On March 6, 2020 (the “Closing Date”), FAT Brands Inc. (the “Company”) completed a whole business securitization transaction involving the contribution of its franchisor subsidiaries to a limited-purpose, bankruptcy remote, wholly-owned direct subsidiary of the Company, FAT Brands Royalty I, LLC, a Delaware limited liability company (the “Issuer”), and the issuance by the Issuer in a private offering of $40.0 million in notes rated by DBRS Morningstar. The Notes were issued in two tranches – $20,000,000 of Series 2020-1 6.50% Fixed Rate Senior Secured Notes, Class A-2, due 2026 (the “Class A-2 Notes”), and $20,000,000 of Series 2020-1 9.00% Fixed Rate Senior Subordinated Secured Notes, Class B-2, due 2026 (the “Class B-2 Notes”) (collectively, the “Notes”). As part of the transaction, the Company contributed 100% of its equity interests in its franchisor subsidiaries (the “Franchise Entities”) to the Issuer under a Contribution Agreement, dated as of the Closing Date (the “Contribution Agreement”). The Notes were issued pursuant to a Base Indenture, dated as of the Closing Date (the “Base Indenture”), and the Series 2020-1 Supplement thereto, dated as of the Closing Date (the “Series 2020-1 Supplement”), in each case entered into by and among the Issuer and UMB Bank, N.A., as the trustee (the “Trustee”) and the securities intermediary thereunder. The issuance of the Notes was exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereunder. The Base Indenture allows the Issuer to issue additional series of notes subject to certain conditions set forth therein, and the Base Indenture, together with the Series 2020-1 Supplement and any other supplemental indenture to the Base Indenture, is referred to herein as the “Indenture.” The Company used a distribution of a portion of the net proceeds from the sale of the Notes to repay in full all obligations under its existing Loan and Security Agreement with The Lion Fund, L.P. and The Lion Fund II, L.P., which was terminated. The Company and Issuer intend to use the remaining proceeds to pay transaction costs and fund the reserve accounts under the Indenture and for potential acquisitions, working capital and general corporate purposes, and the repayment of other indebtedness. In connection with these transactions, the Issuer and each of the Franchise Entities entered into a Management Agreement with the Company, dated as of the Closing Date (the “Management Agreement”), pursuant to which the Company agreed to act as manager of the Issuer and each of the Franchise Entities. The Management Agreement provides for a management fee payable monthly by the Issuer to the Company in the amount of $200,000, subject to three percent (3%) annual increases. The primary responsibilities of the manager are to perform certain franchising, distribution, intellectual property and operational functions on behalf of the Franchise Entities pursuant to the Management Agreement.