What makes a buy-back provision unlawful for a Basecamp Fitness franchise?

of Ownership and Management and Guaranty executed | | | | DEVELOPER: | [INSERT LEGAL NAME OF DEVELOPER] | | Date: | By: | | | | Name: | | | | Title: | |

4921-2446-7980, v. 1

CALIFORNIA ADDENDUM TO AREA DEVELOPMENT AGREEMENT

Notwithstanding anything to the contrary set forth in the Basecamp Fitness Franchisor LLC Area Development Agreement, the following provisions shall supersede and apply to all Basecamp Fitness franchises offered and sold in the state of California:

This California Addendum is only applicable if you are a resident of California or if your business will be located in California.

• 1. The California Franchise Relations Act (Business and Professions Code Section 20000 through 20043), provides franchisees with additional rights concerning termination, transfer and nonrenewal of the Area Development Agreement and certain provisions of the Area Development Agreement relating to termination, transfer and non-renewal may be superseded by the Act. There may also be court decisions which may supersede the Area Development Agreement and your relationship with Franchisor, including the areas of termination and renewal of Franchisee's franchise. If the Area Development Agreement is inconsistent with the law, the law will control.
• 1. The Area Development Agreement requires application of the laws and forum of Minnesota. This provision may not be enforceable under California law.
• 1. The provision in the Area Development Agreement which terminates the franchise upon the bankruptcy of the Franchisee may not be enforceable under Title 11, United States Code, Section 101.
• 1. The Area Development Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
• 1. The Area Development Agreement contains a liquidated damages clause. Under California Civil Code section 1671, certain liquidated damages clauses are unenforceable.
• 1. The Area Development Agreement requires binding arbitration. The arbitration will occur at the office of the American Arbitration Association in Minneapolis, Minnesota. You will bear all costs of arbitration if we secure any relief against you in the arbitration, or are successful in defending a claim you bring against us in the arbitration. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code section 20040.5, Code of Civil Procedure section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
• 1. Section 8 of the Area Development Agreement is deleted in its entirety and replaced with the following:

"[Intentionally Deleted]"

1. No statement, questionnaire, or acknowledgment signed or agreed to by Franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by Franchisor, franchise seller, or other person acting on behalf of the Franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

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BASECAMP FITNESS FRANCHISOR LLC Its: Its:

ILLINOIS ADDENDUM TO DEVELOPMENT AGREEMENT

Notwithstanding anything to the contrary set forth in the Basecamp Fitness Franchisor LLC Area Development Agreement, the following provisions shall supersede any inconsistent provisions and apply to all Basecamp Fitness franchises offered and sold in the state of Illinois:

• 1. In conformance with Section 4 of the Illinois Franchise Disclosure Act, any provision in a franchise agreement that designates jurisdiction and venue in a forum outside of the State of Illinois is void. However, a franchise agreement may provide for arbitration to take place outside of Illinois.
  • 1. Illinois law governs the Area Development Agreement.
• 1. Franchisee's rights upon termination and non-renewal are set forth in Sections 19 and 20 of the Illinois Franchise Disclosure Act.

Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 51–55)