Exhibit 10.31

CEC ENTERTAINMENT, INC.

FRANCHISE AGREEMENT

[CITY, STATE]

4441 West Airport Freeway

Irving, TX 75062

CEC Entertainment, Inc.

[City, State] Franchise

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TABLE OF CONTENTS

 

RECITALS						1
1.		DEFINITIONS				1
2.		GRANT OF RIGHTS				5
		2.1		Grant		5
		2.2		Exclusivity		6
		2.3		Limitation of Rights		6
3.		FEES AND CONTRIBUTIONS				7
		3.1		Franchise Fee.		7
		3.2		Royalty Fees		7
		3.3		System Fund.		7
		3.4		Payments and Taxes		7
		3.5		Overdue Payments		8
		3.6		Franchisor’s Lien		8
		3.7		Contribution Increases		8
4.		SITE SELECTION				8
		4.1		Criteria for Site Approval		8
		4.2		Approval by Franchisor		9
		4.3		Costs of On-Site Evaluation		9
		4.4		Executed Lease or Purchase Agreement		9
		4.5		Extensions		9
		4.6		Relocation		9
5.		CONSTRUCTION AND REFURBISHMENT				10
		5.1		Pre-Construction/Refurbishment Approval Criteria		10
		5.2		Pre-Construction/Refurbishment Approval		11
		5.3		Commencement of Construction/Refurbishment and Extensions		11
		5.4		Construction/Refurbishment		11
		5.5		Opening Assistance		11
		5.6		Inspection		12
		5.7		Continuing Statements		12
		5.8		Installation of Animated Entertainment		12
		5.9		Approval for Opening		12
6.		TRAINING				13
		6.1		Minimum Training		13
		6.2		Location and Expenses		13
		6.3		Additional Training		13

 

				CEC Entertainment, Inc.
		i		[City, State] Franchise

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7.		OPERATION						13
		7.1		General Manager and Technician				13
		7.2		Operational Policies				13
		7.3		Suppliers				15
		7.4		General Maintenance				15
		7.5		Maintenance of Animated Entertainment				15
		7.6		Scheduled Refurbishment				16
		7.7		Inspection				16
				7.7.1		Testing		16
				7.7.2		Recommendations		16
				7.7.3		Failure to Correct Deficiencies		16
		7.8		Accounting and Records				17
				7.8.1		General Accounting Principles		17
				7.8.2		Accounting Statements		17
				7.8.3		Inspection of Accounting and Records		17
				7.8.4		Records of Ownership Interests in Franchisee		18
				7.8.5		Sales Records		18
		7.9		Internet				18
		7.10		Intranet				19
8.		ADVERTISING						20
		8.1		General Requirements				20
		8.2		Pre-Approved Advertising				20
		8.3		New Advertising				20
		8.4		Minimum Advertising Expenditures				20
		8.5		System Fund				21
		8.6		Advertising Cooperative				22
9.		REPRESENTATIONS AND WARRANTIES						23
		9.1		Representations, Warranties and Covenants of Franchisee				23
				9.1.1		Due Incorporation		23
				9.1.2		Authorization		23
				9.1.3		Exclusivity		23
				9.1.4		Execution and Performance		23
				9.1.5		Corporate Documents		23
				9.1.6		Ownership Interests		23
				9.1.7		Stop Transfer Instructions		24
		9.2		Financial Statements				24
		9.3		Franchisee’s Principals				24
		9.4		Guarantee				24
		9.5		Non-Competition During Term of Agreement				25

 

