CEC ENTERTAINMENT, INC. FRANCHISE AGREEMENT

Exhibit 10.31

CEC ENTERTAINMENT, INC.

FRANCHISE AGREEMENT

[CITY, STATE]

4441 West Airport Freeway

Irving, TX 75062

CEC Entertainment, Inc.

[City, State] Franchise

TABLE OF CONTENTS

CEC ENTERTAINMENT, INC.

FRANCHISE AGREEMENT

This Franchise Agreement is executed and entered into this          of                      , 20      , by and between CEC Entertainment, Inc., a Kansas corporation (as Franchisor), and                              , a                      corporation (as Franchisee).

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. Franchisee desires to obtain from Franchisor and Franchisor desires to grant to Franchisee certain rights to use the System, the Animated Entertainment and the Proprietary Marks to develop and establish the Franchised Restaurant at the Site.

NOW THEREFORE, Franchisor and Franchisee in consideration of the undertakings and commitments set forth herein, agree as follows:

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 Franchisee’s indemnity applies.

1.2 “Advertising Cooperative” means a group of two or more System Restaurants, as determined by Franchisor, for the purpose of funding, administering and developing regional advertising and promotion programs.

1.3 “Agreement” means this franchise agreement and all attachments.

1.4 “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, audio or other entertainment and to computer controlled three dimensional animated characters, including present and future improvements, patents, trademarks, copyrights and other intellectual and artistic property.

1.5 “Association” means the International Association of CEC Entertainment, Inc. which, as of the date of this Agreement, serves as Franchisor’s designee to administer the System Fund, in accordance with the Association’s bylaws and this Agreement and to which Franchisee will have the right to be a member so long as Franchisee is in compliance with this Agreement and the Association’s bylaws.

1.6 “Change in Control” means a Transfer of an Equity Interest in Franchisee 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 Franchisee.

1.7 “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.

1.8 “Confidential Information” means the terms of this Agreement and Attachments and any amendments hereto, the components of the System, the Animated Entertainment, the Operational Policies, manuals, written directives and all drawings, equipment, recipes, and all other information know-how, techniques, materials and data imparted or made available by Franchisor to Franchisee which is (i) designated as confidential, (ii) known by Franchisee to be considered confidential by Franchisor, or (iii) by its nature inherently or reasonably to be considered confidential.

1.9 “Designated Market Area” means the geographic area which includes the Protected Territory as defined by Nielson Media Research, Inc. or a successor organization designated by Franchisor.

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 (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 and entered into by Franchisee and Franchisor, as indicated on the first page of the Agreement.

1.12 “Force Majeure” means acts of God (such as tornadoes, hurricanes, floods, fire or other natural catastrophe); strikes, lockouts or other industrial disturbances; war, riot, or other civil disturbance; epidemics; acts of governments, such as the exercise of eminent domain rights and condemnation (if caused by reasons beyond Franchisee’s control); or other forces beyond Franchisee’s reasonable control.

1.13 “Franchisee” means                              .

1.14 “Franchisee’s Principals” means Franchisee’s spouse, if Franchisee is an individual, all officers and directors of Franchisee and all holders of an Equity Interest in Franchisee and of any entity directly or indirectly controlling Franchisee, all as listed on Schedule 1.14 attached hereto.

1.15 “Franchised Restaurant” means the family-oriented pizza restaurant that is established and operated by Franchisee utilizing the System, the Proprietary Marks and the Animated Entertainment in accordance with the terms and conditions of this Agreement.

1.16 “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.

1.17 “Gross Sales” means the total of all sales related to or arising from the operation of the Franchised Restaurant including, without limitation, all monies and receipts from the sale of all beverages, food, merchandise and the operation of rides, amusement games and other attractions in the Franchised Restaurant, as well as all revenue from the sale of tokens, whether for cash or credit and regardless of collection, less applicable sales taxes Franchisee collects and remits, and valid coupon credits and employee discounts deducted from revenues initially recorded as Gross Sales, but without deduction of any other costs or expenses whatsoever.

1.18 “Indemnitees” means any designee(s) of Franchisor which administer the System Fund, Franchisor and its subsidiaries and affiliates and their respective directors, officers, employees, shareholders, affiliates, successors and assigns.

1.19 “Internet” means collectively the myriad of computer and telecommunications facilities, including equipment and software, which comprise the interconnected worldwide network of networks that employ the TCP/IP (Transmission Control Protocol/Internet Protocol), or any predecessor or successor protocols to such protocol, to communicate information of all kinds by fiber optics, wire, radio, or other methods of electronic transmission.

1.20 “Intranet” means an intranet, extranet or other communications network between and among Franchisor and Franchisee that its accessed by the Internet.

1.21 “Losses and Expenses” means all losses, compensatory, exemplary or punitive damages, fines, penalties, charges, costs, expenses, 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.

1.22 “Minority Interest” means an Equity 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.

1.23 “Operational,” used in reference to the Franchised Restaurant, means that the Franchised Restaurant is fully constructed and finished out as approved by Franchisor and is legally permitted to render its services to, and is open to, the general public pursuant to this Agreement.

1.24 “Operational Policies” means the written standards, procedures, rules, regulations, and policies for the operation of a Franchised Restaurant pursuant to the System, as issued from time to time by Franchisor, a copy of which will be provided upon the execution of this Agreement.

1.25 “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.

1.26 “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.”

1.27 “Protected Territory” means the area within a          (      ) mile radius of the Franchised Restaurant.

1.28 “Site” means the location for the establishment and operation of the Franchised Restaurant which is approved as per Section 4.2 of this Agreement.

1.29 “Site Selection Territory” means                      ,                      .

1.30 “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.

1.31 “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, Sky Tubes, 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, and Operational Policies, all of which may be changed, improved or further developed by Franchisor from time to time.

1.32 “System Fund” means collectively, the three (3) funds currently identified as follows:

(a) the “Advertising Fund” (for the maintenance, administration, direction, preparation, purchasing and placement of advertising for the System, Proprietary Marks and Animated Entertainment, and the operation of one or more sites on the World Wide Web portion of the Internet),

(b) the “Entertainment Fund” (for the purchase, lease, shipping and installation of software programs and for the costs related to the production of show tapes, videos and other audio, video and software components of the Animated Entertainment, including licensing rights to certain music, and video, and the design, testing and implementation of new entertainment concepts which may or may not be directly related to the Animated Entertainment, as more fully described in Sections 3.3 and 8.5), and

(c) the “Media Fund” (for purchasing national network television advertising), established for the purposes described above, as well as any other objective which Franchisor designates in writing for the purpose of furthering the System, the Proprietary Marks, the Animated Entertainment or the sales of System Restaurants generally, to which Franchisee will contribute a stated percentage of Gross Sales on a monthly basis.

1.33 “System Restaurant” means a family-oriented pizza restaurant that is established and 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.

1.34 “Transfer” means the sale, assignment, conveyance, pledge, gift, 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 or of any or all rights or obligations of herein, (ii) any Equity Interest in Franchisee, or (iii) any assets of Franchisee beyond transfers necessary in the ordinary course of business.

