhead and business cards to use in the operation of its Franchised Business (the "Marketing Kit").

• b.

Franchisee will be required to purchase ongoing inventory, including certain proprietary and/or branded paint and other products necessary to provide the Approved Services (collectively, the "Proprietary Products"), as in the amounts initially required by Franchisor and otherwise as needed to meet client demand for the Approved Services.

• c.

Beginning when Franchisee opens for business, Franchisee shall pay Franchisor the then-current fee for Franchisor's Business Management Software on the first of each month plus 0.25% of Franchise's monthly Gross Sales generated by the Franchised Business.

The Business Management Software fee is currently $350 per month plus 0.25% of Franchise's monthly Gross Sales generated by the Franchised Business.

Franchisee shall ensure that all of its agents, employees, and contractors who will be utilizing Franchisor's proprietary Spray-Network software accept Franchisor's then-current Terms and Conditions for use of the Spray-Network software.

The current Terms and Conditions are attached hereto as Exhibit G.

Franchisee shall report to Franchisor all data related to products and services as required by Franchisor from time to time.

Such data may include, without limitation, weather conditions among other data points.

Franchisor may request such data from Franchisee from time to time or, in Franchisor's discretion, Franchisor may require Franchisee to enter such data into Franchisor's Spray-Network software or another method of data collection.

• d.

Prior to opening the Franchised Business, Franchisee shall purchase the "Production Supplies Kit" and the "Sales Kit" (or the items that Franchisor designates as constituting these two kits) from Franchisor and/or its approved and/or designated suppliers.

Franchisor may assist Franchisee, as it deems appropriate in its discretion, in developing and conducting the Initial Marketing Investment (as defined and described more fully in Section 9 of this Agreement), which program will be conducted at Franchisee's expense.

• F. Continuing Assistance.

Franchisor may, as it deems appropriate and advisable in its sole discretion, provide continuing advisory assistance in the operation of the Franchised Business.

Franchisor's determination not to provide any particular service, either initial or continuing, shall not excuse Franchisee from any of its obligations under this Agreement.

Franchisor may provide such assistance via telephone, fax, intranet communication, Skype or any other communication channel Franchisor deems appropriate, subject to the availability and schedules of Franchisor's personnel.

Franchisor may make available to Franchisee information regarding any new product, service or suppliers or any updated methods of doing business.

Franchisor reserves the right to require Franchisee to expend any portion of the Local Advertising Requirement on (a) products or services Franchisor directs or approves, or (b) services that Franchisee must acquire from an Approved Supplier (which currently includes Franchisor).

Franchisor may require that Franchisee expend any portion of the Local Advertising Requirement on services, content and other products/items that must be purchased from one (1) or more Approved Suppliers, and (ii) collect your Local Advertising Requirement and pay such Approved Supplier directly as part of its support services and control rights described hereunder.

At Franchisor's option, Franchisee must ensure that: (i) the Franchised Business has a dedicated phone line for use in connection with the Franchised Business only; and (ii) the Franchised Business is listed in the appropriate Internet-based directories and Chamber(s) of Commerce that Franchisor designates.

Franchisee shall obtain at least three (3) telephone numbers solely dedicated to the Franchised Business, which Franchisee shall assign to Franchisor, at Franchisor's option, upon termination, expiration, or transfer of this Agreement.

Franchisee must list and advertise the telephone number(s) for the Franchised Business in the "White pages" telephone director and the classified or "yellow pages" telephone directory distributed in its trade area and under such categories as Franchisor may specify from time to time.

Franchisee must place the classified directory advertisement and listings together with other Spray-Net Businesses operating within the distribution area of the directory.

If a joint listing is obtained, all Spray-Net Businesses listed together shall pay a pro rata share of the cost of all advertisements and listings.

Furthermore, Franchisee shall obtain listings and/or advertise with Franchisor and other franchisees of the System on electronic yellow pages directory and other online directors as Franchisor may designate, including Google Local, Google Business, Angie's List or similar online directory.

In the event Franchisee does not comply with Franchisor's requests regarding such online listings or advertisement, Franchisor reserves the right to place, modify, or remove such listings and advertisements on behalf of Franchisee.

Source: Item 23 — RECEIPTS (FDD pages 75–219)