What is the role of the Area Development Agreement in the Fat Shack statement?

tained in this Development Agreement.

The parties therefore agree as follows:

1. GRANT OF DEVELOPMENT RIGHTS

• 1.1. FSI grants to Franchisee the right to develop and establish FAT SHACK Restaurants using FSI's Marks and Licensed Methods in the geographic area described in the Addendum (the "Protected Area"). Franchisee accepts this grant and undertakes the obligation to develop and operate the FAT SHACK Restaurants in compliance with FSI's standards. Each FAT SHACK Restaurant shall be established and operated pursuant to a separate Franchise Agreement to be entered into between the parties. The term "Franchise Agreement" means the then-current form of Franchise Agreement used by FSI for granting franchises to FAT SHACK Restaurant franchisees, including all ancillary documents FSI may require.
• 1.2. Except as set forth in Section 1.3 below, FSI shall not establish, nor shall it license any other party to establish, FAT SHACK Restaurants using the Marks and Licensed Methods anywhere within the Protected Area for so long as this Development Agreement is in effect. Notwithstanding the foregoing, there may be existing Franchise Agreements in effect as of the date of this Development Agreement under which FSI has granted rights to third parties to operate FAT SHACK Restaurants in the Protected Area (the "Existing Stores"). Franchisee agrees and acknowledges that the Franchise Agreements for such Existing Stores may remain in effect, and nothing in this Development Agreement shall prevent, prohibit, or restrict the operations of such Existing Stores. FSI may renew the Franchise Agreements or enter into successor Franchise Agreements for such Existing Stores.

• 1.3. Franchisee acknowledges that the rights granted in this Development Agreement are nonexclusive. Franchisee acknowledges that FSI reserves the right for itself and its affiliates to market, offer, and sell, and to authorize third parties to market, offer, and sell, any and all products and services (i) through venues and channels of distribution other than franchised and company-owned FAT SHACK Restaurants, including but not limited to grocery stores, wholesale distributors, coffee shops, restaurants that are not FAT SHACK Restaurants, offices, hospitality and food service venues, or through retail store display, catalog sales, Internet and other electronic methods, and catering (collectively, "Special Venues and Channels") and (ii) in FAT SHACK Restaurants located in captive audience venues (collectively, "Captive Audience Venue"). Examples of Captive Audience Venue locations include airports and other transportation hubs, hospitals, convention centers, grocery stores, department stores, "big box" retail centers, resorts, sports arenas and stadiums, hotels and office buildings, military installations (Army and Air Force Exchange Services), and food courts. The products and services available through Special Venues and Channels and in a FAT SHACK Restaurant located in a Captive Audience Venue may include those that are the same as or similar to those which Franchisee will offer and sell, such as FSI's branded and exclusive "FAT sandwiches," or entirely different services and products. Special Venues and Channels and Captive Audience Venues may be in any location, including in close proximity to Franchisee's restaurant locations, and will be without any compensation to Franchisee. The marketing, offer, and sale of products and services through Special Venues and Channels or the Captive Audience Venues may be under the Marks and Licensed Methods or different trademarks, service marks, and methods. The prices advertised and charged by the operators of Special Venues and Channels or Captive Audience Venue Restaurants to third parties and the public may be higher or lower than the prices at which the same or similar products and services are made available by FSI and its affiliates to Franchisee and the prices charged by Franchisee to customers of its FAT SHACK Restaurant. FSI further retains the rights, among others, to: (1) use, and license others to use, the Marks and Licensed Methods in connection with the operation of a FAT SHACK Restaurant at any location other than in the Protected Area, other than Special Venues and Channels and Captive Audience Venue outlets; (2) use and license the use of alternative proprietary marks or methods in connection with the operation of other businesses under names which are not the same as or confusingly similar to the Marks, which businesses may be the same as, or similar to, or different from FAT SHACK Restaurants; (3) establish alternative channels of distribution for the products and services sold in a FAT SHACK Restaurant, which may include marketing and distribution of the products and services through grocery stores, convenience stores, restaurants that are not FAT SHACK Restaurants, via the Internet, catalog sales, and other direct marketing sales channels, which may or may not use the Marks; and (4) engage in any other activities not expressly prohibited in this Agreement or the Franchise Agreement, in each case, at any location, including in your Protected Area, and in each case, on any terms and conditions as FSI deems advisable, without granting Franchisee any rights in them.
• 1.4. The parties acknowledge that concurrently herewith, they have executed a Franchise Agreement (the "Initial Franchise Agreement") governing the operation of Franchisee's first FAT SHACK Restaurant to be opened hereunder. Franchisee agrees to comply with the terms and conditions of the Initial Franchise Agreement as a part of its obligations hereunder and acknowledges that failure to execute and comply with the Initial Franchise Agreement is a breach of this Development Agreement.
• 1.5. Franchisee agrees that if Franchisee is an entity, all of the owners of Franchisee and any other individuals designated by FSI shall sign the Guaranty and Assumption of Franchisee's Obligations attached hereto as Exhibit B and incorporated herein by this reference.
• 1.6. This Development Agreement is not a franchise agreement and FSI does not grant Franchisee any franchise rights or other similar rights to use the Marks or Licensed Methods under this Development Agreement. Franchisee has no right to license or subfranchise others to use the Marks or Licensed Methods. Other than the right to enter into Subsequent Franchise Agreements, as defined in

