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Notice Of A Transaction Exempt Under Corporations Code Section 31106 - Department Of Corporations Page 3

Instructions for Completing and Filing Notice of Exemption

(Sectional and Chapter references are to the California Corporations Code)

General Instructions.

(a)

The filing of this notice means that the FILER is claiming an exemption from Chapter 2

(commencing with Section 31110) regarding any offer, sale, or other transfer of a

franchise or any interest in a franchise, and that the offer, sale or transfer meets the

requirements for filing this notice as described in (b) and (c) below. A separate notice

must be filed for each transaction for which this exemption is claimed, together with the

fee prescribed in Section 31500(f).

(b)

The condition for filing this notice is one of the following:

(1)

One or more of the owners of the prospective franchisee owning at least a 50

percent interest in the prospective franchisee meet both of the following:

(A)

The owner or owners have had, within the seven years before the date of the sale

or other transaction, at least 24 months experience being responsible for the

financial and operational aspects of a business offering products or services

substantially similar to those offered by the franchised business; and

(B)

The owner or owners are not controlled by the franchisor.

(2)

One or more of the owners of the prospective franchisee owning at least a 50

percent interest in the prospective franchisee meet both of the following:

(A)

The owner or owners are, or have been within 60 days prior to the sale or other

transaction, an officer, director, managing agent, or an owner of at least a 25

percent interest in the franchisor for at least 24 months; and

(B)

The owner or owners are not controlled by the franchisor.

(3)

The offer, sale, or other transfer is of an additional franchise to an existing

franchisee of the franchisor, or to an entity, one or more of the officers, directors,

managing agents or owners of at least a 25 percent interest of which is an existing

franchisee of the franchisor; provided that, in either case, for 24 months or more the

franchisee, or the qualifying person, has been engaged in a business offering products or

services substantially similar to those to be offered by the franchise being sold, or

otherwise transferred.

(c)

This notice must be filed, together with the fee prescribed in Section 31500(f), within 15

calendar days after the sale of the franchise.

(d)

If the notice is filed by a subfranchisor (Section 31009), the notice is applicable only to

sales by the subfranchisor filing the notice.

(e)

No documents need be filed with the notice.

Notice Of A Transaction Exempt Under Corporations Code Section 31106 - Department Of Corporations Page 3

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