What are all the fees an Aerus franchisee might pay, considering both initial fees (Item 5) and other fees (Item 6)?

[Item 5: Initial Fees]

If you are purchasing an existing Aerus Business from our affiliate, you will also enter into an asset purchase agreement on mutually acceptable terms. You will pay to our affiliate the negotiated purchase price for the assets of the business you will be acquiring. Under the Standard Program the purchase price for business assets generally range from $2,500 to $215,000 which includes (1) goodwill, including any phone numbers and pre-paid advertisements ($0 to $200,000) and (2) fair market value of furniture, fixtures and equipment ($2,500 to $15,000). Under the Associate Program the purchase price for business assets generally range from $2,000 to $30,000 which includes (1) goodwill, including any phone numbers and pre-paid advertisements ($0 to $25,000) and (2) fair market value of furniture, fixtures and equipment ($2,000 to $5,000). The value of goodwill depends on such factors as the geographic location of the Aerus Business, the amount of time the Aerus Business has existed in its general location and the number of customers serviced by the Aerus Business.

If you are purchasing an existing Aerus Business from our affiliate, you may also enter into a sublease or assignment of lease for the premises of the Franchised Business. Rent and other charges will vary among locations under the Premises Sublease, and will depend primarily on the terms of the underlying real estate lease.

Sponsors

We may pay fees to existing franchisees (sometimes referred to as "Sponsor") for referring or recommending potential franchisee or distributor candidates to us. Such fees to Sponsor may include recurring monthly fees and product credits based on your performance (ranging from $5 to $100 per product sold by you). These fees will only be earned and paid to Sponsor if the candidate is actually awarded a franchise to operate an Aerus Business or right to distribute Aerus products.

[Item 5: Initial Fees]

Item 5

INITIAL FEES

Good Faith Deposit and Initial Franchise Fee

We may require that you pay us a good faith deposit of $100, together with delivering to us a commitment letter, a sample of which is attached as Exhibit 7 to this Disclosure Document, before we will send an execution copy of the Franchise Agreement to you. The requirement of the $100 good faith deposit is dependent upon information disclosed to us in your application, such as work history, credit worthiness, previous franchise experience, references and/or previous work history with us or other Aerus franchisees. If we require the good faith deposit, it will be applied to the initial franchise fee and is only refundable if we choose not to enter into the Franchise Agreement with you. You must pay us the following non-refundable initial franchise fee at the time you sign

a Franchise Agreement, which will vary depending on the type of Franchised Business you wish to operate:

[Item 5: Initial Fees]

Sponsor is not authorized to act as our agent or franchise broker and is not instructed to provide any information to prospects. Similarly, neither Sponsor nor any other franchisee is authorized to (1) award franchises of Aerus Business; (2) make any claims or representations regarding the operation of the Aerus Business; or (3) alter, amend, modify, interpret or change any aspect of the Franchise Agreement or our Franchising Programs. You should not rely on any statements, claims, or representations which may have been made to you by Sponsor or other franchisees.

In certain circumstances, we may reduce initial fees and finance initial fees for our existing franchisees, people working for our existing franchisees and franchisees opening or operating multiple locations. Last year, the initial fees ranged from approximately $5,000 to $16,000.

Except as described above, initial fees are uniformly imposed and nonrefundable and we do not offer financing for the initial franchise fees.

[Item 23: Receipts]

Term.

Unless sooner terminated as provided herein, the duration of the initial term (the "Initial Term") and the renewal term (the "Renewal Term") will be as stated in Schedule 1 attached hereto, which, collectively, shall constitute the "Term" of this Agreement.

