Under what conditions does the Closet Storage Concepts agreement become valid?

CLOSET & STORAGE CONCEPTS FRANCHISE AGREEMENT

THIS AGREEMENT is entered into and made by and between CLOSETS UNLIMITED OF NEW JERSEY, INC., a New Jersey corporation with its principal business address at 436 Commerce Lane, Suite D, West Berlin, "Effective Date"). NJ 08091 ("Franchisor") and ("Franchisee") on the date this Agreement is executed by Franchisor below (the with a principal address at

BACKGROUND

• A. Franchisor and/or its parents, predecessor, equity owners or affiliates, through the expenditure of considerable money, time and effort, has developed a business system (the "Closet & Storage Concepts System" or the "System") for the design, marketing, construction and installation of customized residential and commercial storage space including closets, garages, and other storage areas for consumers and the selling of related retail accessories in a retail showroom, which includes: high standards of services, products, know-how and trade secrets; uniform specifications of products and services, equipment and fixtures; sales techniques, and merchandising, marketing, advertising, and management systems; quality and inventory control procedures; and procedures for operation and management of Closet & Storage Concepts businesses pursuant to the Operations Manual (as hereinafter defined) provided by Franchisor and modified from time to time and other standards and specifications Franchisor otherwise provides.

• B. The System is identified by various trade names, trademarks and service marks used by Franchisor and its franchisees including, without limitation, the service marks "Closet & Storage Concepts®", "Conquer Closet Clutter®", "Closet & Storage Concepts (and Design)®", "Getting Organized is Always in Style®," "Getting Organized is Always in Style!," "Got Space?" and other identifying marks and 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.

Source: Item 22 — CONTRACTS (FDD page 59)