What are the consequences if a Caring Transitions franchisee fails to comply with the System Standards?

travel, room, board and wages, and any training fee charged by Franchisor.

• 7.2 System Standards. Franchisee acknowledges and agrees that every detail of the System is important, not only to Franchisee but also to Franchisor and other Caring Transitions franchisees, in order to develop and maintain high and uniform operating standards, to increase the demand for the products and services offered by all franchisees, to establish and maintain a reputation for uniform, efficient, high quality services, and to protect the goodwill of all Caring Transitions franchises. Franchisee further acknowledges and agrees that a fundamental requirement of the System, this agreement, and other Caring Transitions franchises is adherence by all franchisees to the uniform specifications, standards, operating procedures and rules prescribed by Franchisor for the development

and operation of the franchised business (hereafter referred to as "System Standards"). Accordingly, Franchisee agrees to comply with each and every System Standard (including, by way of example and not limitation, a designated maximum or minimum for a Buyer's Premium or for other Permitted Products and Services), as periodically modified and supplemented by Franchisor in its sole and absolute discretion, during the term of this agreement. Franchisee further agrees that System Standards prescribed from time to time in the Manual, or otherwise communicated to Franchisee in writing, shall constitute provisions of this agreement as if fully set forth in this agreement. All references to this agreement include all System Standards as periodically modified.

• 7.3 Products and Services. Franchisee shall offer and sell all products and services, and only those products and services, authorized by Franchisor and specified in the Manual or as designated in writing by Franchisor ("Permitted Products and Services"). Franchisor may unilaterally add and delete products or services to or from the Permitted Products and Services at any time. Franchisor may also designate any products or services as optional for all or any subgroup of franchisees. Optional services currently include moving services. Before offering or selling any Permitted Products or Services, Franchisee shall comply with all appliable laws and other requirements and submit proof of compliance therewith to Franchisor.
• 7.4 Fixtures and Furnishings. Franchisee, at its own expense, shall purchase and install, the Communication and Information System as specified in Section 7.15 below, and all fixtures, furnishings, signs, and other equipment as may be specified by the System Standards from time to time; and shall not permit the installation of any fixtures, furnishings, signs, or other equipment not conforming to the System Standards.
• 7.5 Supplier Approval. Franchisor has the right to require Franchisee to purchase all goods and services used in the franchised business solely from suppliers designated by Franchisor, which may include Franchisor or an affiliate. Franchisor has the right to condition its approval of any supplier upon benefits to Franchisor and/or its affiliates based upon purchases by Caring Transitions franchisees. Franchisor and/or its affiliates may derive income or receive benefits as a result of Franchisee's and/or other Caring Transitions franchisees' purchase of items. Franchisor has the right to require Franchisee to purchase certain goods or services exclusively from one or more designated suppliers, or to purchase cooperatively with Franchisor or other Caring Transitions franchisees in order to maintain Franchisor's quality standards or to take advantage of price discounts, benefits or other sales incentives. Franchisor and/or its affiliates have the right to receive rebates, discounts, allowances, and other payments from suppliers in respect of group purchasing programs and otherwise on account of the suppliers' dealings with Franchisee and other Caring Transitions franchisees, which Franchisor is entitled to retain and use without restriction for any purpose and without accounting to Franchisee. Franchisor has the unlimited right to change and add designated suppliers and to change the list of goods and services required to be purchased from designated suppliers at any time.
• 7.6 Business Operation. Franchisee must open the franchised business within ninety (90) days after Franchisee or Franchisee's designee completes the initial training program required by Section 7.1 above. After opening, Franchisee shall maintain the franchised business in continuous operation during the term of this agreement. Franchisee shall not use or permit the use of the Premises on which the franchised business is located for any other purpose or activity other than the operation of the franchised business, without first obtaining the written consent of Franchisor (provided, however, that this restriction shall not apply to Franchisee's operation of a business under a license or franchise agreement with an affiliate of Franchisor, or if Franchisee's residence is the Premises). The franchised business must at all times be under the direct supervision of the Franchisee, or such person as has been approved in writing by Franchisor and has successfully completed Franchisor's initial training program and any other mandatory training programs, who must devote his full time, energy, and best

efforts to the operation of the franchised business. If Franchisee owns more than one franchised business, Franchisor may require that each franchised business have its own full-time manager. Franchisee must have a business development representative dedicated to marketing the franchised business.

• 7.7 Payment of Liabilities and Taxes. Franchisee shall pay its distributors, lessors, contractors, suppliers, trade creditors, employees, and other creditors promptly as the debts and obligations to such parties become due, and pay all taxes on real and personal property, leasehold improvements and fixtures and equipment, and all sales and use, income, payroll and other taxes promptly when due and hold Franchisor harmless therefrom. Franchisee's failure to do so shall constitute a breach of this agreement. All taxes shall be paid directly to the taxing authorities prior to the delinquent date. If Franchisee shall fail to pay any such obligations promptly as the debts to such parties become due, or if any taxes become delinquent, Franchisor, in addition to its other remedies provided in this agreement, may elect to pay any such obligation or delinquent tax on behalf of Franchisee, together with late charges, penalties and interest, if any, and Franchisee shall, upon demand, reimburse Franchisor for any sums so paid by Franchisor, together with interest at the rate of eighteen percent (18%) per annum, or the highest rate allowed by law, whichever is less, from the date of payment by Franchisor to the date of reimbursement by Franchisee.
• 7.8 Records. During the term of this agreement, Franchisee shall maintain and preserve, for at least six years from the date of their preparation, full, complete and accurate books and records of account, prepared in accordance with generally accepted accounting principles, and customer files and records pertaining to the franchised business granted pursuant to this agreement, all in the form and manner prescribed by Franchisor in the Manual or otherwise in writing.