DEVELOPMENT AGREEMENT

Development Agreement

You are currently viewing:

This Development Agreement involves

CEC ENTERTAINMENT INC

. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here.

Title: DEVELOPMENT AGREEMENT
Governing Law: Texas Date: 3/5/2004
Industry: Restaurants Sector: Services

CEC ENTERTAINMENT, INC.

DEVELOPMENT AGREEMENT

____________________________________________

[CITY AND STATE]

4441 West Airport Freeway

Irving, TX 75062

<PAGE>

TABLE OF CONTENTS

RECITALS.......................................................................1

1. DEFINITIONS...........................................................1

2. GRANT OF RIGHTS.......................................................4

2.1 Grant.................................................................4

2.2 Exclusivity...........................................................4

2.3 Right of First Refusal................................................4

2.4 Limitation of Rights..................................................4

3. FEES..................................................................5

3.1 Development Fee.......................................................5

3.2 Franchise Fees........................................................5

3.3 Payment and Taxes.....................................................6

4. DEVELOPMENT SCHEDULE..................................................6

4.1 Development Schedule..................................................6

4.2 Ownership Interest....................................................6

4.3 Site Location and Approval............................................6

4.4 Operational Date......................................................6

4.5 Extensions............................................................7

5. REPRESENTATIONS, WARRANTIES AND COVENANTS.............................7

5.1 Representations, Warranties and Covenants of Developer.

If Developer is not an individual.....................................7

5.1.1 Due Incorporation.....................................................7

5.1.2 Authorization.........................................................7

5.1.3 Exclusivity...........................................................7

5.1.4 Execution and Performance.............................................7

5.1.5 Corporate Documents...................................................7

5.1.6 Ownership Interests...................................................7

5.1.7 Stop Transfer Instructions............................................8

5.2 Financial Statements..................................................8

5.3 Developer's Principals................................................8

5.4. Guaranty..............................................................8

5.5 Non-Competition during Term of Agreement..............................8

5.6 Non-Competition after Termination or Non-renewal of Agreement.........9

5.8 Additional Covenants.................................................10

6. PROPRIETARY INFORMATION..............................................10

6.1 Confidential Information.............................................10

6.1.1 Confidentiality Agreements...........................................10

6.1.2 Improvements.........................................................10

6.2 Proprietary Marks....................................................10

7. TRANSFER OF INTEREST.................................................10

7.1 Transfer by Franchisor...............................................10

7.2. Transfer by Developer................................................11

<PAGE>

8. INSURANCE AND INDEMNITY..............................................14

8.1 Insurance............................................................14

8.2 Indemnitees..........................................................14

8.2.1 Indemnification......................................................14

8.2.2. Notice and Counsel...................................................15

8.2.3 Settlement and Remedial Actions......................................15

8.2.4 Expenses.............................................................15

8.2.5 Third Party Recovery.................................................15

8.2.6 Survival.............................................................16

9. TERM AND TERMINATION.................................................16

9.1 Term.................................................................16

9.2 Automatic Termination................................................16

9.3 Termination upon Notice..............................................17

10. REMEDIES.............................................................18

10.1 Remedies.............................................................18

10.1.1 Reduction of Exclusivity.............................................18

10.1.2 Cure.................................................................18

10.1.3 Specific Enforcement.................................................18

11. DISPUTE RESOLUTION...................................................18

11.1 Mediation............................................................18

11.2 Applicable Law.......................................................19

11.3 Jurisdiction and Venue...............................................19

11.4 Mutual Benefit.......................................................19

