What section of the Degree Wellness Franchise Agreement outlines the requirements for transferring ownership interests, with reference to Exhibit 2?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
that you are qualified to do business and will continue to be qualified to do business throughout the Term of this Agreement in all states in which you are required to qualify, that you have the authority to execute, deliver and carry out all of the terms of this Agreement, and that during the Term of this Agreement the only business you (i.e., the corporate, partnership or limited liability entity) will conduct will be the development, ownership and operation of the Franchise.
14.2 Interests in Franchise Owner; Reference to Exhibit 2. You and each Principal Owner represent, warrant, and agree that all "Interests" in Franchise Owner are owned in the amount and manner described in Exhibit 2. No Interests in Franchise Owner will, during the Term of this Agreement, be "public" securities (i.e., securities that require, for their issuance, registration with any state or federal authority). (An "Interest" is defined to mean any shares, units, membership interests, or partnership interests of Franchise Owner and any other equitable or legal right in any of Franchise Owner's stock, revenues, profits, rights, or assets. When referring to Franchise Owner's rights or assets, an "Interest" means this Agreement, Franchise Owner's rights under and interest in this Agreement, any Degree Wellness franchise, and the revenues, profits or assets of any Degree Wellness franchise.) You and each Principal Owner also represent, warrant, and agree that no Principal Owner's Interest has been given as security for any obligation (i.e., no one has a lien on or security interest in a Principal Owner's Interest), and that no change will be made in the ownership of an Interest other than as expressly permitted by this Agreement or
as we may otherwise approve in writing. You and each Principal Owner agree to furnish us with such evidence as we may request from time to time to assure ourselves that the Interests of Franchise Owner and each of your Principal Owners remain as permitted by this Agreement, including a list of all persons or entities owning any Interest, as defined above.
14.3 Transfer by Degree Wellness. You represent that you have not signed this Agreement in reliance on any owner, officer, or employee remaining with us in that capacity. We may change our ownership or form at any time in our sole discretion. This Agreement is fully transferable by us, without restriction, and will inure to the benefit of any person or entity to whom it is transferred, or to any other legal successor to our interests in this Agreement. After our assignment of this Agreement to a third party who expressly assumes our obligations under this Agreement, we no longer will have any performance or other obligations or liabilities under this Agreement.
14.4 No Transfer Without Approval.
- a. You understand and acknowledge that the rights and duties created by this Agreement are personal to you and that we have entered into this Agreement in reliance on the individual or collective character, skill, aptitude, attitude, business ability, and financial capacity of you and your Principal Owners. Accordingly, if you Transfer or attempt to Transfer either this Agreement or any part of your interest in it, or any Interest of Franchise Owner or a Principal Owner, without our advance written approval, you will have breached this Agreement and we will have the right to terminate this Agreement under the terms of Article 15 below. In addition, any attempted Transfer by you of this Agreement or any part of your Interest in it, without our prior consent, is null and void.
- b. As used in this Agreement the term "Transfer" means any voluntary, involuntary, direct or indirect assignment, sale, gift, exchange, grant of a security interest, or occurrence of any other event which would or might change the ownership of any Interest, and includes, without limitation: (1) the Transfer of ownership of stock, units, membership interests, partnership interest or other ownership interest; (2) merger or consolidation, or issuance of additional securities representing an ownership interest in Franchise Owner; (3) sale or issuance of stock, units, membership interests, partnership interest or other ownership interest; (4) Transfer of an Interest in a divorce proceeding or otherwise by operation of law; (5) Transfer or all, or substantially all, of the operating assets of the Franchised Business;
Source: Item 23 — Receipts (FDD pages 66–257)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, Section 14.2, titled "Interests in Franchise Owner; Reference to Exhibit 2", and Section 14.4, titled "No Transfer Without Approval", of the Franchise Agreement outline the requirements for transferring ownership interests, with reference to Exhibit 2.
Section 14.2 states that all "Interests" in the Franchise Owner must be owned in the amount and manner described in Exhibit 2. It also specifies that no Interests in the Franchise Owner will be "public" securities during the term of the agreement, meaning they cannot be securities requiring registration with state or federal authorities. An "Interest" is defined as any shares, units, membership interests, or partnership interests in the Franchise Owner, as well as any equitable or legal right in the Franchise Owner's stock, revenues, profits, rights, or assets, including the Franchise Agreement itself and any Degree Wellness franchise.
Section 14.4 emphasizes that the rights and duties within the agreement are personal to the franchisee, and Degree Wellness has entered into the agreement based on the individual or collective character, skill, aptitude, attitude, business ability, and financial capacity of the franchisee and their Principal Owners. Therefore, any Transfer or attempted Transfer of the agreement or any interest in it, or any Interest of Franchise Owner or a Principal Owner, without Degree Wellness's advance written approval, constitutes a breach of the agreement and gives Degree Wellness the right to terminate the agreement. Any attempted Transfer without prior consent is considered null and void. The term "Transfer" includes various scenarios such as the transfer of ownership of stock, units, membership interests, partnership interest or other ownership interest; merger or consolidation, or issuance of additional securities representing an ownership interest in Franchise Owner; sale or issuance of stock, units, membership interests, partnership interest or other ownership interest; Transfer of an Interest in a divorce proceeding or otherwise by operation of law; Transfer or all, or substantially all, of the operating assets of the Franchised Business; or Transfer of an Interest by will, declaration of or transfer in trust, or under the laws of intestate succession. Degree Wellness will not unreasonably withhold consent to a Transfer of an Interest by a Principal Owner to a member of his or her immediate family or to one or more of your key employees, so long as all Principal Owners together retain a "controlling Interest" (i.e., the minimum ownership percentage listed in Exhibit 2), although Degree Wellness reserves the right to impose reasonable conditions on the Transfer as a requirement for their consent.
Exhibit 2 itself, titled "OWNERSHIP INTERESTS IN FRANCHISE OWNER", requires disclosure of the full name and address of the owners, along with a description of the type of all currently held Interests in Franchise Owner.