2.1 Grant . Subject to the terms, conditions and limitations of this Agreement, Franchisor hereby grants to Franchisee the right, and Franchisee undertakes the obligation, to establish and operate the Franchised Restaurant at a duly approved Site in the Protected Territory. Franchisee’s use of the Proprietary Marks or any element of the System in the operation of a business at any other location or in any other channel of distribution without Franchisor’s express written authorization will constitute willful infringement of Franchisor’s rights in the Proprietary Marks and System.

2.2 Exclusivity . For so long as Franchisee is in full compliance with this Agreement, Franchisor will not, without Franchisee’s prior written consent, establish or operate, or license anyone other than Franchisee to establish or operate, a System Restaurant which is physically located in the Protected Territory during the term of this Agreement.

2.3 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 System Restaurants in the Protected Territory, including facilities that are identified by some or all of the Proprietary Marks. The license granted by this Agreement is only for the operation of a single System Restaurant at the approved Site. 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 System Restaurants, at any location, including within the Protected Territory;

(b) Offer and sell collateral and ancillary products and services, such as pre-packaged food products, toys, games, clothing, and memorabilia, in the Protected Territory under the Proprietary Marks, even though those products and services may be similar to items offered by the Franchised Restaurant;

(c) Offer and sell any products and services (regardless of similarity to products and services sold in the Franchised Restaurant) under any names and marks other than the Proprietary Marks, at any location, including within the Protected Territory;

(d) Establish and operate a System Restaurant anywhere outside of the Protected Territory, regardless of proximity or financial impact to the Franchised Restaurant;

(e) Establish and operate a non-System Restaurant anywhere inside or outside of the Protected Territory, regardless of proximity or financial impact to the Franchised Restaurant; and

(f) Operate one or more sites on the World Wide Web portion of the Internet that advertise System Restaurants, allow customers and potential customers to make reservations at System Restaurants (including the Franchised Restaurant), 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 Protected Territory.

Franchisee shall have no right under this Agreement to sub-license others to use or grant any rights in the Proprietary Marks, the Animated Entertainment or the System.

3.1 Franchise Fee . Prior to or upon the execution of this Agreement, Franchisee shall deliver to Franchisor a franchise fee of Fifty Thousand and No/100 Dollars ($50,000.00) in readily available funds (“Franchise Fee”). The Franchise Fee will be fully earned by Franchisor and non-refundable upon receipt, in consideration for, among other things, Franchisor’s administrative expenses and lost or deferred opportunities in entering into this Agreement.

3.2 Royalty Fees . Beginning the calendar month in which the Franchised Restaurant is Operational, on or before the fifteenth (15th) day of each calendar month thereafter, Franchisee agrees to pay a continuing monthly royalty fee equal to 3.8% of the Gross Sales for the immediately preceding calendar month, subject to the immediately following sentence. During the term of this Agreement, Franchisor shall have the right, at its option, upon ninety (90) days’ prior notice to Franchisee, to increase the royalty fee to an amount not to exceed five percent (5%) of the Gross Sales of the Franchised Restaurant. In such event, Franchisee shall commence payment of the increased royalty fee in the month immediately following the expiration on the ninety (90) day period.

3.3 System Fund . Beginning the calendar month in which the Franchised Restaurant is Operational, on or before the fifteenth (15th) day of each calendar month thereafter, Franchisee agrees to pay to the System Fund a continuing monthly amount designated by Franchisor, but in no event more than three and one-tenth percent (3.1%) of Gross Sales, except as described in Section 3.7 and 8.5(f) (amounting to .2% of Gross Sales currently allocated to the Entertainment Fund, .4% of Gross Sales currently allocated to the Advertising Fund and 2.5% of Gross Sales currently allocated to the Media Fund). The portion of the System Fund payment allocated to the Media Fund may be withdrawn upon (1) the unilateral election of Franchisor or (2) the vote of System franchisees in good standing under their respective franchise agreements, with thirty (30) days advance notice of such vote, one vote per franchised restaurant location and a simple majority of restaurants voting in favor of withdrawal; provided however, that if such vote or election shall be taken on or before March 1 of any calendar year, it shall first become effective on September 1 of the same year, and if such vote or election shall have been taken after March 1 of any calendar year, it shall first become effective September 1 of the following calendar year. Not less than six (6) months following any such withdrawal, such payment may be reinstated, upon the unilateral election by Franchisor or by vote in favor of reinstatement in accordance with the procedure described in this Section.

3.4 Payments and Taxes . All franchise and royalty fees shall be paid directly to Franchisor or its designee. All payments and contributions shall 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 Franchisee pursuant to this Agreement now or in the future will be fully borne by Franchisee. In the event of any bona fide dispute as to liability for taxes assessed or other indebtedness, Franchisee 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 Franchisee 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 the Franchised Restaurant or any improvements thereon.

3.5 Overdue Payments . Any payment not actually received by Franchisor or its designee when due shall accrue late charges equal to one and one-half percent (1.5%) per month or the maximum rate permitted by law, whichever is less, from the date it was due until paid. Such interest charges will be in addition to any other remedies that may be available to Franchisor.

3.6 Franchisor’s Lien . The obligations to make monthly payments required in this Section 3 shall give rise to and remain, until paid in full, a lien in favor of Franchisor against any and all of the personal property, machinery, fixtures, equipment and inventory owned by Franchisee at the Franchised Restaurant, and against the proceeds and replacements thereof. Franchisee hereby irrevocably appoints Franchisor as its attorney-in-fact (surviving any termination or expiration hereof) to execute and file in the name of Franchisee as debtor such instruments, including Uniform Commercial Code financing statements, as may be required by Franchisor from time to time to evidence such lien. Franchisee shall, immediately upon Franchisor’s request, execute such documents as Franchisor may, from time to time, deem necessary to effectuate the above.

3.7 Contribution Increases . The monthly contribution to the System Fund shall be subject at any time to increase upon a majority vote cast by all System franchisees in good standing under their franchise agreements (e.g., not subject to a pending default notice from Franchisor). Each franchisee shall be provided thirty (30) days advance notice and opportunity to vote on the proposed increase and shall be entitled to one (1) vote per System Restaurant in operation, and a majority vote required for any increase shall be a majority of all restaurants represented by the votes cast. Franchisor shall provide written notice to Franchisee at least sixty (60) days prior to the effective date of any increase so approved by such majority vote.

4.1 Criteria for Site Approval . Franchisee agrees that prior to or within one hundred and twenty (120) days after the execution of this Agreement, it will locate and obtain the approval of Franchisor for a Site within the Site Selection Territory for the establishment and operation of the Franchised Restaurant.

Franchisee must submit to Franchisor:

(a) a completed site review form designated by Franchisor, which will include, among other things, demographic information, a site plan, and traffic-related information;

(b) if the premises for the proposed Site are to be leased, satisfactory evidence that the lessor will agree to the requirements contained in the Lease Rider to be executed between Franchisor, Franchisee and the lessor attached hereto as Attachment C; and

(c) any other information or materials as Franchisor reasonably requires, such as a letter of intent or other document which confirms Franchisee’s favorable prospects for obtaining the proposed Site.