12. MISCELLANEOUS........................................................19

12.1 Independent Contractors..............................................19

12.2 Entire Agreement.....................................................19

12.3 JUDGMENT; DISCRETION.................................................20

12.4 No Waiver............................................................20

12.5 Severability.........................................................20

12.6 Notice...............................................................21

12.7 Counterparts.........................................................21

12.8 Headings.............................................................21

12.9 Further Assurances...................................................21

12.10 Compliance with Laws.................................................21

13. ACKNOWLEDGMENTS......................................................21

13.1 Independent Investigation............................................21

13.2 Opportunity to Assess Risks..........................................22

13.3 Receipt of Disclosure Document.......................................22

13.4 No Extraneous Promises...............................................22

13.5 No Extraneous Inducements............................................22

13.6 Commercial Relationship..............................................22

13.7 Compliance with Anti-Corruption and Anti-Money Laundering Laws.......22

13.8. No Claims............................................................23

<PAGE>

SCHEDULE 1.8 Statement of Ownership Interests and Developer's Principals...26

ATTACHMENT A Franchise Agreement..........................................A-1

ATTACHMENT B Agreement and Guaranty of Developer's Principals.............B-1

ATTACHMENT C Employee Confidentiality and Non-Competition Agreement.......C-1

ATTACHMENT D GENERAL RELEASE..............................................D-1

<PAGE>

CEC ENTERTAINMENT, INC.

DEVELOPMENT AGREEMENT

This Development Agreement is executed and entered into as of this ___ day

of ________, 20__, by and between CEC ENTERTAINMENT, INC., a Kansas corporation

(as Franchisor), and ________________, a ________________ corporation (as

Developer).

RECITALS

1. Franchisor has developed and is the owner of the System;

2. Franchisor has developed and is the owner of, or licensee with rights to

sublicense, certain Animated Entertainment and Proprietary Marks which are

utilized in connection with and identify the System; and

3. Developer desires to obtain from Franchisor and Franchisor desires to grant

to Developer certain rights to use the System, the Animated Entertainment and

the Proprietary Marks to develop and establish Franchised Restaurants in the

Territory.

NOW THEREFORE, Franchisor and Developer in consideration of the undertakings and

commitments set forth herein, agree as follows:

1. DEFINITIONS

As used in this Agreement and the above Recitals, the following capitalized

terms shall have the meanings attributed to them in this Section:

1.1 "Action" means any cause of action, suit, proceeding, claim, demand,

investigation or inquiry (whether a formal proceeding or otherwise) with respect

to which Developer's indemnity applies.

1.2 "Agreement" means this Development Agreement and all attachments.

1.3 "Animated Entertainment" means the computer hardware and software, artistic

designs, scripts and musical scores, staging and lighting techniques and

configurations, plans, manuals and specifications, manufacturing know-how and

other intellectual property relating to video display entertainment and to three

dimensional computer controlled animated characters, including present and

future improvements, patents, trademarks, copyrights and other intellectual and

artistic property.

1.4 "Change in Control" means a Transfer of an Equity Interest in Developer

which, directly, indirectly, or combined with prior Transfers, causes a change

in the number of Persons which can vote more than fifty percent (50%) of the

total Equity Interest in Developer.

<PAGE>

1.5 "Competing Business" means a business which operates a restaurant or food

service outlet in combination with family entertainment, including without

limitation, live entertainment and entertainment in the form of video games,

video displays or computer controlled animated characters.

1.6 "Confidential Information" means the terms of the Development Agreement and

Franchise Agreement and any amendments thereto, the components of the System,

the Animated Entertainment, manuals, written directives and all drawings,

equipment, recipes, and all other information know-how, techniques, materials

and data imparted or made available by Franchisor which is (i) designated as

confidential, (ii) known by Developer to be considered confidential by

Franchisor or (iii) by its nature inherently or reasonably considered

confidential.

1.7 "Developer" means ________________.

1.8 "Developer's Principals" means Developer's spouse, if Developer is an

individual, all officers and directors of Developer and all holders of an

ownership interest in Developer and of any entity directly or indirectly

controlling Developer, all as listed on Schedule 1.8 attached hereto.

1.9 "Development Schedule" means the schedule pursuant to which the Developer

will establish Franchised Restaurants as set forth in Section 4.

