CEC ENTERTAINMENT, INC.
FRANCHISE AGREEMENT
[CITY, STATE]
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TABLE OF CONTENTS
RECITALS.......................................................................1
1. DEFINITIONS...............................................................1
2. GRANT OF RIGHTS...........................................................5
2.1 Grant............................................................5
2.2 Exclusivity......................................................5
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..............................................12
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
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........................17
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
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.............................28
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.....................................35
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
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..........................................................47
16.7 Counterparts....................................................47
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.......................................48
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..52
ATTACHMENT A AGREEMENT AND GUARANTY OFFRANCHISEE'S PRINCIPALS............A-1
ATTACHMENT B GENERAL RELEASE.............................................B-1
ATTACHMENT C LEASE RIDER.................................................C-1
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.
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.
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 ▇▇▇▇▇▇▇ Media Research, Inc. or a successor
organization designated by Franchisor.
1.10 "Equity Interest" means a direct or indirect ownership interest in the
capital stock of, partnership or membership interest in, or other equity or
ownership interest in (including the right to vote) any type of legal entity.
1.11 "Execution Date" means the date upon which the Agreement is deemed
duly executed and entered into by Franchisee and Franchisor, as indicated on the
first page of the Agreement.
1.12 "Force Majeure" means acts of God (such as tornadoes, hurricanes,
floods, fire or other natural catastrophe); strikes, lockouts or other
industrial disturbances; war, riot, or other civil disturbance; epidemics; acts
of governments, such as the exercise of eminent domain rights and condemnation
(if caused by reasons beyond Franchisee's control); or other forces beyond
Franchisee's reasonable control.
1.13 "Franchisee" means ____________.
1.14 "Franchisee's Principals" means Franchisee's spouse, if Franchisee is
an individual, all officers and directors of Franchisee and all holders of an
Equity Interest in Franchisee and of any entity directly or indirectly
controlling Franchisee, all as listed on Schedule 1.14 attached hereto.
1.15 "Franchised Restaurant" means the family-oriented pizza restaurant
that is established and operated by Franchisee utilizing the System, the
Proprietary Marks and the Animated Entertainment in accordance with the terms
and conditions of this Agreement.
1.16 "Franchisor" means CEC Entertainment, Inc. or any person or legal
entity to which CEC Entertainment, Inc. assigns or otherwise transfers its
rights and obligations contained in this Agreement.
1.17 "Gross Sales" means the total of all sales related to or arising from
the operation of the Franchised Restaurant including, without limitation, all
monies and receipts from the sale of all beverages, food, merchandise and the
operation of rides, amusement games and other attractions in the Franchised
Restaurant, as well as all revenue from the sale of tokens, whether for cash or
credit and regardless of collection, less applicable sales taxes Franchisee
collects and remits, and valid coupon credits and employee discounts deducted
from revenues initially recorded as Gross Sales, but without deduction of any
other costs or expenses whatsoever.
1.18 "Indemnitees" means any designee(s) of Franchisor which administer the
System Fund, Franchisor and its subsidiaries and affiliates and their respective
directors, officers, employees, shareholders, affiliates, successors and
assigns.
1.19 "Internet" means collectively the myriad of computer and
telecommunications facilities, including equipment and software, which comprise
the interconnected worldwide network of networks that employ the TCP/IP
(Transmission Control Protocol/Internet Protocol), or any predecessor or
successor protocols to such protocol, to communicate information of all kinds by
fiber optics, wire, radio, or other methods of electronic transmission.
1.20 "Intranet" means an intranet, extranet or other communications network
between and among Franchisor and Franchisee that its accessed by the Internet.
1.21 "Losses and Expenses" means all losses, compensatory, exemplary or
punitive damages, fines, penalties, charges, costs, expenses, lost profits,
assessments and fees (including reasonable attorneys', experts', accountants'
and consultants' fees); interest, court costs, settlement or judgment amounts,
compensation for damages to Franchisor's reputation and goodwill, costs of or
resulting from delays, financing costs, costs of advertising material and media
time/space, and costs of changing, substituting or replacing the same, and any
and all expenses of recall, refunds, compensation, public notices and other
similar amounts incurred, charged against or suffered by the Indemnitees in
connection with any Action.
1.22 "Minority Interest" means an Equity Interest of less than five percent
(5%) of the capital stock of, partnership interest in, or other Equity Interest
in (including the right to vote) any type of legal entity.
1.23 "Operational," used in reference to the Franchised Restaurant, means
that the Franchised Restaurant is fully constructed and finished out as approved
by Franchisor and is legally permitted to render its services to, and is open
to, the general public pursuant to this Agreement.
1.24 "Operational Policies" means the written standards, procedures, rules,
regulations, and policies for the operation of a Franchised Restaurant pursuant
to the System, as issued from time to time by Franchisor, a copy of which will
be provided upon the execution of this Agreement.
1.25 "Person" means an individual, corporation, limited liability company,
partnership, association, joint stock company, trust or trustee thereof, estate
or executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
1.26 "Proprietary Marks" means the trademarks, trade names, service marks,
logos, emblems and other indicia of origin as designated from time to time by
Franchisor, which may be owned by Franchisor or licensed to Franchisor with
sublicensing rights, including, but not limited to, the marks "▇▇▇▇▇ ▇. Cheese"
and "▇▇▇▇▇ ▇. Cheese's."
1.27 "Protected Territory" means the area within a ____ (__) mile radius of
the Franchised Restaurant.
1.28 "Site" means the location for the establishment and operation of the
Franchised Restaurant which is approved as per Section 4.2 of this Agreement.
1.29 "Site Selection Territory" means ________, ________.
1.30 "Sky Tubes" means components configured to create sequences of
group/social and independent play, using tubes, windows, entries, climbs,
crawls, play stations, passageways, and slides.
1.31 "System" means the distinctive system developed and owned by
Franchisor for the establishment, development, and operation of family-oriented
pizza restaurants, the distinguishing characteristics of which include without
limitation, Animated Entertainment, Sky Tubes, separate areas with a variety of
rides, amusement games and other attractions, characteristic decorations,
furnishings and materials, specially-designed equipment and equipment layouts,
trade secret food products and other special recipes, menus and food and
beverage designations, food and beverage preparation and service procedures and
techniques, operating procedures for sanitation and maintenance, methods and
techniques for inventory and cost controls, record keeping and reporting,
personnel training and management, and advertising and promotional programs, and
Operational Policies, all of which may be changed, improved or further developed
by Franchisor from time to time.
1.32 "System Fund" means collectively, the three (3) funds currently
identified as follows:
(a) the "Advertising Fund" (for the maintenance, administration,
direction, preparation, purchasing and placement of advertising for the
System, Proprietary Marks and Animated Entertainment),
(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.
2.2 Exclusivity. For so long as Franchisee is in full compliance with this
Agreement, Franchisor will not, without Franchisee's prior written consent,
establish or operate, or license anyone other than Franchisee to establish or
operate, a System Restaurant which is physically located in the Protected
Territory during the term of this Agreement.
2.3 Limitation of Rights. Franchisor retains all rights not expressly
granted hereunder. Franchisor, its affiliates, and their respective franchisees
and licensees may, among other things, operate other types of facilities besides
System Restaurants in the Protected Territory, including facilities that are
identified by some or all of the Proprietary Marks. The license granted by this
Agreement is only for the operation of a single System Restaurant at the
approved Site. Franchisor therefore may (or may authorize a third party to)
conduct, among other things, the following activities:
(a) Advertise and promote sales of or by System Restaurants, at any
location, including within the Protected Territory;
(b) Offer and sell collateral and ancillary products and services,
such as pre-packaged food products, toys, games, clothing, and memorabilia,
in the Protected Territory under the Proprietary Marks, even though those
products and services may be similar to items offered by the Franchised
Restaurant;
(c) Offer and sell any products and services (regardless of similarity
to products and services sold in the Franchised Restaurant) under any names
and marks other than the Proprietary Marks, at any location, including
within the Protected Territory;
(d) Establish and operate a System Restaurant anywhere outside of the
Protected Territory, regardless of proximity or financial impact to the
Franchised Restaurant;
(e) Establish and operate a non-System Restaurant anywhere inside or
outside of the Protected Territory, regardless of proximity or financial
impact to the Franchised Restaurant; and
(f) Operate one or more sites on the World Wide Web portion of the
Internet that advertise System Restaurants, allow customers and potential
customers to make reservations at System Restaurants (including the
Franchised Restaurant), sell any product or service including pre-packaged
food products, games, toys, clothing or memorabilia, or permit other
activities (whether or not similar), even though the Web site is accessible
to or viewable by persons in the Protected Territory.
Franchisee shall have no right under this Agreement to sub-license others
to use or grant any rights in the Proprietary Marks, the Animated Entertainment
or the System.
3. 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.
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. SITE SELECTION
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 minimum
requirements contained in the Lease Rider to be executed between
Franchisor, Franchisee and the lessor attached hereto as Attachment C; and
(c) any other information or materials as Franchisor reasonably
requires, such as a letter of intent or other document which confirms
Franchisee's favorable prospects for obtaining the proposed Site.
4.2 Approval by Franchisor. Upon receipt of all requested documentation as
required in Section 4.1, Franchisor will notify Franchisee of its approval or
disapproval in writing within a period of thirty (30) days. Franchisor shall act
in a commercially reasonable manner when approving or disapproving any proposed
Site. However, Franchisee agrees that Franchisor will have absolute discretion
in approving any proposed Site and Franchisee agrees to accept any of
Franchisor's decisions as final. Franchisee hereby acknowledges and agrees that
Franchisor's approval of a site does not constitute an assurance, representation
or warranty of any kind, express or implied, as to the suitability of the Site
for the Franchised Restaurant or for any other purpose or of the financial
success of operating the Franchised Restaurant at such Site.
4.3 Costs of On-Site Evaluation. If Franchisor deems necessary, Franchisor
will undertake one (1) on-site evaluation of a proposed Site free of charge. For
all subsequent on-site evaluations requested by Franchisee or required by
Franchisor, Franchisee agrees to reimburse Franchisor for its reasonable
expenses, including, without limitation, travel expenses, and a per diem charge
for room and board.
4.4 Executed Lease or Purchase Agreement. Franchisee shall execute a lease
for the premises, or shall enter into a binding commitment to purchase such
premises, within sixty (60) days after receipt of site approval from Franchisor.
Franchisee will provide Franchisor with a fully executed copy of the lease or
purchase agreement with respect to the approved Site within ten (10) days after
execution thereof.
4.5 Extensions. Upon Franchisee's written request, Franchisor, at its sole
discretion and without obligation, may grant a written extension or extensions
to the period for approval of a proposed Site. In the event Franchisor grants
such extension, Franchisee agrees to pay the Franchisor a non-refundable
extension fee of Two-thousand Five Hundred and no/100 Dollars ($2,500.00) for
every thirty (30) day period of the agreed extension.
4.6 Relocation. Once the Franchised Restaurant is established at the
proposed Site in accordance with this Agreement, Franchisee shall not relocate
the Franchise Restaurant without the prior written consent of Franchisor.
Franchisor will not unreasonably withhold its consent of such relocation and may
require, among other things, that: (i) Franchisee has provided Franchisor with
at least ninety (90) days prior written notice of its intent to relocate; (ii)
Franchisee is not in default under this Agreement and all of Franchisee's
accrued monetary obligations to Franchisor have been satisfied; (iii) Franchisee
has paid a relocation fee in an amount equal to fifty (50%) of the then-current
initial Franchise Fee for a new franchisee; (iv) the new location is within the
Protected Territory; (v) Franchisee agrees to execute the then-current form of
franchise agreement, which agreement may contain materially different terms from
this Agreement, including, without limitation, higher royalty fees,
contributions, System assessments and a different Protected Territory, for a
term equal to the unexpired portion of the initial term, and all unexpired
renewal terms hereunder and any other ancillary agreements as Franchisor may
require; provided, however, that Franchisee shall not be required to pay the
initial franchise fee contained in Franchisor's then-current form of franchise
agreement; and (vi) Franchisee has made provisions acceptable to Franchisor for
the removal of all signs and other materials containing Proprietary Marks from
the existing site. Franchisee will receive written notification of Franchisor's
decision regarding relocation of the Franchised Restaurant. Upon approval by
Franchisor, Franchisee must relocate the Franchised Restaurant within one
hundred and eighty (180) days.
5. 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.
5.2 Pre-Construction/Refurbishment Approval. Upon receipt of the above
documents, Franchisor will notify Franchisee of its approval or disapproval in
writing within a period of twenty-one (21) days. Given that the
construction/refurbishment and appearance of the Franchised Restaurant is
critical to the continued success and viability of the System, Franchisee agrees
that Franchisor will have absolute discretion in making such decision and
Franchisee agrees to accept any of Franchisor's decisions as final.
5.3 Commencement of Construction/Refurbishment and Extensions. Once the
pre-construction/refurbishment approval has been obtained and, for construction;
within six (6) months after the date of execution of this Agreement, Franchisee
will commence construction and provide Franchisor with written notice of such
commencement within ten (10) days of such commencement of
construction/refurbishment.
Upon Franchisee's written request, Franchisor, at its sole discretion and
without obligation, may grant to Franchisee written extensions of this six
(6)-month period for construction and not refurbishment, with the understanding
that, if granted, Franchisee shall pay to Franchisor a non-refundable extension
fee of Two-Thousand Five Hundred and no/100 Dollars ($2,500.00) for each thirty
(30) day period of extension.
5.4 Construction/Refurbishment. Franchisee shall complete
construction/refurbishment, including, as applicable, all exterior and interior
carpentry, electrical, painting and finishing work, and installation of all
fixtures, equipment and signs, in accordance with the plans and specifications
for the approved Site within:
(a) six (6) months after commencement of construction/refurbishment,
for refurbishment and construction, if construction is a space conversion
of existing premises, or
(b) nine (9) months after commencement of construction, if the
construction is the erection of a free-standing building.
Franchisor may, at its sole discretion, provide up to two (2) on-site
construction/ refurbishment visits to verify compliance with its standards.
Franchisee shall fully cooperate with Franchisor and provide Franchisor and its
representatives with full access to the Site in connection therewith.
Upon Franchisee's written request, Franchisor, at its sole discretion and
without obligation, may grant to Franchisee written extensions of the
above-described periods for construction and not refurbishment, with the
understanding that, if granted, Franchisee shall pay to Franchisor a
non-refundable extension fee of Two-Thousand Five Hundred and no/100 Dollars
($2,500.00) for each thirty (30) day period of extension.
5.5 Opening Assistance. Franchisor shall provide one (1) representative to
provide such on-site opening assistance and supervision as Franchisor deems
necessary for a period of seven (7) to ten (10) days, at no charge to
Franchisee. If Franchisor determines, in its sole discretion, that Franchisee
requires any additional opening assistance or if Franchisee requests such
assistance, Franchisor reserves the right to charge an additional fee for such
assistance, in addition to obtaining reimbursement for related travel, meals and
lodging expenses.
5.6 Inspection. Franchisee agrees that Franchisor and its agents shall
have the right to inspect the construction/refurbishment at all reasonable
times. Franchisee shall cooperate fully with Franchisor and provide Franchisor
and its representatives with full access to the Site in connection therewith.
5.7 Continuing Statements. Beginning with the calendar month after the
pre-construction/refurbishment approval issued by Franchisor and each calendar
month thereafter until one (1) calendar month after the
construction/refurbishment is completed, Franchisee shall provide Franchisor, on
or before the first Monday of each such month, with a statement in the form
prescribed by Franchisor and signed by Franchisee, certifying Franchisee's
continued compliance with and maintenance of the requirements of Section 5.1
(b).
5.8 Installation of Animated Entertainment. No later than one hundred fifty
(150) days prior to the anticipated date of completion of
construction/refurbishment of the Franchised Restaurant, Franchisee shall, if
applicable, order the Animated Entertainment and related components specified by
Franchisor from the supplier or suppliers designated by Franchisor and shall
provide to Franchisor such evidence thereof as Franchisor requests. All payment
terms for the Animated Entertainment shall be agreed to between Franchisee and
respective suppliers.
Franchisor shall not have any liability to Franchisee for delivery or the
condition of the Animated Entertainment ordered from the supplier or suppliers
designated by Franchisor.
After delivery of the Animated Entertainment and preparation for
installation of the Animated Entertainment by Franchisee, Franchisor will
provide a technician to install the Animated Entertainment. If the technician is
required for more than five (5) working days, then for such time period in
excess of five (5) working days (excluding travel), the Franchisee will pay
Franchisor a fee of Three Hundred and no/100 Dollars ($300.00) per day and shall
reimburse Franchisor for additional actual air travel expenses and a per diem
charge for room and board. Franchisor and Franchisee shall agree upon the dates
for installation; provided, however, Franchisee shall request the services of
the technician in writing, to Franchisor, at least sixty (60) days in advance of
the requested installation dates.
5.9 Approval for Opening. Once construction/refurbishment is completed and
within five (5) days after obtaining Franchisor's written approval for
opening/reopening, Franchisee shall open/reopen the Franchised Restaurant to the
public. Franchisee shall not open/reopen the Franchised Restaurant to the public
unless Franchisor has granted its written approval to do so.
6. TRAINING
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. OPERATION
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 for the Franchised Restaurant, who
shall devote their full time to the Franchised Restaurant.
7.2 Operational Policies. The Operational Policies shall at all times (i)
be kept in a secure place on the premises of the Franchised Restaurant, and (ii)
remain the sole property of Franchisor. Franchisee and Franchisee's Principals
shall at all times ensure that Franchisee's copy of the Operational Policies is
kept current and up-to-date, and in the event of any dispute as to the contents
of the Operational Policies, the terms of the version of the Operational
Policies maintained by Franchisor at Franchisor's home office shall be
controlling. Franchisee acknowledges that every detail of the Franchised
Restaurant is important to Franchisee, Franchisor and other franchisees in order
to develop and maintain the high standards and public image of the System, to
increase the demand for the products and services sold by all System
Restaurants, and to protect Franchisor's reputation and goodwill. As such,
Franchisee agrees to:
(a) Operate the Franchised Restaurant in accordance with the
Operational Policies to ensure that the highest degree of quality and
service is uniformly maintained. If amended or modified by Franchisor,
Franchisee agrees that it will fully implement Franchisor's amended
Operational Policies, within a period of time prescribed by Franchisor, but
in no event to exceed three (3) months after receipt of notice of such
amendment or modification;
(b) Devote the requisite time, energy and best efforts to the
management and operation of the Franchised Restaurant;
(c) Use, prepare, maintain in sufficient supply and offer for sale all
and only such products, materials, ingredients, supplies and paper goods as
conform with Franchisor's standards and specifications;
(d) Sell or offer for sale all and only such services, products and
menu items as meet Franchisor's uniform standards of quality and quantity,
as have been expressly approved for sale in writing by Franchisor, and as
have been prepared in accordance with Franchisor's methods and techniques.