4.2 Approval by Franchisor . Upon receipt of all requested documentation as required in Section 4.1, Franchisor will notify Franchisee of its approval or disapproval in writing within a period of thirty (30) days. Franchisor shall act in a commercially reasonable manner when approving or disapproving any proposed Site. However, Franchisee agrees that Franchisor will have absolute discretion in approving any proposed Site and Franchisee agrees to accept any of Franchisor’s decisions as final. Franchisee hereby acknowledges and agrees that Franchisor’s approval of a site does not constitute an assurance, representation or warranty of any kind, express or implied, as to the suitability of the Site for the Franchised Restaurant or for any other purpose or of the financial success of operating the Franchised Restaurant at such Site.

4.3 Costs of On-Site Evaluation . If Franchisor deems necessary, Franchisor will undertake one (1) on-site evaluation of a proposed Site free of charge. For all subsequent on-site evaluations requested by Franchisee or required by Franchisor, Franchisee agrees to reimburse Franchisor for its reasonable expenses, including, without limitation, travel expenses, and a per diem charge for room and board.

4.4 Executed Lease or Purchase Agreement . Franchisee shall execute a lease for the premises, or shall enter into a binding commitment to purchase such premises, within sixty (60) days after receipt of site approval from Franchisor. Franchisee will provide Franchisor with a fully executed copy of the lease or purchase agreement with respect to the approved Site within ten (10) days after execution thereof.

4.5 Extensions . Upon Franchisee’s written request, Franchisor, at its sole discretion and without obligation, may grant a written extension or extensions to the period for approval of a proposed Site. In the event Franchisor grants such extension, Franchisee agrees to pay the 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 agreed extension.

4.6 Relocation . Once the Franchised Restaurant is established at the proposed Site in accordance with this Agreement, Franchisee shall not relocate the Franchise Restaurant without the prior written consent of Franchisor. Franchisor will not unreasonably withhold its consent of such relocation and may require, among other things, that: (i) Franchisee has provided Franchisor with at least ninety (90) days prior written notice of its intent to relocate; (ii) Franchisee is not in default under this Agreement and all of Franchisee’s accrued monetary obligations to Franchisor have been satisfied; (iii) Franchisee has paid a relocation fee in an amount equal to fifty (50%) of the then-current initial Franchise Fee for a new franchisee; (iv) the new location is within the Protected Territory; (v) Franchisee agrees to execute the then-current form of franchise agreement, which agreement may contain materially different terms from this Agreement, including, without limitation, higher royalty fees, contributions, System assessments and a different Protected Territory, for a term

equal to the unexpired portion of the initial term, and all unexpired renewal terms hereunder and any other ancillary agreements as Franchisor may require; provided, however, that Franchisee shall not be required to pay the initial franchise fee contained in Franchisor’s then-current form of franchise agreement; and (vi) Franchisee has made provisions acceptable to Franchisor for the removal of all signs and other materials containing Proprietary Marks from the existing site. Franchisee will receive written notification of Franchisor’s decision regarding relocation of the Franchised Restaurant. Upon approval by Franchisor, Franchisee must relocate the Franchised Restaurant within one hundred and eighty (180) days.

5.1 Pre-Construction/Refurbishment Approval Criteria . Prior to commencing any construction/refurbishment on the Site, Franchisee, at its own cost, shall submit to Franchisor for its prior written approval:

(a) Complete plans and specifications for the Franchised Restaurant in accordance with local or state laws, regulations or ordinances, and which conform to Franchisor’s general design and specifications. Once approved by Franchisor pursuant to Section 5.2 below, such plans and specifications shall not be modified without the prior written consent of Franchisor;

(b) A statement in the form prescribed by Franchisor and signed by Franchisee, certifying that Franchisee has:

i. complied with all local or state laws, regulations or ordinances in preparing its plans and specifications;

ii. employed a qualified architect or engineer, approved by Franchisor, to prepare construction/refurbishment documents and supervise the construction/refurbishment of the Franchised Restaurant and completion of all improvements (such statement shall also identify the architect or engineer and describe his or her qualifications in detail);

iii. obtained all such permits and certifications required for lawful construction/refurbishment and operation of the Franchised Restaurant, including, without limitation, zoning, access, sign and fire requirements; and

iv. obtained required licenses to sell beer and/or wine, unless otherwise prohibited by law, and to operate rides, amusement games and other attractions as required herein.

(c) A construction/refurbishment schedule acceptable to Franchisor.

5.2 Pre-Construction/Refurbishment Approval . Upon receipt of the above documents, Franchisor will notify Franchisee of its approval or disapproval in writing within a period of twenty-one (21) days. Given that the construction/refurbishment and appearance of the Franchised Restaurant is critical to the continued success and viability of the System, Franchisee agrees that Franchisor will have absolute discretion in making such decision and Franchisee agrees to accept any of Franchisor’s decisions as final.

5.3 Commencement of Construction/Refurbishment and Extensions . Once the pre-construction/refurbishment approval has been obtained and, for construction; within six (6) months after the date of execution of this Agreement, Franchisee will commence construction and provide Franchisor with written notice of such commencement within ten (10) days of such commencement of construction/refurbishment.

Upon Franchisee’s written request, Franchisor, at its sole discretion and without obligation, may grant to Franchisee written extensions of this six (6)-month period for construction and not refurbishment, with the understanding that, if granted, Franchisee shall pay to Franchisor a non-refundable extension fee of Two-Thousand Five Hundred and No/100 Dollars ($2,500.00) for each thirty (30) day period of extension.

5.4 Construction/Refurbishment . Franchisee shall complete construction/refurbishment, including, as applicable, all exterior and interior carpentry, electrical, painting and finishing work, and installation of all fixtures, equipment and signs, in accordance with the plans and specifications for the approved Site within:

(a) six (6) months after commencement of construction/refurbishment, for refurbishment and construction, if construction is a space conversion of existing premises, or

(b) nine (9) months after commencement of construction, if the construction is the erection of a free-standing building.

Franchisor may, at its sole discretion, provide up to two (2) on-site construction/ refurbishment visits to verify compliance with its standards. Franchisee shall fully cooperate with Franchisor and provide Franchisor and its representatives with full access to the Site in connection therewith.

Upon Franchisee’s written request, Franchisor, at its sole discretion and without obligation, may grant to Franchisee written extensions of the above-described periods for construction and not refurbishment, with the understanding that, if granted, Franchisee shall pay to Franchisor a non-refundable extension fee of Two-Thousand Five Hundred and No/100 Dollars ($2,500.00) for each thirty (30) day period of extension.

5.5 Opening Assistance . Franchisor shall provide one (1) representative to provide such

on-site opening assistance and supervision as Franchisor deems necessary for a period of seven (7) to ten (10) days, at no charge to Franchisee. If Franchisor determines, in its sole discretion, that Franchisee requires any additional opening assistance or if Franchisee requests such assistance, Franchisor reserves the right to charge an additional fee for such assistance, in addition to obtaining reimbursement for related travel, meals and lodging expenses.