1.10 "Equity Interest" means a direct or indirect ownership interest in the

capital stock of, partnership or membership interest in, or other equity or

ownership interest in Developer (including the right to vote) any type of legal

entity.

1.11 "Execution Date" means the date upon which the Agreement is deemed duly

executed by Developer and Franchisor, as indicated on the first page of this

Agreement.

1.12 "Franchise Agreement" means the then-current form of franchise agreement

approved by Franchisor and to be executed with franchisees in accordance with

this Agreement, the current form of which is attached as Attachment "A."

1.13 "Franchised Restaurant" means a Restaurant opened pursuant to the

Development Schedule and operated (i) at a Site approved by Franchisor pursuant

to this Agreement and (ii) pursuant to a duly executed Franchise Agreement.

1.14 "Franchisee" means any person or legal entity approved by Franchisor to

enter into a Franchise Agreement and to establish a Franchised Restaurant.

1.15 "Franchisor" means CEC Entertainment, Inc. or any person or legal entity to

which CEC Entertainment, Inc. assigns or otherwise transfers its rights and

obligations contained in this Agreement.

<PAGE>

1.16 "Indemnitees" means Franchisor and is subsidiaries and affiliates, and

directors, officers, employees, shareholders, affiliates, successors and

assigns.

1.17 "Losses and Expenses" means all losses, compensatory, exemplary or punitive

damages, fines, penalties, charges, costs, expenses, the lost profits,

assessments and fees (including reasonable attorneys', experts', accountants'

and consultants' fees); interest, court costs, settlement or judgment amounts,

compensation for damages to Franchisor's reputation and goodwill, costs of or

resulting from delays, financing costs, costs of advertising material and media

time/space, and costs of changing, substituting or replacing the same, and any

and all expenses of recall, refunds, compensation, public notices and other

similar amounts incurred, charged against or suffered by the Indemnitees in

connection with any Action.

1.18 "Minority Interest" means a direct or indirect ownership interest of less

than five percent (5%) of the capital stock of, partnership interest in, or

other equity interest in (including the right to vote) any type of legal entity.

1.19 "Operational" used in reference to a Franchised Restaurant, means a

Franchised Restaurant that is fully constructed and finished out as approved by

Franchisor and is legally permitted to render its services to the general public

pursuant to a duly executed Franchise Agreement.

1.20 "Person" means an individual, corporation, limited liability company,

partnership, association, joint stock company, trust or trustee thereof, estate

or executor thereof, unincorporated organization or joint venture, court or

governmental unit or any agency or subdivision thereof, or any other legally

recognizable entity.

1.21 "Proprietary Marks" means the trademarks, trade names, service marks,

logos, emblems and other indicia of origin as designated from time to time by

Franchisor, which may be owned by Franchisor or licensed to Franchisor with

sublicensing rights, including, but not limited to, the marks: "Chuck E. Cheese"

and "Chuck E. Cheese's."

1.22 "Restaurant" means a family-oriented pizza restaurant operated utilizing

the System, the Proprietary Marks and the Animated Entertainment, either in

accordance with the terms and conditions of a franchise agreement or by

Franchisor.

1.23 "Site" means the location for the construction and operation of a

Franchised Restaurant which has been approved as per Section 4 of this

Agreement.

1.24 "Sky Tubes" means components configured to create sequences of group/social

and independent play, using tubes, windows, entries, climbs, crawls, play

stations, passageways, and slides.

<PAGE>

1.25 "System" means the distinctive system developed and owned by Franchisor for

the establishment, development, and operation of family-oriented pizza

restaurants, the distinguishing characteristics of which include without

limitation, Animated Entertainment, separate areas with a variety of rides,

amusement games and other attractions, characteristic decorations, furnishings

and materials, specially-designed equipment and equipment layouts, trade secret

food products and other special recipes, menus and food and beverage

designations, food and beverage preparation and service procedures and

techniques, operating procedures for sanitation and maintenance, methods and

techniques for inventory and cost controls, record keeping and reporting,

personnel training and management, and advertising and promotional programs,

cornerstones of operation, and operational policies, all of which may be

changed, improved or further developed by Franchisor from time to time.

