What are Degree Wellness franchisees and their owners required to do to their franchise?

Your Studio franchise must operate at a site we approve and according to our standards, specifications, operating procedures, and rules (the "System Standards"). Unless we approve your employment of an on-site general manager to operate your Degree Wellness franchise, you (if you are an individual) or one of your principal owners, officers, directors, or employees approved by us (if you are a legal entity) must actively participate in the actual operation of the franchise, and devote as much of your time as may be reasonably necessary for its efficient operation. If we agree to your employment of a general manager, then the general manager will supervise the dayto-day operation of your franchise. Each general manager and successor general manager must attend and complete our initial training program for your franchise prior to commencing the role of General Manager (see Item 11). We do not require that the general manager have an equity interest in your franchise, but he or she cannot have any interest in or business relationship with any business competitor of your franchise, and must sign a written agreement to maintain confidential the proprietary information described in Item 14 and conform with the covenants not to compete described in Items 17(q) and 17(r), as well as non-disparagement and non-solicitation covenants described in Items 17 (x) and 17(y). Some state laws and regulations affecting the healthcare profession may require a licensed professional to own or supervise your franchise or that you enter into a management agreement with a licensed professional. You are responsible for complying with these state laws and regulations.

• e. You must establish any training programs for your employees and/or independent contractors that we may prescribe in writing from time to time. You are required to enroll in and maintain the human resources and payroll services provided by the vendor we designate for such services, including the payment of any fees and execution of any agreement required by such vendor. The required services consist of payroll processing, payroll tax filing, human resource solutions, benefits administration services, hiring and employee onboarding.

• f. You must require all employees and independent contractors to maintain a neat and clean appearance and conform to the standards of dress that we specify in the Operations Manual, as updated from time to time.

• g. Each of your employees and independent contractors must sign a written agreement, in a form approved by us, to maintain confidential our Confidential Information, proprietary information, and trade secrets as described in Paragraph 9.1. You must forward to us a copy of each such signed agreement.

• h. All of your employees and independent contractors must render prompt, efficient and courteous service to all customers of the Franchise.

• i. You agree not to recruit or hire, either directly or indirectly, any employee (or a former employee, for six (6) months after his or her employment has ended) of any Degree Wellness Studio operated by us, our affiliates, or another Degree Wellnessfranchise owner without first obtaining the written consent of us, our affiliate, or the franchise owner that currently employs (or previously employed) such employee. (If you violate this provision, in addition to any other right or remedy we may have, you agree to pay the employee's current or former employer twice the employee's annual salary, plus all costs and attorneys' fees incurred as a result of the violation. This amount is set at twice the employee's annual salary because it is a reasonable estimation of the damages that would occur from such a breach, and it will almost certainly be impossible to calculate precisely the actual damages from such a breach.)

• 10.1 Condition and Appearance of the Franchise. You agree that:

• a. neither the Franchise nor the Premises will be used for any purpose other than the operation of the Franchise in compliance with this Agreement;

• b. you will maintain the condition and appearance of the Franchise; its equipment, furniture, furnishings, and signs; and the Premises in accordance with our standards and consistent with the image of a Degree Wellness Studio franchise as an efficiently operated business offering high quality services, and observing the highest standards of cleanliness, sanitation, efficient, courteous service and pleasant ambiance, and in that connection will take, without limitation, the following actions during the Term of this Agreement: (1) thorough cleaning, repainting and redecorating of the interior and exterior of the Premises at reasonable intervals; (2) interior and exterior repair of the Premises; and (3) repair or replacement of damaged, worn out or obsolete equipment, furniture, furnishings and signs;

• c. you will not make any material alterations to the Premises or the appearance of the Franchise, as originally developed, without our advance written approval. If you do so, we have the right, at our option and at your expense, to rectify alterations we have not previously approved;

• d. you will promptly replace or add new equipment when we reasonably specify in order to meet changing standards or new methods of service;

• e. on notice from us, you will engage in remodeling, expansion, redecorating and/or refurnishing of the Premises and the Franchise to reflect changes in the operations of Degree Wellness franchises that we prescribe and require of new franchisees, provided that (1) no material changes will be required unless there are at least 2 years remaining on the Initial Term or any renewal Term of this Agreement (all actual changes will be subject to our approval); and (2) we have completed the proposed change in at least twenty-five percent (25%) of all similarly situated Degree Wellness and affiliate-owned Degree Wellness Studios, if there are any, and have undertaken a plan to make the proposed change in the balance of such Degree Wellness and affiliate-owned Studios;

You agree that we would be unable to protect the Confidential Information against unauthorized use or disclosure, and would be unable to encourage a free exchange of ideas and information among Degree Wellness franchises, if franchise owners of Degree Wellness franchises were permitted to hold interests in any competitive businesses (as described below).

Therefore, during the Term of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, shall directly or indirectly perform services for, or have any direct or indirect interest as an owner, investor, partner, director, officer, employee, manager, consultant, representative, or agent in, any business that offers products or services the same as or similar to those offered or sold at Degree Wellness Studio franchises; provided, however, that the ownership of one percent (1%) or less of a publicly traded company will not be deemed to be prohibited by this Paragraph.

You agree that during the Term of this Agreement, and thereafter following any Transfer, termination or expiration of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, will directly or indirectly make any negative or critical statements to any third parties, either verbally or in any other form or media, about (a) us, the Franchise, any of our franchisees, or any of their respective products, services, businesses or business practices, or (b) the actions, operations or character of any of our or their respective owners, officers, directors, employees, consultants or agents.

You agree that during the Term of this Agreement, and thereafter for a period of two (2) years following any Transfer, termination or expiration of this Agreement, neither you, nor any Principal Owner, nor any member of your immediate family or of the immediate family of any Principal Owner, will directly or indirectly (a) solicit for wellness or related services or products with any person who was a member or client of the Franchise within the two year period prior to such Transfer, termination or expiration; or (b) interfere with our relationship with any of our franchisees, vendors, suppliers or referral sources.

Source: Item 15 — Obligation to Participate in the Actual Operation of the Franchise Business (FDD pages 48–49)