5.6 Inspection . Franchisee agrees that Franchisor and its agents shall have the right to inspect the construction/refurbishment at all reasonable times. Franchisee shall cooperate fully with Franchisor and provide Franchisor and its representatives with full access to the Site in connection therewith.

5.7 Continuing Statements . Beginning with the calendar month after the pre-construction/refurbishment approval issued by Franchisor and each calendar month thereafter until one (1) calendar month after the construction/refurbishment is completed, Franchisee shall provide Franchisor, on or before the first Monday of each such month, with a statement in the form prescribed by Franchisor and signed by Franchisee, certifying Franchisee’s continued compliance with and maintenance of the requirements of Section 5.1 (b).

5.8 Installation of Animated Entertainment . No later than one hundred fifty (150) days prior to the anticipated date of completion of construction/refurbishment of the Franchised Restaurant, Franchisee shall, if applicable, order the Animated Entertainment and related components specified by Franchisor from the supplier or suppliers designated by Franchisor and shall provide to Franchisor such evidence thereof as Franchisor requests. All payment terms for the Animated Entertainment shall be agreed to between Franchisee and respective suppliers.

Franchisor shall not have any liability to Franchisee for delivery or the condition of the Animated Entertainment ordered from the supplier or suppliers designated by Franchisor.

After delivery of the Animated Entertainment and preparation for installation of the Animated Entertainment by Franchisee, Franchisor will provide a technician to install the Animated Entertainment. If the technician is required for more than five (5) working days, then for such time period in excess of five (5) working days (excluding travel), the Franchisee will pay Franchisor a fee of Three Hundred and No/100 Dollars ($300.00) per day and shall reimburse Franchisor for additional actual air travel expenses and a per diem charge for room and board. Franchisor and Franchisee shall agree upon the dates for installation; provided, however, Franchisee shall request the services of the technician in writing, to Franchisor, at least sixty (60) days in advance of the requested installation dates.

5.9 Approval for Opening . Once construction/refurbishment is completed and within seven (7) days after obtaining Franchisor’s written approval for opening/reopening, Franchisee shall open/reopen the Franchised Restaurant to the public. Franchisee shall not open/reopen the Franchised Restaurant to the public unless Franchisor has granted its written approval to do so.

6.1 Minimum Training . Prior to rendering their services to the Franchised Restaurant, both the general manager and technician described in Section 7.1 and any replacements or successors thereto shall attend and complete, to Franchisor’s satisfaction, initial training conducted by Franchisor. As part of this initial training, Franchisor shall provide Franchisee with a copy of the Operational Policies, which must be returned to Franchisor upon termination of this Agreement.

6.2 Location and Expenses . Franchisor will not charge Franchisee any fee for the training of Franchisee’s first general manager and technician. Franchisor reserves the right to charge a reasonable fee to Franchisee for any additional required or optional training and training for subsequent general managers, managers and technicians. All training shall be provided at such location as Franchisor may designate and Franchisee shall be responsible for Franchisee’s employees’ travel expenses and room, board and wages during such training.

6.3 Additional Training . Franchisor may periodically make other mandatory or optional training available to Franchisee’s employees as well as other programs, seminars and materials, and Franchisee shall ensure that all employees, as Franchisor may direct, satisfactorily complete any required training within the time specified.

7.1 General Manager and Technician . Franchisee shall at all times employ at least one fully-trained general manager and one fully-trained technician for the maintenance of the Animated Entertainment, who shall devote their full time to the Franchised Restaurant.

7.2 Operational Policies . The Operational Policies shall at all times (i) be kept in a secure place on the premises of the Franchised Restaurant, and (ii) remain the sole property of Franchisor. Franchisee and Franchisee’s Principals shall at all times ensure that Franchisee’s copy of the Operational Policies is kept current and up-to-date, and in the event of any dispute as to the contents of the Operational Policies, the terms of the version of the Operational Policies maintained by Franchisor at Franchisor’s home office shall be controlling. Franchisee acknowledges that every detail of the Franchised Restaurant is important to Franchisee, Franchisor and other franchisees in order to develop and maintain the high standards and public image of the System, to increase the demand for the products and services sold by all System Restaurants, and to protect Franchisor’s reputation and goodwill. As such, Franchisee agrees to:

(a) Operate the Franchised Restaurant in accordance with the Operational Policies to ensure that the highest degree of quality and service is uniformly maintained. If amended or modified by Franchisor, Franchisee agrees that it will fully implement Franchisor’s amended Operational Policies, within a period of time prescribed by Franchisor, but in no event to exceed three (3) months after receipt of notice of such amendment or modification;

(b) Devote the requisite time, energy and best efforts to the management and operation of the Franchised Restaurant;

(c) Use, prepare, maintain in sufficient supply and offer for sale all and only such products, materials, ingredients, supplies and paper goods as conform with Franchisor’s standards and specifications;

(d) Sell or offer for sale all and only such services, products and menu items as meet Franchisor’s uniform standards of quality and quantity, as have been expressly approved for sale in writing by Franchisor, and as have been prepared in accordance with Franchisor’s methods and techniques. You must refrain from any deviation from our standards and specifications for serving or selling the above without our prior written consent and must discontinue selling and offering for sale any such items as we may in our sole discretion, disapprove at any time;

(e) Use at the Franchised Restaurant only such menus and animated character costumes which comply with the style, pattern and design prescribed by Franchisor;

(f) Purchase and install, at Franchisee’s expense, all fixtures, furnishings, signs, and equipment (including, without limitation, video display software which must be updated from time to time, point-of-sale computer hardware and software control systems, and a telephone modem) as Franchisor may reasonably direct from time to time in the Operational Policies or otherwise in writing;

(g) Employ security officers, if necessary, for secure operation of the Franchised Restaurant;

(h) Employ at least the minimum number of other employees as may be prescribed by Franchisor and to comply with all applicable federal, state and local laws, rules and regulations with respect to such employees;

(i) Cause all employees to wear uniforms of the color, style and design prescribed by Franchisor;

(j) Make daily and regular use of a Chuck E. Cheese walk-around character costume and all other animated character costumes designated by Franchisor and to maintain such costumes in good condition, as provided in the Operational Policies;

(k) Use the Site only for the operation of the Franchised Restaurant as well as keep and maintain the Franchised Restaurant open and Operational for the minimum number of hours and days as reasonably required by Franchisor;

(l) Meet and maintain the highest governmental standards and ratings applicable

to the operation of the Franchised Restaurant (including health, alcohol and gaming) and immediately advise Franchisor in writing of any operational license (including health, alcohol and gaming) standard violations applicable to the operation of the Franchised Restaurant; and

(m) Purchase or lease and maintain the minimum number and type of rides, amusement games and other attractions required by Franchisor, with the understanding that Franchisee is prohibited from leasing any of the foregoing on a “shared revenue” or “coin sharing” basis. Franchisee shall obtain Franchisor’s written approval prior to installing any ride, game or other attraction at the Franchised Restaurant which has not been previously approved in writing by Franchisor. If any of the rides, amusement games and other attractions to be installed at the Franchised Restaurant are leased, the lease shall permit Franchisee to substitute rides, amusement games and other attractions subject to the lease, and will provide for Franchisee’s control over the maintenance and operation and the collection of monies from the rides, amusement games and other attractions that are subject to the proposed lease.

