How is the Territory for a Dermani Medspa franchise defined?

You must open and operate the Franchised Business and manage the dermani MEDSPA® at a single agreed-upon location. You may not relocate your Premises without our prior written consent. We will consider your request, and will likely consider factors similar to factors that we consider and evaluate when making decisions regarding a request for approval of a new dermani MEDSPA® site. You may also be required to pay a relocation fee in connection with relocation the Premises.

During the term of the Franchise Agreement, and except as otherwise provided in that agreement, we will not establish nor license anyone else to establish, another dermani MEDSPA® at any location within the Territory that is designated in your Franchise Agreement. The Territory will be based on a particular area surrounding the dermani MEDSPA®. The size of the Territory granted will vary from franchise to franchise, but, except in unusual circumstances, will be the lesser of a 2-mile radius or a population of 75,000 individuals. We will designate the Territory after you propose, and we approve, the Premises for each dermani MEDSPA®. The Territory specified in the Franchise Agreement is a protected territory, but that protection, is limited. Specifically, we will have the right (among other things), on any terms and conditions that we deem advisable, and without granting you any rights, to do any or all of the following:

• 1. the right to operate, and to grant others the right to operate, dermani MEDSPA®s, Franchised Businesses and similar medical management businesses, or similar medspas or medical centers under different names or marks located anywhere outside the Territory under any terms and conditions we deem appropriate and regardless of proximity to the Premises or the Territory;
• 1. the right to establish and operate (and to grant to others the right to establish and operate) any other businesses offering products and services that are different from the products or services offered at dermani MEDSPA®s through similar or dissimilar channels of distribution (including, but not limited to: (i) sales through direct marketing, such as over the Internet or through catalogs or telemarketing; (ii) sales through retail stores that do not operate under the Marks; and (iii) sales made at wholesale), at any locations inside or outside the Territory under trademarks or service marks other than the Marks and on any terms and conditions we deem appropriate;
• 1. the right to acquire the assets or ownership interests of one or more businesses that operate, and/or has granted franchises, licenses, or similar rights to one or more third parties to operate, businesses similar to and/or competing with dermani MEDSPA®s and Franchised Businesses related to dermani MEDSPA®s, and/or the right to be acquired by a competing medical business or medical management business, or by another business, even if such business operates, franchises and/or licenses competitive businesses in the Territory, provided, however, that if we acquire, or are acquired by, such a competing business or chain, we will not establish or grant franchises or licenses to establish new or additional competing businesses under the Marks or the acquired chain's marks in your Territory, although we may rebrand such existing businesses in your Territory to use the Marks and the System, and it is expressly acknowledged by you and us that any such business operations of the same or similar business that existed or operated at the time of such acquisition or transaction shall not constitute a breach of the Franchise Agreement;
• 1. the right to create, place, and/or distribute any advertising and promotional materials related to the System, the Marks, Franchised Businesses and dermani MEDSPA®s, and the services and products offered, and authorize others to do so, and those materials may appear in media, including, without limitation, the Internet or similar electronic media, or be received by prospective customers located anywhere, including within the Territory; and
• 1. the right to operate, and to grant others the right to operate, Franchised Businesses and similar medical management businesses or similar medspas or medical centers, in non-traditional or captive locations, within or outside of the Territory, including, without limitation, in mobile clinics or limited service temporary locations (such as at a "health fair" or at a convention).

You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.

You may not offer or sell products or services authorized under the Franchise Agreement through any other means, including without limitation, through delivery, satellite locations, temporary locations, via telephone, mail order, the Internet, or through any electronic media, without our prior written approval, and only according to our policies as they may be developed and/or modified periodically. When a client purchases a membership from one franchisee and then receives services from another franchisee, the client's payment for services is allocated between the two franchisees in accordance with our then-current policies as set forth in our Manual or otherwise in writing. You may not offer or sell any products or services from any location other than your Premises.

The Franchise Agreement (and the Area Development Agreement) do not require that we pay any compensation for soliciting or accepting orders for products or services within a franchisee's Territory or a developer's Development Area.

The continuation of your territorial protection during the initial term of the Franchise Agreement does not depend on the achievement of any particular sales volume, market penetration, or other contingency. If you default under the Franchise Agreement, we reserve the right to undertake certain actions in lieu of termination of the Franchise Agreement, including modifying, or eliminating completely, the Territory.

If you execute a successor Franchise Agreement (the "Successor Franchise Agreement") for an additional term, we reserve the right to re-evaluate your then-existing Territory according to certain demographics, including population. Since your Territory includes a certain minimum population, your Territory under the Successor Franchise Agreement will be modified to accommodate shifts and changes in population. Our intent is to make the target demographics of your successor Territory similar to the target demographics of then-current new franchises being granted. A re-evaluation of your Territory may result in your successor Territory being smaller or larger than your original Territory. We cannot guarantee that you will achieve any particular level of success with the renewal Territory or that your results will be the same as or similar to your results from operating in the original Territory. This is applicable only if your Territory includes a minimum population, as described above.

Source: Item 12 — TERRITORY (FDD pages 43–46)