You must refrain from any deviation from our standards and specifications
for serving or selling the above without our prior written consent and must
discontinue selling and offering for sale any such items as we may in our
sole discretion, disapprove at any time;
(e) Use at the Franchised Restaurant only such menus and animated
character costumes which comply with the style, pattern and design
prescribed by Franchisor;
(f) Purchase and install, at Franchisee's expense, all fixtures,
furnishings, signs, and equipment (including, without limitation, video
display software which must be updated from time to time, point-of-sale
computer hardware and software control systems, and a telephone modem) as
Franchisor may reasonably direct from time to time in the Operational
Policies or otherwise in writing;
(g) Employ security officers, if necessary, for secure operation of
the Franchised Restaurant;
(h) Employ at least the minimum number of other employees as may be
prescribed by Franchisor and to comply with all applicable federal, state
and local laws, rules and regulations with respect to such employees;
(i) Cause all employees to wear uniforms of the color, style and
design prescribed by Franchisor;
(j) Make daily and regular use of a ▇▇▇▇▇ ▇. Cheese walk-around
character costume and all other animated character costumes designated by
Franchisor and to maintain such costumes in good condition, as provided in
the Operational Policies;
(k) Use the Site only for the operation of the Franchised Restaurant
as well as keep and maintain the Franchised Restaurant open and Operational
for the minimum number of hours and days as reasonably required by
Franchisor;
(l) Meet and maintain the highest governmental standards and ratings
applicable to the operation of the Franchised Restaurant (including health,
alcohol and gaming) and immediately advise Franchisor in writing of any
operational license (including health, alcohol and gaming) standard
violations applicable to the operation of the Franchised Restaurant; and
(m) Purchase or lease and maintain the minimum number and type of
rides, amusement games and other attractions required by Franchisor, with
the understanding that Franchisee is prohibited from leasing any of the
foregoing on a "shared revenue" or "coin sharing" basis. Franchisee shall
obtain Franchisor's written approval prior to installing any ride, game or
other attraction at the Franchised Restaurant which has not been previously
approved in writing by Franchisor. If any of the rides, amusement games and
other attractions to be installed at the Franchised Restaurant are leased,
the lease shall permit Franchisee to substitute rides, amusement games and
other attractions subject to the lease, and will provide for Franchisee's
control over the maintenance and operation and the collection of monies
from the rides, amusement games and other attractions that are subject to
the proposed lease.
7.3 Suppliers. Franchisee shall purchase all equipment, supplies and other
products and materials (including animated character costumes) used in the
operation of the Franchised Restaurant solely from suppliers approved in writing
by Franchisor. To qualify for approval, such suppliers must (i) demonstrate the
ability to meet Franchisor's reasonable standards and specifications for such
items, and (ii) possess adequate quality controls and capacity to supply
Franchisee's needs promptly and reliably. Franchisor shall not be responsible
for the delivery or the condition of goods ordered from any vendor. Franchisor
shall have the right to require that its representatives be permitted to inspect
the supplier's facilities and that samples from the supplier be delivered, at
Franchisor's option, either to Franchisor or to an independent, certified
laboratory designated by Franchisor for testing. A charge not to exceed the
reasonable cost of the inspection and the actual cost of the test shall be paid
by Franchisee or the supplier to Franchisor. Franchisor reserves the right, at
its option, to re-inspect the facilities and products of any such approved
supplier and to revoke its approval upon the supplier's failure to continue to
meet, in Franchisor's discretion, any of Franchisor's criteria.
7.4 General Maintenance. Franchisee shall at all times maintain the
Franchised Restaurant in the highest degree of sanitation, repair and condition.
Within three (3) months after receipt of notice from Franchisor, Franchisee
agrees to make any additions, alterations repairs and replacements that
Franchisor reasonably requires, including, without limitation, such periodic
repainting, equipment repairs and replacement of obsolete signs, games, rides,
equipment and floor coverings (including carpet and tile) as Franchisor may
reasonably direct.
7.5 Maintenance of Animated Entertainment. Franchisee shall at all times
maintain the Animated Entertainment and its components in good repair and full
working order. Franchisee shall immediately, at its own expense, also install
all retrofits and replacements to the Animated Entertainment components which
are required by Franchisor from time-to-time. Franchisee shall, at Franchisor's
option, either destroy or relinquish and deliver to Franchisor or its designee
title and possession of any existing trademarked or proprietary elements or
components of the Animated Entertainment, immediately upon their replacement or
obsolescence and all such elements or components shall become the property of
Franchisor.
7.6 Scheduled Refurbishment. Commencing on January 1 of the second calendar
year following the opening of the Franchised Restaurant and each January 1
thereafter during the term hereof, Franchisee, at its own expense, shall upgrade
and refurbish the Franchised Restaurant, in conformity with Section 5 hereof.
Such upgrades and refurbishment include, without limitation, those necessary to
conform to the building decor, floor plan, trade dress, exterior signage and
decor, color schemes, rides, amusement games and other attractions, food and
beverage service, and presentation of trademarks and service marks consistent
with the public image then prevailing in the latest of upgraded System
restaurants operated by Franchisor. The amount expended for each such upgrade
and/or refurbishment shall be at least the lesser of:
(a) Fifty Thousand and no/100 Dollars ($50,000.00); or
(b) Four percent (4%) of the Gross Sales of the Franchised Restaurant
during the prior calendar year.
Each such upgrade and refurbishment shall be completed by Franchisee on or
before June 30 of each respective year. Franchisee shall provide to Franchisor,
on or before June 30 of each such year, such reports, records, receipts and
other information as Franchisor may request evidencing Franchisee's compliance
with this requirement.
7.7 Inspection. Franchisor will provide such continuing advisory
assistance, as it deems advisable, in the operation of the Franchised
Restaurant. Franchisee agrees to permit Franchisor or its agents, at any
reasonable time, access to the Franchised Restaurant to conduct inspections to
ensure compliance with Franchisor's then-current standards and specifications.
7.7.1 Testing. In conducting its inspections, Franchisor will have the
right to obtain samples of any inventory items without payment therefor, in
amounts reasonably necessary for testing by Franchisor or an independent
certified laboratory to determine whether said samples meet Franchisor's
then-current standards and specifications. Franchisor may require Franchisee to
bear the cost of such testing if the item or supplier of the item has not
previously been approved by Franchisor or if the sample fails to conform to
Franchisor's specifications.
7.7.2 Recommendations. Franchisee acknowledges that Franchisor or its
agents will have the authority to make immediate recommendations and resolutions
to correct any deficiencies detected during such inspections (including ceasing
of the use of the non-conforming equipment, advertising materials, products or
supplies).
7.7.3 Failure to Correct Deficiencies. In the event Franchisee fails
or refuses to implement recommendations or resolutions, Franchisor shall have
the right, but not the obligation, to enter upon the Franchised Restaurant
premises for the purpose of making or causing to be made such corrections as may
be required, with all costs to be paid by Franchisee. The failure to correct any
such deficiencies shall be a material default under Section 13.3.4.
7.8 Accounting and Records.
7.8.1 General Accounting Principles. Franchisee shall maintain for at
least five (5) years from the dates of preparation, full, complete and accurate
books, records and accounts in accordance with generally-accepted accounting
principles in the United States and in the form and manner prescribed by
Franchisor from time to time in the Operational Policies or otherwise in
writing.
7.8.2 Accounting Statements. In addition to the general accounting
requirements, at Franchisee's cost, Franchisee shall submit to Franchisor:
(a) Unaudited quarterly profit and loss statements (in the form
prescribed by Franchisor and showing the sources of all income and the
amount expended each month during the period on local advertising) and
balance sheet within forty-five (45) days of the end of each fiscal
quarter during the term hereof;
(b) Unaudited annual statements, as well as a schedule of capital
expenditures and a schedule of advertising expenditures, within ninety
(90) days of the end of each fiscal year during the term hereof;
(c) Copies of Franchisee's quarterly state sales tax returns; and
(d) Such other financial statements, reports and records as
Franchisor prescribes.
7.8.3 Inspection of Accounting and Records. Franchisor or its
representatives (including independent auditors, attorneys or agents) shall have
the right at all reasonable times to examine, copy (and to remove and return the
materials to be copied from the premises on which they are located), at
Franchisor's expense, the books, records and tax returns of Franchisee.
If an inspection should reveal that payments have been understated in
any report to Franchisor, then Franchisee shall immediately pay to Franchisor
the amount understated upon demand, in addition to interest from the date such
amount was due until paid, at one and one-half percent (1.5%) per month or the
maximum rate permitted by law, whichever is less.
Notwithstanding the foregoing, if an inspection discloses an
understatement in any report of two percent (2%) or more, Franchisee shall
reimburse Franchisor for any and all costs and expenses connected with the
inspection (including, without limitation, reasonable accounting and attorneys'
fees). The foregoing remedies shall be in addition to any other remedies
Franchisor may have, including, without limitation, the remedies for default.
7.8.4 Records of Ownership Interests in Franchisee. In addition to
the terms and conditions of Section 11 hereof, if there is a change in
the Franchisee's Principal's listed in Schedule 1.14 during the term of this
Agreement, Franchisee shall immediately provide Franchisor a list of all Persons
owning an Equity Interest in Franchisee; provided, however, that if Franchisee's
shares are publicly traded on a nationally recognized stock exchange, the list
of shareholders required shall include only those owning five percent (5%) or
more of the shares outstanding.
7.8.5 Sales Records. Franchisee shall record all food, beverage and
token sales and all other sales by, at, from or through the Franchised
Restaurant (excluding only sales from pay telephones and vending machines, if
approved by the Franchisor) on cash registers or other machines approved by
Franchisor, which shall contain devices or systems that will record accumulated
sales and provide such other information and reports as Franchisor may
prescribe. Franchisee must report Gross Sales for royalty and assessment
reporting requirements on the same accounting calendar used by the Franchisor.
Within six (6) months after receipt of written notification from
Franchisor, Franchisee shall install at the Franchised Restaurant as designated
by Franchisor, such point-of-sale computer hardware and software control systems
and telephone modems as reasonably prescribed by Franchisor. Franchisee will
enter into software license agreements as designated by Franchisor for such
purposes.
Franchisee shall permit Franchisor to access such systems by
telephone, modem, or such other means designated by Franchisor at all reasonable
times for the purpose of inspecting, monitoring and retrieving information
concerning the operation of the Franchised Restaurant. Franchisor shall have
access as provided herein at such times, and in such manner as Franchisor shall
from time to time specify.
7.9 Internet. During the term of this Agreement, Franchisor may establish
and maintain an Internet Web site that provides information about the System and
the products and services that System Restaurants offer. The Web site may also
offer reservations or similar services at System Restaurants (including the
Franchised Restaurant) or sales of items identified by the Proprietary Marks,
including clothing, memorabilia, and pre-packaged food items.
(a) Franchisor will have sole discretion and control over the Web
site's design and contents. Franchisor will have no obligation to maintain
the Web site indefinitely, but may discontinue it at any time without
liability to Franchisee. Furthermore, Franchisor has no control over the
stability or maintenance of the Internet generally, Franchisor is not
responsible for damage or loss caused by errors of the Internet. The
Franchisor is not liable for any direct, indirect, special, incidental,
exemplary or consequential damages arising out of the use of the Internet
or the inability to use the Internet including loss of profits, goodwill or
savings, downtime, damage to or replacement of programs and data, whether
based in contract or tort, product liability or otherwise.
(b) Franchisor may use part of the System Fund contributions
designated for advertising to maintain and further develop the Web site.
(c) If Franchisee fails to pay when due any fees or other amounts
payable to Franchisor under this Agreement, Franchisor may temporarily
remove or disable information or functionality relating to Franchisee,
until Franchisee pays its outstanding obligations in full.
(d) Franchisee may not use any of the Proprietary Marks on or in
connection with the Internet, except as permitted by this Section 7.9.
7.10 Intranet. Franchisor may, at its option, establish and maintain either
a series of "private" pages on the Internet Web site, described in Section 7.9,
or a so-called Intranet, through either of which Franchisor, its franchisees,
and their respective employees may communicate with each other and through which
Franchisor may disseminate updates to the Operational Policies and other
confidential information.
(a) Franchisor will have no obligation to maintain the Intranet
indefinitely, but may discontinue it at any time without liability to
Franchisee.
(b) Franchisor will establish policies and procedures for the
Intranet's use. These policies, procedures and other terms of use will
address issues such as (i) restrictions on the use of abusive, slanderous,
or otherwise offensive language in electronic communications; (ii)
restrictions on communications between or among franchisees that endorse or
encourage breach of any franchisee's franchise agreement with Franchisor;
(iii) confidential treatment of materials that Franchisor transmits via the
Intranet; (iv) password protocols and other security precautions; (v)
grounds and procedures for Franchisor's suspension or revocation of access
to the Intranet by Franchisee and others; and (vi) a privacy policy
governing Franchisor's access to and use of electronic communications that
franchisees and others post on the Intranet. Notwithstanding clause (vi),
above, Franchisee acknowledges that, as administrator of the Intranet,
Franchisor can technically access and view any communication that any
person posts on the Intranet. Franchisee further acknowledges that the
Intranet facility and all communications that are posted to it will become
Franchisor's property, free of any claims of privacy or privilege that
Franchisee or any other person may assert.
(c) Upon receipt of notice from Franchisor that the Intranet has
become functional, Franchisee agrees to purchase and install all necessary
additions to the Franchised Restaurant's computer system at Franchisee's
cost and to establish and continually maintain electronic connection with
the Intranet that allows Franchisor to send messages to and receive
messages from Franchisee. Franchisee's obligation to maintain connection
with the Intranet will continue until this Agreement's expiration or
termination (or, if earlier, until Franchisor discontinues the Intranet).
Franchisee's failure to comply with this Section 7.10 will constitute a
material breach of this Agreement on account of which Franchisor may
terminate this Agreement in accordance with Section 13.3.3, unless
Franchisee cures the breach within 10 days after notice from Franchisor.
(d) If Franchisee fails to comply with any policy or procedure
governing the Intranet, Franchisor may temporarily suspend Franchisee's
access to all or any aspect of the Intranet (such as a chat room, bulletin
board, list serve, or similar feature) until Franchisee fully cures the
breach.
8. ADVERTISING
8.1 General Requirements. Recognizing the importance of the standardization
of advertising programs to the furtherance of the goodwill and public image of
the System, Franchisor and Franchisee agree that all advertising by Franchisee
shall be conducted in a commercially acceptable manner and shall conform to such
standards and requirements as Franchisor may specify from time to time in
writing.
8.2 Pre-Approved Advertising. Franchisor may offer from time to time to
provide, upon Franchisee's request and at Franchisee's expense, approved local
advertising and promotional plans and materials, including, without limitation,
newspaper slicks, promotional leaflets and coupons. All such advertising shall
be placed in or distributed through such media or channel of communication as
approved by Franchisor.
8.3 New Advertising. Samples of all planned advertising, not previously
approved by Franchisor, must be submitted to Franchisor (through the mail,
return receipt requested), for Franchisor's prior approval. Upon receipt of such
planned advertising, Franchisor will notify Franchisee no later than fifteen
(15) days after receipt of the proposed advertising whether such advertising has
been approved, with no response being understood as approval. Franchisee shall
not utilize any advertising which has not been approved by Franchisor, or which
has been subsequently disapproved by Franchisor. All such advertising shall be
placed in or distributed through such media or channel of communication as
approved by Franchisor.
8.4 Minimum Advertising Expenditures. Franchisee shall spend during each
calendar quarter a minimum of three percent (3%) of the Gross Sales of the
Franchised Restaurant for local advertising and promotion in Franchisee's
Designated Market Area at least two-thirds (2/3) of which amount shall be spent
for television advertising or advertising in some other form of media approved
by Franchisor. Franchisee shall attempt to spend such amount equally throughout
each month of the calendar quarter.
During the term of this Agreement, Franchisor may, upon ninety (90) days
prior notice to Franchisee, increase the minimum expenditure amount to an amount
not to exceed five percent (5%) of the Gross Sales of the Franchised Restaurant.
The minimum expenditure amount will be reduced by an amount equal to
Franchisee's contributions to: (i) an Advertising Cooperative, and (ii) the
System Fund while the System Fund remains in effect.
8.5 System Fund. Franchisor may, at any time during the term of this
Agreement, establish and/or administer the System Fund. If Franchisor
establishes or has established the System Fund, Franchisee will contribute an
amount described in Section 3.3. Contributions to the System Fund will be paid
at the time and in the manner as described in Section 3.3, and subject to the
late payment charges described in Section 3.5. Franchisor will give Franchisee
at least thirty (30) days' written notice of the establishment of new or
modified System Fund.
Once established, the System Fund will be maintained and administered by
Franchisor or its designee as follows:
(a) The System Fund is intended to maximize general public recognition
and acceptance of the Proprietary Marks, to enhance the collective success
of all System Restaurants and to further develop and maintain the Animated
Entertainment. Franchisor and/or its designees will direct all advertising
and other programs produced using the System Fund, and will have sole
discretion to approve or disapprove the creative concepts, materials, and
media used in those programs, the placement of advertisements, and the
allocation of the money in the System Fund to production, placement, or
other costs. In administering the System Fund, Franchisor and its designees
undertake no obligation to make expenditures for Franchisee which are
equivalent or proportionate to Franchisee's contribution, or to ensure that
Franchisee or any particular System Restaurant benefits directly or pro
rata from the placement of advertising of the expenditure of System Fund
monies.
