$622

Business Description

We were incorporated in the State of Delaware on January 21, 1997. Our principal place of business is 6535 State Hwy 161, Irving, Texas 75039. We conduct business under our corporate name, “Health Mart” and “Health Mart Systems, Inc.” We are a wholly-owned subsidiary of McKesson Corporation, formerly known as McKesson HBOC, Inc. (“Parent” or “McKesson”). A list of our agents for service of process is attached as Exhibit A. Our Parent was incorporated in the State of Delaware on July 7, 1994, as a wholly-owned subsidiary of McKesson Corporation, a Delaware corporation formed on June 9, 1987 (“Old McKesson”); Old McKesson was subsequently dissolved. Our Parent maintains its principal place of business at McKesson Plaza, 6555 State Highway 161, Irving, Texas 75039. From an organizational perspective, our Parent includes us within its US pharmaceutical business division.

Prior Experience

Our Parent is a “Fortune 100” company and a provider of pharmaceutical and health care products and services to pharmacies, hospitals, and health care networks, directly and through its various subsidiaries. Many of the products, services and programs offered by our Parent and Affiliates are available to you, independent of this franchise offering, because they are available to any qualifying pharmacy. Although you may choose to do business with our Affiliates from time to time, that business is not connected to this franchise offering except as described in this Disclosure Document.

Business Offered

We offer franchises for the right to use certain proprietary trademarks (“Proprietary Marks”) and our distinctive and proprietary operating methods and system for establishing and operating Drugstores (the “HEALTH MART System” or “System”). We compile our operating methods, policies, procedures, standards, guidance, and suggestions for running your Drugstore in our Franchise Handbook. You will have access to the Franchise Handbook following execution of the Franchise Agreement. We do not currently operate any retail pharmacies in the U.S. or engage in other business activities at this time. We offer franchises to persons wanting to start a new pharmacy business (“UnOpened Locations”) and persons with existing retail pharmacy businesses interested in converting to a HEALTH MART Drugstore (“Open Locations”). Franchisees of Open Locations and UnOpened Locations will sign the same form of Franchise Agreement (see Exhibit B), which gives you the right to operate your Drugstore at a specific location (“Drugstore Location”) using the Proprietary Marks and the System. Your Monthly Fees (described in Item 6) entitle you to access a number of core support services that we provide to each Drugstore Location, directly or through various suppliers. These Core Services include operational, management, marketing, and merchandising support and technical expertise. Our franchisees currently have access to the following Core Services: > Health Mart OpenSmart, a proprietary online tool that guides pharmacies through the first six weeks of the onboarding, opening and branding process. > Health Mart University (HMU), our online training platform for franchisees. > My Health Mart Web Portal, a proprietary online dashboard that provides information about various third-party programs and facilitates your ordering of products from McKesson. > Pharmacist’s Letter and Natural Medicines, publications of the Therapeutic Research Center, LLC, an independent advisory service on drug therapy and medication management, unaffiliated with us. > Health Mart Purchasing Advantage, a program in which we negotiate discount prices and other purchasing terms with various third-party vendors for the benefit of Health Mart franchisees. > Front-end services, including FrontEdgeSM Planograms that illustrate product layouts and FrontEdgeSM retail pricing advice. > If you elect to sign an agreement with Bula Pharmacy Law Intelligence (“BULA”) in the form of Exhibit D to this Disclosure Document, the BULA Policy and Procedures Module and Regulatory Reference Manual. > If you elect to sign the Health Mart Atlas Pharmacy Participation Agreement attached to this Disclosure Document as Exhibit E, membership in the Health Mart Atlas PSAO. We are continually developing and changing the Core Services in order to keep Drugstores relevant to consumers in a highly competitive environment, and the Core Services available to you may change during the term of the Franchise Agreement. In addition to the Core Services, we may periodically offer certain Enhanced Services and/or optional programs for an additional fee. You may elect to receive an Enhanced Service by initialing the applicable term sheet for the Enhanced Service attached as an exhibit to the Franchise Agreement or later offered as an amendment to the Franchise Agreement. You may elect to participate in any optional program by signing the applicable program agreement. Enhanced Services and optional programs that we currently offer are described in Item 6. We may periodically modify or discontinue any of the Enhanced Services or optional programs that are now in place and add new Enhanced Services or optional programs.

Initial Fees

We do not charge an initial franchise fee. The Franchise Agreement does not require a franchisee to make any payments to us, our Parent, or Affiliates before the Effective Date. Each Drugstore Location is assigned an Effective Date, which corresponds to the date a franchisee begins business as a Health Mart franchisee. For UnOpened Locations, the Effective Date is the date that the franchisee opens its Health Mart Drugstore for business to the general public (“Opening Date”). For Open Locations, the Effective Date is the later of (i) the date that we activate the franchisee’s access to the Health Mart System for the Drugstore located at the Drugstore Location; or (ii) the date the Franchise Agreement is fully executed. A franchisee may, at its option, purchase Merchandise (defined in Item 6) from our Parent before the Effective Date, but it is not required to do so. Franchisees also may, but are not required to, buy signs, fixtures, interior decor furnishings, aisle markers, accessories and various computer systems from us, our Parent, or another Affiliate. If a franchisee elects to buy any of these items from us, our Parent, or another Affiliate, they may do so, but they are not required to do so before the Effective Date.

Financing

For loan terms of under one year, you will sign the short term financing documents that are attached to this Disclosure Document as Exhibit J-1, which include a security agreement, personal guaranty (if you are a business entity) and promissory note. For loan terms of one year or longer, you will sign the long term financing documents that are attached to this Disclosure Document as Exhibit J-2, which include a security agreement, personal guaranty (if you are a business entity), promissory note, certificate of insurance, board resolution (if you are a business entity), landlord waiver, and life insurance assignment. Except as we disclose in the table above, neither we, our Parent, nor any of our Affiliates offer direct or indirect financing, nor do we, our Parent, or our Affiliates guarantee your notes, leases, or other obligations. We make no promise that we, our Parent, or our Affiliates will offer financing to you. The decision to extend the type of financing currently available to franchisees is subject to the sole discretion of our Parent. Among other factors, our Parent will consider your credit history. In individual cases, the actual terms of financing that our Parent may offer may differ from the above terms. Should we or our Affiliates offer financing, the financing terms may be changed prospectively at any time. The new terms would apply to franchisees that purchase a HEALTH MART franchise after the changes become effective.

Franchisee Revenue and Profit

We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting Chuck Wilson at 6535 State Hwy 161, Irving, Texas 75039, the Federal Trade Commission, and the appropriate state regulatory agencies.