Where in the Boulder Designs Franchise Agreement are the territorial development and sales quotas specified?

an id="page-31-0">You will not receive an exclusive territory. You may face competition from other franchisees, from businesses that we own, or from other channels of distribution or competitive brands that we control. You will operate the Franchised Business from an approved location within a defined geographic area (the "Territory"), which will have a minimum population of 225,000. The geographic area is typically defined by county. You may relocate the physical location of business to another location within the Territory with our prior written consent.

We currently offer two types of territories: a "Separate Territory" or a "Shared Territory." If you acquire franchise rights for a Separate Territory, then so long as you are in compliance with your obligations under the Franchise Agreement, we will not grant anyone but you the right to operate a Boulder Designs Business within your territory, subject to our reserved rights below. If you acquire franchise rights for a Shared Territory, then we may grant two or more franchisees the right to operate Boulder Designs Businesses within a larger Territory, such as a metroplex or designated marketing area. Boulder Designs reserves the right to reduce Shared Territory rights proportional to the population of the larger Territory.

Your Franchised Business' activities are confined to retail transactions only. You may not enter into any wholesale transactions without first obtaining our written consent. A "wholesale" transaction means any sale of five or more products or services (regardless of stage of completion) to a customer whose purpose is to, in turn, offer such products or services for resale to a third-party. Sale of products includes sale of

unfinished or raw boulders to wholesale customers. Conducting wholesale transactions without our prior written approval is a material breach of the franchise agreement, for which we may terminate the franchise agreement without an opportunity to cure. Whether retail or wholesale, you may not offer or sell products or services outside of your Territory without prior written approval from us, and we may terminate our permission at any time with 10 days' notice, and your sale of such products and services may not interfere with any national accounts. If your sale of products and services to wholesale customers interferes with national accounts, you must immediately stop offering such products and services upon our request. You shall use your best efforts to maximize sales within your Territory, and you may not directly solicit or advertise outside of the Territory, including on the Internet, without our prior written consent.

You may accept orders outside your Territory with certain restrictions. If such product request is received outside of your Territory, retails less than $2,000, and that Territory is not owned/operated by another franchisee, you may retain all gross revenue associated with the sale and production provided such revenue will be subject to fees due in the franchise agreement. If the product retails over $2,000, and that Territory is not owned/operated by another franchisee, then you must pay 100% of the retail price to the Franchisor. We calculate the boulder weight as follows: Average Length X Average Height X Average Thickness X .0723 = Weight. Weight X Price per Pound = MSRP of boulder. (We suggest starting price point of $1.80 per pound).

If you accept clients outside of your Territory, and we award the area containing those clients to another franchisee, you must relinquish those clients outside of your Territory to the new franchisee. If you accept clients outside of your Territory, and if that area is another franchisee's territory, you must pay us and the franchisee the Encroachment Fee of $1,000 per job performed and 100% of revenue generated from such sale to the franchisee whose territory in which the sale was made. We do not grant you a right of first refusal or any other rights for orders originating in areas that are not in your Territory, and while we do not require it, we encourage you to buy additional Territories adjacent to your Territory if you want to secure those clients.

Whether you operate within a Separate Territory or a Shared Territory, we and our affiliates have the right to operate and to grant others the right to operate similar or competing businesses under a different trademark in your Territory. We and our affiliates also have the right to distribute products and services identified by the BOULDER DESIGNS trademark through alternative channels of distribution, including online sales and infomercials. There are no restrictions on our soliciting or accepting orders from consumers inside your Territory, and we need not compensate you for soliciting or accepting orders from inside your Territory. You may neither directly solicit nor advertise outside of the Territory, including on the Internet, without our prior written consent.

We also reserve the right, to enter into agreements with specific regional or national customers in order to establish a National Account, in any area, including in the Territory. If we establish a National Account in your Territory you agree to service the National Account under the same terms, pricing, and provisions negotiated for the National Account.

Source: Item 9 — FRANCHISEE'S OBLIGATIONS (FDD pages 22–23)