7.3 Suppliers . Franchisee shall purchase all equipment, supplies and other products and materials (including animated character costumes) used in the operation of the Franchised Restaurant solely from suppliers approved in writing by Franchisor. To qualify for approval, such suppliers must (i) demonstrate the ability to meet Franchisor’s reasonable standards and specifications for such items, and (ii) possess adequate quality controls and capacity to supply Franchisee’s needs promptly and reliably. Franchisor shall not be responsible for the delivery or the condition of goods ordered from any vendor. Franchisor shall have the right to require that its representatives be permitted to inspect the supplier’s facilities and that samples from the supplier be delivered, at Franchisor’s option, either to Franchisor or to an independent, certified laboratory designated by Franchisor for testing. A charge not to exceed the reasonable cost of the inspection and the actual cost of the test shall be paid by Franchisee or the supplier to Franchisor. Franchisor reserves the right, at its option, to re-inspect the facilities and products of any such approved supplier and to revoke its approval upon the supplier’s failure to continue to meet, in Franchisor’s discretion, any of Franchisor’s criteria.

7.4 General Maintenance . Franchisee shall at all times maintain the Franchised Restaurant in the highest degree of sanitation, repair and condition. Within three (3) months after receipt of notice from Franchisor, Franchisee agrees to make any additions, alterations repairs and replacements that Franchisor reasonably requires, including, without limitation, such periodic repainting, equipment repairs and replacement of obsolete signs, games, rides, equipment and floor coverings (including carpet and tile) as Franchisor may reasonably direct.

7.5 Maintenance of Animated Entertainment . Franchisee shall at all times maintain the Animated Entertainment and its components in good repair and full working order. Franchisee shall immediately, at its own expense, also install all retrofits and replacements to the Animated Entertainment components which are required by Franchisor from time-to-time. Franchisee shall, at

Franchisor’s option, either destroy or relinquish and deliver to Franchisor or its designee title and possession of any existing trademarked or proprietary elements or components of the Animated Entertainment, immediately upon their replacement or obsolescence and all such elements or components shall become the property of Franchisor.

7.6 Scheduled Refurbishment . Commencing on January 1 of the second calendar year following the opening of the Franchised Restaurant and each January 1 thereafter during the term hereof, Franchisee, at its own expense, shall upgrade and refurbish the Franchised Restaurant, in conformity with Section 5 hereof. Such upgrades and refurbishment include, without limitation, those necessary to conform to the building decor, floor plan, trade dress, exterior signage and decor, color schemes, rides, amusement games and other attractions, food and beverage service, and presentation of trademarks and service marks consistent with the public image then prevailing in the latest of upgraded System restaurants operated by Franchisor. The amount expended for each such upgrade and/or refurbishment shall be at least the lesser of:

(a) Fifty Thousand and No/100 Dollars ($50,000.00); or

(b) Four percent (4%) of the Gross Sales of the Franchised Restaurant during the prior calendar year.

Each such upgrade and refurbishment shall be completed by Franchisee on or before June 30 of each respective year. Franchisee shall provide to Franchisor, on or before June 30 of each such year, such reports, records, receipts and other information as Franchisor may request evidencing Franchisee’s compliance with this requirement.

7.7 Inspection . Franchisor will provide such continuing advisory assistance, as it deems advisable, in the operation of the Franchised Restaurant. Franchisee agrees to permit Franchisor or its agents, at any reasonable time, access to the Franchised Restaurant to conduct inspections to ensure compliance with Franchisor’s then-current standards and specifications.

7.7.1 Testing . In conducting its inspections, Franchisor will have the right to obtain samples of any inventory items without payment therefor, in amounts reasonably necessary for testing by Franchisor or an independent certified laboratory to determine whether said samples meet Franchisor’s then-current standards and specifications. Franchisor may require Franchisee to bear the cost of such testing if the item or supplier of the item has not previously been approved by Franchisor or if the sample fails to conform to Franchisor’s specifications.

7.7.2 Recommendations . Franchisee acknowledges that Franchisor or its agents will have the authority to make immediate recommendations and resolutions to correct any deficiencies detected during such inspections (including ceasing of the use of the non-conforming equipment, advertising materials, products or supplies).

7.7.3 Failure to Correct Deficiencies . In the event Franchisee fails or refuses to

implement recommendations or resolutions, Franchisor shall have the right, but not the obligation, to enter upon the Franchised Restaurant premises for the purpose of making or causing to be made such corrections as may be required, with all costs to be paid by Franchisee. The failure to correct any such deficiencies shall be a material default under Section 13.3.4.

7.8 Accounting and Records .

7.8.1 General Accounting Principles . Franchisee shall maintain for at least five (5) years from the dates of preparation, full, complete and accurate books, records and accounts in accordance with generally-accepted accounting principles in the United States and in the form and manner prescribed by Franchisor from time to time in the Operational Policies or otherwise in writing.

7.8.2 Accounting Statements . In addition to the general accounting requirements, at Franchisee’s cost, Franchisee shall submit to Franchisor:

(a) Unaudited quarterly profit and loss statements (in the form prescribed by Franchisor and showing the sources of all income and the amount expended each month during the period on local advertising) and balance sheet within forty-five (45) days of the end of each fiscal quarter during the term hereof;

(b) Unaudited annual statements, as well as a schedule of capital expenditures and a schedule of advertising expenditures, within ninety (90) days of the end of each fiscal year during the term hereof;

(c) Copies of Franchisee’s quarterly state sales tax returns; and

(d) Such other financial statements, reports and records as Franchisor prescribes.

7.8.3 Inspection of Accounting and Records . Franchisor or its representatives (including independent auditors, attorneys or agents) shall have the right at all reasonable times to examine and copy (and to remove and return the materials to be copied from the premises on which they are located), at Franchisor’s expense, the books, records and tax returns of Franchisee.

If an inspection should reveal that payments have been understated in any report to Franchisor, then Franchisee shall immediately pay to Franchisor the amount understated upon demand, in addition to interest from the date such amount was due until paid, at one and one-half percent (1.5%) per month or the maximum rate permitted by law, whichever is less.

Notwithstanding the foregoing, if an inspection discloses an understatement in any report of two percent (2%) or more, Franchisee shall reimburse Franchisor for any and all costs and expenses connected with the inspection (including, without limitation, reasonable accounting and attorneys’ fees). The foregoing remedies shall be in addition to any other remedies Franchisor may have, including, without limitation, the remedies for default.

7.8.4 Records of Ownership Interests in Franchisee . In addition to the terms and conditions of Section 11 hereof, if there is a change in the Franchisee’s Principal’s listed in Schedule 1.14 during the term of this Agreement, Franchisee shall immediately provide Franchisor a list of all Persons owning an Equity Interest in Franchisee; provided, however, that if Franchisee’s shares are publicly traded on a nationally recognized stock exchange, the list of shareholders required shall include only those owning five percent (5%) or more of the shares outstanding.

