What rights does Craters & Freighters grant to franchisees?

chisor") with its principal offices at 331 Corporate Circle, Suite J, Golden, | | | Colorado 80401, and ("Franchisee") with its | | | principal offices at | | | | |

RECITALS

WHEREAS, Franchisor was organized September 23, 1991, for the purpose of developing a national network that provides quality crating, packaging, shipping, receiving and delivery, storage, transportation, logistics services, and freight forwarding services products and services for companies and individuals in specific market areas.

WHEREAS, Franchisor has developed a multitude of programs specific to the operation of a Craters & Freighters® franchised business ("Franchised Business") including but not limited to specialized crating and packaging techniques, shipping and logistics solutions, a national accounts program, national cargo insurance plan, proprietary software, advertising programs, brand identity system, and a comprehensive website.

WHEREAS, in doing so, Franchisor has developed a concept for crating, packaging, shipping, receiving and delivery, storage, transportation, logistics, and freight forwarding services and products which operates under distinctive business formats, systems, methods, procedures, designs, layouts and specifications (collectively, the "System"), which Franchisor may improve, further develop, or otherwise modify from time to time. Franchisor grants to franchisees the right to operate a Franchised Business and requires them to use certain trade names, trademarks, and service marks ("Marks").

1. GRANT OF FRANCHISE.

• 1.1 Grant. Subject to the terms and conditions of this Agreement, Franchisor grants to Franchisee a non-exclusive license to operate a Franchised Business at the Premises (as such term is defined below) using the System and the Marks for the Initial Term of this Agreement. Franchisee may not operate the Franchised Business at any site other than the Premises without Franchisor's prior written consent. Franchisee must use the Marks and System only in accordance with the terms and conditions of this Agreement.
• 1.2 Territory. During the Initial Term and any Successor Term (as such terms are defined below), neither Franchisor nor its Affiliates will own, operate or franchise a fixed location for the operation of any other Franchised Business within Franchisee's territory ("Territory") as set forth in Attachment A to this Agreement. For purposes of this Agreement, "Affiliate" means any person or entity that controls, is controlled by, or is in common control with, Franchisor or Franchisee.

• 1.3 Operation of Franchised Business Limited to Territory. Franchisee agrees to devote its best efforts to identifying, attracting, and serving customers who reside or operate within the Territory. Therefore, except as otherwise permitted herein or as approved in advance and in writing by Franchisor, Franchisee will solicit business only in the Territory for the purpose of obtaining customers who reside or operate within the Territory, and Franchisee will not knowingly solicit business outside of the Territory. However, Franchisee is not required to verify that customers to the Franchised Business reside or conduct business within the Territory. Franchisee acknowledges and agrees that Franchisor, an Affiliate of Franchisor, or designee of Franchisor, as part of Franchisor's business strategy, may advertise or market on behalf of the System in the Territory. Franchisee agrees to abide by Franchisor's then current policies on marketing outside the Territory, if any, and on cooperating with neighboring Craters & Freighters franchisees, as the same may be set forth from time to time in the Operations Manuals. Franchisee acknowledges and agrees that customers residing or operating within the Territory are entitled the freedom to choose any Craters & Freighters outlet which they believe will best serve them and their needs, and that they may seek service of the type provided by Franchisee from others, including another Craters & Freighters outlet located outside of Franchisee's Territory. Franchisee further acknowledges and agrees that advertising promotions conducted by third parties upon request by Franchisor may inadvertently refer customers residing or operating within the Territory to a Craters & Freighters outlet outside of the Territory.
• 1.4 Servicing in Unsold Adjacent Territories. Franchisor may grant Franchisee the right, in Franchisor's sole determination, to promote and advertise the Franchised Business to customers, or to service customers, in an unsold territory adjacent to the Territory ("Adjacent Territory"). Franchisee acknowledges and agrees that it is obligated to pay Royalty Fees to Franchisor, in accordance with Section 3.2 of this Agreement, on all Adjusted Gross Sales (as hereafter defined) from customers residing or operating within the Territory and any Adjacent Territory. Franchisee acknowledges and agrees that neither the ability to service nor the grant of Franchisor's permission to service customers residing or operating in any Adjacent Territory affords Franchisee any right, title, or interest in or to such Adjacent Territory whatsoever, including the ability to do further business in the Adjacent Territory after it is granted to a third party (including any right to acquire such Adjacent Territory or any right of first refusal as to such Adjacent Territory). If the right to operate in the Adjacent Territory is subsequently granted by Franchisor to another Craters & Freighters franchisee through the sale of a franchise, Franchisee agrees to, upon receipt of written notice from Franchisor, cease all promotional and advertising efforts within the Adjacent Territory, return to Franchisor all customer data and prospect information related to the Adjacent Territory, and cease providing products and services to customers in the Adjacent Territory. Franchisee will use its best efforts to comply with Franchisor's requirements set forth herein, but Franchisor and Franchisee acknowledge and agree that customers residing or operating within the Adjacent Territory are entitled the freedom to choose any Craters & Freighters outlet which they believe will best serve them and their needs, and that they may seek service from Franchisee.
• 1.5 Non-Exclusivity; Franchisor's Reservation of Rights. Franchisee acknowledges that the franchise granted hereunder is non-exclusive and that Franchisor and its Affiliates retain the exclusive right, among others to:

• 1.5.1 Own, franchise, or operate Craters & Freighters outlets at any location outside of the Territory, regardless of the proximity to the boundaries of the Territory; provided, however, Franchisor will not establish within the Territory another franchisee or company-owned outlet which may also use the Marks;
• 1.5.2 Use the Marks and System to sell any products or services similar to those which Franchisee will sell, through any alternate channels of distribution within or outside of the Territory, including to National Accounts (as defined below). This includes, but is not limited to, other channels of distribution such as television, mail order, catalog sales, wholesale to unrelated retail outlets, or over the Internet. Franchisor exclusively reserves alternative channels of distribution such as the Internet, catalog sales, telemarketing or other direct marketing, as channels of distribution for Franchisor. Franchisee may not independently use alternative channels of distribution to make sales within or outside the Territory without Franchisor's prior written approval;
• 1.5.3 Use and license the use of other proprietary and non-proprietary marks or methods which are not the same as or are confusingly similar to the Marks, whether in alternative channels of distribution or in the operation of a business offering shipping, packaging, crating, receiving and delivery, storage, transportation, moving, logistics, blanket wrap, and freight forwarding services and products, at any location, including within the Territory, which may be similar to or different from Franchisee's Franchised Business;
• 1.5.4 Purchase or be purchased by, or merge or combine with, any business, including a business that competes directly with Franchisee's Franchised Business, wherever located, so long as such business does not operate under the same or similar trademarks or service mark;

Source: Item 22 — CONTRACTS (FDD pages 49–50)