(b) The System Fund may be used to satisfy any and all costs of
maintaining, administering, directing, preparing purchasing and placing
advertising (including the cost of preparing and conducting television,
radio, magazine, and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; public relations activities; and employing
advertising agencies to assist in those activities), for purchasing,
leasing shipping and installing software programs, for the costs related to
producing show tapes, videos and other audio, video and software components
of the Animated Entertainment, including licensing rights to music and
videos, and for designing, testing and implementing new entertainment
concepts which may not be directly related to Animated Entertainment. All
sums paid by Franchisee to the System Fund will be maintained in a separate
account or accounts by Franchisor and/or its designees and may be used to
defray any of Franchisor's reasonable operating costs and overhead that
Franchisor incurs in activities reasonably related to the administration or
direction of the System Fund and advertising programs for franchisees and
the System. The System Fund and its earnings will not otherwise inure to
the benefit of Franchisor. The System Fund is operated solely as a conduit
for collecting and expending the System Fund fees as outlined above.
Franchisor and its designees have no fiduciary duty to Franchisee, or any
other franchisees, or their respective principals, including Franchisee's
Principals with regard to the operation or administration of the System
Fund.
(c) Franchisor will, with respect to System Restaurants operated by
Franchisor or any affiliate, contribute to the System Fund generally on the
same basis as Franchisee.
(d) A statement of the operations of the System Fund will be prepared
annually and will be made available to Franchisee upon written request.
(e) Although the System Fund is intended to be of perpetual duration,
Franchisor may terminate the System Fund. The System Fund will not be
terminated, however, until all monies in the System Fund have been expended
or returned to contributing System Restaurants (whether franchised or
operated by Franchisor or its affiliates), without interest, on the basis
of their respective contributions.
(f) Franchisor reserves the right to structure the System Fund's
organization and administration in ways that, in Franchisor's judgment,
most effectively and efficiently accomplish the System Fund's objectives.
Franchisor may therefore organize or reorganize the System Fund as a
separate non-profit corporation or other appropriate entity and transfer
the System Fund's assets to the entity to administer the System Fund.
Franchisee agrees to become a member of the entity and, in that regard, to
sign a participation agreement and take such other steps as Franchisor
reasonably specifies.
(g) In the event Franchisor's designee maintains or administers the
System Fund, neither Franchisor nor its officers, directors, employees, or
agents shall be liable to Franchisee for any act, error or omission
committed by such designee or in connection with the designation of such
designee(s).
8.6 Advertising Cooperative. Franchisor shall have the right, in its
discretion, to designate any geographic area (e.g., a Designated Market Area) as
a region for purposes of establishing an Advertising Cooperative to which
Franchisee shall be a member. Such Cooperative will be established and operated
in accordance with an advertising cooperative agreement which is attached hereto
as Attachment D. If, on the date of this Agreement an Advertising Cooperative
has already been established for a geographic area that encompasses the
Franchised Restaurant, or if any Advertising Cooperative for that geographic
area is established during the term of this Agreement, Franchisee will
(immediately upon request of Franchisor) execute Attachment D hereof and any
other documents required by Franchisor to become a member of the Advertising
Cooperative. If the Franchised Restaurant is within the geographic area of more
than one (1) Advertising Cooperative, Franchisee must be a member of only one
(1) Advertising Cooperative as Franchisor designates.
9. 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 maintain stop-transfer instructions against the transfer on
Franchisee's records of any of its equity securities and each stock certificate
will have conspicuously endorsed upon it a statement in a form satisfactory to
Franchisor that it is held subject to all restrictions imposed upon assignments
by this Agreement; but the requirements of this Section 9.1.7 will not apply to
the transfer of equity securities of a publicly-held corporation. If Franchisee
is a partnership or limited liability company, its written partnership or
limited liability company agreement will provide that ownership of an interest
in the partnership or limited liability company is held subject to all
restrictions imposed upon assignments by this Agreement.
If Franchisee is an individual, then Franchisee represents, warrants
and covenants that neither the execution, delivery nor performance by Franchisee
of this Agreement or any other agreements contemplated hereby conflicts with, or
results in a breach of any contract or agreement to which Franchisee is a party
or a breach of any order, writ, injunction or decree of any court,
administrative agency or governmental body.
9.2 Financial Statements. Franchisee and, at Franchisor's request, each of
Franchisee's Principals have provided Franchisor with their most recent
financial statements in the form and for the time periods specified by
Franchisor. The financial statements (i) present fairly Franchisee's financial
position and the financial position of each of Franchisee's Principals, as
applicable, at the dates indicated therein and, with respect to Franchisee, the
results of its operations and cash flow for the periods then ended; (ii) are
certified as true and correct by the Franchisee's Chief Financial Officer or
President, as applicable; and (iii) have been prepared in conformity with
generally accepted accounting principles in the United States, applied on a
consistent basis. No material liabilities, adverse claims, commitments or
obligations of any nature, whether accrued, unliquidated, absolute, contingent
or otherwise, exist as of the date of this Agreement which are not reflected as
liabilities on Franchisee's financial statements or those of Franchisee's
Principals.
9.3 Franchisee's Principals. Franchisee will notify Franchisor within ten
(10) days following the date that any person previously identified as
Franchisee's Principal ceases to qualify as such or that any new person succeeds
to or otherwise comes to occupy a position which would qualify such person as
one of Franchisee's Principals. That person will immediately execute all
documents and instruments (including, as applicable, this Agreement) required by
Franchisor to be executed by others in a comparable position; but if there is
any conflict between this provision and the transfer provisions of Section 11,
the provisions of Section 11 will control.
9.4 Guarantee. Franchisee's Principals will, jointly and severally,
guarantee the performance of Franchisee's obligations, covenants and agreements
under this Agreement pursuant to the terms and conditions of the guaranty
attached to this Agreement, and will otherwise bind themselves to the terms of
this Agreement as stated herein.
9.5 Non-Competition During Term of Agreement. In consideration of the
training described herein and disclosure to Franchisee of the System and the
Confidential Information, during the term of this Agreement, Franchisee and
Franchisee's Principals shall not, directly or indirectly:
(a) Divert or attempt to divert business of any System Restaurant to
any competitor, or do or perform any other act injurious or prejudicial to
the goodwill associated with Franchisor's Proprietary Marks, the Animated
Entertainment or the System;
(b) Employ or seek to employ any person who is employed by Franchisor
or by any other franchisee of Franchisor, or induce such person to leave
such employment; and
(c) Except as provided for herein, own, maintain, engage in, or have
an Equity Interest in a Competing Business; provided that this provision
shall not apply to any Minority Interest collectively held by Franchisee or
Franchisee's Principals in any publicly-held corporation listed on a
national stock exchange.
9.6 Non-Competition after Termination or Non-Renewal of Agreement. In
consideration of the training described herein and disclosure to Franchisee of
the System and the Confidential Information, for a period of three (3) years
after the expiration and non-renewal or termination of this Agreement or after
the approved Transfer by Franchisee and/or Franchisee's Principals, Franchisee
and Franchisee's Principals (as applicable) shall not, directly or indirectly:
(a) Divert or attempt to divert business of any System Restaurant to
any competitor, or do or perform any other act injurious or prejudicial to
the goodwill associated with Franchisor's Proprietary Marks, the Animated
Entertainment or the System;
(b) Employ or seek to employ any person who is employed by Franchisor
or by any other franchisee of Franchisor, or induce such person to leave
such employment; and
(c) Except as provided for herein, own, maintain, engage in, or have
any interest in a Competing Business which is located within the Protected
Territory or within a twenty-five (25) mile radius of the Protected
Territory; provided that this provision shall not apply to any Minority
Interest collectively held by Franchisee or Franchisee's Principals in any
publicly-held corporation listed on a national stock exchange.
9.7 Independent Covenants. Each of the covenants in Sections 9.5 and 9.6
will be construed as independent of any other covenant or provision of this
Agreement.
(a) Franchisee and each of Franchisee's Principals understand and
acknowledge that Franchisor will have the right, in its sole discretion, to
reduce the scope of any covenant set forth in Sections 9.5 and 9.6, or any
portion thereof, without their consent, effective immediately upon notice
to Franchisee; and Franchisee and Franchisee's Principals agree that they
will comply with any covenant as so modified, which will be fully
enforceable notwithstanding the provisions of Section 17.5 hereof.
(b) Franchisee and each of Franchisee's Principals expressly agree
that the existence of any claims they may have against Franchisor, whether
or not arising from this Agreement, will not constitute a defense to the
enforcement by Franchisor of the covenants in Sections 9.5 and 9.6.
(c) Franchisee and each of Franchisee's Principals acknowledge that
the covenants not to compete contained in Sections 9.5 and 9.6 are
reasonable and necessary to protect the business and goodwill of the System
and to avoid misappropriation or other unauthorized use of the System and
Franchisor's other trade secrets.
(d) Franchisee and each of Franchisee's Principals acknowledge and
confirms that Franchisee and Franchisee's Principals possess the education,
training and experience necessary to earn a reasonable livelihood apart
from operating a Competing Business.
9.8 Additional Covenants. Franchisee shall require and obtain for the
benefit of Franchisor execution of covenants similar to those set forth in
Sections 9.5 and 9.6 from any and all of its employees having access to
materials or information furnished or disclosed to Franchisee by Franchisor,
including, without limitation, all managers, assistant managers and directors of
operations.
9.9 Guaranty. As an inducement and as a condition to Franchisor's execution
and acceptance of this Agreement, all of Franchisee's Principals shall execute
the Agreement and Guaranty of Franchisee's Principals attached hereto.
9.10 Rights and Limitations to use Animated Entertainment. Franchisee and
Franchisee's Principals acknowledge and agree that the rights granted to
Franchisee under this Agreement to use Animated Entertainment, including,
without limitation, computer-controlled animated characters, video displays
(regardless of the format of the display, e.g., video tape, video disk, 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
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, which transfer is permitted by and subject to the
terms and conditions set forth in Section 11 hereof.
Franchisee and Franchisee's Principals acknowledge superior rights and
interest of Franchisor in and to the Animated Entertainment. Neither Franchise
nor Franchisee's Principals shall copy or reproduce in any manner and Franchisee
and Franchisee's Principals shall use their best efforts to prevent others from
copying or reproducing in any manner the computer software, video displays,
artistic designs, scripts and musical scores and all other plans,
specifications, documentation and programming related to the Animated
Entertainment and they agree that any duplication or unauthorized use thereof is
and shall be deemed an infringement of the rights of Franchisor.
9.11 Non-Liability. Franchisee acknowledges and agrees that Franchisor
shall not, by virtue of any approvals, advice or services provided to
Franchisee, assume responsibility or liability to Franchisee or any third
parties to which it would not otherwise be subject.
9.12 Performance by Franchisor. Franchisee acknowledges and agrees that any
duty or obligation imposed on Franchisor by this Agreement may be performed by
any designee, employee, or agent of Franchisor, as Franchisor may direct.
9.13 Licensing of Musical Compositions. Franchisee and Franchisee's
Principals understand that Franchisee's right to use certain of the musical
compositions contained in the Animated Entertainment programs is conditioned
upon obtaining licenses from and the payment of fees to performing rights
societies such as the American Society of Composers, Authors and Publishers,
Broadcast Music, Inc. and SESAC, Inc. ("Societies"). Franchisor shall have the
right to obtain and maintain on Franchisee's behalf performing rights licenses
from the Societies as may be required to authorize Franchisee to use such music
at the Franchised Restaurant, and to forward payment on behalf of Franchisee
(for which Franchisee shall reimburse Franchisor as described below) for the
music performance fees due to the Societies under the licenses. Franchisee shall
submit to Franchisor all information necessary to enable Franchisor to submit
any required reports to the Societies and shall promptly reimburse Franchisor
upon demand for all payments which are made on Franchisee's behalf by Franchisor
to the Societies and for which reimbursement is requested by Franchisor. Failure
by Franchisee to comply with the terms of this Paragraph will constitute a
material default pursuant to Section 13.3.4 and will result in Franchisee's loss
of rights to use the musical compositions in Animated Entertainment programs.
10. 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 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 acknowledges and agrees that:
(a) The Proprietary Marks will only be used by Franchisee in
connection with the operation of the Franchised Restaurant under the System
and only in the manner authorized and prescribed by Franchisor herein or by
written notification.
(b) Except for the non-exclusive license to use granted herein,
Franchisee and Franchisee's Principals acquire no right, title or interest
in (or any goodwill associated with) the System, the Proprietary Marks and
the Animated Entertainment.
(c) Upon the expiration or termination of this Agreement, no monetary
amount shall be assigned as attributable to any goodwill associated with
Franchisee's use of the System, the Proprietary Marks or the Animated
Entertainment and all goodwill associated with Franchisees' use of the
System, the Proprietary Marks and the Animated Entertainment will inure to
the benefit of Franchisor or Franchisor's licensors, as the case may be.
(d) Franchisee and Franchisee's Principals shall promptly notify
Franchisor of any use by any third party of the Proprietary Marks of which
the Franchisee and Franchisee's Principals know or have reason to know is
unauthorized.
(e) Franchisee and Franchisee's Principals shall promptly notify
Franchisor of any litigation action or claim instituted by any person or
legal entity against Franchisor, Franchisee or Franchisee's Principals
involving the Proprietary Marks and, if necessary, shall execute any and
all documents, and to render such assistance as may, in the opinion of
Franchisor's counsel, be reasonably requested to carry out such defense or
prosecution.
(f) Franchisee shall operate, advertise and promote the Franchised
Restaurant under the Proprietary Marks designated by Franchisor, without
prefix or suffix, and shall use no other name or ▇▇▇▇ and shall refrain
from using any of the Proprietary Marks in conjunction with any word or
symbol without Franchisor's prior written consent. Franchisee shall not use
the Proprietary Marks as part of its corporate or other legal name, and
will obtain Franchisor's approval of its corporate or other legal name
before applying for or filing it with the applicable government authority.
(g) This license to use the Proprietary Marks is non-exclusive, and
Franchisor has the right: (i) to grant other franchises for the Proprietary
Marks, in addition to those franchises already granted to existing
franchisees, (ii) to use the Proprietary Marks in connection with the sale
of food and other products through the Internet or at wholesale and/or
retail outlets in the Protected Territory, and (iii) to develop and
establish other systems for the same or similar products and services
utilizing the same Proprietary Marks, or any similar or other proprietary
marks, and to grant licenses thereto without providing Franchisee any right
therein.
(h) Franchisee will use, promote and offer for sale under the
Proprietary Marks only those products and services which meet Franchisor's
prescribed standards and specifications, as they may be revised by
Franchisor from time to time.
(i) Franchisee will execute all documents requested by Franchisor or
its counsel that are necessary to obtain protection for the Proprietary
Marks or to maintain their continued validity or enforceability and to take
no action that would jeopardize the validity or enforceability thereof.
10.3 Copyrights. Franchisee and Franchisee's Principals acknowledge that
Franchisor owns the worldwide copyright and other ownership rights to all
materials provided by Franchisor (in all forms or media now or hereafter known)
including, without limitation the Operational Policies, the Animated
Entertainment, promotional materials and software. Franchisee also agrees:
(a) If registration of the copyright of any of the materials mentioned
above is required by law or deemed advisable by Franchisor, Franchisee
agrees to cooperate with and assist Franchisor in obtaining the
registration in the name of Franchisor and will not register or attempt to
register or assist or be involved in any way with the registration (either
directly or indirectly) of such materials;
(b) Franchisee agrees to use proper copyright and other proprietary
notices in connection with all copyright materials and conform with
Franchisor's standards for protecting its rights; and
(c) Franchisee agrees to promptly cause the execution of any
assignments, waivers of rights, or other documents, and take any further
actions needed or advisable to ensure that Franchisor has such copyright
and other rights described in this Section 10.
11. TRANSFER OF INTEREST
11.1 Transfer by Franchisor. Franchisor shall have the right to transfer or
assign this Agreement, its rights to the Proprietary Marks, and all or any part
of its rights or obligations herein to any person or legal entity without the
consent of Franchisee or Franchisee's Principals. Upon such transfer by
Franchisor, any transferee or assignee of Franchisor shall become solely
responsible for all such obligations of Franchisor under this Agreement from the
date of transfer or assignment. Without limiting the foregoing, Franchisee
acknowledges that Franchisor may sell its assets (including its rights in the
Proprietary Marks and the System) to a third party; may offer its securities
privately or publicly; may merge, acquire other legal entities or be acquired by
another legal entity; and may undertake a refinancing, recapitalization,
leveraged buy out or other economic or financial restructuring. With regard to
any or all of the above sales, assignments and dispositions, Franchisee
expressly and specifically waives any claims, demands, or damages against
Franchisor or its affiliates arising from or related to Franchisor's transfer of
its rights in this Agreement, the Proprietary Marks or the System to any other
party. Nothing contained in this Agreement will require Franchisor to remain in
the business of operating or licensing the operation of the System Restaurants
or other businesses or to offer any services or products to Franchisee, whether
or not bearing or not bearing the Proprietary Marks, if Franchisor transfers or
assigns its rights in or obligations under this Agreement.
11.2 Transfer by Franchisee. Franchisee and Franchisee's Principals
understand and acknowledge that the rights and duties set forth in this
Agreement are personal to Franchisee and are granted, in part, in reliance upon
the skill, aptitude, business and financial capacity of Franchisee and
Franchisee's Principals and their intention of complying with its terms and
conditions. Therefore, if the Franchisee and/or Franchisee's Principals desire
to Transfer any interest to any individual or entity (including a trust), they
must first obtain the prior written approval of Franchisor. Any such attempted
Transfer not approved by Franchisor shall be null and void from its purported
inception.