1.26 "Territory" means ________________________________ in which the Developer

shall develop the System in accordance with the terms and conditions of this

Agreement.

1.27 "Transfer" means the sale, assignment, conveyance, pledge, mortgage or

other encumbrance, whether direct or indirect, in whole or in part, or in one or

a series of related transactions or occurrences, of (i) this Agreement, (ii) any

Franchise Agreement between Franchisor and Developer, (iii) any Equity Interests

in Developer, or (iv) in the assets of Developer, beyond transfer necessary in

the ordinary course of business.

2. GRANT OF RIGHTS

2.1 Grant. Subject to the terms, and conditions and limitations of this

Agreement, Franchisor hereby grants to Developer the right, and Developer

undertakes the obligation to establish and operate ________ (___) Franchised

Restaurants at duly approved Sites in the Territory and pursuant to duly

executed Franchise Agreements. Franchisor retains all other rights.

2.2 Exclusivity. For so long as Developer is in compliance with this Agreement,

Franchisor will not, without Developer's prior written consent, establish or

operate, or license anyone other than Developer to establish or operate a

Restaurant, which is physically located in the Territory prior to the last date

specified in the Development Schedule.

2.3 Right of First Refusal. For a period of two (2) years after the successful

and timely completion of the Development Schedule, if Franchisor proposes to

establish any additional Restaurants which are physically located in the

Territory, Developer shall have the right to enter into a new Development

Agreement and/or Franchise Agreement to establish such additional Restaurants

under the terms and conditions of the then-current form of Development and/or

Franchise Agreements. If the Developer and Franchisor have not executed a new

Development and/or Franchise Agreement within a period of thirty (30) days after

Franchisor provides written notice to Developer of Franchisor's desire to

further develop the Territory, Franchisor will have the right, to the exclusion

of Developer, to further develop or establish additional Restaurants in the

Territory on its own or with others.

<PAGE>

2.4 Limitation of Rights. Franchisor retains all rights not expressly granted

hereunder. Franchisor, its affiliates, and their respective franchisees and

licensees may, among other things, operate other types of facilities besides

Restaurants in the Territory, including facilities that are identified by some

or all of the Proprietary Marks. Franchisor therefore may (or may authorize a

third party to) conduct, among other things, the following activities:

(a) Advertise and promote sales of or by Restaurants, at any location,

including within the Territory;

(b) Offer and sell collateral and ancillary products and services, such as

pre-packaged food products, toys, games, clothing, and memorabilia, in the

Territory under the Proprietary Marks, even though those products and services

may be similar to items offered by the Franchised Restaurants;

products and services sold in the Franchised Restaurants) under any names and

marks other than the Proprietary Marks; at any location, including within the

Territory;

(d) Establish and operate a Restaurant anywhere outside of the Territory,

regardless of proximity or financial impact to the Franchised Restaurants;

(e) Establish and operate any business other than a Restaurant (including

restaurants) anywhere inside or outside of the Territory, regardless of

proximity or financial impact to the Franchised Restaurants; and

(f) Operate one or more sites on the World-Wide Web portion of the Internet

that advertise Restaurants, allow customers and potential customers to make

reservations at Restaurants (including the Franchised Restaurants), sell any

product or service including pre-packaged food products, games, toys, clothing

or memorabilia, or permit other activities (whether or not similar), even though

the Web site is accessible to or viewable by persons in the Territory.

This Agreement is not a Franchise Agreement, and Developer shall have no

right to use, or to license to others in any manner, the Proprietary Marks, the

Animated Entertainment or the System by virtue hereof.

