Can an Aerus franchisee face competition from other channels of distribution that Aerus controls?

to sales made to persons or entities who reside outside of the Area of Responsibility.

You may face competition from other franchisees or franchisee-owned outlets within or outside of your Area of Responsibility and/or Protected Area or from other channels of distribution or competitive brands we control. You may face competition from other franchisees or franchisee-owned outlets having physical locations outside of your Protected Area or from other channels of distribution or competitive brands we control.

Other than upon our prior written approval, you must not (1) conduct the Franchised Business under any actual or assumed name other than the trade name approved in advance by us, (2) sell to any person or entity that is not an Approved Customer, (3) conduct any aspect of the Franchised Business by, through or over the internet or world wide web, including without limitation, advertising, marketing and solicitation, unless or until we establish an Aerus sponsored program for such conduct by Franchisees and, then, only as part of and in accordance with such program, (4) use any trade name, trademark or service mark in connection with the Franchised Business other than the Marks (and then only in strict accordance with the terms and conditions of the Franchise Agreement, the Policies and Procedures, the Manuals and any specific guidelines

imposed by us), (5) unless authorized in advance by us, advertise or sell any product or service from an Approved Location or through the Franchised Business bearing any trade name, trademark or service mark other than the Marks, (6) sell any product or service that is not a Product, or (7) permit any Product to be sold from any physical location other than an Approved Location, by any Person other than your authorized representative or in a manner otherwise inconsistent with the System.

We and our affiliates and existing franchisees, distributors and licensees operate existing businesses and systems, and may in the future establish and operate new businesses and systems, including Aerus Businesses, under the same and other assumed names, trade names and trademarks as the Marks, which businesses and systems may offer or sell products and services similar or identical to the Products and Beyond Products and may do so (or grant licenses or franchises for third-parties to do so) within any part of the Area of Responsibility (provided that we may not establish a physical location for the operation of an Aerus Business within your Protected Area). The right granted under the Franchise Agreement is only for the operation of the Franchised Business in accordance with the Franchise Agreement. You are granted no rights of any kind of any other business or system that may now or in the future be owned, operated or licensed by us or any of our affiliates. We and our affiliates retain all rights not specifically mentioned in this document. We reserve the right to provide new products and services under the System, and to require or permit new products and services to be provided, marketed, promoted, distributed or sold hereunder by you through the Franchised Business, and may, in connection, without limitation (1) require you to execute an additional or supplemental agreement; and (2) require the payment of a royalty or additional fee.

We do not offer rights of first refusal.

One or more of our affiliates currently sells, or has in the past sold, floor care, water purification products and air purification products through several alternative channels as more fully described below. Such sales may take place at or from locations within, or to customers located in, the Area of Responsibility. Additionally, we, or our affiliates, expect to continue to explore additional opportunities for selling home environment cleaning products, water purification products and air purification products that may be the same as, or similar to, those offered by Aerus Businesses. This includes selling products bearing the Marks to independent distributors who may then sell those products in the Area of Responsibility. We will not pay you any amounts for orders solicited or accepted by us in the Area of Responsibility. At present, the only significant alternative channels in which we or our affiliates are selling similar products, are:

Television. In the past, our affiliate has sold floor care products bearing the Marks on a television shopping channel. Our affiliate also sold air purification and other products bearing the Marks through direct response television advertising. One of our affiliates, licensees or permitees may offer such products or Beyond Products, or any of the Products, for sale on television in the future.

Catalogs and Direct Mail. In the past, our affiliate has sold floor care and air purification products bearing the Marks through a variety of catalogs and direct mail to customers. One of our affiliates, licensees or permitees may offer such products, or any of the Products or Beyond Products, for sale in a variety of catalogs and mailings in the future.

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Floor Care Retailers and Mass Merchandise Retailers. In the past, our affiliate has sold parts bearing the Marks to distributors who then sell the parts to a number of floor care specialty shops. One of our affiliates, licensees or permitees may offer such products, or any of the Products, for sale to mass merchandise retailers in the future.

Commercial. In the past, our affiliates have sold floor care, air purification, water purification and other products and related parts, bags, filters and supplies to distributors who then sell them (directly and indirectly) to a variety of commercial end-users and consumer households. Currently, our affiliates sell air purification and water purification products to a variety of commercial end users (including medical facilities, assisted living facilities and athletic facilities) and to distributors who then resell such products (directly or indirectly) to such end users and consumer households. One of our affiliates, licensees or permitees may offer such products, or any of the Products or Beyond Products, for sale to other commercial end-users or product distributors in the future.

Internet. Our affiliate has sold parts and accessories bearing the Marks over the Internet. One of our affiliates, licensees or permitees may offer such products, or any of the Products or Beyond Products, for sale over the Internet in the future.

Customer Service Call Center.

Source: Item 12 — Territory (FDD pages 43–47)