What reporting and monetary obligations must an Azal Coffee franchisee satisfy to be eligible for renewal?

our Store opens for business unless sooner terminated as provided in this Agreement.

3.2 Option.

You will have the option to remain an Azal Coffee franchisee for two (2) additional periods of five (5) years if, at the beginning of the option period, all of the following conditions are fulfilled:

• (a) You are not in default under this Agreement or any other agreement with us or our affiliates and no affiliate of yours is in default under any agreement with us or our affiliates.
• (b) Within the last thirty-six (36) months we have not sent you two (2) or more notices of default of the terms of this Agreement or of any of our specifications, standards, or operating procedures (whether or not the notices related to the same or different violations and whether or not you have remedied those violations).
• (c) You provide written notice of your intent to continue as a franchisee not more than twelve (12) months and not less than six (6) months before the beginning of the option period.
• (d) You are able to maintain possession of the Franchise Location or you have been able to secure and develop, in compliance with our then applicable standards used in the granting of a franchise, suitable alternative premises within your Protected Area for your Store. Any alternative premises must be acceptable to and approved in advance by us.
• (e) You agree to take any action specified by us to make the Franchise Business comply with current appearance, Franchise Trade Dress, equipment, fixture, and signage requirements. You acknowledge that we may not uniformly impose refurbishing obligations on renewal of our franchises based on numerous factors and that we may require you to take steps to refurbish the Franchise Location that we have not required of other franchisees.
• (f) Throughout the term of this Agreement you have satisfied all material reporting requirements and all monetary obligations to us and our affiliates, suppliers, vendors, and creditors (excepting reasonable disputes that you are attempting in good faith to resolve) within the amount of time specified for satisfaction or cure of default with respect to the obligation.
• (g) You have satisfied any current training requirements for new or existing franchisees.

• (h) You have signed a general release, in a form specified by us, of any and all claims against us and our affiliates, and their respective officers, directors, agents, owners, members, and employees.
• (i) You must have signed and delivered to us our standard franchise agreement in use at the time of your notice to renew together with the other documents we are then using to grant new franchises, all of which will replace this Agreement (the new standard franchise agreement signed by you may have substantial differences from this Agreement, including different or increased fees).
• (j) You have paid the renewal fee specified in Section 4.6. This fee must be paid at the time the new standard franchise agreement is signed by you and delivered to us.
• (k) We have approved the renewal. If all the other conditions in this Section are met, we will not unreasonably withhold approval of renewal.

If you fail or refuse to sign the franchise agreement and other documents and pay the renewal fee within thirty (30) days after delivery of the franchise agreement and other documents to you, when we have approved renewal of the franchise, it will be deemed that you have elected not to renew the franchise. If you do not elect to renew your franchise relationship, do not qualify for renewal, or do not comply with the requirements for renewal specified above, the franchise relationship between you and us will automatically expire on completion of the term of this Agreement.

3.3 Continuation.

If you continue to operate the Franchise Business with our consent following the expiration of this Agreement, the continuation will be a month-to-month extension of this Agreement, unless otherwise agreed in writing. All provisions of this Agreement will apply while you continue to operate the Franchise Business. This Agreement will then be terminable by either party on thirty (30) days written notice to the other party.

ARTICLE 4 - FEES

4.1 Initial Franchise Fee.

You must pay us an initial franchise fee in the amount of Twenty-Five Thousand Dollars ($25,000). The initial franchise fee is payable at the time you sign this Agreement. The initial franchise fee is considered earned at the time we sign this Agreement and is not refundable.

4.2 Royalty Fee; Gross Sales.

You must pay us a royalty fee in an amount equal to five percent (5%) of your Gross Sales. You must report Gross Sales and pay royalty monthly, in the manner specified in Section 4.13, by the 1^st business day of each calendar month based on your Gross Sales for the preceding calendar month. You must make royalty payments daily or weekly or at some other interval, instead of monthly, if specified by us. Royalty fees are not refundable.

"Gross Sales" means the entire amount of all of your revenues from the ownership and operation of the Franchise Business and any business at or about the Franchise Location including sales at or from the Franchise Location and outside sales and sales at events outside the Franchise Location as well as the proceeds of any business interruption insurance, whether the revenues are evidenced by cash, credit, checks, gift certificates, coupons and premiums (unless exempted by us), services, property or other means of exchange, excepting only the amount of any sales taxes

that are collected and paid to the taxing authority. You may deduct cash refunded and credit given to customers and receivables uncollectible from customers in computing Gross Sales if the cash, credit or receivables represent amounts previously included in Gross Sales for which you paid royalty fees. You may not deduct fees and other amounts taken by third-party delivery service providers.

Source: Item 22 — CONTRACTS (FDD page 51)