7.8.5 Sales Records . Franchisee shall record all food, beverage and token sales and all other sales by, at, from or through the Franchised Restaurant (excluding only sales from pay telephones and vending machines, if approved by the Franchisor) on cash registers or other machines approved by Franchisor, which shall contain devices or systems that will record accumulated sales and provide such other information and reports as Franchisor may prescribe. Franchisee must report Gross Sales for royalty and assessment reporting requirements on the same accounting calendar used by the Franchisor.

Within six (6) months after receipt of written notification from Franchisor, Franchisee shall install at the Franchised Restaurant as designated by Franchisor, such point-of-sale computer hardware and software control systems and telephone modems as reasonably prescribed by Franchisor. Franchisee will enter into software license agreements as designated by Franchisor for such purposes.

Franchisee shall permit Franchisor to access such systems by telephone, modem, or such other means designated by Franchisor at all reasonable times for the purpose of inspecting, monitoring and retrieving information concerning the operation of the Franchised Restaurant. Franchisor shall have access as provided herein at such times, and in such manner as Franchisor shall from time to time specify.

7.9 Internet . During the term of this Agreement, Franchisor may establish and maintain an Internet Web site that provides information about the System and the products and services that System Restaurants offer. The Web site may also offer reservations or similar services at System Restaurants (including the Franchised Restaurant) or sales of items identified by the Proprietary Marks, including clothing, memorabilia, and pre-packaged food items.

(a) Franchisor will have sole discretion and control over the Web site’s design and contents. Franchisor will have no obligation to maintain the Web site indefinitely, but may discontinue it at any time without liability to Franchisee. Furthermore, Franchisor has no control over the stability or maintenance of the Internet generally, Franchisor is not responsible for damage or loss caused by errors of the Internet. The Franchisor is not liable for any direct, indirect, special, incidental, exemplary or consequential damages arising out of the use of the Internet or the inability to use the Internet including loss of profits, goodwill or savings, downtime, damage to or replacement of programs and data, whether based in contract or tort, product liability or otherwise.

(b) Franchisor may use part of the System Fund contributions designated for advertising to maintain and further develop the Web site.

(c) If Franchisee fails to pay when due any fees or other amounts payable to Franchisor under this Agreement, Franchisor may temporarily remove or disable information or functionality relating to Franchisee, until Franchisee pays its outstanding obligations in full.

(d) Franchisee may not use any of the Proprietary Marks on or in connection with the Internet, except as permitted by this Section 7.9.

7.10 Intranet . Franchisor may, at its option, establish and maintain either a series of “private” pages on the Internet Web site, described in Section 7.9, or a so-called Intranet, through either of which Franchisor, its franchisees, and their respective employees may communicate with each other and through which Franchisor may disseminate updates to the Operational Policies and other confidential information.

(a) Franchisor will have no obligation to maintain the Intranet indefinitely, but may discontinue it at any time without liability to Franchisee.

(b) Franchisor will establish policies and procedures for the Intranet’s use. These policies, procedures and other terms of use will address issues such as (i) restrictions on the use of abusive, slanderous, or otherwise offensive language in electronic communications; (ii) restrictions on communications between or among franchisees that endorse or encourage breach of any franchisee’s franchise agreement with Franchisor; (iii) confidential treatment of materials that Franchisor transmits via the Intranet; (iv) password protocols and other security precautions; (v) grounds and procedures for Franchisor’s suspension or revocation of access to the Intranet by Franchisee and others; and (vi) a privacy policy governing Franchisor’s access to and use of electronic communications that franchisees and others post on the Intranet. Notwithstanding clause (vi), above, Franchisee acknowledges that, as administrator of the Intranet, Franchisor can technically access and view any communication that any person posts on the Intranet. Franchisee further acknowledges that the Intranet facility and all communications that are posted to it will become Franchisor’s property, free of any claims of privacy or privilege that Franchisee or any other person may assert.

(c) Upon receipt of notice from Franchisor that the Intranet has become functional, Franchisee agrees to purchase and install all necessary additions to the Franchised Restaurant’s computer system at Franchisee’s cost and to establish and continually maintain electronic connection with the Intranet that allows Franchisor to send messages to and receive messages from Franchisee. Franchisee’s obligation to maintain connection with the

Intranet will continue until this Agreement’s expiration or termination (or, if earlier, until Franchisor discontinues the Intranet). Franchisee’s failure to comply with this Section 7.10 will constitute a material breach of this Agreement on account of which Franchisor may terminate this Agreement in accordance with Section 13.3.3, unless Franchisee cures the breach within 10 days after notice from Franchisor.

(d) If Franchisee fails to comply with any policy or procedure governing the Intranet, Franchisor may temporarily suspend Franchisee’s access to all or any aspect of the Intranet (such as a chat room, bulletin board, list serve, or similar feature) until Franchisee fully cures the breach.

8.1 General Requirements . Recognizing the importance of the standardization of advertising programs to the furtherance of the goodwill and public image of the System, Franchisor and Franchisee agree that all advertising by Franchisee shall be conducted in a commercially acceptable manner and shall conform to such standards and requirements as Franchisor may specify from time to time in writing.

8.2 Pre-Approved Advertising . Franchisor may offer from time to time to provide, upon Franchisee’s request and at Franchisee’s expense, approved local advertising and promotional plans and materials, including, without limitation, newspaper slicks, promotional leaflets and coupons. All such advertising shall be placed in or distributed through such media or channel of communication as approved by Franchisor.

8.3 New Advertising . Samples of all planned advertising, not previously approved by Franchisor, must be submitted to Franchisor (through the mail, return receipt requested), for Franchisor’s prior approval. Upon receipt of such planned advertising, Franchisor will notify Franchisee no later than fifteen (15) days after receipt of the proposed advertising whether such advertising has been approved, with no response being understood as approval. Franchisee shall not utilize any advertising which has not been approved by Franchisor, or which has been subsequently disapproved by Franchisor. All such advertising shall be placed in or distributed through such media or channel of communication as approved by Franchisor.

8.4 Minimum Advertising Expenditures . Franchisee shall spend during each calendar quarter a minimum of three percent (3%) of the Gross Sales of the Franchised Restaurant for local advertising and promotion in Franchisee’s Designated Market Area at least two-thirds (2/3) of which amount shall be spent for television advertising or advertising in some other form of media approved by Franchisor. Franchisee shall attempt to spend such amount equally throughout each month of the calendar quarter.

During the term of this Agreement, Franchisor may, upon ninety (90) days prior notice to Franchisee, increase the minimum expenditure amount to an amount not to exceed five percent (5%) of the Gross Sales of the Franchised Restaurant.

The minimum expenditure amount will be reduced by an amount equal to Franchisee’s contributions to: (i) an Advertising Cooperative, and (ii) the System Fund while the System Fund remains in effect.

8.5 System Fund . Franchisor may, at any time during the term of this Agreement, establish and/or administer the System Fund. If Franchisor establishes or has established the System Fund, Franchisee will contribute an amount described in Section 3.3. Contributions to the System Fund will be paid at the time and in the manner as described in Section 3.3, and subject to the late payment charges described in Section 3.5. Franchisor will give Franchisee at least thirty (30) days’ written notice of the establishment of new or modified System Fund.