Upon the expiration of the Initial Term, Franchisee may renew the franchise for one (1) Renewal Term, provided Company is then offering new franchise rights for the establishment of Aerus Businesses in the State where the franchise subject to renewal is located and provided Franchisee meets all of the following conditions: (1) Franchisee has no uncured Event of Default under the Agreement at the time of renewal; (2) Franchisee gives Company written notice of Franchisee's desire to renew at least thirty (30) days prior to the end of the Initial Term; (3) Franchisee has achieved ten thousand dollars ($10,000) or more in Gross Sales each month during the prior six (6) months; (4) Franchisee executes Company's then-current form of franchise agreement, which, upon execution, will supersede this Agreement and which may differ from the terms of this Agreement, including, without limitation, the payment of higher or additional fees and revised Minimum Sales Requirements; (5) Franchisee pays Company a renewal fee of one hundred dollars ($100) (in lieu of paying an initial franchisee fee); and (6) Franchisee and its principals and guarantors execute a general release, in a form satisfactory to Company, of any and all claims against Company and Company's current and former Affiliates, officers, directors, owners, employees, and agents.

In the event the parties continue to perform under this Agreement after expiration of the Initial Term or Renewal Term without executing a new agreement, this Agreement will be deemed to extend

on a month-to-month basis and both parties will have the right to terminate (and prevent further extensions of) this Agreement upon at least thirty (30) days' written notice.

3. License of the Marks.¹

A.

[Item 23: Receipts]

Term.

Unless sooner terminated as provided herein, the duration of the initial term (the "Initial Term") and the renewal term (the "Renewal Term") will be as stated in Schedule 1 attached hereto, which, collectively, shall constitute the "Term" of this Agreement.

Upon the expiration of the Initial Term, Franchisee may renew the franchise for one (1) Renewal Term, provided Company is then offering new franchise rights for the establishment of Aerus Businesses in the State where the franchise subject to renewal is located and provided Franchisee meets all of the following conditions: (1) Franchisee has no uncured Event of Default under the Agreement at the time of renewal; (2) Franchisee gives Company written notice of Franchisee's desire to renew at least thirty (30) days prior to the end of the Initial Term; (3) Franchisee has achieved ten thousand dollars ($10,000) or more in Gross Sales each month during the prior six (6) months; (4) Franchisee executes Company's then-current form of franchise agreement, which, upon execution, will supersede this Agreement and which may differ from the terms of this Agreement, including, without limitation, the payment of higher or additional fees and revised Minimum Sales Requirements; (5) Franchisee pays Company a renewal fee of one hundred dollars ($100) (in lieu of paying an initial franchisee fee); and (6) Franchisee and its principals and guarantors execute a general release, in a form satisfactory to Company, of any and all claims against Company and Company's current and former Affiliates, officers, directors, owners, employees, and agents.

In the event the parties continue to perform under this Agreement after expiration of the Initial Term or Renewal Term without executing a new agreement, this Agreement will be deemed to extend on a month-to-month basis and both parties will have the right to terminate (and prevent further extensions of) this Agreement upon at least thirty (30) days' written notice.

3. License of the Marks.²

A.

[Item 7: Estimated Initial Investment]

Note 6. Opening inventory of products and supplies will vary based on your expected volume of business, the size of your premises, and the size of any storage areas on the premises. You will order an initial inventory of Consigned Products. The estimate above includes your Security

Deposit for an initial supply of Consigned Products, which Security Deposit is fully earned and payable according to the Manuals at the time of signing of the Franchise Agreement. Also included in the estimate is the cost of an initial supply of parts and supplies. See Item 8 of this Disclosure Document for more information about your purchase requirements.

Note 7. This amount represents our estimate of transportation and living expenses for two trainees attending our initial training program in Dallas, Texas. You will be responsible for paying these expenses. The high end of our estimate includes the extra week of initial training required if you sign a Beyond Addendum. Please see Item 11.

Note 8. The estimated cost of annual premiums for the insurance policies required by the Franchise Agreement will vary significantly based on your location, and the claims experience of commercial businesses in the area, as well as your claims experience in other businesses you operate.

