What are the key elements of the Ledgers Franchise System that franchisees will utilize?

Ledgers has developed a system ("Franchise System") to deliver advisory, compliance, recordkeeping and tax services (collectively "Services"). The Franchise System utilizes prescribed marketing techniques and operating procedures to deliver outstanding service to businesses ("Clients").

We seek to identify and recruit candidates with the ability to deliver outstanding Client service in a defined Territory who are willing to own at least one Franchise Business. Franchisee seeks to use the Franchise System to profitably deliver an outstanding Client experience (collectively the "Services").

For mutual promises expressed in this Agreement, along with other valuable consideration, the receipt of which is acknowledged, Ledgers and Franchisee (collectively "the Parties") will be bound as follows:

A. Use of our Marks.

We allow and require you to use our trademarks and service marks ("Marks") to hold out your Franchise Business to the public. You will use only our Marks as we develop them for this purpose. Use of our Marks must be in accordance with our Manual.

Your Franchised Business must solicit Clients and utilize our engagement letter to offer Ledgers Products and Services. Your Franchised Business must serve every Client in a professional and respectful businesslike manner diligently fulfilling your obligations to them when they desire to purchase your goods or services. In providing services, you must prepare tax returns and conduct business in accordance with all federal, state, and local laws. You must follow all rules of the Internal Revenue Service and any state or local taxing authority. You must develop internal policies to ensure compliance. You must use commercially reasonable efforts to participate fully in all marketing programs offered by us.

You must offer the Products and Services that we require as specified in the manual. You may not offer any other Products and Services through the Franchise Business without our prior written consent. You must use commercially reasonable efforts to deliver all recommended Services including advisory, compliance, recordkeeping and tax services to Clients.

You must operate the Franchise Business according to the then-current Manual. This includes using commercially reasonable efforts to obtain engagement agreements, in writing, prior to performing Services.

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. However, you will receive a protected territory, meaning a geographical area within which we promise not to establish a company owned or franchised Ledgers location.

We will normally direct all inquiries for Services from within your Territory to your Franchise Business.

You must maintain the facility housing your Franchised Business in a clean and well-maintained manner in order to uphold the image and goodwill of our Franchise System.

Source: Item 22 — CONTRACTS (FDD page 46)