11.2.1 General Requisites. Prior to authorizing a Transfer by
Franchisee of any interest, Franchisor may require, among other things,
satisfaction of any or all of the following:
(a) Franchisee shall be in full compliance with all of the terms
and conditions of this Agreement;
(b) Franchisee and/or any of Franchisee's Principals shall remain
liable for the performance of its obligations contained in this
Agreement through the date of Transfer and shall execute all
instruments reasonably requested by Franchisor to evidence such
liability;
(c) The transferee shall satisfy, in Franchisor's reasonable
judgment, Franchisor's then existing criteria for a franchisee
including, without limitation: (i) education; (ii) business skill,
experience and aptitude; (iii) character and reputation; and (iv)
financial resources;
(d) The transferee and all owners of any record or beneficial
interest in the capital stock (or other interest) of transferee shall
execute all instruments (including a new franchise agreement and
guaranty) reasonably requested by Franchisor to evidence acceptance
and assumption of all of the terms and conditions of this Agreement.
Such new franchise agreement may contain terms materially different
from this Agreement, including higher fees and shall be for a term
equal to the then unexpired term hereof; and
(e) Franchisee and Franchisee's Principals (if applicable) must
have executed a general release, in a form satisfactory to Franchisor,
of any and all claims against Franchisor, its affiliates, and the
officers, directors, members, shareholders, partners, agents,
representatives, independent contractors, servants and employees of
each of them, in their corporate and individual capacities, including,
without limitation, claims arising under this Agreement and any other
agreement between Franchisee or any of Franchisee's affiliates and
Franchisor or any of its affiliates or under federal, state or local
laws, rules, regulations or orders. Franchisor's current form of
general release is attached hereto as Attachment B.
(f) Franchisee pays a transfer fee equal to (i) one half (1/2) of
the then current initial Franchise Fee for franchise agreements if the
Franchisee does not have a Controlling Interest in the transferee (who
is not one of Franchisee's Principals); or (ii) an amount equal to the
reasonable costs incurred by Franchisor in connection with the
Transfer among Franchisee's Principals only, but in no event less than
One Thousand and no/100 Dollars ($1,000.00);
(g) At the transferee's expense, the transferee and any of the
transferee's employees responsible for the operation of the Franchised
Restaurant have satisfactorily completed such training as Franchisor
may then require; and
(h) The transferee has complied with Franchisor's then-current
application requirements for a new franchise.
11.2.2 Right of First Refusal. In the event that Franchisee and/or any
of Franchisee's Principals or any holder of an Equity Interest in Franchisee
desire to effectuate a Transfer, Franchisor shall have the right and option,
exercisable within thirty (30) days after Franchisor's receipt of all materials
and information described in Section 11.2.2(a), (b) and (c) to purchase the
interest proposed to be transferred in accordance with the following:
(a) Franchisee or the proposed transferee shall notify Franchisor
in writing of any bona fide proposed Transfer and set forth a complete
description of all terms and fees of the proposed Transfer in the
manner prescribed by the Franchisor, including the prospective
transferee's name, address, financial qualifications and previous five
years business experience;
(b) Franchisee shall provide the Franchisor with any additional
information, agreements, certifications or documents Franchisor
requests for use in its evaluation of whether to exercise its first
refusal right.
(c) Upon receipt of the Franchisor's request, Franchisee or the
proposed transferee shall promptly provide Franchisor with access to
any real or personal property, documents or records relevant to the
transaction and to the interest which is the subject of the Transfer.
Once Franchisor has received all materials submitted by Franchisee or
the proposed transferee and has reviewed all property, records and
documents it has requested, Franchisor shall notify Franchisee or the
proposed transferee of its decision to exercise its option to acquire
the interest being transferred, and the conditions, if any, under
which it will approve the proposed Transfer.
(d) If the Franchisor exercises its first refusal right, the
transferor shall transfer the interest to Franchisor or to its
assignee pursuant to an agreement to purchase which contains the
material terms to which the transferor and the proposed transferee had
agreed. If the offer or proposed purchase contract omitted any terms
customarily addressed in a transfer of an interest of the type which
is the subject of the transaction, Franchisor may supply those terms
in the purchase agreement and related documents.
(e) If the proposed transferor wishes to make a Transfer, the
transferor shall provide Franchisor with a copy of any offer or
agreement to purchase, signed by the proposed transferee, together
with copies of any documents referenced in the offer or agreement. If
all material terms of the proposed sale are not described in the offer
or agreement, Franchisee shall provide details of all such terms in
its submission to the Franchisor, accompanied by the proposed
transferee's written agreement to the terms.
(f) In the event the consideration, terms, and/or conditions
offered by the third party are such that Franchisor or its nominee may
not reasonably be able to furnish the same consideration, terms,
and/or conditions, then Franchisor or its nominee, as appropriate, may
purchase the interest proposed to be transferred for the reasonable
equivalent in cash. If the parties cannot agree, within a reasonable
time, on the reasonable equivalent in cash of the consideration,
terms, and/or conditions offered by the third party, an independent
appraiser shall be designated by Franchisor, and such appraiser's
determination shall be binding.
11.2.3 Death or Disability. Within fifteen (15) days after the death
or permanent disability of Franchisee or any of Franchisee's Principals,
Franchisee or a representative of Franchisee must notify Franchisor in writing.
Any transfer upon death or permanent disability will be subject to the same
terms and conditions as described in this Section for any inter vivos transfer.
Upon the death of Franchisee (if a natural person) or any Franchisee's
Principal who is a natural person and who has an interest in this Agreement, in
the Franchised Restaurant, or in Franchisee, the executor, administrator, or
other person representative of the deceased will transfer the interest of the
deceased to a third party approved by Franchisor within twelve (12) months after
the date of death. If no personal representative is designated or appointed and
no probate proceedings are instituted with respect to the estate of the
deceased, then the distributee of the interest of the deceased must be approved
by Franchisor. If the distributee is not approved by Franchisor, then the
distributee will transfer the interest of the deceased to a third party approved
by Franchisor within twelve (12) months after the date of death of the deceased.
Upon the permanent disability of Franchisee (if a natural person) or
any of Franchisee's Principals who is a natural person and who has an interest
in this Agreement, in the Franchised Restaurant or in Franchisee, Franchisor may
require the interest to be transferred to a third party in accordance with the
conditions described in this Section 11 within six (6) months after notice to
Franchisee. For purposes of this Section 11.2.3, "permanent disability" means
any physical, emotional, or mental injury, illness, or incapacity that would
prevent a person from performing the obligations set forth in this Agreement or
in the Guaranty made part of this Agreement for at least ninety (90) consecutive
days, and from which condition recovery within ninety (90) days from the date of
determination of disability is unlikely. If the parties disagree as to whether a
person is permanently disabled, the existence of permanent disability will be
determined by a licensed practicing physician selected by Franchisor, upon
examination of the person; or if the person refuses to submit to an examination,
then (for the purpose of this Section 11.2.3) the person automatically will be
considered permanently disabled as of the date of refusal. The costs of any
examination required by this Section 11.2.3 will be paid by Franchisor.
If an interest is not transferred upon death or permanent disability
as required in this Section 11.2.3 then the failure will constitute a material
event of default under this Agreement.
11.2.4 Public Offerings. Equity Interests in Franchisee and
Franchisee's Principals may be offered, only with the prior written consent of
Franchisor, which consent shall not be unreasonably withheld. Such approval will
be subject to the following:
(a) All registration materials required for such offering by
federal or state law shall be submitted to Franchisor for review prior
to their being filed with any government agency;
(b) No offering material (for either a public or private
offering) shall express or imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in an underwriting,
issuance or public offering of Franchisee, Franchisee's Principals, or
Franchisor securities. Franchisor may, at its option, require such
offering materials to contain a written statement prescribed by
Franchisor concerning the limitations described in the preceding
sentence;
(c) Franchisee, Franchisee's Principals and the other
participants in the registration and offering must fully indemnify
Franchisor in connection with the offering;
(d) For each proposed public offering, other than offerings which
are exempt from registration, Franchisee shall pay to Franchisor a
non-refundable fee of Ten Thousand and no/100 Dollars ($10,000.00) or
such greater amount as is necessary to reimburse Franchisor for its
reasonable costs and expenses associated with reviewing the proposed
offering, including, without. limitation, legal and accounting fees;
(e) Franchisor's receipt of a legal opinion from counsel
satisfactory to Franchisor stating (a) that the offering materials and
the conduct of the securities offering comply in all material respects
with the laws of the applicable Territory Segment from which an offer
of securities originates or into which an offer of securities is
directed, and (b) that neither the conduct nor consummation of the
securities offering will result in a violation of any anti-terrorism
or anti- money laundering laws.
(f) Franchisee and Franchisee's Principals shall give Franchisor
at least sixty (60) days' prior written notice before the effective
date of any offering or other transaction covered by this Section
11.2.4.
12. INSURANCE AND INDEMNITY
12.1 Insurance. Prior to the commencement of construction of the Franchised
Restaurant and for the entire term of this Agreement, Franchisee shall obtain
and maintain insurance protecting Franchisee and the Indemnitiees against any
demand or claim arising or occurring in connection with the construction and
operation of the Franchised Restaurant. Such policies shall: (i) be of the types
and for the minimum amounts of coverage indicated in the Operational Policies;
(ii) contain a waiver of subrogation in favor of Franchisor; (iii) name the
Indemnitees as additional insureds; (iv) contain no provision which limits or
reduces coverage in the event of a claim by any one (1) or more of the
Indemnitees; (v) provide that policy limits shall not be reduced, coverage
restricted, canceled, allowed to lapse or otherwise altered or such policy(ies)
amended without Franchisor's consent; and (vi) be obtained from reputable
insurance companies approved by Franchisor and authorized to do business in all
jurisdictions in which the Franchised Restaurant is located. Franchisee also
acknowledges and agrees to:
(a) furnish Franchisor with evidence that Franchisee has obtained the
required insurance at least fifteen (15) days prior to the commencement of
construction, and each year afterwards, and at any other time a carrier or
coverage is changed;
(b) increase the insurance coverage amounts in the amounts indicated
by Franchisor upon thirty (30) days prior written notice from Franchisor;
and
(c) reimburse Franchisor for any insurance policies obtained by
Franchisor on behalf of Franchisee if Franchisee fails to obtain the
insurance required by this Section.
12.2 Indemnities.
12.2.1 Indemnification. Franchisee and Franchisee's Principals agree
to and hereby, jointly and severally, indemnify, defend (by counsel chosen by
Franchisor) and agree to hold harmless each Indemnitee from all Losses and
Expenses alleged, incurred or assessed in connection with:
(a) Franchisee's or any Franchisee's Principal's alleged
infringement or alleged violation of any trademark or other
proprietary name, ▇▇▇▇, or right allegedly owned or controlled by a
third party;
(b) The violation, breach or asserted violation or breach, by
Franchisee or any of Franchisee's Principals, of any federal, state or
local law, regulation, ruling, standard or directive or any industry
standard;
(c) Libel, slander or any other form of defamation of Franchisor,
the System or any franchisee operating under the System, by Franchisee
or by any of Franchisee's Principals;
(d) The violation or breach by Franchisee or any of Franchisee's
Principals, of any warranty, representation, agreement or obligation
in this Agreement or in any other agreement, between Franchisee, its
subsidiaries and affiliates and Franchisor, its subsidiaries and
affiliates or the officers, directors, shareholders, partners, agents,
representatives, independent contractors and employees thereof; and
(e) Acts, errors or omissions of Franchisee, any of Franchisee's
subsidiaries or affiliates or any of Franchisee's Principals and the
officers, directors, shareholders, partners, agents, representatives,
independent contractors and employees of Franchisee and its
subsidiaries and affiliates in connection with the activities
contemplated under this Agreement, including the operation of the
Franchised Restaurant.
12.2.2 Notice and Counsel. Franchisee and each of Franchisee's
Principals agree to give Franchisor immediate notice of any Action. Franchisor
may engage, at its expense, separate counsel to represent the Indemnitees in
such Action and/or elect to assume (but under no circumstance is obligated to
undertake) the defense and/or reasonable settlement of any Action. Franchisor's
election to settle shall not diminish Franchisee's and each of Franchisee's
Principal's obligation to defend, indemnify and hold the Indemnitees harmless
from all Losses and Expenses.
12.2.3 Settlement and Remedial Actions. In order to protect persons
or property, or its reputation or goodwill, or the reputation or goodwill of
others, Franchisor may, at any time and without notice, as it, in its judgment
deems appropriate, consent or agree to settlements or take such other remedial
or corrective actions it deems expedient with respect to any Action if, in
Franchisor's sole judgment, there are reasonable grounds to believe that:
(a) any of the acts or circumstances enumerated in Section 12.2.1
((a) through (d)) above have occurred; and
(b) any act, error, or omission as described in Section 12.2.1
(e) may result directly or indirectly in damage, injury, or harm to
any person or any property.
12.2.4 Expenses. All Losses and Expenses incurred under this
Section 12 shall be chargeable to and paid by Franchisee or any of Franchisee's
Principals pursuant to Franchisee's obligations of indemnity under this
Section 12 regardless of any actions, activity or defense undertaken by
Franchisor or the subsequent success or failure of such actions, activity, or
defense.
12.2.5 Third Party Recovery. Under no circumstances shall the
Indemnitees be required or obligated to seek recovery from third parties or
otherwise mitigate their losses in order to maintain a claim against Franchisee
or any of Franchisee's Principals. Franchisee and each of Franchisee's
Principals agree that the failure to pursue such recovery or mitigate loss will
in no way reduce the amounts recoverable from Franchisee or any of Franchisee's
Principals by the Indemnitees.
12.2.6 Survival. Franchisee and Franchisee's Principals expressly
agree that the terms of this Section 12 shall survive the termination,
expiration or transfer of this Agreement or any interest herein.
13. TERM, RENEWAL AND TERMINATION
13.1 Term. Unless terminated as provided for herein, the term of this
Agreement shall commence upon the Execution Date and shall expire fifteen (15)
years thereafter.
13.2 Renewal. Franchisee may, at Franchisee's option, renew this Agreement
for one (1) additional period of ten (10) years, provided that at the end of the
initial term:
(a) Franchisee has given Franchisor written notice of election to
renew not less than nine (9) months nor more than twelve (12) months prior
to the end of the initial term;
(b) Franchisee shall have completed to Franchisor's satisfaction all
maintenance, refurnishing, renovating and remodeling of the premises and
equipment as Franchisor shall require in order to meet Franchisor's
then-current standards for System Restaurants;
(c) Franchisee is in compliance with all of the terms of this
Agreement and any other agreement between Franchisee and Franchisor;
(d) Franchisee shall have executed upon renewal hereunder Franchisor's
then current form of franchise agreement, which agreement may have
different terms from this Agreement including, without limitation, the
royalty fee, contributions and System assessments, for a term equal to the
renewal terms hereof (unless otherwise agreed to by Franchisor), and any
other ancillary agreements as Franchisor may then require; provided,
however, Franchisee shall be required to pay, in lieu of the then-current
initial Franchise Fee, a renewal fee which shall be fifty percent (50%) of
the then-current initial Franchise Fee as then charged by Franchisor; and
(e) Franchisee and Franchisee's Principals shall execute a general
release, in a form prescribed by Franchisor, of any and all claims the
against the Indemnitees. Franchisor's current form of general release is
attached hereto as Attachment B.
13.3 Termination.
13.3.1 Automatic Termination. Franchisee will be in default under
this Agreement, and all rights granted by this Agreement will automatically
terminate without notice to Franchisee:
(a) If Franchisee becomes insolvent or makes a general assignment
for the benefit of creditors;
(b) If Franchisee files a voluntary petition under any section or
chapter of the federal bankruptcy law or under any similar law or
statute of the United States or any state, or admits in writing its
inability to pay its debts when due;
(c) If Franchisee is adjudicated bankrupt or insolvent in
proceedings filed against Franchisee under any section or chapter of
the federal bankruptcy laws or under any similar law or statute of the
United States or any state; or if a ▇▇▇▇ in equity or other proceeding
for the appointment of a receiver of Franchisee or other custodian for
Franchisee's business or assets is filed and consented to by
Franchisee; or if a receiver or other custodian (permanent or
temporary) of Franchisee's assets or property, or any part thereof, is
appointed by any court of competent jurisdiction;
(d) If proceedings for a composition with creditors under any
state or federal law is instituted by or against Franchisee;
(e) If a final judgment against Franchisee in any amount
Franchisor deems material (but in no event more than $25,000.00)
remains unsatisfied or of record for thirty (30) days or longer
(unless a supersedeas bond is filed);
(f) If Franchisee is dissolved;
(g) If Franchisee, or any of Franchisee's Principals, makes any
offer, attempts to offer, solicits an offer, or takes steps to offer
publicly any interest in Franchisee in violation of Section 11 of this
Agreement;
(h) If execution is levied against Franchisee's business or
property in any amount Franchisor deems material (but in no event more
than $25,000.00);
(i) If suit to foreclose any lien or mortgage against the
Franchised Restaurant premises or equipment in any amount Franchisor
deems material (but in no event more than $25,000.00) is instituted
against Franchisee and not dismissed within thirty (30) days; or
(j) If the real or personal property of Franchised Restaurant
will be sold after levy thereupon by any sheriff, marshal, or
constable.
