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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
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| RECITALS |
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1 |
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| 1. |
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DEFINITIONS |
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1 |
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| 2. |
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GRANT OF RIGHTS |
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5 |
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2.1 |
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Grant |
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5 |
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2.2 |
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Exclusivity |
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6 |
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2.3 |
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Limitation of Rights |
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6 |
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| 3. |
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FEES AND CONTRIBUTIONS |
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7 |
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3.1 |
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Franchise
Fee. |
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7 |
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3.2 |
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Royalty
Fees |
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7 |
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3.3 |
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System
Fund. |
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7 |
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3.4 |
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Payments
and Taxes |
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7 |
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3.5 |
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Overdue
Payments |
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8 |
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3.6 |
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Franchisor’s Lien |
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8 |
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3.7 |
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Contribution Increases |
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8 |
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| 4. |
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SITE SELECTION |
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8 |
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4.1 |
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Criteria
for Site Approval |
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8 |
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4.2 |
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Approval
by Franchisor |
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9 |
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4.3 |
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Costs of
On-Site Evaluation |
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9 |
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4.4 |
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Executed
Lease or Purchase Agreement |
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9 |
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4.5 |
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Extensions |
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9 |
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4.6 |
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Relocation |
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9 |
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| 5. |
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CONSTRUCTION AND REFURBISHMENT |
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10 |
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5.1 |
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Pre-Construction/Refurbishment Approval Criteria |
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10 |
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5.2 |
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Pre-Construction/Refurbishment Approval |
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11 |
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5.3 |
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Commencement of Construction/Refurbishment and
Extensions |
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11 |
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5.4 |
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Construction/Refurbishment |
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11 |
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5.5 |
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Opening
Assistance |
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11 |
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5.6 |
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Inspection |
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12 |
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5.7 |
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Continuing Statements |
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12 |
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5.8 |
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Installation of Animated Entertainment |
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12 |
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5.9 |
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Approval
for Opening |
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12 |
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| 6. |
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TRAINING |
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13 |
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6.1 |
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Minimum
Training |
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13 |
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6.2 |
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Location
and Expenses |
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13 |
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6.3 |
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Additional Training |
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13 |
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CEC Entertainment, Inc. |
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i |
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[City, State] Franchise |
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| 7. |
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OPERATION |
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13 |
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7.1 |
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General Manager and Technician |
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13 |
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7.2 |
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Operational Policies |
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13 |
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7.3 |
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Suppliers |
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15 |
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7.4 |
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General Maintenance |
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15 |
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7.5 |
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Maintenance of Animated Entertainment |
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15 |
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7.6 |
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Scheduled Refurbishment |
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16 |
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7.7 |
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Inspection |
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16 |
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7.7.1 |
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Testing |
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16 |
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7.7.2 |
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Recommendations |
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16 |
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7.7.3 |
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Failure
to Correct Deficiencies |
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16 |
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7.8 |
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Accounting and Records |
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17 |
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7.8.1 |
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General
Accounting Principles |
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17 |
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7.8.2 |
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Accounting Statements |
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17 |
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7.8.3 |
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Inspection of Accounting and Records |
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17 |
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7.8.4 |
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Records
of Ownership Interests in Franchisee |
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18 |
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7.8.5 |
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Sales
Records |
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18 |
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7.9 |
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Internet |
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18 |
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7.10 |
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Intranet |
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19 |
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| 8. |
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ADVERTISING |
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20 |
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8.1 |
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General Requirements |
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20 |
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8.2 |
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Pre-Approved Advertising |
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20 |
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8.3 |
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New Advertising |
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20 |
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8.4 |
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Minimum Advertising Expenditures |
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20 |
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8.5 |
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System Fund |
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21 |
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8.6 |
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Advertising Cooperative |
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22 |
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| 9. |
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REPRESENTATIONS AND WARRANTIES |
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23 |
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9.1 |
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Representations, Warranties and Covenants of
Franchisee |
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23 |
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9.1.1 |
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Due
Incorporation |
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23 |
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9.1.2 |
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Authorization |
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23 |
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9.1.3 |
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Exclusivity |
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23 |
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9.1.4 |
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Execution
and Performance |
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23 |
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9.1.5 |
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Corporate
Documents |
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23 |
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9.1.6 |
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Ownership
Interests |
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23 |
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9.1.7 |
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Stop
Transfer Instructions |
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24 |
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9.2 |
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Financial Statements |
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24 |
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9.3 |
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Franchisee’s Principals |
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24 |
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9.4 |
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Guarantee |
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24 |
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9.5 |
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Non-Competition During Term of Agreement |
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25 |
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CEC Entertainment, Inc. |
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ii |
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[City, State] Franchise |
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9.6 |
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Non-Competition after Termination or Non-Renewal of
Agreement |
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25 |
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9.7 |
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Independent Covenants |
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25 |
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9.8 |
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Additional Covenants |
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26 |
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9.9 |
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Guaranty |
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26 |
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9.10 |
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Rights and Limitations to use Animated
Entertainment |
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26 |
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9.11 |
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Non-Liability |
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27 |
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9.12 |
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Performance by Franchisor |
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27 |
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9.13 |
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Licensing of Musical Compositions |
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27 |
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| 10. |
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PROPRIETARY RIGHTS AND INFORMATION |
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27 |
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10.1 |
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Confidential Information |
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27 |
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10.1.1 |
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Confidentiality Agreements |