<PAGE>

3. FEES

3.1 Development Fee. Upon the execution of this Agreement, Developer shall

deliver a nonrefundable development fee of ________________ and no/100 Dollars

($________) in consideration for the administrative and other expenses incurred

by Franchisor and for the development opportunities lost or deferred as a result

of Franchisor's entering into this Agreement with Developer. This development

fee is Ten Thousand and no/100 Dollars ($10,000.00) for each restaurant to be

developed. In addition, Developer will pay to Franchisor upon the execution of

this Agreement a non-refundable amount equal to Twelve Thousand Five Hundred and

no/100 Dollars ($12,500.00) multiplied by the number of Franchised Restaurants

(excluding the first Franchised Restaurant) to be opened and operated pursuant

to the Development Schedule in Section 4. This Twelve Thousand Five Hundred and

no/100 Dollars ($12,500.00) will be credited toward each franchise fee

(excluding the franchise fee for the first Franchise Agreement) to be paid to

Franchisor pursuant the terms of this Development Agreement and the Franchise

Agreements.

3.2 Franchise Fees . Upon the execution of this Agreement, Developer shall

deliver a non-refundable franchise fee of Fifty Thousand and no/100 Dollars

($50,000.00) for the first Franchise Agreement to be executed pursuant to the

Development Schedule. Such non-refundable fee, which shall be deemed earned by

Franchisor when received, is in consideration for administrative and other

expenses incurred by Franchisor and for the development opportunities lost or

deferred as a result of Franchisor's entering into this Agreement with

Developer. The Developer will deliver all future franchise fees upon the

execution of and in accordance with the terms (including franchise fee amounts)

and conditions of the respective Franchise Agreement.

3.3 Payment and Taxes. All payments made by Developer to Franchisor pursuant to

this Agreement will be in United States dollars and will be made free and clear

of any tax, deduction, offset or withholding of any kind. All taxes and

penalties on any payment made by Developer pursuant to this Agreement now or in

the future will be fully borne by Developer. In the event of any bona fide

dispute as to liability for taxes assessed or other indebtedness, Developer may

contest the validity or the amount of the tax or indebtedness in accordance with

procedures of the taxing authority or applicable law; however, in no event shall

Developer permit a tax sale or seizure by levy of execution or similar writ or

warrant, or attachment by a creditor, to occur against the premises of any

Franchised Restaurant, or any improvements thereon.

4. DEVELOPMENT SCHEDULE

4.1 Development Schedule. The Developer agrees to execute separate Franchise

Agreements and establish Franchised Restaurants at Sites in the Territory in

accordance with the following Development Schedule:

<TABLE>

Execution Date Number of Franchised Number of Franchised Restaurants Total Number of

Restaurants Operated by operated by an Entity in which Franchised Restaurants

Developer Directly Developer has a Majority Equity

Interest

________________ _________________________ __________________________________ ________________________

</TABLE>

<PAGE>

4.2 Ownership Interest. Franchisor and Developer agree that the Developer shall

enter into a Franchise Agreement and establish and operate the Franchised

Restaurants either directly or by using subsidiaries in which it has a majority

Equity Interest.

4.3 Site Location and Approval. Developer agrees that prior to or within one

hundred and twenty (120) days after the execution of a Franchise Agreement, it

will locate or cause the franchisee under the Franchise Agreement in question to

locate a Site within the Territory for the establishment and operation of the

respective Franchised Restaurant. Within the same one hundred and twenty (120)

day period, Developer also agrees that it will cause the franchisee under the

respective Franchise Agreement to obtain the approval for such Site from the

Franchisor as per the terms and conditions of the respective Franchise

Agreement.

4.4 Operational Date. Developer agrees that, within a period of ________ (___)

days from the approval by Franchisor of the Site, it will cause the respective

Franchised Restaurant to be fully Operational.

4.5 Extensions. Developer shall at all times comply with the Development

Schedule. However, Franchisor, at its sole discretion and without obligation,

may grant a written extension or extensions to Developer for the period of time

that the Developer requests. In the event Franchisor grants an extension,

Developer agrees to pay Franchisor a non-refundable extension fee of Two

Thousand Five Hundred and No/100 Dollars ($2,500.00) for every thirty (30) day

period of the extension.

5. REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1 Representations, Warranties and Covenants of Developer. If Developer is not

an individual, then Developer and each of Developer's Principals represent,

warrant and covenant to Frachisor that:

5.1.1 Due Incorporation. If Developer is a corporation, limited liability

company, limited or general partnership, or other form of business entity, it is

duly formed and organized, validly existing and in good standing under the laws

of the jurisdiction of its organization with all requisite power and authority

to enter into this Agreement and perform the obligations contained herein.

5.1.2 Authorization. The execution, delivery and performance by Developer

of this Agreement and all other agreements contemplated herein has been duly

authorized by all requisite actions on the part of Developer and no further

actions are necessary to make this Agreement or such other agreements valid and

binding upon it and enforceable against it in accordance with their respective

terms.

5.1.3 Exclusivity. Developer's corporate charter, written partnership or

limited liability company agreement, membership agreement or other governing

documents will at all times provide that Developer's activities are confined

exclusively to the development of the Franchised Restaurants unless otherwise

consented to in writing by Franchisor.

<PAGE>

5.1.4 Execution and Performance. Neither the execution, delivery nor

performance by Developer of this Agreement or any other agreements contemplated

hereby will conflict with, or result in a breach of any term or provision of

Developer's charter, by-laws, articles of organization, or partnership agreement

and/or other governing documents and any amendments thereto, any indenture,

mortgage, deed of trust or other material contract or agreement to which

Developer is a party or by which it or any of its assets are bound, or breach

any order, writ, injunction or decree of any court, administrative agency or

governmental body.

5.1.5 Corporate Documents. Certified copies of Developer's charter,

by-laws, articles of organization, partnership agreement, membership agreement

and/or other governing documents and any amendments thereto, including board of

director's or partner's resolutions authorizing this Agreement have been

delivered to Franchisor. Any amendments or changes to such governing or charter

documents subsequent to the date of this Agreement, shall not be undertaken

without Franchisor's prior written consent.

5.1.6 Ownership Interests. All Equity Interests in Developer are accurately

and completely described in Schedule 1.8. Developer will maintain at all times a

current list of all owners of record and all beneficial owners of Equity

Interests in Developer. Developer will make such list available to Franchisor

upon request.

5.1.7 Stop Transfer Instructions. If Developer is a corporation, Developer

will maintain stop-transfer instructions against the transfer on Developer's

records of any of its equity securities and each stock certificate will have

conspicuously endorsed upon it a statement in a form satisfactory to

Franchisor's that it is held subject to all restrictions imposed upon

assignments by this Agreement; but the requirements of this Section will not

apply to the transfer of equity securities of a publicly-held corporation. If

Developer is a partnership or limited liability company, its written partnership

or limited liability company agreement will provide that ownership of an

interest in the partnership or limited liability company is held subject to all

restrictions imposed upon assignments by this Agreement.

If Developer is an individual, then Developer represents, warrants

and covenants that neither the execution, delivery nor performance by Developer

of this Agreement or any other agreements contemplated hereby conflicts with, or

results in a breach of any contract or agreement to which Developer is a party

or a breach of any order, writ, injunction or decree of any court,

administrative agency or governmental body.

<PAGE>

5.2 Financial Statements. Developer and, at Franchisor's request, each of

Franchisee's Principals have provided Franchisor with your and their most recent

financial statements in the form and for the time periods specified by

Franchisor. The financial statements (i) present fairly Developer's financial

position and the financial position of each of Franchisee's Principals, as

applicable, at the dates indicated therein and, with respect to Franchisee, the

results of its operations and cash flow for the periods then ended; (ii) are

certified as true and correct by the Franchisee's Chief Financial Officer or

President, as applicable; and (iii) have been prepared in conformity with

generally accepted accounting principles in the United States, applied on a

consistent basis. No material liabilities, adverse claims, commitments or

obligations of any nature, whether accrued, unliquidated, absolute, contingent

or otherwise, exist as of the date of this Agreement which are not reflected as

liabilities on Developer's financial statements or those of Developer's

Principals.

