Under what circumstances can Closet Storage Concepts operate a franchised business?

d symbols that Franchisor uses now or may later use as part of the System (the "Proprietary Marks"). The rights to all the Proprietary Marks shall be owned exclusively by Franchisor or its parents or affiliates.

• C. Franchisor is engaged in the business of granting franchises to qualified individuals and business entities to use the System to operate Closet & Storage Concepts franchises.
• D. Franchisee has applied to Franchisor for a franchise to operate a Closet & Storage Concepts business using the System and Proprietary Marks and to receive the training, confidential information and other assistance Franchisor provides. Franchisor has approved Franchisee's application in reliance upon all of the representations made in the application.
• E. By executing this Agreement, Franchisee acknowledges the importance of Franchisor's quality and service standards and agrees to operate Franchisee's business in accordance with those standards and as described in the Operations Manual. Franchisee also acknowledges that adhering to the terms of this Agreement and implementing the System as Franchisor directs are essential to the operation of Franchisee's business, to the System and to all Franchisor's franchisees.

In consideration of the mutual promises and commitments contained in this Agreement, together with other valuable consideration, the receipt and sufficiency of which is acknowledged, Franchisor and Franchisee agree as follows:

1. GRANT OF FRANCHISE AND LOCATION

• 1.1 Grant and Acceptance. Franchisor grants to Franchisee, and Franchisee accepts, all subject to the terms of this Agreement: a franchise to establish and operate one Closet & Storage Concepts business using the Closet & Storage Concepts System and the Proprietary Marks pursuant to this Agreement (the "Franchised Business"). Franchisee shall use the Proprietary Marks, participate in the promotional, advertising and marketing programs that are made available to Franchisee, and have access to certain proprietary trade secrets, marketing and business expertise of Franchisor, as they may be modified from time to time, in connection with the Franchised Business. If Franchisor determines that demand justifies it, Franchisee may be permitted to operate a satellite location within the granted Territory pursuant to all terms and conditions of this Agreement, as applicable, unless otherwise expressly indicated.
• 1.2 Approved Location. If the Approved Location is not identified on Exhibit 1 when this Agreement is executed, then Franchisee is responsible for locating a site within the geographic site selection area described on Exhibit 1 (the "Search Area"). The Search Area is delineated for the sole purpose of site selection and does not provide any territorial exclusivity or protection. Franchisee must find a location in the Search Area and submit it to Franchisor for approval as required in this Agreement. The exact address of Franchisee's Closet & Storage Concepts businessis set forth on Exhibit 1 and Exhibit 4 of this Agreement (said address is hereinafter referred to as the "Approved Location"). If the Approved Location is not identified in Exhibit 1 and Exhibit 4 when the parties execute this Agreement, Franchisee shall find a location and submit it to Franchisor for approval as required in Section 1.3.
• 1.3 Site Search; Purchase or Lease of Premises. Within one hundred and twenty (120) days after Franchisor's execution of this Agreement, Franchisee shall execute a Business Location Agreement in the form attached hereto as Exhibit 4. The parties may extend the 120 day period for an additional 120 days provided Franchisee diligently complied with the obligations of this Section 1.3. Prior to acquiring by lease or purchase a site for the Franchised Business, Franchisee with Franchisor's assistance (as described in Section 4.2 of this Agreement) shall locate a site for the Franchised Business that satisfies the site selection guidelines provided to Franchisee by Franchisor pursuant to Section 4.2 of this Agreement.

Source: Item 22 — CONTRACTS (FDD page 59)