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27 |
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10.1.2 |
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Improvements |
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28 |
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10.2 |
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Proprietary Marks |
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28 |
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10.3 |
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Copyrights |
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29 |
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| 11. |
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TRANSFER OF INTEREST |
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30 |
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11.1 |
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Transfer by Franchisor |
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30 |
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11.2 |
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Transfer by Franchisee |
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30 |
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11.2.1 |
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General
Requisites |
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30 |
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11.2.2 |
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Right of
First Refusal |
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31 |
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11.2.3 |
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Death or
Disability |
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33 |
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11.2.4 |
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Public
Offerings |
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33 |
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| 12. |
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INSURANCE AND INDEMNITY |
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34 |
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12.1 |
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Insurance |
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34 |
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12.2 |
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Indemnities |
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35 |
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12.2.1 |
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Indemnification |
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35 |
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12.2.2 |
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Notice
and Counsel |
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36 |
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12.2.3 |
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Settlement and Remedial Actions |
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36 |
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12.2.4 |
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Expenses |
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36 |
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12.2.5 |
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Third
Party Recovery |
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36 |
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12.2.6 |
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Survival |
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36 |
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| 13. |
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TERM, RENEWAL AND TERMINATION |
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36 |
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13.1 |
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Term |
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36 |
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13.2 |
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Renewal |
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36 |
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13.3 |
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Termination |
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37 |
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13.3.1 |
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Automatic
Termination |
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37 |
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13.3.2 |
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Termination upon Notice |
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38 |
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13.3.3 |
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Termination with Ten Day Notice |
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40 |
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13.3.4 |
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Termination with Thirty Day Notice |
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40 |
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13.4 |
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Obligations upon Termination or Expiration |
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40 |
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CEC Entertainment, Inc. |
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iii |
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[City, State] Franchise |
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| 14. |
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REMEDIES |
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44 |
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14.1 |
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Remedies |
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44 |
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14.1.1 |
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Cure |
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44 |
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14.1.2 |
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Specific
Enforcement |
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44 |
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| 15. |
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DISPUTE RESOLUTION |
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44 |
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15.1 |
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Mediation |
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44 |
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15.2 |
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Applicable Law |
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44 |
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15.3 |
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Jurisdiction and Venue |
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45 |
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15.4 |
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Mutual Benefit |
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45 |
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| 16. |
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MISCELLANEOUS |
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45 |
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16.1 |
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Independent Contractors |
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45 |
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16.2 |
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Entire Agreement |
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45 |
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16.3 |
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Judgment; Discretion |
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46 |
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16.4 |
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No Waiver |
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46 |
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16.5 |
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Severability |
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46 |
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16.6 |
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Notice |
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46 |
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16.7 |
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Counterparts |
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46 |
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16.8 |
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Headings |
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47 |
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16.9 |
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Further Assurances |
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47 |
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16.10 |
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Compliance with Laws |
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47 |
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| 17. |
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ACKNOWLEDGMENTS |
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48 |
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17.1 |
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Independent Investigation |
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48 |
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17.2 |
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Opportunity to Assess Risks |
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48 |
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17.3 |
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Receipt of Disclosure Document |
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48 |
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17.4 |
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No Extraneous Promises |
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48 |
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17.5 |
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No Extraneous Inducements |
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49 |
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17.6 |
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Commercial Relationship |
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49 |
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17.7 |
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Compliance with Anti-Corruption and Anti-Money Laundering
Laws |
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49 |
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17.8 |
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No Claims |
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49 |
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SCHEDULE 1.14
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STATEMENT
OF OWNERSHIP INTERESTSAND FRANCHISEE’S PRINCIPALS |
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53 |
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ATTACHMENT A
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AGREEMENT
AND GUARANTY OFFRANCHISEE’S PRINCIPALS |
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A-1 |
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ATTACHMENT B
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GENERAL
RELEASE |
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B-1 |
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ATTACHMENT C
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LEASE
RIDER |
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C-1 |
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CEC Entertainment, Inc. |
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iv |
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[City, State] Franchise |
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ATTACHMENT D
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ADVERTISING COOPERATIVE AGREEMENT |
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D-1 |
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ATTACHMENT E
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EMPLOYEE’S CONFIDENTIALITY AND NON-COMPETITION
AGREEMENT |
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E-1 |
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ATTACHMENT F
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RENEWAL
AMENDMENT TO FRANCHISE AGREEMENT |
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F-1 |
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CEC Entertainment, Inc. |
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v |
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[City, State] Franchise |
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.
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CEC Entertainment, Inc. |
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1 |
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[City, State] Franchise |
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
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CEC Entertainment, Inc. |
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2 |
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[City, State] Franchise |
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.
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CEC Entertainment, Inc. |
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3 |
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[City, State] Franchise |
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.
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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.
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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.
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| 3. |
FEES AND CONTRIBUTIONS |
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.
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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
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(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
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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. |
CONSTRUCTION AND REFURBISHMENT |
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.
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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
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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.
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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;
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(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
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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
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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
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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.
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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.
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(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
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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.
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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
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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.
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| 9. |
REPRESENTATIONS AND WARRANTIES |
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
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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.
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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.
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(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
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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. |
PROPRIETARY RIGHTS AND INFORMATION |
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
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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
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