5.3 Developer's Principals. Developer will notify Franchisor within ten (10)

days following the date that any person previously identified as Developer's

Principal ceases to qualify as such or that any new person succeeds to or

otherwise comes to occupy a position which would qualify such person as one of

Developer's Principals. That person will immediately execute all documents and

instruments (including, as applicable, this Agreement) required by Franchisor to

be executed by others in a comparable position; but if there is any conflict

between this provision and the transfer provisions of Section 7, the provisions

of Section 7 will control.

5.4. Guaranty. As an inducement and as a condition to Franchisor's execution and

acceptance of this Agreement, Developer's Principals will, jointly and

severally, guarantee the performance of Developer's obligations, covenants and

agreements under this Agreement pursuant to the terms and conditions of the

Agreement and Guaranty of Developer's Principals in the form of Attachment B to

this Agreement, and will otherwise bind themselves to the terms of this

Agreement as stated herein.

5.5 Non-Competition during Term of Agreement. In consideration of, among other

things, the disclosure to Developer of the System and the Confidential

Information, during the term of this Agreement, Developer and Developer's

Principals shall not, directly or indirectly:

(a) Divert or attempt to divert business of any Restaurant to any

competitor, or do or perform any other act injurious or prejudicial to the

goodwill associated with Franchisor's Proprietary Marks, the Animated

Entertainment and the System;

(b) Employ or seek to employ any person who is employed by Franchisor

or by any other franchisee or developer of Franchisor or entice such person to

leave such employment; and

an Equity Interest in a Competing Business; provided that this provision shall

not apply to any Minority Interest collectively held by Developer or Developer's

Principals in any publicly-held corporation listed on a national stock exchange.

5.6 Non-Competition after Termination or Non-renewal of Agreement. In

consideration of, among other things, the disclosure to Developer of the System

and the Confidential Information, for a period of three (3) years after the

expiration or approved Transfer by Developer and/or Developer's Principals,

Developer and Developer's Principals (as applicable) shall not, directly or

indirectly:

<PAGE>

(a) Divert or attempt to divert business of any Restaurant to any

competitor, or do or perform any other act injurious or prejudicial to the

goodwill associated with Franchisor's Proprietary Marks, the Animated

Entertainment and the System;

(b) Employ or seek to employ any person who is employed by Franchisor

or by any other franchisee or developer of Franchisor, or entice such person to

leave such employment; and

an Equity Interest in a Competing Business which is located within the Territory

or within twenty five (25) miles from the outer boundaries of the Territory;

provided that this provision shall not apply to any Minority Interest

collectively held by Developer or Developer's Principals in any publicly-held

corporation.

5.7 Independent Covenants. Each of the covenants in Sections 5.5 and 5.6 will

be construed as independent of any other covenant or provision of this

Agreement.

(i) Developer and Developer's Principals understand and acknowledge

that Franchisor will have the right, in its sole discretion, to reduce the scope

of any covenant set forth in Sections 5.5 and 5.6, or any portion thereof,

without their consent, effective immediately upon notice to Developer; and

Developer and Developer's Principals agree that they will comply with any

covenant as so modified, which will be fully enforceable notwithstanding the

provisions of Section 12.2 hereof.

(ii) Developer and Developer's Principals expressly agree that the

existence of any claims they may have against Franchisor, whether or not arising

from this Agreement, will not constitute a defense to the enforcement by

Franchisor of the covenants in Sections 5.5 and 5.6.

(iii) Developer and each Developer's Principal acknowledges that the

covenants not to compete contained in Sections 5.5 and 5.6 are reasonable and

necessary to protect the business and goodwill of the System and to avoid

misappropriation or other unauthorized use of the System and Franchisor's other

trade secrets.