13.3.2 Termination upon Notice. This Agreement shall terminate
immediately upon notice from Franchisor to Franchisee and without providing
Franchisee the right to cure such default, if Franchisee:
(a) Ceases to do business at the Franchised Restaurant;
(b) Or any of Franchisee's Principals cause a threat or danger to
the public health or safety in the construction or operation of the
Franchised Restaurant;
(c) Or any of Franchisee's Principals is convicted of, or pleads
nolo conendere to a felony or any other crime or offense that is
reasonably likely, in the opinion of Franchisor, to adversely affect
the System, the Proprietary Marks, the Animated Entertainment, the
goodwill associated therewith, or Franchisor's interest therein;
(d) Or any of Franchisee's Principals copies or duplicates any
Animated Entertainment programs or materials or purports to transfer
ownership or possession of any Animated Entertainment components or
materials without the prior written consent of Franchisor;
(e) Or any of Franchisee's Principals, except as described in
Section 13.3.1(g), violates the requirements for Transfers contained
in Section 11;
(f) Or any of Franchisee's Principals, as applicable, fails to
comply with the representations and warranties in Sections 9 and 17
hereof;
(g) Or any of Franchisee's Principals discloses or divulges the
contents of the Operational Policies or other trade secret or
confidential information provided Franchisee by Franchisor contrary to
the provisions of this Agreement;
(h) Fails to maintain the insurance(s) required by Section 12;
(i) Knowingly maintains false books or records, or submits any
false reports to Franchisor;
(j) Operates the Franchised Restaurant or sells products or
services authorized by Franchisor for sale at the Franchised
Restaurant from a location which has not been approved by Franchisor;
(k) Fails to construct or refurbish the Franchised Restaurant in
accordance with Section 5 hereof;
(l) Fails to open the Franchised Restaurant for business as a
System Restaurant by the date described in Section 5.9;
(m) At any time ceases to operate or otherwise abandons the
Franchised Restaurant, or loses the right to possession of the
premises, or otherwise forfeits the right to do or transact business
in the jurisdiction where the Franchised Restaurant is located. This
provision will not apply if through no fault of Franchisee, the
premises are damaged or destroyed by an event of Force Majeure,
provided that Franchisee applies for Franchisor's approval to relocate
or reconstruct the premises within thirty (30) days after the event
and Franchisee diligently pursues the reconstruction or relocation
after Franchisor's approval. Franchisor will not unreasonably withhold
its approval to relocate or reconstruct the premises after an event of
Force Majeure, but Franchisor may condition its approval upon
Franchisee's payment of an agreed minimum fee to Franchisor during the
period in which the Franchised Restaurant is not in operation;
(n) Or any of Franchisee's Principals fails to comply with the
in-term covenants in Section 9.5 or if Franchisee fails to obtain
execution of the covenants and related agreements required under
Section 9.8 within thirty (30) days after being requested to do so by
Franchisor;
(o) Misuses or makes any unauthorized use of the Proprietary
Marks or otherwise materially impairs the goodwill associated
therewith or Franchisor's rights therein and Franchisee fails to cure
that default within twenty-four (24) hours after notice from
Franchisor;
(p) Or Franchisee's Principals engage in any act, conduct, or
practice which Franchisor, in its sole judgment, deems to be
deceptive, misleading, unethical or otherwise contrary to or in
conflict with the reputation and image of the System; or
(q) Fails to cure any default of which it has been given prior
notices on two (2) occasions.
13.3.3 Termination with Ten Day Notice. Franchisee shall have ten (10)
days after its receipt from Franchisor of a written notice to remedy
Franchisee's failure, refusal, or neglect to pay promptly any monies due under
this Agreement or to submit the financial information or other reports required
by Franchisor under this Agreement. If such default is not cured within that
time, this Agreement shall terminate without further notice to Franchisee
effective immediately upon the expiration of the ten (10) day period.
13.3.4 Termination with Thirty Day Notice. Except as otherwise
provided in this Section 13, Franchisee shall have thirty (30) days after its
receipt from Franchisor of a written notice within which to remedy any default
of the terms of this Agreement and the attachments hereunder and provide
evidence thereof to Franchisor. If any such default is not cured within that
time, this Agreement shall terminate without further notice to Franchisee
effective immediately upon the expiration of the thirty (30) day period.
13.4 Obligations upon Termination or Expiration. Upon termination or
expiration of this Agreement for any reason, all rights of Franchisee under this
Agreement will immediately terminate and Franchisee will have the following
duties which will survive termination of this Agreement:
(a) Amounts Due. Franchisee will promptly pay to Franchisor and its
affiliates all sums due under this Agreement and any other agreements,
including, without limitation, all damages, costs, expenses, and reasonable
attorneys' fees incurred by Franchisor by reason of default on the part of
Franchisee, whether or not the expenses occur before or after the
termination or expiration of this Agreement;
(b) Franchised Restaurant. Franchisee will immediately cease to
operate the Franchised Restaurant and cease to use the Proprietary Marks,
the Animated Entertainment, the System, and the Operational Policies in any
manner including any advertising, equipment, format, confidential methods,
procedures and techniques associated with the Franchised Restaurant, the
Proprietary Marks, the Animated Entertainment, the System, and the
Operational Policies, and shall not thereafter hold itself out as a former
franchisee of Franchisor;
(c) Operational Policies. Franchisee shall immediately return all
manuals, including the Operational Policies, records, files, instructions,
correspondence, all materials related to operating the Franchised
Restaurant, and shall retain no copy or record of any of the foregoing,
excepting only Franchisee's copy of this Agreement and of any
correspondence between the parties, and any other documents which
Franchisee and Franchisee's Principals reasonably need for compliance with
any provision of law;
(d) Proprietary Marks. Franchisee will immediately cease to use in any
manner whatsoever, any Proprietary Marks and distinctive trade dress,
forms, slogans, signs, symbols, devices, or animated character costumes
associated with the System;
(e) Assumed Name. Franchisee shall take such action as may be
necessary to cancel any assumed name or equivalent registration which
contains any of the Proprietary Marks, and Franchisee and Franchisee's
Principals shall furnish Franchisor with evidence satisfactory to
Franchisor of compliance with this obligation within thirty (30) days after
termination or expiration of this Agreement; and
(f) Payments. Franchisee and Franchisee's Principals will promptly pay
all sums owing to Franchisor and its affiliates, including all damages,
costs, and expenses, including reasonable attorneys' fees, incurred by
Franchisor as a result of any default by Franchisee. Until those amounts
are paid in full, the obligation to pay them will give rise to and remain a
lien in favor of Franchisor against all of the personal property,
furnishings, equipment, signs, fixtures, and inventory owned by Franchisee
and on the premises of the Franchised Restaurant at the time of default.
In addition, Franchisee and Franchisee's Principals will pay to
Franchisor all damages, costs, and expenses, including reasonable
attorneys' fees, incurred by Franchisor in connection with obtaining any
remedy available to Franchisor for any violation of this Agreement and
subsequent to the termination or expiration of this Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this
Section13.4.
(g) Confidentiality and Non-Competition. Franchisee and Franchisee's
Principals will comply with the non-competition covenants and the
restrictions on confidential information contained in Sections9.6 and 10.1
of this Agreement. Any other person required to execute similar covenants
pursuant to Sections9.8 and 10.1 will also comply with those covenants.
(h) Leases. If Franchisee leases the Franchised Restaurant premises or
leases any equipment used in the operation of the Franchised Restaurant
from a third party, then Franchisee will, at Franchisor's option, assign to
Franchisor any interest that Franchisee has in the lease or sublease.
Franchisor may exercise this option at any time within thirty (30) days
from and including either the date of termination or (subject to any
existing right to renew) expiration of this Agreement. The time for closing
on the assignment of the lease described in this Section13.4(h) will be on
the date of or no later than ten (10) days after Franchisor's exercise of
its option hereunder unless Franchisor is also exercising its purchase
options under Section13.4(i), in which case the date of the closing will be
on the same closing date prescribed for the purchase option. In any event,
closing will take place at Franchisor's corporate offices or at such other
location Franchisor may designate.
(i) Purchase Options. Except as provided in Section13.4(h) (with
respect to leased equipment), Franchisor will have the option, to be
exercised within thirty (30) days from and including either the date of
termination or expiration of this Agreement (unless appraisals are needed
as described below, in which case such option shall be exercised within
thirty (30) days after such appraisals are provided), to purchase from
Franchisee any or all of the furnishings, equipment, signs, fixtures, motor
vehicles, supplies, and inventory of Franchisee related to the operation of
the Franchised Restaurant, at Franchisee's cost or fair market value,
whichever is less. Franchisor will purchase Franchisee's assets only and
will assume no liabilities whatsoever, unless otherwise agreed to in
writing by the parties. If the parties cannot agree on the fair market
value within thirty (30) days after Franchisor's exercise of its option,
fair market value will be determined by two appraisers, with each party
selecting one appraiser, and the average of their determinations will be
binding. In the event of such appraisal, each party will bear its own legal
and other costs and will split the appraisal fees equally. Within thirty
(30) days after Franchisor's receipt of such appraisal, the parties
agreement as to fair market value or Franchisor's receipt of such
information and materials from Franchisee as Franchisor may prescribe
evidencing Franchisee's cost, as applicable, Franchisor shall have the
right to rescind its exercise of such option. If Franchisor elects to
exercise any option to purchase herein provided, it will have the right to
set off all amounts due from Franchisee to Franchisor or any of its
affiliates (including any costs for the appraisal) and any costs incurred
in connection with any escrow arrangement (including reasonable legal fees)
against any payment therefor and will pay the remaining amount in cash.
With respect to the option described in this Section13.4(i)
Franchisee will deliver to Franchisor, in a form satisfactory to
Franchisor, such warranties, deeds, releases of lien, bills of sale,
assignments, and any other documents and instruments necessary in order to
perfect Franchisor's title and possession in and to the properties being
purchased or assigned and to meet the requirements of all tax and
government authorities. If, at the time of closing, Franchisee has not
obtained all of these certificates and other documents, Franchisor may, in
its sole discretion, place the purchase price or rent in escrow pending
issuance of any required certificates or documents.
The time for closing of the purchase and sale of the properties
described in this Section13.4(i) will be a date not later than sixty (60)
days after the purchase price is determined by the parties or the
determination of the appraisers, or such date Franchisor receives and
obtains all necessary permits and approvals, whichever is later, unless the
parties mutually agree to designate another date. Closing will take place
at Franchisor's corporate offices or at such other location as Franchisor
may designate.
(j) Modification of Premises. If Franchisor does not elect to exercise
the options under Sections13.4(h) or 13.4(i) as applicable, to acquire the
lease or sublease for the Franchised Restaurant premises, then Franchisee
will make all modifications or alterations to the Franchised Restaurant
premises that are necessary to distinguish the appearance of the Franchised
Restaurant from that of other System Restaurants and will make any specific
additional changes that Franchisor reasonably requests. If Franchisee fails
or refuses to comply with the requirements of this Section13.4(j), then
Franchisor may enter upon the premises of the Franchised Restaurant,
without being guilty of trespass or any other crime or tort, to make or
cause to be made the changes required, at the expense of Franchisee, which
expense Franchisee agrees to pay upon demand.
(k) Assignments. If requested by Franchisor, Franchisee will (at
Franchisee's expense) assign to Franchisor all rights to the: (i) telephone
numbers of the Franchised Restaurant and any related Yellow Pages or other
business listings; and (ii) all e-mail addresses, URLs, domain names,
Internet listings, and Internet accounts related to the Franchised
Restaurant. Franchisee will execute all forms and documents required by
Franchisor, by any telephone company, or by any Internet service provider
at any time to transfer those services and numbers to Franchisor. In
addition to any forms and documents which may have been executed by
Franchisee hereunder, Franchisee hereby appoints Franchisor its true and
lawful agent and attorney-in-fact with full power and authority for the
sole purpose of taking such action as is necessary to complete these
assignments. This power of attorney will survive the expiration or
termination of this Agreement. Franchisee will thereafter use different
telephone numbers and e-mail addresses or listings at or in connection with
any subsequent business conducted by Franchisee.
(l) Cease to Use and Cease to Operate. For purposes of the Section
13.4, "cease to use" as referring to the Proprietary Marks, Animated
Entertainment, System, Operational Policies, and distinctive trade dress,
forms, slogans, signs, symbols and devices or animated character costumes
associated with the System, shall include without limitation, refraining
from deriving any economic benefit therefrom or displaying to the public
and, at Franchisor's option and as applicable, destroying or relinquishing
and delivering to Franchisor or its designee title and possession of the
Animated Entertainment, all items bearing the Proprietary Marks, the
Operational Policies and all embodiments thereof, and any distinctive trade
dress, forms, slogans, signs, symbols, devices, or animated character
costumes associated with the System. "Cease to Operate" as referring to the
Franchised Restaurant shall include, without limitation, refraining from
offering or selling any goods or services therefrom.
14. REMEDIES
14.1 Remedies. Upon the occurrence of an uncured breach, Franchisor may
exercise one or more of the following remedies or such other remedies as may be
available at law or in equity:
14.1.1 Cure. Franchisor, at Franchisor's discretion and without
obligation, may cure such breach at Franchisee's expense and, in connection
therewith, Franchisee (i) hereby grants to Franchisor all rights and powers
necessary or appropriate to accomplish such cure; (ii) shall indemnify and hold
the Indemnitees harmless from and against all costs, expenses (including
reasonable fees of counsel and other engaged professionals), liabilities,
claims, demands and causes of action (including actions of third parties)
incurred by or alleged against any Indemnitee in connection with Franchisor's
cure; and (iii) shall reimburse or pay such costs or damages within ten (10)
days of receipt of Franchisor's invoice therefor; or
14.1.2 Specific Enforcement. Franchisor may, in addition to pursuing
any other remedies, specifically enforce Franchisee's and Franchisee's
Principal's obligations, covenants and agreements or obtain injunctive or other
equitable relief in connection with the violation or anticipated violation
of such obligations, covenants and agreements without the necessity of showing
(i) actual or threatened harm; (ii) the inadequacy of damages as a remedy; or
(iii) likelihood of success on the merits, and without being required to furnish
bond or other security. Nothing in this Agreement shall impair Franchisor's
right to obtain equitable relief.
15. DISPUTE RESOLUTION
15.1 Mediation. Except for infringement of Proprietary Marks, Animated
Entertainment or other violation of Franchisor's intellectual property rights,
regarding which Franchisor may apply for emergency, special, or injunctive
relief, both Franchisor and Franchisee will attempt in good faith to settle any
dispute related to the execution of or performance under this Agreement and the
operation of the Franchised Restaurant. If Franchisor and Franchisee are unable
to do so, they hereby agree to submit to non-binding mediation prior to bringing
such claim, controversy or dispute in a court. The mediation shall be conducted
through either an individual mediator or a mediator appointed by a mediation
services organization or body, experienced in the mediation of food service
business disputes, as agreed upon by Franchisor and Franchisee. The costs and
expenses of mediation, including compensation of the mediator, shall be borne by
the parties equally. If the parties are unable to resolve the claim, controversy
or dispute within ninety (90) days after the mediator has been appointed, unless
such time period is extended by written agreement of the parties, then either
party may bring a legal proceeding under the following Sections, 15.2 through
15.4, to resolve such claim.
15.2 Applicable Law. Franchisor and Franchisee agree that this Agreement
shall be governed by, construed and enforced in accordance with the laws of the
State of Texas without regard to its conflicts of laws provisions.
15.3 Jurisdiction and Venue. FRANCHISOR AND FRANCHISEE HEREBY IRREVOCABLY
SUBMIT THEMSELVES TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY,
TEXAS AND THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS
DIVISION. FRANCHISEE AND FRANCHISEE'S PRINCIPALS FURTHER AGREE THAT VENUE FOR
ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT WILL BE DALLAS
COUNTY, TEXAS; PROVIDED, HOWEVER THAT WITH RESPECT TO ANY ACTION (I) FOR MONIES
OWED, (II) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, (III) INVOLVING
OWNERSHIP OR USE OF THE PROPRIETARY MARKS OR THE ANIMATED ENTERTAINMENT, OR (IV)
INVOLVING POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO THE PREMISES
OF THE FRANCHISED RESTAURANT, FRANCHISOR MAY BRING SUCH ACTION IN ANY STATE OR
FEDERAL DISTRICT COURT WHICH HAS JURISDICTION.
15.4 Mutual Benefit. FRANCHISEE, FRANCHISEE'S PRINCIPALS AND FRANCHISOR
ACKNOWLEDGE THAT THE PARTIES' AGREEMENT REGARDING APPLICABLE STATE LAW AND FORUM
IN SECTIONS 15.2 AND 15.3 PROVIDES THE PARTIES WITH THE MUTUAL BENEFIT OF
UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THIS
AGREEMENT OR THE PARTIES' RELATIONSHIP CREATED BY THIS AGREEMENT. FRANCHISEE,
FRANCHISEE'S PRINCIPALS AND FRANCHISOR FURTHER ACKNOWLEDGE THE RECEIPT AND
SUFFICIENCY OF MUTUAL CONSIDERATION FOR THAT BENEFIT.
16. MISCELLANEOUS
16.1 Independent Contractors. In performing this Agreement, the parties
specifically agree that Franchisor and Franchisee's relationship is and always
will be solely that of independent contractors. Neither Franchisor or Franchisee
shall not represent itself or permit any of its employees, agents, servants, or
representatives to represent itself as an employee, agent, servant, or joint
venturer of the other. Neither party shall have no right to and shall not
attempt to enter into contracts or commitments in the name of or on behalf of
the other in any respect whatsoever.
16.2 Entire Agreement. This Agreement and the attachments hereto constitute
the entire agreement between Franchisor, Franchisee and Franchisee's Principals
concerning the subject matter hereof. All prior agreements, discussions,
representations, warranties and covenants are merged herein. THERE ARE NO
WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR IMPLIED,
BETWEEN THE PARTIES EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. Except
those permitted to be made unilaterally by Franchisor, any amendments or
modifications of this Agreement shall be in writing and executed by Franchisor
and Franchisee.
16.3 Judgment; Discretion. FRANCHISEE AND FRANCHISOR ACKNOWLEDGE THAT
VARIOUS PROVISIONS OF THIS AGREEMENT SPECIFY CERTAIN MATTERS THAT ARE WITHIN THE
DISCRETION OR JUDGMENT OF FRANCHISOR OR ARE OTHERWISE TO BE DETERMINED
UNILATERALLY BY FRANCHISOR. IF THE EXERCISE OF FRANCHISOR'S DISCRETION OR
JUDGMENT AS TO ANY SUCH MATTER IS SUBSEQUENTLY CHALLENGED, THE PARTIES TO THIS
AGREEMENT EXPRESSLY DIRECT THE TRIER OF FACT THAT FRANCHISOR'S RELIANCE ON A
BUSINESS REASON IN THE EXERCISE OF ITS DISCRETION OR JUDGMENT IS TO BE VIEWED AS
A REASONABLE AND PROPER EXERCISE OF SUCH DISCRETION OR JUDGMENT, WITHOUT REGARD
TO WHETHER OTHER REASONS FOR ITS DECISION MAY EXIST, WITHOUT REGARD TO WHETHER
THE TRIER OF FACT WOULD INDEPENDENTLY ACCORD THE SAME WEIGHT TO THE BUSINESS
REASONS, AND WITHOUT REGARD TO WHETHER SUCH DISCRETION OR JUDGMENT IS EXERCISED
IN THE BEST INTERESTS OF FRANCHISEE.
