What is the Learningrx franchisee's obligation regarding compliance with regulations?

l bear the cost of the audit, unless Franchisee fails to report as required or understates Gross Revenue by two percent (2%) or more for any reported time period, in which case Franchisee will pay the audit cost plus interest on understated costs of one percent (1%) per month. Franchisee must immediately pay to Franchisor all sums owed in addition to any other remedies provided in this Agreement or by law.

12. FRANCHISEE'S DUTIES

• 12.1 Compliance with Applicable Laws. Franchisee agrees to (i) comply with all applicable laws, ordinances and regulations or rulings, or licensing requirements, of every nature whatsoever which in any way regulate or affect the operation of its Business and to the care and safety of children, (ii) comply with all applicable educational and professional licensing requirements, (promptly all taxes and business expenses, unless Franchisee is legitimately disputing such matters and has adequately reserved therefor, and (iv) comply with all laws covering occupational hazards, accommodations for the disabled, including without limitation, the Americans with Disabilities Act, if applicable, health, workers' compensation insurance and unemployment insurance. If Franchisee does not obtain all required permits and licenses and other certifications necessary to operate the business and have all required professional and licensed personnel required by law or the Operations Manual to operate the Business, within six (6) months after Franchisee's execution of this Agreement, Franchisor may terminate this Agreement without providing the Franchisee notice or the opportunity to cure the default. Franchisee agrees, at its expense, to modify its Center, if necessary, to comply with any such applicable laws or regulations. Franchisee shall not engage in any activity or practice that results, or may reasonably be anticipated to result, in any public criticism of the System or any part thereof. At the end of each year of the term of this Agreement, Franchisee must submit to Franchisor a certified statement listing and describing all performance-based lawsuits or potential claims threatened or actually filed against Franchisee, its owners, managers, employees or agents in connection with the operation of the Business, or if no such lawsuits or claims are threatened or filed during that year, a certified statement to that effect.
• 12.2 System Compliance. Franchisee must comply with the System, the Operations Manual, systems, procedures and forms, as in effect from time to time. All mandatory, specifications, standards, and operating procedures prescribed by Franchisor in the Operations Manual, or otherwise communicated to Franchisee in writing, shall constitute provisions of this Agreement as if fully set forth herein. Accordingly, all references in this Agreement to Franchisee's obligations under this Agreement, including to the Center, equipment, procedures, products and materials, shall include such mandatory specifications,

standards, and operating procedures. Franchisor reserves the right to require Franchisee to add additional products or concepts to the Business in the future, at Franchisee's expense.

• 12.3 Privacy Laws. In the operation of the LearningRx Franchised Business, Franchisee will receive "Customer Data." "Customer Data" is information, records, lists or data that contains "Personal Information." "Personal Information" includes information that identifies, relates to, describes, is capable of being associated with, or could reasonably be linked, directly or indirectly, with a particular consumer, potential consumer, individual or household, as such term may be further defined or amended by applicable federal, state and local statutes, regulations, ordinances and requirements, including but not limited to, the California Consumer Privacy Act. Personal Information is collected, maintained or generated in the operation of the LearningRx Franchised Business, including through the use of a point of sale system.

Source: Item 23 — RECEIPT (FDD pages 54–209)