What is the legal basis for the agreement between Associate, Company, and FSI regarding Fat Shack?

This Nondisclosure and Noncompetition Agreement (this "Agreement") is made and entered into effective as of the date set forth on the signature page hereof, by and among FAT SHACK INC., a Delaware corporation ("FSI") located at 420 East 58th Avenue, Suite 128B, Denver, Colorado 80216, the undersigned franchisee ("Company"), and the undersigned associate of Company ("Associate").

RECITALS

• A.

FSI is engaged in the business of establishing, operating, franchising, and promoting specialty quick service sandwich restaurants under the name Fat Shack® that features "Fat Sandwiches," burgers and wings, together with appetizers, desserts, hot and cold beverages, and related merchandise, for dine in, takeout and delivery, and specializes in late night delivery of its products to its customers ("FAT SHACK Restaurants") associated with the service mark "FAT SHACK" and other logos, trademarks, service marks and commercial symbols and the Franchisor's proprietary methods of doing business ("Licensed Methods").

• B.

FSI and its affiliates have developed proprietary methods for establishing, operating and promoting FAT SHACK Restaurants utilizing certain confidential information as more fully described herein, and have established substantial goodwill and an excellent reputation with respect to the quality of the products and services available in a FAT SHACK Restaurant, which goodwill and reputation have been and will continue to be of major benefit to FSI.

• C.

Company is a franchisee under an effective franchise agreement, development agreement, or both, with FSI (as applicable, the "Franchise Agreement").

• D.

Associate is or will become involved with Company in the capacity of an officer, partner, director, manager, agent, employee, member, Managing Owner, Designated Manager (as defined in the Franchise Agreement), beneficial owner, or independent contractor (such capacities collectively referred to as "Affiliation") or is related to a person who has an Affiliation with Company, and will become privileged as to certain confidential information related to FSI, its operations, the FAT SHACK Restaurants and/or the Licensed Methods.

• E.

FSI and Company require that Associate enter into this Agreement with them before Associate shall be allowed to have access to any confidential information of FSI (i) as a material term of the Franchise Agreement; (ii) in order to protect FSI's confidential know-how and distinctive systems, designs, décor, trade dress, specifications, standards, procedures and other trade secrets authorized or required by FSI for use in the operation of Company's FAT SHACK Restaurant; (iii) in order to protect FSI's proprietary rights in, and Company's right to use, the confidential information of FSI; and (iv) in consideration of Associate's Affiliation with Company.

• F.

Associate, Company, and FSI have reached an understanding and agreement with regard to nondisclosure by Associate of confidential information and with respect to noncompetition by Associate with FSI and Company.

• NOW THEREFORE, in consideration of the foregoing, the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Associate, Company and FSI, intending legally to be bound, agree as follows:

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