16.4 No Waiver. Either party's failure to exercise any right or remedy or
to enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, such party's right to enforce strict compliance with
any such obligation, covenant or agreement. No custom or practice shall modify
or amend this Agreement. Either party's waiver of, or failure or inability to
enforce, any right or remedy shall not impair such party's rights or remedies
with respect to subsequent default of the same, similar or different nature.
Acceptance of any payment shall not waive any default.
16.5 Severability. If all or any portion of any covenant contained herein
are held unreasonable or unenforceable by a court or agency having valid
jurisdiction in an unappealed final decision to which Franchisor is a party,
Franchisee and Franchisee's Principals expressly agree to be bound by any lesser
covenant subsumed within the terms of the covenant that imposes the maximum duty
permitted by law, as if the resulting covenant were separately stated in and
made a part of this Agreement. Notwithstanding the above, should any term,
covenant or provision hereof, or the application thereof, be determined by a
valid, final, non-appealable order to be invalid or unenforceable, the remaining
terms, covenants or provisions hereof shall continue in full force and effect
without regard to the invalid or unenforceable provision. In such event such
term, covenant or provision shall be deemed modified to impose the maximum duty
permitted by law and such term, covenant or provision shall be valid and
enforceable in such modified form as if separately stated in and made a part of
this Agreement. Notwithstanding the foregoing, if any term hereof is so
determined to be invalid or unenforceable and such determination adversely
affects, in Franchisor's reasonable judgment, Franchisor's ability to preserve
its rights in, or the goodwill underlying, the Proprietary Marks, the Animated
Entertainment, the System and/or the Confidential Information, or materially
effects Franchisor's other rights hereunder, Franchisor may terminate this
Agreement upon notice to Franchisee.
16.6 Notice. All notices required or desired to be given hereunder shall be
in writing and shall be sent by personal delivery, expedited delivery service,
return receipt requested or facsimile to the following addresses or such other
addresses as designated by Franchisor or Franchisee in writing pursuant to this
Section:
Notices to Franchisor: Director of Franchise
CEC Entertainment, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
Fax.(▇▇▇) ▇▇▇-▇▇▇▇
Notices to Franchisee: ______________________
______________________
______________________
______________________
Tel. (___) ___________
Fax. (___) ___________
Notices posted by personal delivery or given by facsimile shall be deemed
given upon receipt. Notice to Franchisee shall constitute notice to Franchisee's
Principals.
16.7 Counterparts. This Agreement may be executed in any number of
counterparts each of which when so executed shall be an original, but all of
which together shall constitute one (1) and the same instrument.
16.8 Headings. The section headings in this Agreement are for convenient
reference only and shall be given no substantive or interpretive effect.
16.9 Further Assurances. Franchisor and Franchisee shall execute and
deliver any and all additional papers, documents, and other assurances and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
16.10 Compliance with Laws. Franchisee agrees to comply at its sole expense
with all laws and regulations applicable to this Agreement and the operation of
the Franchised Restaurant. Copies of all inspection reports, warnings,
certificates and ratings, issued by any governmental entity during the term of
this Agreement in connection with the conduct of the Franchised Restaurant which
indicate Franchisee's failure to meet or maintain the highest governmental
standards (such as, without limitation, a Grade A sanitation rating or its
equivalent) or less than full compliance by Franchisee with any applicable law,
rule or regulation, shall be forwarded to Franchisor by Franchisee within five
(5) days of Franchisee's receipt thereof.
17. ACKNOWLEDGMENTS
17.1 Independent Investigation. Franchisee acknowledges that it has
conducted an independent investigation of the business venture contemplated by
this Agreement and recognizes that the success of this business venture involves
substantial business risks and will largely depend upon the ability of
Franchisee. Franchisor expressly disclaims making, and Franchisee acknowledges
that it has not received or relied on, any warranty or guaranty, express or
implied, as to the potential volume, profits or success of the business venture
contemplated by this Agreement.
Franchisee's Principals Initials _____________
17.2 Opportunity to Assess Risks. Franchisee acknowledges that Franchisee
has received, read, and understands this Agreement and the related Attachments
and agreements and that Franchisor has afforded Franchisee sufficient time and
opportunity to consult with advisors selected by Franchisee about the potential
benefits and risks entering into this Agreement.
Franchisee's Principals Initials _____________
17.3 Receipt of Disclosure Document. Franchisee acknowledges that it
received a complete copy of this Agreement and all related attachments and
agreements at least five business days before the date on which this Agreement
was executed. Franchisee further acknowledges that it has received the
disclosure document required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at least ten (10) business days
before the date of on which this Agreement was executed.
Franchisee's Principals Initials _____________
17.4 No Extraneous Promises. Franchisee confirms and acknowledges that no
written or oral agreements, promises, commitments, undertakings or
understandings were made to or with Franchisee that are not expressly set forth
in this Agreement and any duly executed amendment or addendum attached to this
Agreement.
Franchisee's Principals Initials _____________
17.5 No Extraneous Inducements. Franchisee confirms and acknowledges that
no representation, warranty, guaranty or promise other than those expressly set
forth in this Agreement and in the disclosure document described in Section 17.3
was made by Franchisor or any other person to induce Franchisee to sign this
Agreement. Franchisee recognizes that neither Franchisor nor any other party can
guarantee Franchisee's business success or state the exact costs of opening and
operating the Franchised Restaurant, and that such success and costs will depend
primarily upon Franchisee's own efforts and business ability. Franchisee also
recognizes that any new business venture is speculative.
Franchisee's Principals Initials _____________
17.6 Commercial Relationship. Franchisee acknowledges that this Agreement
creates an arm's length commercial relationship that cannot and will not be
transformed into a fiduciary or other "special" relationship by course of
dealing, by any special indulgences or benefits that Franchisor bestows on
Franchisee, or by inference from a party's conduct.
Franchisee's Principals Initials _____________
17.7 Compliance with Anti-Corruption and Anti-Money Laundering Laws.
Franchisee represents, covenants and warrants to Franchisor that, to the best of
its knowledge, neither it nor any owner or managerial employee thereof is
identified, either by name or an alias, pseudonym or nickname, on the lists of
"Specially Designated Nationals" or "Blocked Persons" maintained by the U.S.
Treasury Department's Office of Foreign Assets Control (texts currently
available at ▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇/). Further, Franchisee
represents, covenants and warrants that, to the best of its knowledge, it has
not violated and agrees that it will not violate any law (in effect now or which
may become effective in the future) prohibiting corrupt business practices,
money laundering or the aid or support of persons or entities who conspire to
commit acts of terror against any person or government, including acts
prohibited by the U.S. Patriot Act, Public Law No. 107-56 (text currently
available at ▇▇▇▇://▇▇▇.▇▇▇▇.▇▇▇/▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇/▇▇▇▇▇▇.▇▇▇▇), U.S. Executive
Order 13244 (text currently available at
▇▇▇▇://▇▇▇▇▇.▇▇▇/▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇▇▇▇/▇▇▇▇/ sanctions/terrorism.html), or similar
law. The foregoing constitute continuing representations and warranties, and
Franchisee shall notify Franchisor immediately in writing of the occurrence of
any event or the development of any circumstance that might render the foregoing
representation and warranty false, inaccurate or misleading.
Franchisee's Principals Initials _____________
17.8 No Claims. Franchisee and Franchisee's Principals represent, covenant
and warrant to Franchisor that, to the best of their knowledge, neither they nor
an affiliate of either hold or are due, as applicable, any claims, debts,
liabilities, demands, obligations, expenses, actions, or causes of action of any
nature, character or description related to this Agreement against Franchisor,
and its affiliates and each of their respective successors, partners and the
partners, shareholders, representatives, assigns, agents, servants, employees,
independent contractors, officers and directors of each of them, in their
corporate and individual capacities.
Franchisee's Principals Initials _____________
[Signatures appear on following pages]
IN WITNESS WHEREOF, the parties hereto have fully executed, sealed and
delivered this Agreement in duplicate on the day and year first above written.
FRANCHISOR:
CEC ENTERTAINMENT, INC.
By: ____________________
Name: ____________________
Title: ____________________
STATE OF TEXAS
COUNTY OF DALLAS
Before me personally appeared ____________________ who, after being duly
sworn, says that he is the ____________________ of CEC Entertainment, Inc., a
corporation, organized and existing under the laws of Kansas, and that he has
authority to execute under oath and has so executed the above Agreement for and
on behalf of such corporation for such purposes therein contained.
WITNESS my hand and official seal this _____ day of ________, 20__.
____________________________
(SEAL) Notary Public
FRANCHISEE:
________________________
By: ____________________
Name: ____________________
Title: ____________________
STATE OF ________________
COUNTY OF ______________
Before me personally appeared ________________ who, after being duly sworn,
says that he is the ________ of ________________, a (corporation) (partnership),
organized and existing under the laws of ________, and that he has authority to
execute under oath and has so executed the above Agreement for and on behalf of
such corporation for the purposes therein contained.
WITNESS my hand and official seal this ___ day of __________________,20__.
____________________________
(SEAL) Notary Public
SCHEDULE 1.14
STATEMENT OF OWNERSHIP INTERESTS
AND FRANCHISEE'S PRINCIPALS
A. The following is a list of stockholders, partners or other investors in
Franchisee, including all investors who own or hold a direct or indirect
interest in Franchisee, and a description of the nature of their interest. All
such individuals and entities shall be deemed to be "Franchisee's Principals"
described in and designated pursuant to the Franchise Agreement, each of whom
will execute the Agreement and Guaranty of Franchiser's Principals:
Name Percentage of Ownership/Nature of Interest
______________________ __________________________________________
______________________ __________________________________________
B. The following is a list of all other of "Franchisee's Principals" not
described in "A", above, described in and designated pursuant to the Franchise
Agreement, each of whom will execute the Agreement and Guaranty of Franchisee's
Principals.
ATTACHMENT A
AGREEMENT AND GUARANTY OF
FRANCHISEE'S PRINCIPALS
Each of the undersigned acknowledges and agrees as follows:
(1) Each has read the terms and conditions of the Franchise Agreement and
acknowledges that the execution of this Guaranty and the undertakings of the
Franchisee's Principals in the Franchise Agreement are in partial consideration
for, and a condition to, the granting of the franchise, and that Franchisor
would not have granted the franchise without the execution of this Guaranty and
the other undertakings by each of the undersigned;
(2) Each is included in the term "Franchisee's Principals";
(3) Each individually, jointly, and severally, makes all of the covenants,
representations, warranties and agreements of Franchisee's Principals set forth
in the Franchise Agreement and is obligated to perform thereunder; and
(4) Each individually, jointly and severally, unconditionally, and
irrevocably guarantees to Franchisor and its successors and assigns that all of
Franchisee's obligations under the Franchise Agreement will be punctually paid
and performed. Upon default by Franchisee or upon notice from Franchisor, each
will immediately make each payment and perform each obligation required of
Franchisee under the Franchise Agreement.
(5) Without affecting the obligations of any of Franchisee's Principals
under this Guaranty, Franchisor may, without notice to the Franchisee's
Principals, waive, renew, extend, modify, amend, or release any indebtedness or
obligation of Franchisee or settle, adjust, or compromise any claims that
Franchisor may have against Franchisee.
(6) Each of the Franchisee's Principals waives all demands and notices of
every kind with respect to the enforcement of this Guaranty, including notices
of presentment, demand for payment or performance by Franchisee, any default by
Franchisee or any guarantor, and any release of any guarantor or other security
for this Guaranty or the obligations of Franchisee.
(7) Franchisor may pursue its rights against any of Franchisee's Principals
without first exhausting its remedies against Franchisee and without joining any
other guarantor and no delay on the part of Franchisor in the exercise of any
right or remedy will operate as a waiver of the right or remedy, and no single
or partial exercise by Franchisor of any right or remedy will preclude the
further exercise of that or any other right or remedy.
(8) Upon receipt by Franchisor of notice of the death of any of
Franchisee's Principals, the estate of the deceased will be bound by the
foregoing Guaranty, but only for defaults and obligations under the Franchise
Agreement existing at the time of death, and in that event, the obligations of
the remaining Franchisee's Principals will continue in full force and effect.
ATTEST: FRANCHISEE'S PRINCIPALS
Name: ____________________
____________________
Name: ____________________
____________________
Name: ____________________
____________________
STATE OF ________________
COUNTY OF ______________
Before me personally appeared the following persons: ________, ________ and
________ who are known to me to be the persons who executed the foregoing
Agreement and Guaranty of Franchisee's Principals and each acknowledged the same
to be his or her free act and deed for the purpose s therein contained.
WITNESS my hand and official seal this ___ day of ___________________,20__.
____________________________
(SEAL) Notary Public
ATTACHMENT B
GENERAL RELEASE
(UPON RENEWAL OF FRANCHISE AGREEMENT)
THIS GENERAL RELEASE (this "Release") is made and entered into this ___ day
of ________, 20__, by ________ ("Franchisee"), and ________ and ________ (the
"Franchisee's Principals").
RECITALS
WHEREAS, CEC Entertainment, Inc. ("Franchisor") and Franchisee entered into
that certain Franchise Agreement dated ________ (the "Franchise Agreement"), for
the establishment of a ▇▇▇▇▇ ▇. Cheese's located at ________________;
WHEREAS, the Franchisee's Principals are described in the Franchise
Agreement as "Franchisee's Principals" and as such, have among other things,
agreed to be bound by certain of the obligations contained in the Franchise
Agreement; and
WHEREAS, Franchisee desires to renew or otherwise extend the term of the
Franchise Agreement and the Franchise Agreement provides that as a condition to
such renewal, Franchisee and the Franchisee's Principals shall, among other
things, execute a general release as contained herein.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by each of the parties hereto, Franchisee and the
Franchisee's Principals agree as follows:
AGREEMENT
1. RELEASE. Franchisee, and each of the Franchisee's Principals,
individually and collectively, jointly and severally, do hereby release and
forever discharge Franchisor and its affiliates, and each of their respective
successors, partners, and the shareholders, partners, representatives, assigns,
agents, servants, employees, independent contractors, officers, and directors of
each of them, in their corporate and individual capacities ("Designees"), of and
from any claims, debts, liabilities, demands, obligations, costs, expenses,
actions, and causes of action of every nature, character, and description, known
or unknown, vested or contingent, which the Franchisee and the Franchisee's
Principals now own or hold, or have at any time heretofore owned or held, or may
at any time own or hold against the Franchisor, or each of the respective
Designees of the Franchisor, arising under or in connection with any agreement,
law, rule, regulation ordinance, or any other context whatsoever, including,
without limitation, the Franchise Agreement or the operation of the ▇▇▇▇▇ ▇.
Cheese's store established thereunder, and any state or federal franchise or
business opportunity law; provided, however, that this release shall not serve
to terminate any agreement currently effective by an among Franchisee or any or
all of the Franchisee's Principals and Franchisor.
[The parties intend this paragraph 1 to cover, encompass, release, and
extinguish all claims and matters that might otherwise be reserved by California
Civil Code section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected the settlement with the
debtor."]
2. AUTHORITY. By executing this Release, the parties represent and warrants
that each have the right and authority to enter into and to accept the terms and
covenants of this Release, and that no third party has or claims an interest in
any claim released hereby.
3. NO CONFLICTS. Each of the undersigned hereby represents and warrants
that its execution of this Release does not violate any other agreement to which
it is a party.
4. MISCELLANEOUS.
4.1 Counterparts. This Release may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
4.2 Opportunity to Review. Franchisee and the Franchisee's Principals
represent and warrant that they: (i) have had an opportunity to review this
Release; (ii) have had an opportunity to consult with an attorney; and (iii)
fully understand the content and legal effect of this Release; and
4.3 Governing Law. This Release shall be governed by the laws of the
State of ________, which laws shall be controlling in the event of any conflict
of law.
4.4 Section Headings. The section headings of this Release are for the
convenience of the parties only shall have no force or effect.
4.5 Severability. The provisions of this release are severable, and, in
the event that any of them is held void and unenforceable as a matter of law,
the remainder shall continue in full force and effect.
[Signatures appear on following pages]
IN WITNESS WHEREOF, Franchisee and the Franchisee's Principals have
executed and delivered this Release.
FRANCHISEE:
By: ____________________
Name: ____________________
Title: ____________________
FRANCHISEE'S PRINCIPALS:
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
GENERAL RELEASE
(UPON TRANSFER)
THIS GENERAL RELEASE (this "Release") is made and entered into this ___ day
of ________, 20__, by ________ ("Franchisee"), ________ and ________ (the
"Franchisee's Principals").
RECITALS
WHEREAS, CEC Entertainment, Inc. ("Franchisor") and Franchisee entered into
that certain Franchise Agreement (the "Franchise Agreement") for the
establishment and operation of a ▇▇▇▇▇ ▇. Cheese's restaurant located at
________________;
WHEREAS, the Franchisee and/or one or more of Franchisee's Principals
desire to effect a Transfer, as such term is defined in the Franchise Agreement;
and
WHEREAS, the Franchise Agreement provides, as a condition to Franchisor's
approval of such Transfer, Franchisee and Franchisee's Principals shall execute
a release of certain claims.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by each of the parties hereto, Franchisee and the
Franchisee's Principals agree as follows:
AGREEMENT
1. RELEASE. Franchisee, each of the Franchisee's Principals, individually
and collectively, jointly and severally, do hereby release and forever discharge
Franchisor and its affiliates, and each of their respective successors,
partners, and the shareholders, partners, representatives, assigns, agents,
servants, employees, independent contractors, officers, and directors of each of
them, in their corporate and individual capacities ("Designees"), of and from
any claims, debts, liabilities, demands, obligations, costs, expenses, actions,
and causes of action of every nature, character, and description, known or
unknown, vested or contingent ("Claims"), which the Franchisee and the
Franchisee's Principals now own or hold, or have at any time heretofore owned or
held, or may at any time own or hold against the Franchisor, or each of the
respective Designees of the Franchisor, arising under or in connection with any
agreement, law, rule, regulation ordinance, or any other context whatsoever,
including, without limitation, the Franchise Agreement and any other franchise
agreement or the operation of the ▇▇▇▇▇ ▇. Cheese's restaurant established
thereunder, and any state or federal franchise or business opportunity law;
provided, however, that this release shall not serve to terminate any agreement
currently effective by an among Franchisee or any or all of the Franchisee's
Principals and Franchisor.
