What is the purpose of the agreement between FSI, Company, and Associate regarding Fat Shack?

SCLOSURE AND NONCOMPETITION AGREEMENT

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:
• 1. Confidential Information. Associate recognizes and agrees that certain proprietary information relating to FSI and its operations ("Confidential Information") is owned by and treated as

confidential by FSI and Company, including without limitation, (1) the Licensed Methods; (2) all proprietary information concerning FSI's business, the FAT SHACK Restaurants, and the FAT SHACK Restaurant business format and operating procedures; (3) sales methods; (4) formulas, recipes, or processes related to any products sold at FAT SHACK Restaurants; (5) all financial information of FSI and Company other than financial information filed with any government regulatory agency; (6) information regarding the design, décor and layout of FAT SHACK Restaurants; (7) franchise sales processes and promotional methods and materials; (8) all nonpublic statistical information; (9) the strategic plan, budgets and projections for FSI; (10) all information concerning negotiations of any kind conducted by FSI whether pending or completed; (11) all marketing research data and marketing plans; (12) all lead generation or prospecting methods; (13) all information contained in FSI's operations manual, and any other manual, written instructional guides, or other nonpublic written information; (14) internal lists of FSI's current and former franchisees, area developers, and customers of FSI and its franchisees and area developers, including contact information such as physical addresses and e-mail addresses thereof; and (15) all other information which gives FSI and its affiliates an opportunity to obtain an advantage over their competitors or that may be considered a trade secret or proprietary and such Confidential Information that may be further developed from time to time by FSI. Such Confidential Information is unique, exclusive property and a trade secret of FSI.

• 1. Use and Disclosure of Confidential Information. Associate acknowledges that, in connection with Associate's Affiliation with Company, FSI or Company will disclose in strict confidence certain Confidential Information necessary for the operation of a FAT SHACK Restaurant. Associate specifically acknowledges that the Confidential Information is valuable, unique and comprises a key portion of the assets of FSI; and Associate agrees that he or she will not utilize all or any portion of the same for Associate's personal benefit during the term of Associate's Affiliation with Company, nor in any manner use the same subsequent to the termination of Associate's Affiliation with Company or the termination or expiration of the Franchise Agreement, nor disclose any of the same to any person, firm, corporation or other entity whatsoever, including but not limited to a Competitive Business, as defined below, at any time for any reason or purpose, without the prior written consent of FSI. Associate shall not copy, publish or otherwise duplicate the Confidential Information or permit others to do so and shall return all Confidential Information to FSI or Company upon termination of Associate's Affiliation with Company. Associate may disclose to other employees, agents, or representatives of FSI or Company the Confidential Information only to the extent necessary for such employees, agents or representatives to carry out their intended function.

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