Are Fat Shack franchisees permitted to have any direct or indirect interest as a disclosed or beneficial owner in a Competitive Business?

mpetition During Term

Franchisee acknowledges that, in addition to the license of the Marks hereunder, FSI has also licensed commercially valuable information which comprises and is a part of the Licensed Methods, including without limitation operations, marketing, advertising and related information and materials, and that the value of this information derives not only from the time, effort and money which went into its compilation, but from the usage by all franchisees of FSI using the Marks and Licensed Methods. Franchisee therefore agrees that other than the FAT SHACK Restaurant licensed herein, neither Franchisee nor any of Franchisee's officers, directors, shareholders, managers, members or partners, nor any immediate family member of Franchisee or any of these individuals ("Bound Parties"), shall during the term of this Agreement:

• a. have any direct or indirect interest as a disclosed or beneficial owner in a "Competitive Business" as defined below;
• b. perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business, wherever located or operating;
• c. divert or attempt to divert any business related to the FAT SHACK Restaurant, FSI's business, or any other FAT SHACK franchisee by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of FSI or another franchisee licensed by FSI to use the Marks and Licensed Methods, to any Competitive Business; or
• d. directly or indirectly solicit or employ any person who is employed by FSI.

The term "Competitive Business" as used in this Agreement shall mean any business operating, or granting franchises or licenses to others to operate a restaurant or other business deriving more than 10 percent of its gross receipts, excluding gross receipts relating to the sale of alcoholic beverages, from the sale of sandwiches, burgers and wings (other than another FAT SHACK Restaurant operated by Franchisee); provided, however, neither Franchisee nor the other Bound Parties shall be prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the-counter market and represent 2 percent or less of that class of securities issued and outstanding. Franchisee agrees that nothing in this Article 21 shall be construed to grant Franchisee any protected territory.

21.2. Post-Termination Covenant Not to Compete

For a period of two years from termination or expiration of this Agreement for any reason, or the date on which Franchisee ceases to conduct business, whichever is later, neither Franchisee nor any Bound Party shall have any direct or indirect interest as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within a 10-mile radius of the former Restaurant Location or within a 10-mile radius of any other franchised or company-owned FAT SHACK Restaurant. If Franchisee or any other Bound Party breaches this section, the two-year period shall start on the date that such person is enjoined from competing or stops competing, whichever is later. Franchisee and the Bound Parties expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills. Consequently, enforcement of the covenants made in this section will not deprive them of their personal goodwill or ability to earn a living.

21.3. Additional Remedies for Breach

In addition to any other remedies or damages allowed hereunder, if Franchisee breaches the covenants set forth in Sections 21.1 or 21.2, Franchisee shall pay FSI a fee equal to FSI's then-current Initial Franchise Fee for each Competitive Business opened in violation of the covenants, plus 6 percent of such Business' Gross Sales until expiration of the noncompetition period.

21.4. Confidentiality of Proprietary Information

Franchisee shall treat all information it receives which comprises the Licensed Methods (including without limitation the Operations Manual, the information on and comprising FSI's intranet system, recipes, FSI's distinctive business format, plans, methods, processes, data, marketing systems, formulas, techniques, electronic communications systems, designs, layouts, operating procedures, trademarks, proprietary marks, information and know-how) as proprietary and confidential and will not use such information in an unauthorized manner or disclose the same to any unauthorized person without first obtaining FSI's written consent. Franchisee agrees that all such material is the sole property of FSI. Franchisee acknowledges that the Marks and the Licensed Methods have valuable goodwill attached to them, that the protection and maintenance thereof is essential to FSI and that any unauthorized use or disclosure of the Marks and Licensed Methods will result in irreparable harm to FSI. All ideas, concepts, techniques, or materials concerning a FAT SHACK Restaurant, whether or not protectable intellectual property and whether created by or for Franchisee or its owners or employees, must be promptly disclosed to FSI and will be deemed FSI's sole and exclusive property, part of the FAT SHACK Licensed Methods and works made-for-hire for FSI. To the extent any item does not qualify as a "work made-forhire" for FSI, Franchisee assigns ownership of that item, and all related rights to that item, to FSI and agrees to sign whatever assignment or other documents FSI requests to show ownership or to help FSI obtain intellectual property rights in the item.

21.5.

Source: Item 23 — Receipts (FDD pages 53–223)