Under what conditions can Byrider assign or transfer the Franchise Agreement to a third party?

ils the second consecutive Compliance Audit, Franchisee shall pay to Company a penalty in the amount of $2,500.00 plus reimbursement of travel, food, and lodging for a third consecutive Compliance Audit. If Franchisee fails the third consecutive Compliance Audit, Franchisee shall pay to Company a penalty in the amount of $10,000.00 and the Company shall have the right to terminate this Agreement pursuant to Section 16.2.

ARTICLE XIV

TRANSFER OF FRANCHISE

14.1 Assignment by the Company. The Franchisee acknowledges that the Company maintains a staff to manage and operate the System and that staff members can change as employees come and go. The Franchisee further acknowledges that it did not sign this Agreement in reliance on the continued participation by or employment of any of the Company's shareholders, directors, officers, or employees. The Company shall have the right to change its ownership or form and/or assign or transfer this Agreement, all of its rights, obligations and privileges under this Agreement, and any other agreement to a third party without restriction. After the Company's assignment of this Agreement to a third party who expressly assumes all of the obligations of the Company under this Agreement, the Company will no longer have any performance or other obligations under this Agreement. This Agreement and any other agreement will inure to the benefit of any transferee or other legal successor to the Company's interest in it.

14.2 Assignment by Franchisee to a Wholly-Owned Corporation or Limited Liability Company or Other Business Entity. Notwithstanding anything contained herein to the contrary, including, without limitation, Section 14.3 below, subject to the Company's prior written consent, which will not be unreasonably withheld, if the Franchisee is a natural person and is in full compliance with this Agreement, he may assign and transfer the rights hereunder to a corporation, limited liability company, or other similar business entity (hereinafter, the "Entity") in which the Franchisee (a) is the owner of the controlling ownership interests of the Entity and (b) is the principal executive officer of the Entity, as long as: (i) the Entity owns all of the assets of the Franchisee's Business; (ii) the Entity's activities are confined exclusively to operating the Franchisee's Business; and (iii) the other owners of the Entity's ownership interests would not be in violation of the covenants not to compete set forth in Section 18.1. Such transfer will not be subject to payment of a transfer fee. The Entity must, in a writing satisfactory to the Company, assume all the Franchisee's obligations under this Agreement. No new ownership interests in the Entity shall be issued to any person, trust, foundation, limited liability company, corporation or other business entity without obtaining the Company's prior written consent and then only upon disclosure of the terms and conditions contained herein being made to the prospective new holders of the ownership interest. Franchisee agrees to execute a guaranty in the form Company prescribes undertaking personally to be bound, jointly and severally, by all provisions of this Agreement and any ancillary agreements between the Company and Franchisee.

14.3 Assignment by Franchisee to Third Party.

A. The Franchisee understands and acknowledges that the rights and duties this Agreement creates are personal to the Franchisee and its owners and that the Company has granted the Franchisee the franchise in reliance upon its perceptions of the Franchisee's and its owners' individual or collective character, skill, aptitude, attitude, business ability, and financial capacity. Accordingly, none of the following (each a "Transfer") may be transferred without the Company's prior written approval which will not be unreasonably withheld: (i) this Agreement (or any interest in this Agreement); (ii) the Franchisee's Business (or any right to receive all or a portion of the Franchisee's Business' profits or losses or capital appreciation related to the Franchisee's Business); (iii) the right to occupy the Business Location; (iv) substantially all of the assets of the

Franchisee's Business; (v) any ownership interest in the Franchisee (if the Franchisee is a legal entity); or (vi) any ownership interest in any of the Franchisee's owners (if such owners are legal entities). A transfer of the ownership, possession or control of the Franchisee's Business, or substantially all of its assets, may be made only with a transfer of the franchise granted under this Agreement. Any transfer without the Company's approval is a breach of this Agreement and has no effect.

A "transfer" shall not include a transfer of a deceased owner's ownership interest in Franchisee or Franchisee's owner to an existing owner so long as a new majority owner, if any, signs all documents a majority owner is required to sign under this Agreement.

• B. In this Agreement, the term "Transfer" includes a voluntary, involuntary, direct, or indirect assignment, sale, gift, or other disposition. An assignment, sale, gift, or other disposition includes the following events:
• (1) merger or consolidation or issuance of additional securities or other forms of ownership interest;
  • (2) any sale of a security convertible to an ownership interest;
• (3) transfer of an interest in the Franchisee or the Franchisee's owners, this Agreement, the Franchisee's Business or substantially all of its assets, or the right to occupy the Business Location in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law;
• (4) if the Franchisee, one of the Franchisee's owners or an owner of one of the Franchisee's owners dies (if natural persons), a transfer of an interest in the Franchisee, this Agreement, the Franchisee's Business or substantially all of its assets, the right to occupy the Business Location or the Franchisee's owner by will, declaration of or transfer in trust, or under the laws of intestate succession; or
• (5) pledge of this Agreement (to someone other than the Company) or an ownership interest in the Company or its owners as security, foreclosure upon the Franchisee's Business, or the Franchisee's transfer, surrender, or loss of the possession, control, or management of the Franchisee's Business; provided that Franchisee may pledge the assets of the Franchisee's Business to a lender in connection with obtaining financing for the Franchisee's Business.
• C. If the Franchisee and its owners are in full compliance with this Agreement, then, subject to the provisions of this Section 14, the Company will approve a transfer that meets all of the requirements of this Section 14.3.C. A non-controlling (less than 50%) ownership interest in the Franchisee (or its owners), as determined as of the date on which the proposed transfer will occur, may be transferred if the proposed transferee and its direct and indirect owners (if the transferee is a legal entity) are of good character and meet the Company's then applicable standards for franchisees. All proposed transferees must fill out and submit to the Company its then current form of franchise application.

Source: Item 23 — Receipts (FDD pages 88–335)