How are Checkers franchisees' contributions to the National Production Fund (NPF) calculated?

10.01 National Production Fund. We may, in our sole discretion, establish and administer a National Production Fund ("NPF") for the creation and production of marketing materials and preparation of advertising campaigns. In addition to the Initial Advertising Deposit under Section 3.06, you must contribute to the NPF amounts that we establish at any time and from time to time, not to exceed three percent (3%) of Net Sales, which are payable semi-monthly together with the royalty fees due hereunder. Upon notice from us, you may be required to contribute to the NPF for each Bi-weekly Period, concurrently with the payment of royalty fees on a biweekly basis.

3.06 Initial Advertising and Promotional Program. If this Agreement is for a new Restaurant, you agree to contribute Fifteen Thousand Dollars ($15,000) to the National Production Fund (the "Initial Advertising Deposit"). The Initial Advertising Deposit is due upon commencing construction at the Premises for the Franchised Restaurant. We describe the National Production Fund below in Section 10.01. We agree to use the Initial Advertising Deposit to conduct, through the NPF (and, if applicable, any local advertising cooperative), an initial advertising and promotional program for the Franchised Restaurant as we deem appropriate. The

Initial Advertising Deposit will be used to purchase advertising and promotions for the Franchised Restaurant, and to cover the types of expenses incurred by the NPF relating to the Franchised Restaurant. Upon completion of the initial advertising and promotional program we shall (after deducting for incurred costs and expenses) credit any remaining amount from the Initial Advertising Deposit towards your required advertising contributions to the NPF or your local advertising cooperative.

You must participate in such advertising cooperative and its programs (other than price advertising, as to which you may choose not to participate) and abide by its by-laws. You must contribute such amounts to the advertising cooperative(s) as they determine at any time and from time to time in accordance with their by-laws. Any Restaurants owned by us or any of our Affiliates located in such designated local or regional area(s) will contribute to the cooperative(s) on the same basis. Contributions to such local and regional advertising cooperatives are credited toward the 4.5% advertising expenditures required by this Section; however, if we provide you and your local and/or regional advertising cooperative ninety (90) days' notice of a special regional promotion, you must participate in such promotion and pay to us any regional advertising fees assessed in connection therewith, beginning on the effective date of such notice and continuing until such regional promotion is concluded. Any such special regional advertising fees shall be in addition to, and not credited towards, the 4.5% advertising expenditure required by this Section.

If your Franchised Restaurant is located in a geographical area where we have not established an advertising cooperative, then, at our option, you will be required to either (i) spend the difference between the current NPF contribution rate and 4.5% of your Net Sales marketing your Franchised Restaurant in your local market, (ii) contribute to an advertising purchasing collective that we establish and control (which may not be governed by by-laws similar to a typical local or regional advertising cooperative where you will have voting rights), or (iii) join a local or regional cooperative that we create in your designated marketing area. If we require you to contribute to an advertising purchasing collective, we will provide you with an accounting of the amount spent in your designated marketing area.

Source: Item 22 — CONTRACTS (FDD pages 91–92)