(iv) Developer and each Developer's Principal acknowledges and

confirms that Developer and the Developer's Principals possess the education,

training and experience necessary to earn a reasonable livelihood apart from

operating a Competing Business.

5.8 Additional Covenants. Developer shall require and obtain for the benefit of

Franchisor execution of covenants similar to those set forth in this Section

from any and all of its employees having access to materials or information

furnished or disclosed to Developer by Franchisor, including, which limitation,

all managers, assistant managers and director of operations.

<PAGE>

6. PROPRIETARY INFORMATION

6.1 Confidential Information. Except expressly provided herein, Developer shall

have no right, title or interest in the Confidential Information. The Developer

and the Developer's Principals shall only communicate, disclose or use the

Confidential Information as expressly permitted herein or as required by law.

Developer and Developer's Principals shall disclose the Confidential Information

only to such of Developer's employees, agents, or independent contractors who

must have access to it in connection with their employment. The covenant in this

Section will survive the expiration, termination, or transfer of this Agreement

or any interest in this Agreement and will be perpetually binding upon Developer

and each of Developer's Principals.

6.1.1 Confidentiality Agreements. Developer shall cause all employees

having access to the Confidential Information to execute confidentiality

agreements substantially in the form of Attachment C stating that they will

preserve in confidence all Confidential Information. Neither Developer,

Developer's Principal's or their respective employees may at any time, without

Franchisor's prior written consent, copy, duplicate, record or otherwise

reproduce the Confidential Information, in whole or in part, nor otherwise make

the same available to any unauthorized person.

6.1.2 Improvements. If Developer makes any improvements (as determined by

Franchisor) to the Confidential Information or the System, Developer and the

Developer's Principals shall each execute an amendment to this Agreement

reflecting such improvements and Franchisor's exclusive ownership thereof. All

such improvements, which are hereby assigned to Franchisor, shall be considered

Confidential Information.

6.2 Proprietary Marks. Developer acknowledges Franchisor's exclusive ownership

of or right to sublicense the Proprietary Marks and shall neither directly or

indirectly infringe, contest or otherwise impair Franchisor's exclusive

ownership of, and/or license with respect to, the Proprietary Marks either

during or after termination or expiration of this Agreement.

<PAGE>

7. TRANSFER OF INTEREST

7.1 Transfer by Franchisor. Franchisor shall have the right to transfer or

assign this Agreement, its rights to the Proprietary Marks, and all or any part

of its rights or obligations herein to any person or legal entity without the

consent of Developer or Developer's Principals. Upon such transfer by

Franchisor, any transferee or assignee of Franchisor shall become solely

responsible for all obligations of Franchisor under this Agreement from the date

of transfer or assignment. Without limiting the foregoing, Developer

acknowledges that Franchisor may sell its assets (including its rights in the

Proprietary Marks and the System) to a third party; may offer its securities

privately or publicly; may merge, acquire other legal entities or be acquired by

another legal entity; and may undertake a refinancing, recapitalization,

leveraged buy out or other economic or financial restructuring. With regard to

any or all of the above sales, assignments and dispositions, Developer expressly

and specifically waives any claims, demands, or damages against Franchisor or

its affiliates arising from or related to Franchisor's transfer of its rights in

this Agreement, the Proprietary Marks or the System to any other party. Nothing

contained in this Agreement will require Franchisor to remain in the business of

operating or licensing the operation of the Restaurants or other businesses or

to offer any services or products to Developer, whether or not bearing or not

bearing the Proprietary Marks, it Franchisor transfers or assigns its rights in

or obligations under this Agreement.

7.2. Transfer by Developer. Developer and Developer's Principals understand and

acknowledge that the rights and duties set forth in this Develop

SITE SEARCH

AGREEMENTS / CONTRACTS

CLAUSES

Search Contract Clauses >>

Browse Contract Clause Library>>

Get Email Updates