Can Alloy or its affiliates establish another Franchised Business within a franchisee's Designated Area?

ating or reverse engineering the Alloy App in any manner.

ITEM 12 TERRITORY

Franchise Agreement

The Franchise Agreement grants you the right to operate your Franchised Business only at the location we approve ("Authorized Location"). You will not receive an exclusive territory. You may face competition from other franchisees, from outlets we own, or from other channels of distribution or competitive brands that we control. However, we will grant you a protected area, which will be described in an exhibit to your Franchise Agreement ("Designated Area"). If your Designated Area is located in a suburban area, your Designated Area will include a population of at least 30,000 people, which for most suburban areas will cover a radius of approximately 2 miles from the Authorized Location (taking into account any geographic factors like rivers or other similar natural boundaries). We reserve the right to create a more limited Designated Area for Facilities located in densely populated areas but your Designated Area will have a population of at least 30,000 people. Your Designated Area may be described in terms of street boundaries or may be drawn on a map to be attached to your Franchise Agreement. We (and any affiliates) will not establish, nor allow another franchise owner to establish, another Franchised Business located within your Designated Area, although in certain instances there may be overlap of Designated Area boundaries of two franchisees. We do not anticipate permitting franchisees to establish

Facilities at captive market locations, such as a shopping mall, office building, or similar location. There are no circumstances under which we can modify the boundaries of your Designated Area during the term of your Franchise Agreement.

You must achieve a minimum level of Gross Sales annually to retain your territorial rights, as follows (there is no Minimum Annual Gross Sales for the period of time between signing your Franchise Agreement and the date you open):

| | Year of Operation (beginning when you | Minimum Annual Gross Sales | |---|---|---| | | open for business | | | Year 1 | | $240,000 | | Year 2 and each subsequent year of operation | | $300,000 | | through the initial term of your Franchise | | | | Agreement | | | We reserve the right, based on an individual franchisee's circumstances, to reduce or modify the minimum annual Gross Sales that a franchisee must achieve, although we will not increase the minimum annual Gross Sales without your consent. If we do this, we are not required to grant you a similar modification.

If you fail to achieve the minimum annual Gross Sales a first time, you must receive additional on-site training and assistance from one of our representatives, at your expense (including payment of our then-current per diem fee plus reimbursement of our representative's expenses). If you fail to achieve the minimum annual Gross Sales a second time, we may again require you to receive additional on-site training and assistance. If you fail to achieve the minimum annual Gross Sales a third time, we may terminate your Franchise Agreement without giving you the opportunity to cure the default. You must pay any shortfall of royalty fees for each failure to achieve the minimum annual Gross Sales.

During the term of the Franchise Agreement, we (and any affiliates that we periodically might have) have the right:

• (1) to establish and operate, and grant rights to other franchise owners to establish and operate, Facilities or similar businesses at any locations outside your Designated Territory and on any terms and conditions we deem appropriate;

Source: Item 12 — TERRITORY (FDD pages 42–46)