What requirements must the franchisee and transferee comply with under each Franchise Agreement when transferring a Fat Shack franchise?

Franchisee and the transferee shall comply with the requirements under each Franchise Agreement entered into between FSI and Franchisee for the transfer of each such Franchise Agreement, including the payment of the applicable transfer fee for each Franchise Agreement.

17.2. Pre-Conditions to Franchisee's Transfer

Franchisee agrees that there may be no transfers before the FAT SHACK Restaurant has opened for business. FSI will not approve a proposed transfer in any case where Franchisee (and its owners) is not in full compliance with this Agreement. The proposed transferee and its owners must be individuals of good moral character and otherwise meet FSI's then applicable standards for franchisees. In the event of a transfer, all of the following conditions must be met before or concurrently with the effective date of the transfer:

• a. All amounts due and owing pursuant to this Agreement or otherwise by Franchisee to FSI, its affiliates or to third parties whose debts or obligations FSI has guaranteed on behalf of Franchisee, if any, are paid in full;
• b. Franchisee has submitted all required reports and statements;
• c. Franchisee has not violated any provision of this Agreement, the FAT SHACK Restaurant's lease, or any other agreement with FSI during the 60-day period before Franchisee requested FSI's consent to the transfer or during the period between Franchisee's request and the effective date of the transfer:
• d. The proposed transferee agrees to operate the FAT SHACK Restaurant as a FAT SHACK Restaurant, signs the then-current form of franchise agreement, the provisions of which may differ materially from any and all of those contained in this Agreement, and satisfactorily completes the initial training program;
• e. Franchisee provides written notice to FSI at least 30 days prior to the proposed effective date of the transfer, and includes information reasonably detailed to enable FSI to evaluate the

terms and conditions of the proposed transfer, and which at a minimum includes a written offer from the proposed transferee;

• f. The proposed transferee provides information to FSI sufficient for FSI to assess the proposed transferee's business experience, aptitude and financial qualifications, and FSI approves the proposed transferee as a franchisee;
• g. Unless waived or reduce by FSI in its sole discretion, Franchisee provides to FSI a plan acceptable to FSI in its sole discretion for the proposed transferee to receive a minimum of 10 days of on-site assistance, the exact length of which shall be determined by FSI. If approved by FSI, this on-site assistance may be provided in whole or in part by Franchisee. If some or all of this on-site assistance is provided by FSI, Franchisee or the proposed transferee shall pay FSI $500 for each day of assistance provided by FSI, which shall be in addition to the transfer fee noted below:
• h. Neither the transferee nor its owners or affiliates operate or have an interest in a Competitive Business (defined in Section 21.1);
• i. Franchisee's landlord allows Franchisee to transfer the FAT SHACK Restaurant's lease to the transferee;
• j. If Franchisee or its owners finance any part of the purchase price, Franchisee and/or its owners agree that all of the transferee's obligations under promissory notes, agreements, or security interests reserved in the FAT SHACK Restaurant are subordinate to the transferee's obligations to pay fees and other amounts due to FSI and otherwise to comply with this Agreement;
• k. Franchisee executes a general release, in a form satisfactory to FSI, of any and all claims against FSI, its affiliates and their respective shareholders, members, managers, officers, directors, employees and agents; and
• l. Franchisee abides by all post-termination covenants, including, without limitation, the covenant not to compete set forth in Section 21.2.

In the event of any proposed sale, transfer or assignment by Franchisee as described herein, Franchisee and/or the proposed transferee shall pay to FSI the standard transfer fee for each franchise agreement to be transferred, as governed by such franchise agreement executed pursuant to this Development Agreement, plus $5,000.00 for every undeveloped franchise right for which no Subsequent Franchise Agreement has been executed.

In the event of transfer, the transferee shall pay the remaining portions of the Initial Franchise Fees owed to FSI, when each Subsequent Franchise Agreement is signed.

Transfer fees paid to FSI will not be applied to the Initial Franchise Fees due, but the transferee will receive credit for Franchisee's earlier payment of the Development Fees.

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