Does the Mr. Sandless franchisee have discretion in operating the franchise?

ed, the parties hereto, intending to be legally bound, mutually agree as follows:

1. FRANCHISE GRANT

We hereby grant to you, and you hereby accept, a nonexclusive franchise to establish and operate one (1) Franchised Business pursuant to the terms of this Agreement. This Agreement does not give you the right to establish additional Franchised Businesses.

2. TERRITORY AND LOCATION

2.1 Designated Territory

You shall operate your Business only within the designated territory identified, or (if the parties have not agreed upon a territory at the time this Agreement is signed) to be identified, in the Data Sheet (the "Designated Territory"). The size and configuration of your Designated Territory is defined in terms of contiguous zip codes and/or by a map attached to this Agreement as Attachment 2. This Agreement grants you the right to operate the Franchised Business within the Territory only. You acknowledges that (i) the Designated Territory was mutually agreed upon by you and us, (ii) prior to the Effective Date hereof, you conducted your own due diligence with regard to potential customers and other matters relative to the operation of the Franchised Business in the Designated Territory, and (iii) our agreement to the Designated Territory is permission only, does not constitute a representation, promise, warranty, or guarantee, express or implied, by us that the Franchised Business operated therein will be profitable or otherwise successful, and cannot, and does not, create any liability for us. You may not offer or sell any products or services offered by the Business to customers located outside of the Designated Territory. However, you may offer or sell products or services to customers located outside of and adjacent to your Designated Territory if the customer is located in an area that is not serviced by another System franchisee, and you have received prior written approval from us, which approval may be granted or denied at our sole discretion.

During the term of this Agreement, so long as you are in substantial compliance with the terms and conditions of this Agreement, we will not establish or locate, or grant any third party the right to establish or locate, another Mr. Sandless Business using the System and Proprietary Marks within the Designated Territory, except as set forth in Section 2.2 below. This Agreement does not grant you any other territorial rights. Notwithstanding the foregoing, if you meet our qualifications, you may purchase one or more additional territories of approximately 100,000 population each, not to exceed a total of four (4) territories under this Agreement. You shall pay an additional territory fee of Five Thousand Dollars ($5,000.00) for each additional territory purchased. Upon such additional purchase, we will amend Attachment 2.

2.2 Reservation of Rights and Alternative Channels of Distribution

We retain the right to establish, or to grant others the right to establish, Mr. Sandless Businesses outside the Designated Territory. You acknowledge and agree that certain of our or our affiliates' products, whether now existing or developed in the future and whether or not designated as "proprietary products", may be distributed in the Designated Territory by us, our affiliates, our franchisees, licensees or designees, in such manner and through such channels of distribution as we, in our sole discretion, shall determine. Such alternative channels of distribution shall include, but are not limited to, sales of any products offered hereunder or other products using the Proprietary Marks or using other marks or private labeling at or through home improvement stores, home shows, the internet (including orders via our Website), mail order or other distributions methods or supply chains. We reserve the right, among others, as to any distribution arrangements relating thereto. You understand that this Agreement grants you no rights: (i) to distribute such products via alternative channels of distribution as described in this section; or (ii) to share in any of the proceeds received by any party from such sales via alternative channels of distribution. We will not sell the Mr. Sandless services in a "do it yourself" kit by any means which bypasses the franchise System.

2.3 Regional Accounts

The term "Regional Account" means any entity, customer, contract, or business which on its own behalf or through agents, franchisees or other third parties owns, manages, controls or otherwise has responsibility for five (5) or more businesses and whose presence is not confined within any one particular designated territory. Any dispute as to whether a particular customer is a Regional Account shall be determined by us in our sole discretion and our determination shall be final and binding.

• 2.3.

Source: Item 22 — CONTRACTS (FDD page 42)