[The parties intend this paragraph 1 to cover, encompass, release, and
extinguish all claims and matters that might otherwise be reserved by California
Civil Code section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected the settlement with the
debtor."]
2. AUTHORITY. By executing this Release, the parties represent and warrants
that each have the right and authority to enter into and to accept the terms and
covenants of this Release, and that no third party has or claims an interest in
any claim released hereby.
3. NO CONFLICTS. Each of the undersigned hereby represents and warrants
that its execution of this Release does not violate any other agreement to which
it is a party.
4. MISCELLANEOUS.
4.1 Counterparts. This Release may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
4.2 Opportunity to Review. Franchisee and the Franchisee's Principals
represent and warrant that they: (i) have had an opportunity to review this
Release; (ii) have had an opportunity to consult with an attorney; and (iii)
fully understand the content and legal effect of this Release; and
4.3 Governing Law. This Release shall be governed by the laws of the
State of ________, which laws shall be controlling in the event of any conflict
of law.
4.4 Section Headings. The section headings of this Release are for the
convenience of the parties only shall have no force or effect.
4.5 Severability. The provisions of this release are severable, and, in
the event that any of them is held void and unenforceable as a matter of law,
the remainder shall continue in full force and effect.
IN WITNESS WHEREOF, Franchisee, the Franchisee's Principals and the
Affiliates have executed and delivered this Release.
FRANCHISEE:
By: ____________________
Name: ____________________
Title: ____________________
FRANCHISEE'S PRINCIPALS:
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
_________________________________ ______________________________________
Name: ____________________ Name: ____________________
Date: ____________________ Date: ____________________
ATTACHMENT C
LEASE RIDER
This Lease Rider is made and entered into ________, 20__, by and between
CEC Entertainment, Inc., a Kansas corporation ("Franchisor"), ________, a
________ corporation ("Franchisee") and ____________________ ("Landlord").
WHEREAS, Franchisor and Franchisee are parties to that certain Franchise
Agreement dated ________, 20__ ("Franchise Agreement");
WHEREAS, Franchisee and Landlord desire to enter into a lease (the "Lease")
pursuant to which Franchisee will occupy the premises located at
________________ (the "Premises") for a family-oriented pizza restaurant
(hereinafter "Restaurant") licensed under the Franchise Agreement; and
WHEREAS, as a condition to entering into the Lease, the Franchisee is
required under the Franchise Agreement to execute this Lease Rider along with
the Landlord and Franchisor;
NOW, THEREFORE, the parties in consideration of the mutual undertakings and
commitments of each party to the other party set forth herein and in the
Franchise Agreement, mutually agree as follows:
1. During the term of the Franchise Agreement, the Premises shall be used
only for the operation of the Restaurant.
2. Landlord consents to Franchisee's use of such marks and signs, decor
items, color schemes and related components of the ▇▇▇▇▇ ▇. Cheese system as
Franchisor may prescribe for the Restaurant.
3. Landlord agrees to furnish Franchisor with copies of any and all letters
and notices sent to Franchisee pertaining to the Lease and the Premises, at the
same time that such letters and notices are sent to Franchisee.
4. Franchisor shall have the right to enter the Premises to make any
modification or alteration necessary to protect the ▇▇▇▇▇ ▇. Cheese system and
marks or to cure any default under the Franchise Agreement or any development
agreement entered into between Franchisor and Franchisee or under the Lease,
without being guilty of trespass or any other crime or tort, and Landlord shall
not be responsible for any expenses or damages arising from Franchisor's action
in connection therewith.
5. Franchisee shall not assign the Lease or renew or extend the term
thereof without the prior written consent of Franchisor.
6. Landlord and Franchisee shall not amend or otherwise modify the Lease in
any manner that could materially affect any of the foregoing requirements
without the prior written consent of Franchisor.
7. In the event of Franchisee's default under the terms of the Lease,
Franchisor may, but is not required, to cure the default and may assume the
Lease in Franchisor's name. Within thirty (30) days after Franchisor receives
notice of the default, Franchisor will have the option, in its sole discretion,
to cure the default and assume the Lease. If Franchisor elects to cure the
default and assume the Lease, Franchisor will notify Landlord of its intent to
cure such default and to assume the Lease. Franchisor will cure the default
within thirty (30) days of such election or, if the default cannot be reasonably
cured within such thirty (30) day period, then Franchisor will commence and
proceed to cure the default within such time as is reasonably necessary to cure
the default. If Franchisor elects to assume the Lease, Landlord agrees to
recognize Franchisor as the tenant under the Lease and Franchisee will no longer
have any rights thereunder. Landlord shall provide to Franchisor an estoppel
certificate confirming that no additional defaults exist and no acts or
omissions have occurred which, with the passage of time, would result in
default.
8. Franchisee will be permitted to assign the Lease to Franchisor or its
affiliates upon the expiration or earlier termination of the Franchise Agreement
and the Landlord hereby consents to such assignment and agrees not to impose or
assess any assignment fee or similar charge or accelerate rent under the Lease
in connection with such assignment, or require Franchisor to pay any past due
rent or other financial obligation of Franchisee to Landlord, it being
understood that Landlord will look solely to the Franchisee for any rents or
other financial obligations owed to Landlord prior to such assignment. Landlord
and Franchisee acknowledge that Franchisor is not a party to the Lease and will
have no liability under the Lease, unless and until the Lease is assigned to, or
assumed by, Franchisor.
9. Except for the Franchisee's obligations to Landlord for rents and other
financial obligations accrued prior to the assignment of the Lease, in the event
of such assignment, Franchisor or any affiliate designated by Franchisor will
agree to assume from the date of assignment all obligations of Franchisee
remaining under the Lease, and in such event Franchisor or any affiliate will
assume Franchisee's occupancy rights, and the right to sublease the Premises,
for the remainder of the term of the Lease.
10. Notwithstanding anything contained in this Lease, Franchisor is
expressly authorized, without the consent of the Landlord, to sublet the
Premises to an unauthorized franchisee, provided such subletting is specifically
subject to the terms of this Lease and further provided Franchisor remains
liable for the performance of the terms of this Lease and provided the
franchisee expressly assumes all obligations of the Lease. Franchisor agrees to
notify Landlord as to the name of the franchisee within ten (10) days after such
subletting.
11. The terms of this Lease Rider will supersede any conflicting terms of
the Lease.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Lease Rider as of the date first above written.
FRANCHISOR:
CEC ENTERTAINMENT, INC.
a Kansas corporation
By: ____________________
Name: ____________________
Title: ____________________
FRANCHISEE:
_____________________________
a ________ (corporation) (partnership)
By: ____________________
Name: ____________________
Title: ____________________
LANDLORD:
_____________________________
a _________ corporation
By: ____________________
Name: ____________________
Title: ____________________
ATTACHMENT D
ADVERTISING COOPERATIVE AGREEMENT
THIS ________ DMA ADVERTISING COOPERATIVE AGREEMENT (hereinafter referred
to as "Agreement") is made and entered into this ___ day of ________, 20__, by
and between the undersigned franchisees ("Members"), and CEC Entertainment,
Inc., a Kansas corporation ("Franchisor") or any of its affiliates to the extent
they are operating a ▇▇▇▇▇ ▇. Cheese's restaurant ("Franchised Restaurant") as
such term is defined in the Franchise Agreement ("Franchise Agreement") located
in the ________ Designated Marketing Area, or DMA (as such term is defined in
the Franchise Agreement), then Franchisor shall be included in the term "Member"
and shall execute this Agreement as a Member, with reference to the following
facts:
WHEREAS, each of the Members is engaged in the operation of a Franchised
Restaurant, pursuant to the terms of a Franchise Agreement entered into by and
between the Member and the Franchisor;
WHEREAS, the Franchised Restaurants operated by the Members are located
within the ________ DMA ("DMA");
WHEREAS, the Franchisor is requiring the Members to form a cooperative
advertising association (the "Cooperative") for the purpose of advertising and
promoting the Franchised Restaurants in the DMA pursuant to specified
advertising and promotional activities, and each Member is required to
contribute a portion of the Member's Gross Sales (as defined in the Franchise
Agreement) to the Cooperative for this purpose;
WHEREAS, the Members acknowledge and agree that the formation of the
Cooperative is in the best interest of the Members and the System (as defined in
the Franchise Agreement), and that the formation of the Cooperative by the
Members will provide each Member with greater and more effective exposure of the
products and services marketed by each Member to the general public than would
otherwise be available; and
THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Members have agreed as follows:
SECTION 1. ORGANIZATION.
1.1 Formation. The Members agree that they shall hereby form and
participate in the Cooperative for the exclusive purposes of funding and
administering regional advertising and promotion programs, and developing,
subject to Franchisor's approval, standardized advertising materials for use by
the Members in regional advertising.
1.2 Use of Funds. The Cooperative shall be operated solely as a conduit for
funds contributed for the purpose referenced above and as otherwise set forth
herein.
SECTION 2. MEMBERSHIP.
2.1 Establishing Cooperative. Franchisor shall have the right, in its
discretion, to designate any geographic area (i.e., DMA) as a region for
purposes of establishing a Cooperative and to determine whether a Cooperative is
applicable to the Members. Throughout the term of this Agreement, the geographic
area encompassed by the DMA shall be subject to change in accordance with the
boundaries as established by ▇▇▇▇▇▇▇ Media Research, Inc. A Cooperative shall be
composed of any two or more restaurants, whether such restaurants are operated
by Franchisor or franchisees. If a Cooperative has been established for the
geographic area in which the Franchised Restaurant is located at the time a
System Restaurant (as defined in the Franchise Agreement) commences business
hereunder, the operator of such System Restaurant (franchisee, Franchisor (or
any of its affiliates) shall immediately become a member of such Cooperative not
later than thirty (30) days after the date on which the Cooperative commences
operation, as provided below. If the System Restaurant is within the geographic
area of more than one Cooperative, the franchisee shall be required to be a
member of only one such Cooperative as designated by Franchisor.
2.2 Termination of Membership. The membership of any Member in the
Cooperative shall terminate upon the termination, expiration, or transfer of the
Franchise Agreement applicable to the Member's Franchised Restaurant located in
the DMA, or in the event the Member's Franchised Restaurant ceases to be located
in the DMA due to a change in the geographic area constituting the DMA, at the
time of such change. In the event the Member operates more than one System
Restaurant located in the DMA, the Member's membership shall terminate upon the
termination, expiration, or transfer of all of the Franchise Agreements
applicable to such System Restaurants or upon all such System Restaurants
ceasing to be located within the DMA; provided, however, that a Member shall not
be required to pay a cooperative fee and shall not have any voting rights in the
Cooperative with respect to any System Restaurant for which the Franchise
Agreement has terminated, expired, or been transferred or which is no longer
located in the DMA. Any Member whose membership in the Cooperative has been
terminated as provided herein shall have no further rights of membership in the
Cooperative.
SECTION 3. CONTRIBUTIONS.
3.1 Amount of Contributions. Commencing upon the date of this Agreement (or
upon the effective date of membership with respect to a new Member) and
continuing until the dissolution of the Cooperative or the earlier termination
of a Member's membership in the Cooperative, each Member shall pay directly to
the Cooperative contributions in such amounts as are determined by the
Cooperative; provided, however, that Member shall be required to contribute to
the Cooperative at least three percent (3.0%) of the Member's monthly gross
sales of each System Restaurant located in the DMA.
3.2 Payment Date. Each Member shall submit to the Cooperative, no later
that the fifteenth (15th) day of each month, for the preceding calendar month,
its contribution as provided herein, together with such other statements or
reports as may be required by Franchisor or by the Cooperative with Franchisor's
prior approval.
3.3 Overdue Contributions. Any cooperative fee which is not received by the
Cooperative on or before the date on which it is due shall be deemed overdue. In
addition to the overdue amount, the Member shall pay to the Cooperative interest
on such amount from the date it was due until paid at the rate of twelve percent
(12%) per annum, provided that in no event shall such interest rate be more than
the maximum rate allowed by the applicable law. In addition, each Member agrees
to pay all costs and expenses (including reasonable attorneys' fees) incurred by
the Cooperative and/or the Franchisor in connection with the recovery of any
cooperative fee due hereunder. Except as described below with respect to the
dissolution of the Cooperative, no cooperative fee paid by any Member hereunder
shall be refundable in whole or in part upon termination of membership in the
Cooperative or otherwise.
3.4 Default. The failure to pay any cooperative fee for any System
Restaurant when due hereunder shall constitute a default by the Member and shall
result in the suspension of the right of the Member to receive any advertising
and promotional materials and services provided by the Cooperative, the
suspension of the right to participate in any advertising and marketing
activities conducted by the Cooperative and in the suspension of voting rights
with respect to the Cooperative.
SECTION 4. GOVERNMENT AND MANAGEMENT.
4.1 Membership Meetings. The Members shall have at least one regularly
scheduled meeting (which may be conducted through a telephonic conference call)
during every fiscal year and shall hold additional meetings from time to time as
the Members or Franchisor deems necessary to conduct the business of the
Cooperative. Such meetings shall be necessary for all matters to be acted on by
the Cooperative, including, but not limited to, the funding and administration
of regional advertising and promotion programs and developing, subject to
Franchisor's approval, standardized advertising materials for use by the Members
in regional advertising. Notice of any meeting shall be given to each Member
entitled to vote at the meeting.
The holders of a majority of those votes entitled to be cast shall
constitute a quorum at a meeting of Members. Any and all matters to be acted on
by the Cooperative shall be determined by the affirmative vote of the majority
of votes entitled to be cast at a meeting at which a quorum is present. Any CEC
Entertainment, Inc. franchisee who has executed a Franchise Agreement but whose
System Restaurant is not yet open for business may attend any meeting of
Members, notwithstanding that such franchisee's membership in the Cooperative is
not yet effective and the franchisee has no voting privileges.
4.2 Voting. Each Member shall be entitled to one (1) vote, in person, by
written consent, or by proxy, for each System Restaurant operated by the Member
that is located in the DMA. The voting rights of any Member shall be
automatically suspended upon the failure to pay any cooperative fee when due
hereunder and such suspension shall continue until such time as all overdue
amounts (including interest, attorneys' fees and other costs and expenses due
hereunder) are paid in full. In addition, the voting rights of any Member shall
be automatically suspended upon the occurrence of an event of default by the
Member under any applicable Franchise Agreement to which such Member is a party.
Such suspension shall continue until such default is cured within the time and
in the manner specified in the applicable Franchise Agreement. Each Member's
obligation to pay cooperative fees hereunder shall continue notwithstanding any
suspension of voting rights.
4.3 General Manager. If Franchisor is a member of the Cooperative it will
be the General Manager; otherwise, the Cooperative will elect an individual to
serve as General Manager. The Cooperative hereby appoints the General Manager as
its true and lawful agent to collect all sums due the Cooperative, maintain and
make disbursements from an account established for such sums collected, prepare
an operating budget, including an advertising and marketing plan for each fiscal
year, expend funds from the Cooperative's account as necessary to conduct
advertising and marketing activities for the Cooperative in accordance with
standards and specifications set forth by the Franchisor, engage such
advertising and marketing personnel (on an independent contractor basis) as the
General Manager deems necessary, and conduct the meetings of the Members.
SECTION 5. BOOKS AND RECORDS; REPORTS.
General Manager shall maintain a comprehensive system of just and true
books of account in which shall be entered fully and accurately each and every
transaction with respect to the operation of the Fund. Such records, accounts,
and books shall be maintained either at the office of the General Manager or at
some other location, as the General Manager shall decide, or at such other place
as Cooperative and Franchisor shall mutually determine, and each party shall at
all reasonable times have access to such records, accounts, and books. Such
records, accounts, and books shall be kept on a calendar year basis and on such
method of accounting as Cooperative may direct. The books may be audited by a
certified public accountant selected by Cooperative at the close of each such
year and/or at such other times as Cooperative may direct. The cost of any such
audit shall be borne by Cooperative.
SECTION 6. ACT OF COOPERATIVE.
All matters to be acted on by the Cooperative shall be determined by the
General Manager or vote of the Members as described herein. Except as provided
herein, no individual Member shall be an agent of the Cooperative for any
purpose and no action taken by any individual Member, of whatever nature or
kind, shall bind the Cooperative in any manner unless such action is
specifically authorized by the Members as described below.
SECTION 7. DISSOLUTION.
The Cooperative shall exist and operate hereunder until dissolved by the
Franchisor. Upon dissolution and after payment of all liabilities of the
Cooperative, all funds remaining in the Cooperative's bank account shall be
disbursed by the General Manager to the Members on a pro rata basis in
accordance with cooperative fees respectively paid by the Members at the time
the last cooperative fee was required to be paid hereunder.
SECTION 8. INDEMNIFICATION.
The Cooperative shall, at all times, indemnify and hold harmless the
Franchisor, its designee(s) which administer the System Fund (as defined in the
Franchise Agreement), and their respective subsidiaries, affiliates, successors,
and assigns, and their respective directors, officers, shareholders, partners,
servants, employees, agents, and representatives from and against any and all
causes of action, suits, debts, costs, expenses, liabilities, claims, or
demands, of whatever nature or kind, in law or in equity, arising out of or in
connection with the existence and operation of the Cooperative. In addition, the
Cooperative shall, at all times, indemnify and hold harmless any current or
former General Manager of the Cooperative from and against any and all causes of
action, suits, debts, costs, expenses, liabilities, claims, or demands, of
whatever nature or kind, whether known or unknown, in law or in equity, arising
because such person is or was an officer of the Cooperative. The Cooperative may
additionally indemnify any person covered by the foregoing grant of mandatory
indemnification to such further extent as is permitted by law and may indemnify
any other person to the fullest extent permitted by law.
