What standards must a proposed transferee meet to become a Big Apple Bagels franchisee?

uests in connection with an audit of Franchisee's Store under Section 12.a. of this Agreement.

14. TRANSFER

a. By Franchisor. This Agreement is fully transferable by Franchisor and shall inure to the benefit of any transferee or other legal successor to the interests of Franchisor herein.

b. By Franchisee.

• i. Franchisee May Not Transfer Without Approval of Franchisor. Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Franchisee (and its owners) and that Franchisor has granted the Franchise to Franchisee (and its owners) in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Franchisee (and its owners). Accordingly, neither this Agreement nor the Franchise (or any interest therein), nor any part or all of the ownership of Franchisee or of the assets of Franchisee or the BAGELS Store (or any interest therein) may be transferred, sold, assigned, pledged, mortgaged or liened without the prior written approval of Franchisor, and any such transfer or attempt to transfer without such approval shall constitute a breach hereof, such be null and void, and shall convey no rights to or interests in this Agreement, the Franchise, Franchisee, the BAGELS Store or its assets.
• ii. Conditions for Approval of Transfer. If Franchisee and its owners are in full compliance with this Agreement, Franchisor shall not unreasonably withhold its approval of a transfer that meets all the applicable requirements of this Paragraph. The proposed transferee and its owners must be

individuals of good moral character and otherwise meet Franchisor's then applicable standards for BAGELS Store franchisees. Franchisor shall interview and evaluate the proposed transferee at Franchisor's principal place of business or at such other location that Franchisor designates. A transfer of ownership in the BAGELS Store may only be made in conjunction with a transfer of this Franchise Agreement. All of the following conditions must be met prior to or concurrently with the effective date of the transfer (unless otherwise specified):

• (1) the assignee, transferee or purchaser shall have been approved by Franchisor for financial responsibility, good moral character and suitability as an operator of a BAGELS Store;

• (2) Franchisee shall pay to Franchisor prior to transferee attending the required training program a transfer fee of Five Thousand Dollars ($5,000.00), which is not refundable in whole or in part under any circumstances;

• (3) the assignee, transferee or purchaser shall not be engaged in any activity which would be prohibited by Paragraph 9.f. of this Agreement;

• (4) Franchisee shall have paid all outstanding debts and obligations to Franchisor and its Affiliates, including the royalty fees and all amounts due the Marketing Fund, and to its designated suppliers;

• (5) Franchisee and its owners, and the transferee (if it has had any previous relationship with Franchisor or Franchisor's affiliates), shall execute a release of any and all claims against Franchisor, and Franchisor's officers, directors, agents, employees and Affiliates, arising out of or related to this Agreement, as well as claims arising out of or related to the relationship of the parties created under this Agreement, which release shall contain language and be of the form prescribed by Franchisor;

• (6) the assignee, transferee or purchaser (and its owners) shall, at Franchisor's sole discretion, have executed and agreed to be bound by: (i) an assignment and assumption agreement satisfactory to the Franchisor, whereby the transferee assumes the obligations of Franchisee under this Agreement; or (ii) Franchisor's then-current form of Franchise Agreement, for a new term (not equal to the remaining term of the assignor's franchise), which may provide for a different rate for royalty fees and Marketing Fund contributions required hereunder;

• (7) if required, the lessor of the premises of the BAGELS Store has consented to Franchisee's assignment or sublease of said premises to the proposed transferee;

• (8) Franchisor shall have approved the material terms and conditions of such assignment;

• (9) Franchisee shall have entered into an agreement with Franchisor agreeing to that any obligations of transferee to Franchisee (such as any obligations of such transferee to make installment payments of the purchase price to Franchisee) shall be subordinate to all of transferee's obligations to Franchisor;

• (10) the assignee, transferee or purchaser shall complete to Franchisor's satisfaction, at transferee's expense and upon such terms and conditions as Franchisor may reasonably require, the Franchisor's training programs modified to be applicable for transferees, at such time and place designated by Franchisor;

• (11) if the transfer is of a BAGELS Satellite Store, the transferee must have a BAGELS Production Store.

• (12) if the transferee, prior to his or her initial contact with Franchisee, had contact with Franchisor with respect to a franchise opportunity, Franchisee shall pay Franchisor, in addition to the transfer fee described in Paragraph 14.b.ii.(2) above, a sum equal to ten percent (10%) of the gross sales price relating to the transaction between Franchisee and transferee, but in no event shall such sum be greater than Franchisor's then-current initial Franchise Fee;

Source: Item 22 — CONTRACTS (FDD pages 86–87)