Under what conditions can Browns Chicken withhold approval of a franchise transfer?

anchise is personal to Franchisee, and neither the Franchise (except as hereinafter provided with respect to assignment to a partnership, corporation, or limited liability company), any interest in the Store, nor any part of the ownership of the Franchisee (which shall mean and include voting stock, securities convertible thereto, proprietorship and general partnership

interests and membership interests in an LLC), may be voluntarily, involuntarily, directly or indirectly assigned, subdivided, subfranchised or otherwise transferred by Franchisee or its owners (including without limitation by will, declaration of or transfer in trust or the laws of intestate succession) without the prior written approval of Brown, and any such assignment or transfer without such approval shall constitute a breach hereof and convey no rights to or interests in this Agreement, the Franchise, Franchisee or the Store.

C. Conditions For Approval of Transfer.

If Franchisee and its owners are in full compliance with this Agreement, Brown shall not unreasonably withhold its approval of a transfer that meets all the applicable requirements of this Paragraph. The proposed transferee or its owner must be an individual of good moral character, must not be engaged in any activity which would be prohibited by Section 15 of this Agreement, and otherwise meet Brown's then applicable standards for Brown's franchisees. A transfer of ownership in the Store may be made only in conjunction with a transfer of the Franchise. If the transfer is of the Franchise or a controlling interest in Franchisee, or is one of a series of transfers which in the aggregate constitute the transfer of the Franchise or a controlling interest in Franchisee, all of the following conditions must be met prior to or concurrently with, the effective date of the transfer: (1) the transferee must have sufficient business experience, aptitude and financial resources to operate the Store; (2) Franchisee must pay such royalty fees, advertising contributions, amounts owed for purchases by Franchisee from Brown and its affiliates and all other amounts owed to Brown or its affiliates, which are then due and unpaid; (3) the transferee and/or its personnel must agree to complete Brown's training to Brown's satisfaction; (4) the transferee must agree to execute and be bound by all terms and conditions of Brown's then-current form of standard franchise agreement (which shall be modified as necessary to provide for the same royalty fees and advertising contributions provided herein and for a term equal to the remaining term of this Agreement); (5) if Brown determines that training is required, Brown may charge Franchisee or the transferee a training fee in an amount equal to twenty percent (20%) of the initial franchise fee then customarily charged by Brown for Brown's franchises; (6) Franchisee or the transferee must pay Brown a transfer fee in the amount of Five Thousand Dollars ($5,000); (7) Franchisee and its owners must execute a general release, in form satisfactory to Brown, of any and all claims against Brown, its affiliates and their officers, directors, employees and agents; (8) Brown must approve the material terms and conditions of such transfer, including, without limitation, that the price and terms of payment are not so burdensome as to adversely affect the operation of the Store by the transferee; (9) if Franchisee finances any part of the sale price of the transferred interest, Franchisee and its owners agree that all obligations of the transferee under or pursuant to any promissory notes, agreements or security interests reserved by Franchisee or its owners in the assets of the Store or the Premises shall be subordinate to: (a) the obligations of the transferee to pay royalty fees, advertising contributions and other amounts due to Brown and its affiliates, and otherwise to comply with this Agreement or the franchise agreement executed by the transferee; and (b) the collateral security interest of Brown in the lease of the Premises; (10) Franchisee and its transferring owners must execute a non-competition covenant in favor of Brown and the transferee, agreeing that for a period of not less than five (5) years, commencing on the effective date of the transfer, Franchisee, its owners and members of the immediate family of each owner of Franchisee, will not hold any direct or indirect interest as a disclosed or beneficial owner, investor, partner,