SECTION 9. NOTICES.
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by expedited delivery
service or certified or registered mail, return receipt requested, first class
postage prepaid, or sent by prepaid facsimile or telex to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:
If to Franchisor: If to Cooperative:
Director of Franchise International Association of CEC Entertainment, Inc.
CEC Entertainment, Inc. c/o CEC Entertainment, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax) (▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
If to any Member:
The address set forth in the applicable Franchise Agreement
Any notice shall be deemed to have been given at the time of personal
delivery or, in the case of facsimile or telex, upon receipt or, in the case of
expedited delivery service or registered or certified mail, three (3) business
days after the date and time of mailing.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Relationship with Franchisor. It is understood and agreed by the
parties hereto that this Agreement does not constitute the Franchisor as a
member of the Cooperative or as a partner, joint venturer, principal or
affiliate of the Cooperative for any purpose; provided that the foregoing shall
not apply in the event the Franchisor is a Member of the Cooperative as provided
in Section 2 above.
10.2 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the parties hereto, subject to
the restrictions on assignment contained herein.
10.3 Assignment. The rights and obligations of each of the Members under
this Agreement are personal and may not be transferred or assigned; provided
that the Franchisor, in its capacity as a Member or otherwise, shall have the
right to transfer or assign all or any part of its rights or obligations
hereunder to any person or legal entity.
10.4 Waiver and Delay. The failure of the Cooperative or the Franchisor to
exercise any right, power, or option of it hereunder, or to insist upon strict
compliance with the terms hereof shall not constitute a waiver of any term
and/or condition of this Agreement with respect to any other or subsequent
breach thereof, nor a waiver of rights at any time thereafter to require exact
and strict compliance with the terms and/or conditions set forth herein. The
remedies hereunder are cumulative to any other rights or remedies which may be
granted by law.
10.5 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or any breach thereof, including, without limitation, any claim
that any of said Agreement, or any part thereof, is invalid, illegal or
otherwise voidable or void, shall be submitted to arbitration in accordance with
the Commercial Rules of the American Arbitration Association; provided, however,
this clause shall not be construed to limit or to preclude either party from
bringing any action in any court of competent jurisdiction for injunctive or
other provisional relief as is necessary or appropriate. The arbitration shall
be conducted in Dallas, Dallas County, Texas, in the United States of America.
Any award or determination of the arbitration tribunal shall be final,
non-appealable, and conclusive upon the parties, and judgment thereon may be
entered by any court of competent jurisdiction.
10.6 Attorneys' Fees. If any arbitration or other legal action is initiated
by either of the parties hereto, the prevailing party shall be entitled to
recover from the other party reasonable attorneys' fees in addition to any other
relief that may be awarded.
10.7 Titles for Convenience. Titles used in this Agreement are for
convenience only and shall not be deemed to affect the meaning or construction
of any of the terms, provisions, covenants, or conditions of this Agreement.
10.8 Choice of Law and Forum. All disputes concerning the validity,
interpretation, or performance of this Agreement and any of its terms or
provisions, or any rights or obligations of the parties hereto, shall be
governed by and resolved in accordance with the laws of the State of Texas, and
be resolved in the courts located within Dallas, Dallas County, Texas.
10.9 Severability. Nothing contained in this Agreement shall be construed
as requiring the commission of any act contrary to law. Whenever there is any
conflict between any provision of this Agreement and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but in such event the
provision(s) of this Agreement thus affected shall be curtailed and limited only
to the extent necessary to bring it within the requirements of the law. In the
event that any part, article, paragraph, sentence or clause of this Agreement
shall be held to be indefinite, invalid or otherwise unenforceable, the
indefinite, invalid or unenforceable provision(s) shall be deemed deleted, and
the remaining part of the Agreement shall continue in full force and effect. If
any tribunal or court of competent jurisdiction deems any provision(s) hereof
unenforceable, such provision(s) shall be modified only to the extent necessary
to render it enforceable and this Agreement shall be valid and enforceable and
the parties hereto agree to be bound by and perform same as thus modified.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Entire Agreement. With the exception of each Franchise Agreement to
which the various Members are a party, this Agreement contains all of the terms
and conditions agreed upon by the parties hereto with reference to the subject
matter hereof. No other agreements, oral or otherwise, shall be deemed to exist
or to bind either of the parties hereto, and all prior agreements and
understandings are suspended hereby. Except for those amendments and
modifications permitted to be made unilaterally by the Franchisor under this
Agreement, this Agreement may only be amended or modified pursuant to the
written agreement of all Members of the Cooperative, subject to the prior
approval of the Franchisor.
[Signatures appear on following pages]
MEMBER:
_____________________________
a ________ (corporation) (partnership)
By: ____________________
Name: ____________________
Title: ____________________
Restaurant(s): ______________
Date: ____________________
APPROVED AND AGREED TO :
FRANCHISOR:
CEC ENTERTAINMENT, INC.
By: ____________________
Name: ____________________
Title: ____________________
Date: ____________________
ATTACHMENT E
EMPLOYEE'S CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
(For Managers, Assistant Managers, Directors of Operations,
District Managers and others)
This Confidentiality and Non-Competition Agreement ("Agreement") is made
and entered into this ___ day of ________, 20__, by and between CEC
Entertainment, Inc., a Kansas corporation ("Franchisor"), ________
("Franchisee"), and ________ ("Covenantor").
RECITALS
WHEREAS, Franchisor and Franchisee have entered into a Franchise Agreement
dated ________ (the "Franchise Agreement"), pursuant to which Franchisor has
granted Franchisee the right to establish and operate a family-oriented pizza
restaurant (the "Franchised Restaurant") and to use the Proprietary Marks and
System solely in connection therewith; and
WHEREAS, Franchisor has provided, or will provide to Franchisee, a
confidential operations manual and such other written or printed material to
explain the operation of the System and aid in its use (the "Documentation") and
certain confidential information, knowledge, and know-how concerning the
construction and methods of operation of the Franchised Restaurant relating to
the System, including the Documentation, drawing, materials, equipment,
techniques, products, recipes, and other data of Franchisor ("Trade Secrets");
and
WHEREAS, the Proprietary Marks and Trade Secrets provide economic
advantages to Franchisor and the Trade Secrets are not generally known to, and
are not readily ascertainable by proper means by, Franchisor's competitors who
could obtain economic value from knowledge and use of the Trade Secrets; and
WHEREAS, Covenantor or acknowledges that receipt of and the right to use
the Trade Secrets constitutes independent valuable consideration for the
representations, promises and covenants made by Covenantor or herein;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties agree as follows:
Confidentiality Agreement
1. Franchisor and Franchisee shall disclose to Covenantor some or all of
the Trade Secrets. All information and materials, including, without limitation,
the Documentation, which Franchisor provides to Franchisee and/or Covenantor
shall be deemed confidential Trade Secrets for purposes of this Agreement.
2. Covenantor shall at all times treat as confidential, and shall not at
any time disclose, distribute, copy, duplicate, record, or otherwise reproduce,
in whole or in part, or otherwise make available to any person or source or
otherwise use in any manner except for the operation of the Franchised
Restaurant, the contents of the Trade Secrets without the prior written consent
of Franchisor.
3. Covenantor agrees that any goodwill that may arise from Covenantor's use
of the Trade Secrets shall at all times remain the sole and exclusive property
of Franchisor and shall inure to the sole benefit of Franchisor.
4. Covenantor agrees to notify Franchisor and Franchisee promptly in
writing of any loss, theft, or unauthorized disclosure or use of any of the
Trade Secrets of which Covenantor has knowledge.
5. Covenantor shall surrender any material containing some or all of the
Trade Secrets, including the Documentation, to Franchisee or Franchisor, upon
request, or upon termination of employment by Franchisee, or upon conclusion of
the use for which such information or material may have been furnished to
Covenantor.
Covenants Not to Compete
1. Covenantor specifically acknowledges that, pursuant to Covenantor's
employment or association with Franchisee, Covenantor will receive valuable,
specialized training and/or confidential information. In consideration for the
disclosure of the Trade Secrets, Covenantor covenants that during Covenantor's
employment or association with Franchisee, and for one (1) year following the
earlier of the expiration, termination or transfer of all of Franchisee's
interest in the Franchise Agreement or the termination of Covenantor's
association with or employment by Franchisee, except as otherwise approved in
writing by Franchisor, Covenantor shall not, either directly or indirectly, for
itself, or through, on behalf of, or in conjunction with, any person or legal
entity:
(a) Divert or attempt to divert any business or customer of the
Franchised Restaurant to any competitor, by direct or indirect inducement
or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to the goodwill associated with the Proprietary
Marks, the Animated Entertainment or the System;
(b) Employ or seek to employ any person who is at that time employed
by Franchisor, or by any Licensee of Franchisor (other than Franchisee), or
otherwise directly or indirectly induce such person to leave his or her
employment; or
(c) Own, maintain, operate, engage in, be employed by, provide any
assistance to, or have any interest in (as owner or otherwise) any
business, which operates a restaurant or food service outlet in combination
with family entertainment, including without limitation, live entertainment
and entertainment in the form or video tapes, video displays or computer
controlled animated characters; provided, however, that this provision
shall not apply to the operation by Covenantor of any license which may be
granted by Franchisor to Covenantor; and provided, further, that this
provision shall not apply to any ownership by Covenantor, of less than five
percent (5%) of the outstanding equity securities in any publicly-held
corporation, and which business is located within the United States and any
foreign jurisdiction where Franchisor or its licensees do business (during
the term of Covenantor's employment) or within a twenty-five (25)-mile
radius from the Franchised Restaurant.
(d) Covenantor understands and acknowledges that Franchisor will have
the right, in its sole discretion, to reduce the scope of any
non-competition covenant set forth above, or any portion thereof, without
its consent, effective immediately upon notice to Covenantor; and
Covenantor agrees that he or she will comply with any covenant as so
modified, which will be fully enforceable notwithstanding the provisions of
Section 4 under the heading entitled "Miscellaneous."
Miscellaneous
1. Franchisee and Covenantor agree that in the event of a breach of this
Agreement, Franchisor and/or Franchisee shall be entitled to enforce the
provisions of this Agreement and shall be entitled, in addition to any other
remedies which are made available to it at law or in equity, to a temporary
and/or permanent injunction and a decree for the specific performance of the
terms of this Agreement, without the necessity of showing actual or threatened
harm and without being required to furnish a bond or other security.
2. Covenantor agrees to pay all expenses (including court costs and
reasonable attorneys' fees) incurred by Franchisor and Franchisee in enforcing
this Agreement.
3. THIS AGREEMENT SHALL BE INTERPRETED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF ________, WITHOUT REFERENCE TO ________ CHOICE OF
LAW PRINCIPLES.
4. This Agreement contains the entire agreement of the parties regarding
the subject matter hereof. This Agreement may be modified only by a duly
authorized writing executed by all parties.
5. Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered or mailed by certified mail, return
receipt requested, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:
Notices to Franchisor: Notices to Franchisee:
Director of Franchise ____________________
CEC Entertainment, Inc. ____________________
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ____________________
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ____________________
(▇▇▇) ▇▇▇-▇▇▇▇ (___) ______________
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax) (___) ______________ (Fax)
Notices to Covenantor:
_________________________
_________________________
_________________________
Any notice by certified mail shall be deemed to have been given at the date
and time of mailing.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.
FRANCHISOR: FRANCHISEE:
CEC ENTERTAINMENT, INC., __________________________,
a Kansas corporation a ________ (corporation) (partnership)
By: ____________________ By: ____________________
Name: ____________________ Name: ____________________
Title: ____________________ Title: ____________________
COVENANTOR:
By: ____________________
Name: ____________________
ATTACHMENT F
RENEWAL AMENDMENT
TO
FRANCHISE AGREEMENT
This Renewal Amendment to Franchise Agreement ("Amendment") is executed and
entered into this ___ day of ________, 20__, by and between CEC Entertainment,
Inc. a Kansas corporation (as "Franchisor"), and ________________, a ________
corporation (as "Franchisee").
RECITALS
1. On ________, Franchisor and Franchisee entered into that certain
franchise agreement (the "Expiring Franchise Agreement"), pursuant to which
Franchisee established and operates ▇▇▇▇▇ ▇. Cheese's restaurant located at
________________ (the "Franchised Restaurant");
2. The Expiring Franchise Agreement provides for an initial term of ___
years and grants Franchisee the conditional right to renew the Expiring
Franchise Agreement for ___ consecutive renewal term(s) of ___ years each.
3. Such renewal is conditioned on, among other things, Franchisee's
execution of Franchisor's then-current form of franchise agreement;
4. Franchisee desires to renew the Expiring Franchise Agreement and
Franchisor and Franchisee have, contemporaneous with the execution of this
Amendment, executed Franchisor's then-current form of franchise agreement (the
"Franchise Agreement"), which supercedes the Expiring Franchise Agreement; and
5. Franchisor and Franchisee desire to amend the terms of the Franchise
Agreement to reflect the renewal conditions contained in the Expiring Franchise
Agreement and Franchisee's continued operation of the Franchised Restaurant.
NOW, THEREFORE, Franchisor and Franchisee, in consideration of the
undertakings and commitments set forth herein and in the Franchise Agreement,
agree as follows:
1. Section 1.28 of the Franchise Agreement shall be deleted in its entirety
and shall have no force effect and the following shall be substituted in lieu
thereof:
1.28 "Site" means the existing location of the Franchised Restaurant
as of the date first above written.
2. Section 3.1 of the Franchise Agreement shall be deleted in its entirety
and shall have no force or effect and the following shall be substituted in lieu
thereof:
3.1 Renewal Fee. Prior to or upon execution of this Agreement
Franchisee shall deliver to Franchisor a renewal fee of ________ and no/100
Dollars ($________) in readily available funds (the "Renewal Fee"). The
Renewal 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. Section 4 of the Franchise Agreement, entitled "Site Selection" shall be
amended by the addition of the following Section 4.7, which shall deemed an
integral part thereof:
4.7 Franchisor hereby approves the site described in Section 1.28
hereof as the Site for the Franchised Restaurant, and acknowledges receipt
of a fully executed copy of the lease or purchase agreement as described in
Section 4.4 hereof.
4. Section 6 of the Franchise Agreement, entitled "Training" shall be
amended by the addition of the following Section 6.4, which shall be deemed an
integral part thereof:
6.4 Franchisor and Franchisee acknowledge and agree that Franchisor
has provided, and Franchisee's current general manager and technician have
attended and completed to Franchisor's satisfaction, initial training
conducted by Franchisor and that Franchisor has provided to Franchisee a
copy of the Operational Policies. Franchisor shall not charge any
additional fee for such training previously provided by Franchisor.
5. Section 12.1 of the Franchise Agreement shall be deleted in its entirety
and shall have no force or effect and the following shall be substituted in lieu
thereof:
12.1 Insurance. For the entire term of this Agreement, Franchisee
shall obtain and maintain insurance protecting Franchisee and the
Indemnitees against any demand or claim arising or occurring in connection
with the operation of the Franchised Restaurant. Such policies shall: (i)
be of the types and for the minimum amounts of coverage indicated in the
Operational Policies; (ii) contain a waiver of subrogation in favor of
Franchisor; (iii) name the Indemnitees as additional insureds; (iv) contain
no provision which limits or reduces coverage in the event of a claim by
any one (1) or more of the Indemnitees; (v) provide that policy limits
shall not be reduced, coverage restricted, canceled, allowed to lapse or
otherwise altered or such policy(ies) amended without Franchisor's cosent;
and (vi) be obtained from reputable insurance companeis approved by
Franchisor and authorized to do business in all jurisdictions in which the
Franchised Restaurant is located. Franchiseealso acknowledges and agrees
to:
(a) furnish Franchisor with evidence that Franchisee has obtained
the required insurance each year afterwards, and at any other time a
carrier or coverage is changed;
(b) increase the insurance coverage amounts in the amounts
indicated by Franchisor upon thirty (30) days prior written notice
from Franchisor; and
(c) reimburse Franchisor for any insurance policies obtained by
Franchisor on behalf of Franchisee if Franchisee fails to obtain the
insurance required by this Section.
6. Section 13.1 of the Franchise Agreement shall be deleted in its entirety
and shall have no force or effect and the following shall be substituted in lieu
thereof:
13.1 Term. Unless terminated as provided for herein, the term of this
Agreement shall expire ________ (___) years thereafter.
7. That portion of Section 13.2 of the Franchise Agreement prior to Section
13.2(a) shall be deleted in its entirety and shall have no force or effect and
the following shall be substituted in lieu thereof:
13.2 Renewal. Franchisee may, at Franchisee's option, renew this
Agreement for ________ (___) additional period(s) of ________ (___) years
[each], provided that at the end of the initial term:
8. All other provisions of the Franchise Agreement are hereby verified and
confirmed.
IN WITNESS WHEREOF, the parties hereto have fully executed, sealed and
delivered this Agreement in duplicate on the day and year first above written.
[Signatures appear on following pages]
FRANCHISOR:
CEC ENTERTAINMENT, INC.
By: ____________________
Name: ____________________
Title: ____________________
STATE OF TEXAS
COUNTY OF DALLAS
Before me personally appeared ____________________, who, after being duly
sworn, says that he is the ____________________ of CEC Entertainment, Inc., a
corporation, organized and existing under the laws of Kansas, and that he has
authority to execute under oath and has so executed the above Agreement for and
on behalf of such corporation for such purposes therein contained.
WITNESS my hand and official seal this _____ day of _____________, 20__.
______________________________
(SEAL) Notary Public
FRANCHISEE:
_____________________________
By: ____________________
Name: ____________________
Title: ____________________
STATE OF ____________________
COUNTY OF ___________________
Before me personally appeared ____________________, who, after being duly
sworn, says that he is the ____________________ of ________________, a
(corporation) (partnership), organized and existing under the laws of
____________________, and that he has authority to execute under oath and has so
executed the above Agreement for and on behalf of such (corporation)
(partnership) for the purposes therein contained.
WITNESS my hand and official seal this ___ day of __________________, 20__.
______________________________
(SEAL) Notary Public