Is Red Wagon Club obligated to maintain a systemwide advertising fund?

your other required marketing expenditures.

Brand Fund

We do not currently maintain, nor are we obligated to maintain, a systemwide advertising fund. However, we may elect to establish a Brand Fund to promote the awareness of the Red Wagon Club brand (the "Brand") and RWC Businesses generally. If we establish the Brand Fund, your contribution will be in amounts we periodically specify and will be payable in the same manner as the Program Fee; however, if we establish the Brand Fund, we have the right, at any time and on notice to you, to change the amount you must contribute to the Brand Fund, but we cannot increase the amount you must contribute to the Brand

Fund by more than 10% in any calendar year after we establish the Brand Fund. We anticipate that, if we establish the Brand Fund, your initial Brand Fund contribution would be $500 per month.

If we establish the Brand Fund, we or our affiliates or other designees will direct all programs that are funded by contributions to the Brand Fund, with sole control over the creative concepts, materials, and endorsements used and their geographic, market, and media placement and allocation. We may use contributions to the Brand Fund to pay for preparing and producing materials and electronic or digital media in any form or format that we periodically designate, including but not limited to: administrating online advertising strategies, including developing and maintaining a System Website and mobile apps; administering regional and multi-regional marketing and advertising programs; implementing gift and loyalty programs; and supporting public relations, market research, product development, and other advertising, promotional, social media, creation and publishing of books and other marketing materials; and marketing activities. In our discretion, we may sell you, at reasonable prices, copies of certain materials funded by contributions to the Brand Fund.

We are not required to segregate Brand Fund contributions from our other funds, but we will account for contributions to the Brand Fund separately from our other funds and not use the Brand Fund contributions for any of our general operating expenses. However, we may use contributions to the Brand Fund to reimburse us or our affiliates or designees for the reasonable salaries and benefits of personnel who manage and administer or work on the Brand Fund's activities, the Brand Fund's other administrative costs, travel expenses of personnel while they are on Brand Fund business, meeting costs, overhead relating to Brand Fund business, and other expenses that we incur in activities reasonably related to administering or directing the Brand Fund and its programs. While references to the availability of franchises may appear in marketing materials, the Brand Fund will not be used primarily to sell franchises.

Contributions to the Brand Fund will not be our asset, but we do not assume or owe any fiduciary obligation to you in respect of those contributions or for administering the Brand Fund or any other reason. We will hold all Brand Fund contributions for the benefit of the contributors. We may spend in any fiscal year on Brand Fund activities more or less than the total Brand Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We may use all interest earned on the Brand Fund contributions to pay costs before using the Brand Fund's other assets. We will prepare an annual, unaudited statement of Brand Fund collections and expenses and, once prepared, give you the statement for the most recently completed fiscal year upon your written request. We may have the Brand Fund audited annually, at the Brand Fund's expense, by an independent certified public accountant. We may incorporate the Brand Fund or operate it through a separate entity whenever we deem appropriate, in which case the successor entity will have all of the rights and duties we have.

We need not ensure that Brand Fund expenditures in or affecting any geographic area are proportionate or equivalent to Brand Fund contributions by RWC Businesses operating in that geographic area or that any RWC Business benefits from Brand Fund activities either directly or in proportion to its Brand Fund contributions. We have the right, but no obligation, to use collection agents and institute legal proceedings to collect Brand Fund contributions at the Brand Fund's expense. We also may forgive, waive, settle, and compromise all claims by or against the Brand Fund. Except as expressly provided in the Franchise Agreement, we assume no direct or indirect liability or obligation to you for collecting amounts due to, maintaining, directing, or administering the Brand Fund.

We may at any time defer or reduce your contributions to the Brand Fund, and upon 30 days' prior notice to you, suspend Brand Fund operations for one or more periods of any length and/or terminate (and if terminate, reinstate) the Brand Fund. If we terminate the Brand Fund, we will, at our option, either spend

all unspent monies at our discretion, until such amounts are exhausted, or distribute the funds in the Brand Fund to the contributing RWC Business owners in a manner we deem fair and equitable.

We have no advertising councils.

Local Advertising

Under the Sublicense Agreement, the Affiliate Law Firm Business must spend, monthly, a minimum of $10,000 to locally advertise and promote the Affiliate Law Firm Business and/or your RWC Business (the "Local Advertising Requirement"). You must list and advertise your RWC Business with the online directories we periodically prescribe and establish any other Online Presence (as defined in Item 13, below) we require or authorize, each in accordance with our System Standards. If other RWC Businesses are located within the directory's distribution area, we may require you to participate in a collective advertisement with them and to pay your share of that collective advertisement. Within 30 days after the end of each calendar quarter, we may require that you provide, in the manner that we prescribe, an accounting of the Affiliate Law Firm Business's advertising expenditures during the preceding calendar quarter.

You must obtain our written approval of any advertising that you or the Affiliate Law Firm Business propose to use in connection with your RWC Business that has not been prepared by the Brand Fund (if applicable) or that we have not approved.

Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 24–31)