director, officer, employee, consultant, lessor, lender, representative or agent, or in any other capacity, in any retail food service business offering cooked chicken, pasta or sandwiches and located within a radius of five (5) miles of the Premises or any BROWN's Store, or in any entity which is granting franchises or licenses for retail food service businesses featuring cooked chicken, pasta or sandwiches; (11) the transferee (and its owners) shall, at Brown's sole discretion, have executed and agreed to be bound by: (i) an assignment and assumption agreement satisfactory to Brown, whereby the transferee assumes the obligations of Franchisee under this Agreement; or (ii) Brown'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 Advertising Fund contributions required hereunder; (12) if required, the lessor of the premises of the Store has consented to Franchisee's assignment or sublease of said premises to the proposed transferee; (13) if the transferee, prior to his or her initial contact with Franchisee, had contact with Brown with respect to a franchise opportunity, Franchisee shall pay Brown, in addition to the $5,000 transfer fee described 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 Brown's then-current initial Franchise Fee; (14) the selling Franchisee and its owners will remain liable (and will execute a guaranty if requested by Brown) for the performance by the transferee of its obligations under the Franchise Agreement, for a duration, not to exceed the remainder of the term of the transferor's Franchise Agreement, as determined by Brown; and (15) the transferee must submit a Marketing Deposit in the amount of One Thousand Dollars ($1,000), to be expended in the same manner as the Marketing Deposit described in the Paragraph 11.B(1) above, except that references to the date the Store opens shall be replaced with the date the transferee re-opens the Store.

If the proposed transfer is to or among owners of Franchisee or to or among the immediate family members of Franchisee or an owner of Franchisee, Subparagraph (5) of the above requirements shall not apply, and Subparagraphs (8) and (9) shall not apply to transfers by gift, bequest, or inheritance.

In the event Franchisee shall request consent to a transfer of this Agreement or a controlling interest in Franchisee and for any reason such transfer is not completed or consummated, Brown shall be entitled to reimbursement of its reasonable expenses incurred in connection with such proposed transfer in the manner and in accordance with the procedures set forth herein, including, without limitation, expenses related to investigating, processing and training any proposed transferee.

D. Assignment To Partnership or Corporation.

The Franchise may be assigned to a partnership or corporation in which Franchisee owns and controls not less than fifty-one percent (51%) of the general partnership interest or the equity and voting power. If Franchisee is, or if the Franchise is assigned to, a partnership or corporation, such partnership or corporation shall conduct no business other than the operation of the Store (and other BROWN'S Stores under franchise agreements with Brown), and shall be actively managed by Franchisee or the principal owner or owners of the equity or operating control of the Franchisee; all general partners or shareholders of voting stock shall execute this Agreement or an assignment and assumption agreement undertaking to be bound, jointly and

severally, by all provisions of this Agreement; all issued and outstanding stock certificates of any such corporation shall bear a legend reciting or referring to the restrictions of Paragraphs B, C and D of this Section 22.

E. Death Or Disability of Franchisee.

• (1) Transfer of Interest in Franchise: Upon the death or permanent disability of Franchisee, or, if Franchisee is a corporation or partnership, upon the death or permanent disability of the owner of a controlling interest in Franchisee, the executor, administrator, conservator, guardians or other personal representative of such person shall transfer his interest in this Agreement and the Franchise, or such interest in Franchisee, to a third party approved by Brown. Such disposition of this Agreement and the Franchise, or such interest in Franchisee (including, without limitation, transfer by bequest or inheritance), shall be completed within a reasonable time, not to exceed six (6) months from the date of death or permanent disability and shall be subject to all the terms and conditions applicable to transfers contained in this Section 22. Failure to so dispose of this Agreement and the Franchise, or such interest in Franchisee, within said period of time shall constitute a breach of this Agreement. Franchisee agrees to provide Brown with monthly written reports of progress toward effecting the transfer, from the date of death or disability until the transfer is completed.
• (2) Operation After Death or Permanent Disability. Upon the death or permanent disability of Franchisee or the owner of a controlling interest in Franchisee, the executor, administrator, conservator, guardian or other personal representative of such person shall appoint a manager to operate the Store within a reasonable time, not to exceed thirty (30) days from the date of death or permanent disability of such person. The appointment of such manager shall be subject to the prior written approval of Brown and, if requested by Brown, such manager shall attend and complete Brown's training program for franchisees. Such manager shall execute Brown's then-current form of Confidentiality and Non-Competition Agreement. If in the judgment of Brown, the Store is not being managed properly after the death or permanent disability of Franchisee or the owner of a controlling interest in Franchisee, Brown shall have the right to appoint a manager for the Store to manage the Store for up to thirty (30) days. During that period, Franchisee shall either cause its manager to attend additional training, or appoint another manager. If Franchisee fails to do so, Brown may terminate this Agreement.

Source: Item 22 — Contracts (FDD page 43)