What North Dakota law necessitates the amendment to the Boulder Designs Franchise Agreement?

In recognition of the requirements of the North Dakota Franchise Investment Law, N.D. Cent. Code 51- 1901 through 51-19-17, and the policies of the Office of the State of North Dakota Securities Commission, the Disclosure document for Boulder Designs Franchising, LLC for use in the State of North Dakota shall be amended as follows:

Sections 2.5, and 17.2 and Exhibit 2 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which the Franchisee must agree.

The Securities Commissioner of the State of North Dakota has held that covenants restricting competition, contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statute, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.

Covenants not to compete such as those referenced above are generally considered unenforceable in the State of North Dakota;

Section 3.1 of the Franchise Agreement is amended to reflect that payment of Franchise Fee will be deferred until Franchisor has met its initial obligations to Franchisee, and Franchisee has commenced doing business.

Section 23.1, of the Franchise Agreement provide that Texas law governs the Franchise Agreement.

The Securities Commissioner of the State of North Dakota has held that Franchise Agreements which specify that they are to be governed by the laws of a state other than North Dakota are unfair, unjust or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law, therefore, this provision is void and of no effect in the State of North Dakota;

Sections 23.2 and 23.7 of the Franchise Agreement provides that Franchisees must consent to the jurisdiction of the McLennan County, Texas.

The Securities Commissioner of the State of North Dakota has held that requiring Franchisees to consent to jurisdiction of courts outside of North Dakota is unfair, unjust or inequitable within the intent of Section 51-19-09 of the North Dakota Investment Law.

The site of mediation or arbitration shall be agreeable to all parties; therefore, this provision is amended to provide that the state of mediation or arbitration shall be agreeable to all parties;

Section 23.5 of the Franchise Agreement stipulates that the Franchisee shall pay all costs and expenses incurred by Franchisor in enforcing the Franchise Agreement.

The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.

Therefore, the referenced section of the Franchise Agreement is amended to provide that the prevailing party in any enforcement action is entitled to recover all costs and expenses, including attorney fees;

Section 23.5 of the Franchise Agreement requires the Franchisee to consent to a waiver of exemplary and punitive damages.

The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law, therefore, this portion of Section 23.5 is void and of no effect in the State of North Dakota; and

Section 17.9 of the Franchise Agreement stipulates that the Franchisee shall pay liquidated damages to Franchisor if the Franchise Agreement in terminated early.

• 1. The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. Therefore, the referenced section of the Franchise Agreement is amended to provide that Franchisor is entitled to recover all costs and expenses, including attorney fees allowable by law; and
• 1. Section 23.6 of the Franchise Agreement stipulates that the Franchisee shall agree to a Waiver of Jury Trial. The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. Therefore, the referenced section of the Franchise Agreement is void and of no effect in the State of North Dakota; and
• 1. Section 4.2 of the Franchise Agreement requires the Franchisee to sign a general release upon renewal of the Franchise Agreement. The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. Therefore, the referenced section of the Franchise Agreement is void and of no effect in the State of North Dakota; and
• 1. Section 23.4 of the Franchise Agreement requires a limitation of Claims. The Securities Commissioner of the State of North Dakota has determined this to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. Therefore, the referenced section of the Franchise Agreement is amended to provide that the statute of limitations under North Dakota law applies; and
• 1. Each provision of this Amendment will be effective only to the extent that, with respect to the provision, the jurisdictional requirements of the North Dakota Franchise Investment Law is met independently of this Amendment. Franchisor does not waive its right to challenge the enforceability of any state law and declares void or unenforceable any provision contained in this Agreement. Franchisor and Franchisee will enforce the provisions of this Agreement to the extent permitted by law.

Source: Item 22 — CONTRACTS (FDD page 50)