Section 2.2 below, nothing in this Development Agreement grants to Franchisee the right to enter into any agreement with respect to the Marks or Licensed Methods.

2. DEVELOPMENT FEE AND INITIAL FRANCHISE FEES

• 2.1. Concurrently with the execution of this Development Agreement, Franchisee will pay FSI as consideration for the development rights granted herein, in addition to the initial franchise fee ("Initial Franchise Fee") for the first FAT SHACK Restaurant under the Initial Franchise Agreement, an amount set forth in the Addendum ("Development Fee") equal to $5,000 for each additional FAT SHACK Restaurant to be opened hereunder.
• 2.2. Franchisee will be required to pay a total Initial Franchise Fee of $18,000 for the second and each subsequent FAT SHACK Restaurant to be developed pursuant to this Development Agreement. FSI will credit the $5,000 portion of the Development Fee attributable to each of the second and subsequent FAT SHACK Restaurants to be developed under this Development Agreement to the Initial Franchise Fee due under the Franchise Agreement for such FAT SHACK Restaurant (individually, the "Subsequent Franchise Agreement" or collectively, the "Subsequent Franchise Agreements"). The balance of the Initial Franchise Fee for each of the second and subsequent FAT SHACK Restaurants to be developed will be due at the earlier of (1) the date set forth in Paragraph 4 of the Addendum which is the deadline for signing the Franchise Agreement for that particular FAT SHACK Restaurant; or (2) the date which Franchisee signs a Subsequent Franchise Agreement for the FAT SHACK Restaurant to be developed.
• 2.3. Other than to have applied the portions of the Development Fee to a portion of the Initial Franchise Fee for Subsequent Franchise Agreements, the amounts paid pursuant to this Development Agreement are nonrefundable once paid to FSI. Under no circumstances will Franchisee be entitled to a refund, return or rebate of any portion of Development Fee paid hereunder.

3. DEVELOPMENT OBLIGATIONS

• 3.1. Franchisee will be bound by and strictly follow the schedule for developing the FAT SHACK Restaurants in the Protected Area set forth in the Addendum (the "Development Schedule"). Time is of the essence. By the date set forth under the Development Schedule for each applicable FAT SHACK Restaurant, Franchisee must exercise its development rights by entering into a Franchise Agreement with FSI for that FAT SHACK Restaurant. Further, Franchisee shall itself continuously maintain in operation at least the number of FAT SHACK Restaurants set forth on the Development Schedule.
• 3.2. Franchisee will exercise its right for development of each FAT SHACK Restaurant by giving FSI written notice of its intention to develop such FAT SHACK Restaurant at least 90 days in advance of the deadline set forth in the Development Schedule for executing each Subsequent Franchise Agreement. Subject to FSI's approval, Franchisee must execute the then-current form of Franchise Agreement for the particular FAT SHACK Restaurant and pay the balance of the Initial Franchise Fee, together with all other initial fees and deposits set forth in the applicable Subsequent Franchise Agreement by the deadline set forth in the Development Schedule. FSI will execute a Franchise Agreement with Franchisee only if Franchisee is in compliance with all requirements and obligations of this Development Agreement and all other agreements between the parties, including the individual Franchise Agreements between FSI and Franchisee. Franchisee acknowledges and agrees that FSI will have the right to refuse to offer Franchisee the right to enter into a Subsequent Franchise Agreement if FSI believes, in its discretion, that Franchisee does not have sufficient financial resources or other ability to properly develop and operate the proposed subsequent FAT SHACK Restaurant.

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