				CEC Entertainment, Inc.
		ii		[City, State] Franchise

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		9.6		Non-Competition after Termination or Non-Renewal of Agreement				25
		9.7		Independent Covenants				25
		9.8		Additional Covenants				26
		9.9		Guaranty				26
		9.10		Rights and Limitations to use Animated Entertainment				26
		9.11		Non-Liability				27
		9.12		Performance by Franchisor				27
		9.13		Licensing of Musical Compositions				27
10.		PROPRIETARY RIGHTS AND INFORMATION						27
		10.1		Confidential Information				27
				10.1.1		Confidentiality Agreements		27
				10.1.2		Improvements		28
		10.2		Proprietary Marks				28
		10.3		Copyrights				29
11.		TRANSFER OF INTEREST						30
		11.1		Transfer by Franchisor				30
		11.2		Transfer by Franchisee				30
				11.2.1		General Requisites		30
				11.2.2		Right of First Refusal		31
				11.2.3		Death or Disability		33
				11.2.4		Public Offerings		33
12.		INSURANCE AND INDEMNITY						34
		12.1		Insurance				34
		12.2		Indemnities				35
				12.2.1		Indemnification		35
				12.2.2		Notice and Counsel		36
				12.2.3		Settlement and Remedial Actions		36
				12.2.4		Expenses		36
				12.2.5		Third Party Recovery		36
				12.2.6		Survival		36
13.		TERM, RENEWAL AND TERMINATION						36
		13.1		Term				36
		13.2		Renewal				36
		13.3		Termination				37
				13.3.1		Automatic Termination		37
				13.3.2		Termination upon Notice		38
				13.3.3		Termination with Ten Day Notice		40
				13.3.4		Termination with Thirty Day Notice		40
		13.4		Obligations upon Termination or Expiration				40

 

				CEC Entertainment, Inc.
		iii		[City, State] Franchise

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14.		REMEDIES						44
		14.1		Remedies				44
				14.1.1		Cure		44
				14.1.2		Specific Enforcement		44
15.		DISPUTE RESOLUTION						44
		15.1		Mediation				44
		15.2		Applicable Law				44
		15.3		Jurisdiction and Venue				45
		15.4		Mutual Benefit				45
16.		MISCELLANEOUS						45
		16.1		Independent Contractors				45
		16.2		Entire Agreement				45
		16.3		Judgment; Discretion				46
		16.4		No Waiver				46
		16.5		Severability				46
		16.6		Notice				46
		16.7		Counterparts				46
		16.8		Headings				47
		16.9		Further Assurances				47
		16.10		Compliance with Laws				47
17.		ACKNOWLEDGMENTS						48
		17.1		Independent Investigation				48
		17.2		Opportunity to Assess Risks				48
		17.3		Receipt of Disclosure Document				48
		17.4		No Extraneous Promises				48
		17.5		No Extraneous Inducements				49
		17.6		Commercial Relationship				49
		17.7		Compliance with Anti-Corruption and Anti-Money Laundering Laws				49
		17.8		No Claims				49

 

SCHEDULE 1.14		STATEMENT OF OWNERSHIP INTERESTSAND FRANCHISEE’S PRINCIPALS		53
ATTACHMENT A		AGREEMENT AND GUARANTY OFFRANCHISEE’S PRINCIPALS		A-1
ATTACHMENT B		GENERAL RELEASE		B-1
ATTACHMENT C		LEASE RIDER		C-1

 

				CEC Entertainment, Inc.
		iv		[City, State] Franchise

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ATTACHMENT D		ADVERTISING COOPERATIVE AGREEMENT		D-1
ATTACHMENT E		EMPLOYEE’S CONFIDENTIALITY AND NON-COMPETITION AGREEMENT		E-1
ATTACHMENT F		RENEWAL AMENDMENT TO FRANCHISE AGREEMENT		F-1

 

				CEC Entertainment, Inc.
		v		[City, State] Franchise

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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:

 

1.	DEFINITIONS

As used in this Agreement and the above Recitals, the following capitalized terms shall have the meanings attributed to them in this Section:

1.1 “Action” means any cause of action, suit, proceeding, claim, demand, investigation or inquiry (whether a formal proceeding or otherwise) with respect to which 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.

 

				CEC Entertainment, Inc.
		1		[City, State] Franchise

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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                             .

 

				CEC Entertainment, Inc.
		2		[City, State] Franchise

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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.

 

				CEC Entertainment, Inc.
		3		[City, State] Franchise

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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.

 

				CEC Entertainment, Inc.
		4		[City, State] Franchise

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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.	GRANT OF RIGHTS

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.

 

				CEC Entertainment, Inc.
		5		[City, State] Franchise

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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.

 

				CEC Entertainment, Inc.
		6		[City, State] Franchise

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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