Once established, the System Fund will be maintained and administered by Franchisor or its designee as follows:

(a) The System Fund is intended to maximize general public recognition and acceptance of the Proprietary Marks, to enhance the collective success of all System Restaurants and to further develop and maintain the Animated Entertainment. Franchisor and/or its designees will direct all advertising and other programs produced using the System Fund, and will have sole discretion to approve or disapprove the creative concepts, materials, and media used in those programs, the placement of advertisements, and the allocation of the money in the System Fund to production, placement, or other costs. In administering the System Fund, Franchisor and its designees undertake no obligation to make expenditures for Franchisee which are equivalent or proportionate to Franchisee’s contribution, or to ensure that Franchisee or any particular System Restaurant benefits directly or pro rata from the placement of advertising of the expenditure of System Fund monies.

(b) The System Fund may be used to satisfy any and all costs of maintaining, administering, directing, preparing purchasing and placing advertising (including the cost of preparing and conducting television, radio, magazine, and newspaper advertising campaigns; direct mail and outdoor billboard advertising; public relations activities; and employing advertising agencies to assist in those activities), for purchasing, leasing shipping and installing software programs, for the costs related to producing show tapes, videos and other audio, video and software components of the Animated Entertainment, including licensing rights to music and videos, and for designing, testing and implementing new entertainment concepts which may not be directly related to Animated Entertainment. All sums paid by Franchisee to the System Fund will be maintained in a separate account or accounts by Franchisor and/or its designees and may be used to defray any of Franchisor’s reasonable operating costs and overhead that Franchisor incurs in activities reasonably related to the administration or direction of the System Fund and advertising programs for franchisees and the System. The System Fund and its earnings will not otherwise inure to the benefit of

Franchisor. The System Fund is operated solely as a conduit for collecting and expending the System Fund fees as outlined above. Franchisor and its designees have no fiduciary duty to Franchisee, or any other franchisees, or their respective principals, including Franchisee’s Principals with regard to the operation or administration of the System Fund.

(c) Franchisor will, with respect to System Restaurants operated by Franchisor or any affiliate, contribute to the System Fund generally on the same basis as Franchisee.

(d) A statement of the operations of the System Fund will be prepared annually and will be made available to Franchisee upon written request.

(e) Although the System Fund is intended to be of perpetual duration, Franchisor may terminate the System Fund. The System Fund will not be terminated, however, until all monies in the System Fund have been expended or returned to contributing System Restaurants (whether franchised or operated by Franchisor or its affiliates), without interest, on the basis of their respective contributions.

(f) Franchisor reserves the right to structure the System Fund’s organization and administration in ways that, in Franchisor’s judgment, most effectively and efficiently accomplish the System Fund’s objectives. Franchisor may therefore organize or reorganize the System Fund as a separate non-profit corporation or other appropriate entity and transfer the System Fund’s assets to the entity to administer the System Fund. Franchisee agrees to become a member of the entity and, in that regard, to sign a participation agreement and take such other steps as Franchisor reasonably specifies.

(g) In the event Franchisor’s designee maintains or administers the System Fund, neither Franchisor nor its officers, directors, employees, or agents shall be liable to Franchisee for any act, error or omission committed by such designee or in connection with the designation of such designee(s).

8.6 Advertising Cooperative . Franchisor shall have the right, in its discretion, to designate any geographic area (e.g., a Designated Market Area) as a region for purposes of establishing an Advertising Cooperative to which Franchisee shall be a member. Such Cooperative will be established and operated in accordance with an advertising cooperative agreement which is attached hereto as Attachment D. If, on the date of this Agreement an Advertising Cooperative has already been established for a geographic area that encompasses the Franchised Restaurant, or if any Advertising Cooperative for that geographic area is established during the term of this Agreement, Franchisee will (immediately upon request of Franchisor) execute Attachment D hereof and any other documents required by Franchisor to become a member of the Advertising Cooperative. If the Franchised Restaurant is within the geographic area of more than one (1) Advertising Cooperative, Franchisee must be a member of only one (1) Advertising Cooperative as Franchisor designates.

9.1 Representations, Warranties and Covenants of Franchisee . If Franchisee is not an individual, then Franchisee and each of Franchisee’s Principals represent, warrant and covenant to Franchisor that:

9.1.1 Due Incorporation . If Franchisee is a corporation, limited liability company, general or limited 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.

9.1.2 Authorization . The execution, delivery and performance by Franchisee of this Agreement and all other agreements contemplated herein has been duly authorized by all requisite actions on the part of Franchisee 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.

9.1.3 Exclusivity . Franchisee’s corporate charter, written partnership, limited liability company agreement, membership agreement or other governing documents will at all times provide that Franchisee’s activities are confined exclusively to the operation of the Franchised Restaurant unless otherwise consented to in writing by Franchisor.

9.1.4 Execution and Performance . Neither the execution, delivery nor performance by Franchisee of this Agreement or any other agreements contemplated hereby will conflict with, or result in a breach of any term or provision of Franchisee’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 Franchisee 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.

9.1.5 Corporate Documents . Certified copies of Franchisee’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.

9.1.6 Ownership Interests . All Equity Interests in Franchisee are accurately and completely described in Schedule 1.13. Franchisee will maintain at all times a current list of all owners of record and all beneficial owners of Equity Interests in Franchisee. Franchisee will make such list of available to Franchisor upon request.

9.1.7 Stop Transfer Instructions . If Franchisee is a corporation, Franchisee will

maintain stop-transfer instructions against the transfer on Franchisee’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 that it is held subject to all restrictions imposed upon assignments by this Agreement; but the requirements of this Section 9.1.7 will not apply to the transfer of equity securities of a publicly-held corporation. If Franchisee 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 Franchisee is an individual, then Franchisee represents, warrants and covenants that neither the execution, delivery nor performance by Franchisee of this Agreement or any other agreements contemplated hereby conflicts with, or results in a breach of any contract or agreement to which Franchisee is a party or a breach of any order, writ, injunction or decree of any court, administrative agency or governmental body.

9.2 Financial Statements . Franchisee and, at Franchisor’s request, each of Franchisee’s Principals have provided Franchisor with their most recent financial statements in the form and for the time periods specified by Franchisor. The financial statements (i) present fairly Franchisee’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 Franchisee’s financial statements or those of Franchisee’s Principals.

9.3 Franchisee’s Principals . Franchisee will notify Franchisor within ten (10) days following the date that any person previously identified as Franchisee’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 Franchisee’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 11, the provisions of Section 11 will control.

9.4 Guarantee . Franchisee’s Principals will, jointly and severally, guarantee the performance of Franchisee’s obligations, covenants and agreements under this Agreement pursuant to the terms and conditions of the guaranty attached to this Agreement, and will otherwise bind themselves to the terms of this Agreement as stated herein.