Note 9. You must purchase or lease a retail location for your Franchised Business. We recommend that you lease a space with approximately 1,500 to 2,000 square feet, depending on the type of Franchised Business you choose to operate. The leased space should preferably be located in a strip shopping center. This estimate presumes you will lease a space, and includes the cost of rent, security deposits, and other charges during the first three months of operations. The cost of purchasing or leasing space will vary, depending on location and other factors, and cannot be accurately projected by us. You should consult with a real estate broker and/or other professional in your area to assess the typical leasing costs for your target market area.

Note 10. The range in the chart reflects the estimated amount of working capital you will need during your first 3 months of operation to pay for additional expenses not itemized above, including, among other things, labor and supplies. The estimates described above were compiled based upon our or our affiliate's 80+ years' experience in establishing and operating businesses similar to the Aerus Businesses, and on the actual experience of existing franchisees in the System in operating under the Standard and Associate Programs since 2002 and 2007, respectively.

[Item 11: Franchisor's Assistance, Advertising, Computer Systems, and Training]

We or our affiliates conduct our training program. Aerus' President, Kevin Hickey, supervises the training program. His experience includes over 42 years in the field, and over 17 years as the company's President or similar titles. Various instructors and franchisees provide training. Aerus' Vice President of Sales Operations, Director of Sales Operations and/or Director of National Service, or employees they designate, provide administration, accounting, inventory control and FOAS training. The Executive Vice President- Sales, Area and Regional Director of Franchising, other executives, other regional franchise directors and franchise owners provide training as to sales and service personnel development, real estate and marketing, advertising and database management, store opening assistance and Standard Product Training. All instructors have more than 5 years' experience in the industry. The instructional materials we use includes our Manuals, software systems, product demonstration and other instructional sales videos and materials.

If your personnel do not successfully complete any portion of their required training, we may require them to repeat it. If, you, your Operating Personnel and/or other personnel have actual current (or prior) sales experience, either through working directly with an existing Aerus Business or through comparable industry experience, and have demonstrated proficiency in customer service, lead generation and management, they may not be required to complete all phases of training. We may require further, advanced or additional training for you or any of your personnel. Your Operating Principal and General Manager must successfully complete initial training to our satisfaction before the Opening Date, but in no event later than 6 months after you sign the Franchise Agreement. If you do not successfully complete initial training, we have the right to terminate the Franchise Agreement.

We do not charge tuition or impose a fee for training-related materials in connection with our initial training programs, but you are responsible for all training-related expenses incurred by all persons who attend training including costs of travel, lodging, local transportation to and from the training site, meals and wages. Training provided to individuals not required by us to attend may require the payment of an attendance fee.

The current training programs are instructed by individuals with expertise in the subject matter upon which they are offering instruction. These instructors have a minimum of one (1) year of experience in the area of their expertise. Most trainees have more than five (5) years' experience with the business you will be operating and in the specific area of their expertise.

[Item 23: Receipts]

Company may, from time to time, authorize certain other items to be excluded from Gross Sales. Any such permission may be revoked or withdrawn at any time in writing by Company at its option.

• Y. "Initial Franchise Fee" means the fee payable by Franchisee to Company upon execution of this Agreement in an amount specified in Schedule 3, attached hereto.
  • Z. "Initial Term" has the meaning assigned in Section 2.
  • AA. "Licensed Outlet" has the meaning assigned in Section 1.C.
• BB. "Location Closure Fee" means a fee due by Franchisee with any closing of an Aerus Business whether directly or indirectly made, attempted or completed in an amount specified in Schedule 3, attached hereto.
• CC. "Manuals" mean the confidential operations manuals, including the Policies and Procedures, and such other manuals and written materials (including electronically stored or communicated materials) that Company may develop or have developed for use in the operation of Aerus Businesses, including the Franchised Business (as the same may be revised by Company from time to time). The Manuals may contain mandatory and suggested specifications, standards and operating procedures that Company develops for the System and information relating to other obligations of Franchisee. Any required specifications, standards, and/or operating procedures exist to protect Company's interests in the System and the Marks and to create a uniform customer experience. They are not for the purpose of establishing any control or duty to take control over the day-t