Must Healthsource Chiropractic Clinic franchisees be licensed to practice chiropractic care?

Clinic Franchises. We franchise the right to operate a single Clinic that must be physically located in a designated geographic area (the "Protected Territory") under the "HealthSource Chiropractic" name and other authorized names and marks (the "Marks"), using a system of distinctive operating procedures, methods, and standards that we have developed (the "System"). Clinic franchises will only be offered and sold to individuals licensed to practice or provide chiropractic care unless otherwise permitted by law, or unless you operate a Clinic as a Clinic Management Business (as defined below). You may purchase your franchise as a new, start-up Clinic (a "Start-Up Clinic"), or you may convert an existing chiropractic clinic to a HealthSource Chiropractic Clinic (a "Conversion Clinic"). You will sign our standard franchise agreement attached as Exhibit B (the "Franchise Agreement") when you purchase your Clinic franchise. In the past, we have negotiated the terms of the Franchise Agreement with certain franchises. HealthSource Chiropractic, LLC will be the contracting party under the Franchise Agreement and under no circumstances will our Regional Developer franchises sign the Franchise Agreement on our behalf.

In certain cases, where permitted by law, we may offer franchises to persons or legal entities that meet our qualifications but are not licensed to practice or provide chiropractic care, and are willing to undertake the investment and effort to own and operate a business that will

manage a Start-Up or Conversion Clinic under the System; we refer to these businesses as "Clinic Management Businesses." For example, certain states do not permit non-licensed persons to own and/or operate chiropractic practices, but some states do. In states that do not permit non-licensed persons to own or operate chiropractic practices, a Clinic Management Business may be offered. In states that do permit non-licensed persons to own and operate chiropractic practices, a Clinic Management Business Franchise is not necessary, but may be offered by us under certain circumstances. To operate a Clinic Management Business, you must enter into a Franchise Agreement with us and a Management Agreement with a "Licensed Provider" that will own and operate the Clinic. A general form of a Management Agreement, to serve as a starting point for satisfying this requirement is attached as Exhibit M, but the actual Management Agreement to be used must be approved by us, in our discretion, and must satisfy all requirements and limitations of applicable laws, rules, and regulations of the state in which the Clinic Management Business will be located. A "Licensed Provider" will be one or more licensed individuals, or a professional corporation or similar entity, such as a professional limited liability company, that is duly authorized to provide chiropractic services under local and state laws.

Source: Item 1 — The Franchisor and any Parents, Predecessors, and Affiliates (FDD pages 10–13)