What financial obligation does a Kidokinetics franchisee have to maintain?

Franchisee agrees to pay all current obligations and liabilities to suppliers, lessors, and creditors on a timely basis.

Franchisee agrees to indemnify Franchisor in the event that Franchisor is held responsible for debts owed by Franchisee if Franchisor elects to pay any of Franchisee's obligations in order to preserve the relationship between any System suppliers and System franchisees.

Franchisee agrees to make prompt payment of all federal, state and local taxes, including individual and corporate taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, FICA taxes,

personal property and real estate taxes arising from Franchisee's operation of the Kidokinetics Business. Franchisee agrees to indemnify Franchisor in the event that Franchisor is held responsible for these taxes.

• 11.2.1.

Franchisee agrees to keep and maintain complete and accurate books and records of its transactions and business operations utilizing the accounting procedures specified by Franchisor.

Franchisee agrees to: (i) purchase the computer systems in accordance with the requirements of this Agreement; and (ii) maintain the records and accounts of the Franchisee to the standards of the Franchisor.

Franchisor reserves the right to require Franchisee hire an outside accounting or bookkeeping firm to maintain the records and accounts of the Franchisee should it find, in its sole discretion, that Franchisee is not maintaining the records and accounts in accordance with the standards of the Franchisor.

Franchisee is required to use the bookkeeping service that Franchisor chooses.

• 11.2.2.

Franchisee must maintain, for at least five fiscal years from their preparation, complete financial records for the operation of the Kidokinetics Business in accordance with the then current Internal Revenue Service Publication and must provide Franchisor, at Franchisor's request, with: (i) a weekly Sales Report signed by Franchisee and in the form Franchisor specifies that contains the sales information pertaining to the preceding week including, without limitation, a summary of all monies received during the relevant period, any other additional information which Franchisor deems necessary to properly evaluate Franchisee's progress; (ii) a quarterly income statement and profit and loss statement, reflective of the three individual months in the quarter, in a format specified by Franchisor, including a standard chart of accounts, within 20 days after the end of each quarter; (iii) annual financial reports and operating statements in the form Franchisor specifies within 50 days after the close of each of Franchisee's fiscal years; (iv) state and local sales tax returns or reports and federal, state and local income tax returns for each year in which Franchisee's Kidokinetics Business is operated, within 30 days after their timely completion; and (v) such other reports as Franchisor may from time to time require, in the form and at the time Franchisor prescribes.

• 11.1.16. At all times, maintain such working capital as may be reasonably necessary to enable Franchisee to properly and fully carry out and perform all of Franchisee's duties, obligations and responsibilities hereunder and to operate the Kidokinetics Business in a businesslike, proper and efficient manner;

Source: Item 22 — CONTRACTS (FDD page 59)