For Annex Brands franchisees, can franchisees purchase equipment, supplies, and services from any source, or are there exceptions?

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You must purchase or lease equipment, supplies (including packaging materials, labels and forms), services (such as FedEx, UPS and DHL shipping services), furniture, interior and exterior signage, computer hardware, and software programs and licenses, in accordance with our

specifications. Also, you must purchase or lease these items in amounts that we recommend, based on our experience in the business, and to provide you proper planning, training and record keeping. Except as otherwise stated in this disclosure document, in our Manuals, in writing or otherwise, you may purchase or lease these items from any source. There are no approved suppliers in which any of our officers owns an interest.

You must use a contractor and an architect that we designate in the build-out of your retail center. The contractor will coordinate with the architect, design and plan the premises, interact with local officials for appropriate building approvals, and complete the build-out of the premises (including electrical, painting, equipment package installation for your retail center, and also possibly including interior and exterior signage installation). The architect will design the premises of your retail center according to our specifications and prepare plans that meet local requirements. You may use a substitute licensed contractor if we approve the licensed contractor in advance. It is not our regular practice to approve substitute contractors. The factors we consider to approve or disapprove a substitute contractor are licensing experience, commercial tenant improvement experience, pricing, reputation and scheduling availability. If we approve and you use a substitute contractor, you must pay us a $2,500 construction consultation fee before construction begins. You may not use a substitute architect.

We may reject a proposed site for your franchised facility. We will consider factors such as visibility and accessibility, appearance, parking, size, layout, length of availability, and the terms of any proposed lease or sublease.

To ensure adequate insurance coverage, Subsection 9.I of the franchise agreement requires you to obtain and maintain in force, at your sole expense, under policies of insurance issued by carriers with no less than a Best's rating of A, the following:

• 1. Comprehensive general, public, and product liability insurance, against claims for bodily and personal injury, death, and property damage caused by or occurring in conjunction with the operation of your retail center or otherwise in conjunction with your conduct of business under the franchise agreement, under 1 or more policies of insurance containing a minimum of $2,000,000 per occurrence and $4,000,000 aggregate liability coverage.
• 1. Notary professional liability insurance of at least $500,000 or the maximum permitted by the state if less than $500,000.
• 1. Property insurance against any claims at your retail center included within the classification "Causes of Loss – Special Form," including vandalism, malicious mischief and theft. The coverage must be in an amount not less than 100% of the actual replacement cost of your retail center, and also must include property of others in your care, custody or control with a minimum limit of $400,000, and employee dishonesty coverage with a minimum limit of $25,000.
• 1. Business interruption coverage on an "actual loss sustained" basis for a period of not less than 24 months or the maximum permitted by the state if less than 24 months.
• 1. Motor vehicle liability insurance policies covering all vehicles (owned, nonowned, leased, hired, rented or borrowed) operated by or on behalf of the business

conducted under the franchise agreement, and providing protection for injury caused to person or property by the vehicles in the minimum amount of $2,000,000.

• 1. Any workers' compensation, employer's liability or comparable insurance required by the law of the jurisdiction where your retail center is located, and all other insurance coverage that we periodically require.
• 1. For a flex Center that chooses to provide expanded services of household moving and other relocation products and services, "Bailee's" insurance that is in addition to small parcel, freight or transit damage insurance. The policy must include coverage of personal property of others in an insured's care, custody and control that is temporarily at the insured's retail center with a minimum limit of $400,000, coverage of personal property of others in the insured's care, custody and control at another location with a minimum limit of $300,000, and coverage of personal property of others while being transported in the insured's auto or truck with a minimum limit of $400,000.

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 39–43)