9.5 Non-Competition During Term of Agreement . In consideration of the training described herein and disclosure to Franchisee of the System and the Confidential Information, during the term of this Agreement, Franchisee and Franchisee’s Principals shall not, directly or indirectly:

(a) Divert or attempt to divert business of any System 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 or the System;

(b) Employ or seek to employ any person who is employed by Franchisor or by any other franchisee of Franchisor, or induce such person to leave such employment; and

(c) Except as provided for herein, own, maintain, engage in, or have an Equity Interest in a Competing Business; provided that this provision shall not apply to any Minority Interest collectively held by Franchisee or Franchisee’s Principals in any publicly-held corporation listed on a national stock exchange.

9.6 Non-Competition after Termination or Non-Renewal of Agreement . In consideration of the training described herein and disclosure to Franchisee of the System and the Confidential Information, for a period of three (3) years after the expiration and non-renewal or termination of this Agreement or after the approved Transfer by Franchisee and/or Franchisee’s Principals, Franchisee and Franchisee’s Principals (as applicable) shall not, directly or indirectly:

(a) Divert or attempt to divert business of any System 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 or the System;

(b) Employ or seek to employ any person who is employed by Franchisor or by any other franchisee of Franchisor, or induce such person to leave such employment; and

(c) Except as provided for herein, own, maintain, engage in, or have any interest in a Competing Business which is located within the Protected Territory or within a twenty-five (25) mile radius of the Protected Territory; provided that this provision shall not apply to any Minority Interest collectively held by Franchisee or Franchisee’s Principals in any publicly-held corporation listed on a national stock exchange.

9.7 Independent Covenants . Each of the covenants in Sections 9.5 and 9.6 will be construed as independent of any other covenant or provision of this Agreement.

(a) Franchisee and each of Franchisee’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 9.5 and 9.6, or any portion thereof, without their consent, effective immediately upon notice to Franchisee; and Franchisee and Franchisee’s Principals agree that they will comply with any covenant as so modified, which will be fully enforceable notwithstanding the provisions of Section 17.5 hereof.

(b) Franchisee and each of Franchisee’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 9.5 and 9.6.

(c) Franchisee and each of Franchisee’s Principals acknowledge that the covenants not to compete contained in Sections 9.5 and 9.6 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.

(d) Franchisee and each of Franchisee’s Principals acknowledge and confirms that Franchisee and Franchisee’s Principals possess the education, training and experience necessary to earn a reasonable livelihood apart from operating a Competing Business.

9.8 Additional Covenants . Franchisee shall require and obtain for the benefit of Franchisor execution of covenants similar to those set forth in Sections 9.5 and 9.6 from any and all of its employees having access to materials or information furnished or disclosed to Franchisee by Franchisor, including, without limitation, all managers, assistant managers and directors of operations.

9.9 Guaranty . As an inducement and as a condition to Franchisor’s execution and acceptance of this Agreement, all of Franchisee’s Principals shall execute the Agreement and Guaranty of Franchisee’s Principals attached hereto.

9.10 Rights and Limitations to use Animated Entertainment . Franchisee and Franchisee’s Principals acknowledge and agree that the rights granted to Franchisee under this Agreement to use Animated Entertainment, including, without limitation, computer-controlled animated characters, video displays (regardless of the format of the display, e.g., video tape, video disc, etc.), computer hardware and software, artistic designs, scripts and musical scores, staging and lighting techniques and configurations, and any and all improvements, additions, replacements, patents, copyrights, trademarks, service marks, technology, and know-how and all other intellectual and artistic property relating thereto, are limited solely to using the Animated Entertainment during the term of this Agreement in the Franchised Restaurant at the site approved by Franchisor. Franchisee shall not use the Animated Entertainment, including, without limitation, (i) toy versions, games, or anything of play value related to the Animated Entertainment, or (ii) records, cassettes, audio and video tapes or other recordings or embodiments of music or musical scores included in the Animated Entertainment, except on terms, if any, set forth in writing by Franchisor. Franchisee’s right to use the Animated Entertainment shall not survive termination or expiration hereof, nor shall such right be transferable by Franchisee except as part of, and in connection with, the transfer of the franchise granted hereunder, subject to the terms and conditions set forth in Section 11 hereof.

Franchisee and Franchisee’s Principals acknowledge superior rights and interest of

Franchisor in and to the Animated Entertainment. Neither Franchise nor Franchisee’s Principals shall copy or reproduce in any manner and Franchisee and Franchisee’s Principals shall use their best efforts to prevent others from copying or reproducing in any manner the computer software, video displays, artistic designs, scripts and musical scores and all other plans, specifications, documentation and programming related to the Animated Entertainment and they agree that any duplication or unauthorized use thereof is and shall be deemed an infringement of the rights of Franchisor.

9.11 Non-Liability . Franchisee acknowledges and agrees that Franchisor shall not, by virtue of any approvals, advice or services provided to Franchisee, assume responsibility or liability to Franchisee or any third parties to which it would not otherwise be subject.

9.12 Performance by Franchisor . Franchisee acknowledges and agrees that any duty or obligation imposed on Franchisor by this Agreement may be performed by any designee, employee, or agent of Franchisor, as Franchisor may direct.

9.13 Licensing of Musical Compositions . Franchisee and Franchisee’s Principals understand that Franchisee’s right to use certain of the musical compositions contained in the Animated Entertainment programs is conditioned upon obtaining licenses from and the payment of fees to performing rights societies such as the American Society of Composers, Authors and Publishers, Broadcast Music, Inc. and SESAC, Inc. (“Societies”). Franchisor shall have the right to obtain and maintain on Franchisee’s behalf performing rights licenses from the Societies as may be required to authorize Franchisee to use such music at the Franchised Restaurant, and to forward payment on behalf of Franchisee (for which Franchisee shall reimburse Franchisor as described below) for the music performance fees due to the Societies under the licenses. Franchisee shall submit to Franchisor all information necessary to enable Franchisor to submit any required reports to the Societies and shall promptly reimburse Franchisor upon demand for all payments which are made on Franchisee’s behalf by Franchisor to the Societies and for which reimbursement is requested by Franchisor. Failure by Franchisee to comply with the terms of this Paragraph will constitute a material default pursuant to Section 13.3.4 and will result in Franchisee’s loss of rights to use the musical compositions in Animated Entertainment programs.

10.1 Confidential Information . Except as expressly provided herein, Franchisee shall have no right, title or interest in the Confidential Information. Franchisee and the Franchisee’s Principals shall only communicate, disclose or use the Confidential Information as expressly permitted herein or as required by law. Franchisee and Franchisee’s Principals shall disclose the Confidential Information only to such of Franchisee’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 Franchisee and each of Franchisee’s Principals.

10.1.1 Confidentiality Agreements . Franchisee shall cause Franchisee’s employees

having access to the Confidential Information to execute confidentiality agreements substantially in the form of Attachment E, stating that they will preserve in confidence all Confidential Information. Neither Franchisee, Franchisee’s Principal’s nor 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.

10.1.2 Improvements . If Franchisee makes any improvements (as determined by Franchisor) to the Confidential Information or the System, Franchisee and the Franchisee’s Principals shall each execute an amendment to this Agreement reflecting such improvements and Franchisor’s exclusive ownership thereof. All such improvements shall be considered Confidential Information.

10.2 Proprietary Marks . Franchisee 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 the termination or expiration of this Agreement. Franchisee also expressly acknowle