hisor of the character, business experience and capability and financial capacity of Franchisee Parties; and

• (2) Because of this, there are important restrictions in this clause 13 on Franchisee's ability to deal with the Franchise and The Franchised Business.

13.2 Prohibition Against Transfer by Franchisee

(1) Franchisee must not sell or otherwise Dispose of its interest in the Franchise or The Franchised Business, whether in whole or in part, voluntarily or involuntarily, by operation of law (including as a result of bankruptcy, divorce, death or disability, without Franchisor's prior written consent and without first offering to sell the Ownership Interest of the Outlet

(Business) to Franchisor in accordance with clause 13.4.

• (2) If an offer made by Franchisee pursuant to clause 13.2(1) is not accepted, Franchisee may sell or otherwise Dispose of its interest in the Franchise or the Franchised Business subject to obtaining Franchisor's written consent which must not be unreasonably withheld if all of the conditions mentioned in clause 13.3 have been satisfied.
• (3) A request for Franchisor's consent under clause 13.2(2) must be made in writing.
• 13.3 Conditions to be Satisfied Before Assignment can be Approved

Franchisor must not unreasonably withhold its consent under clause 13.2(2) if the sale, assignment or other Disposal is of the whole of Franchisee's interest in the Franchise and the Franchised Business and each of the following conditions are satisfied:

• (1) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its Owners and directors if the assignee is a company):
  • (a) Possesses the financial resources necessary to conduct and operate the Franchised Business as a franchisee and to service any borrowings it makes in order to acquire The Franchised Business;
  • (b) Is a reputable and responsible party and has the business experience and capabilities necessary to operate the Franchised Business successfully; and
  • (c) Otherwise meets Franchisor's criteria for the selection of new Chatime franchisees;
• (2) Franchisee pays to Franchisor the Transfer Fee;
• (3) Franchisee, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
• (4) At the option of Franchisor:
  • (a) The assignee executes Franchisor's then-standard form franchise agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
  • (b) Franchisee and the assignee execute an assignment of Franchisee's rights and obligations under this Agreement to the assignee in a form required by Franchisor,

and Franchisee and the assignee execute any other documents then used by Franchisor for the grant of Chatime franchises;

• (5) When the assignee is a company, those directors and shareholders or other Affiliates of the assignee nominated by Franchisor each:
  • (a) Executed and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in the form attached as Exhibit 3;
  • (b) Executed and deliver a confidentiality and non-competition agreement in the form attached as Exhibit 4; and
  • (c) Execute the new franchise agreement or assignment in their personal capacities;
• (6) The assignee's proposed manager is approved by Franchisor and successfully completes

Franchisor's required training program;

(7) Franchisee:

• (a) Gives to Franchisor all details of the proposed assignment including a copy of the applicable contract (which must comply with Franchisor's requirements) and any other agreements between Franchisee and the assignee. Franchisee acknowledges that:
  • (i) These documents must be provided to Franchisor so that Franchisor can ensure that its interests are protected (for example, that the contract of sale does not purport to sell the Intellectual Property); and
  • (ii) Franchisor will not sell the Franchised Business on behalf of Franchisee or negotiate the sale on behalf of Franchisee and does not hold itself out as performing these functions; and
• (b) Sells to the assignee all of Franchisee's essential assets used in the business;
• (8) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignment will not have a significantly adverse effect on the System or the Network;
• (9) Franchisee pays all Franchisor's Costs in connection with or incidental to the request for Franchisor's consent to the transfer of the Franchise and the sale of the Business, whether or not the assignment or sale is actually completed or the consent is granted; and
• (10) Franchisee and its Owners execute and deliver to Franchisor a Release in substantially the form attached as Exhibit 1.

13.4 Franchisor's Right of First Refusal

• (1) If Franchisee wants to:
  • (a) Sell The Franchised Business;

Source: Item 23 — Receipts (FDD pages 58–262)