Under what conditions can a Closet Storage Concepts franchisee open their franchised business?

roprietary Marks at any location, and on such terms and conditions, as Franchisor shall determine outside of the Territory, regardless of proximity thereto, up to and including a location immediately adjacent to the Territory.

1.5 Exclusivity of Territory. In order to facilitate the successful development of the Franchisee's Closet & Storage Concepts business and to protect Franchisee's investment therein, Franchisor grants to Franchisee the exclusive right, except as otherwise provided herein and except to the extent inconsistent with Federal or state law, to operate the Closet & Storage Concepts business within the Territory. Except as otherwise provided herein, neither Franchisor nor any other of its franchisees shall be authorized to establish a Closet & Storage Concepts business at a location or solicit customers within the Territory. Franchisor and/or Franchisor's affiliates, retain all other rights, including without limitation, (i) the right to own, operate, franchise or license (whether in connection with a merger or acquisition or otherwise), businesses of any type operating under names other than the Proprietary Marks, regardless of whether or not these other concepts offer products and services which are similar to or competitive with those offered by the Franchised Business and regardless of location and the right to convert those locations to Franchised Businesses; and (ii) the right to be acquired by (or merge or become affiliated with) any other business operating under names other than the Proprietary Marks, including a competing business, with locations anywhere, which may result in the required conversion of Franchised Businesses.

With the written consent of Franchisor, Franchisee may operate the Franchised Business out of more than one location within the Territory provided that each of the following conditions precedent are fulfilled:

• 1.5.1 The Franchisee shall submit reasonable projections based upon pertinent marketing data that the Territory can support such multiple locations and that the opening of multiple locations is desirable to avoid loss of marketing position and business to competition;
• 1.5.2 The Franchisee shall demonstrate that the establishment of more than one location does not impact materially and adversely upon a franchise location or potential franchise location outside of the Territory; and
• 1.5.3 In obtaining the lease for the additional locations, Franchisee shall comply with the requirements set forth in Section 1.3 of this Agreement.

Any such additional Closet & Storage Concepts business location established by Franchisee under this Section 1.5 shall be governed by the terms and conditions of this Agreement, including, but not limited to, Franchisee's obligation to pay Royalties, NAP and Local Advertising fees with respect to each and every location established hereunder. For the purposes of determining these fees, the Gross Revenues of all locations operated by Franchisee under a single Franchise Agreement within a single Territory shall be aggregated.

1.6 Relocation. Any new location to be proposed pursuant to Section 1.3.4 above shall be within the Territory. The approval of a particular location within the Territory or the determination that an

appropriate location is not available within the Territory shall all be within the sole and absolute discretion of Franchisor and its decisions thereon shall be final. If the location is to be leased, subleased, or sold by Franchisor or any affiliated corporation to Franchisee, such proposal shall be accompanied by a statement of such requirements as may be prescribed by Franchisor relating to the construction or alteration of improvements on the premises. Franchisor shall not submit to Franchisee any lease or sublease with Franchisor or any affiliated entity the term of which extends beyond the term of this Agreement. Franchisor's proposal of a location does not constitute Franchisor's representation or guarantee that Franchisee shall succeed at the selected location, nor an expression of Franchisor's opinion regarding the viability of the location.

• 1.7 Acceptance of Relocation. If, within thirty (30) days after receipt of Franchisor's proposal of a new location, Franchisee gives to Franchisor written notice of acceptance of such proposal, and either enters into such tendered lease, sublease, or sale contract, or if none is tendered, agrees in writing to comply with any and all requirements prescribed by Franchisor relating to the lease of the Closet & Storage Concepts business premises and construction or alteration of improvements on the premises, then notwithstanding the termination right at Section 8.2.2 (r) of this Agreement, this Agreement shall continue for the remainder of the term and shall be deemed amended to refer to such new location. If Franchisee fails to comply with the provisions of this Section 1.7 within said thirty (30) day period, then Franchisor shall have the right to terminate this Agreement pursuant to Section 8.2.2 (r), and Franchisee shall have no further rights under or by virtue of Sections 1.6 through 1.7 of this Article.
• 1.8 Other Channels of Distribution. Franchisor and Franchisor's affiliates, reserve the unrestricted right to offer products and services, whether now existing or developed in the future, identified by the Proprietary Marks or other marks Franchisor and/or Franchisor's affiliates own or license, through any distribution method Franchisor or its affiliates may establish, and may franchise or license others to do so, both within and outside the Territory, regardless of whether the offering of products or services in the other channels of distribution compete with Franchisee's Closet & Storage Concepts business.

Source: Item 22 — CONTRACTS (FDD page 59)