1. INTRODUCTION.

1.1 Style of Agreement; Common Terms. This Agreement has been written in an informal style in order to make it more easily readable and to be sure that you become thoroughly familiar with all of the important rights and obligations the Agreement covers before you sign it. This Agreement includes several exhibits, all of which are legally binding and are an integral part of the complete Franchise Agreement. In this Agreement, we refer to as "we," "us," or the "HealthSource Chiropractic." We refer to you as "you," "Franchise Owner" or "Franchisee" and such terms include any person or entity that operates or has an interest in the Franchised Business (defined below). If you are a corporation, partnership or limited liability company, you will notice certain provisions that are applicable to those principal shareholders, partners or members on whose business skill, financial capability and personal character we are relying in entering into this Agreement. Those individuals will be referred to in this Agreement as "Principal Owners".

1.2 The Franchise System.

a. Through the expenditure of considerable time, effort and money, we and our affiliates have devised a system for the establishment and operation of a HealthSource Chiropractic business model that specializes in "progressive rehabilitation," by offering physical therapy and chiropractic services together as a comprehensive solution for pain relief, restoration of function, wellness care and other related services and products (all of which we refer to in this Agreement as the "System"). The System includes procedures, specifications, techniques and procedures that we may designate for operating a chiropractic business. This business model includes a clinic model offering all of our franchised services and products (individually, a "Clinic" or "Clinic," and collectively, the "Clinics" or "Clinics"). Subject to an additional fee, we also offer additional programs, products and services as more fully described herein, which additional programs,

products and services may change from time to time. We identify the System by the use of certain trademarks, service marks and other commercial symbols, including the marks "HealthSource Chiropractic," "HS," and "America's Chiropractor" and certain associated designs, artwork and logos, which we may change or add to from time to time (the "Marks").

• b. From time to time we grant to persons who meet our qualifications, franchises to own and operate a HealthSource Chiropractic Clinic in accordance with the System in a specified geographic territory. This Agreement is being presented to you because of the desire you have expressed to obtain the right to develop, own, and be franchised to operate a HealthSource Chiropractic Clinic (we refer to your HealthSource Chiropractic franchise hereinafter as the "Franchise" or the "Franchised Business"). You may purchase and operate your Franchise as a new, start-up Clinic (a "Start-up Clinic"), or may convert an existing chiropractic practice to a HealthSource Chiropractic Clinic (a "Conversion Clinic").
• c. 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.

As further described below, to operate a Clinic Management Business, you must enter into a Franchise Agreement with us and a Management Agreement with a "PC" that will own and operate the Clinic. A "PC" 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. In such an arrangement:

• You, as franchisee, will construct or build-out the Clinic for use by the PC.
• The Clinic business will be operated by the PC using the HealthSource name and Marks.
• In addition to signing the Franchise Agreement with us, before you begin operating the Clinic Management Business, you must enter into a management agreement

Source: Item 23 — Receipts (FDD pages 77–282)