Franchise Agreement - ShowBiz Pizza Time Inc.
SHOWBIZ PIZZA TIME, INC.
FRANCHISE AGREEMENT
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[TERRITORY]
4441 West Airport Freeway
P.O. Box 152077
Irving, TX 75062
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 . . . . . . . . . . . . . . . . .5
3. FEES AND CONTRIBUTIONS. . . . . . . . . . . . . . . . . . .5
3.1 Franchise Fee. . . . . . . . . . . . . . . . . . . . .5
3.1.1 Termination prior to Site Approval . . . . .6
3.1.2 Termination after Site Approval. . . . . . .6
3.1.3 Termination after Construction . . . . . . .6
3.2 Royalty Fees . . . . . . . . . . . . . . . . . . . . .6
3.3 Entertainment Fund . . . . . . . . . . . . . . . . . .6
3.4 Advertising Fund . . . . . . . . . . . . . . . . . . .6
3.5 Payments and Taxes . . . . . . . . . . . . . . . . . .6
3.6 Overdue Payments . . . . . . . . . . . . . . . . . . .6
4. SITE SELECTION. . . . . . . . . . . . . . . . . . . . . . .7
4.1 Criteria for Site Approval . . . . . . . . . . . . . .7
4.2 Approval by Franchisor . . . . . . . . . . . . . . . .7
4.3 Costs of On-Site Evaluation. . . . . . . . . . . . . .7
4.4 Executed Lease or Purchase Agreement . . . . . . . . .7
4.5 Extensions . . . . . . . . . . . . . . . . . . . . .7
4.6 Relocation . . . . . . . . . . . . . . . . . . . . . .8
5. CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . . . .8
5.1 Pre-Construction Approval Criteria . . . . . . . . . .8
5.2 Pre-Construction Approval. . . . . . . . . . . . . . .9
5.3 Commencement of Construction and Extensions. . . . . .9
5.4 Construction . . . . . . . . . . . . . . . . . . . . .9
5.5 Opening Assistance . . . . . . . . . . . . . . . . . .9
5.6 Inspection . . . . . . . . . . . . . . . . . . . . . 10
5.7 Continuing Statements. . . . . . . . . . . . . . . . 10
5.8 Installation of Animated Entertainment . . . . . . . 10
5.9 Approval for Opening . . . . . . . . . . . . . . . . 10
6. TRAINING. . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Minimum Training . . . . . . . . . . . . . . . . . . 10
6.2 Location and Expenses. . . . . . . . . . . . . . . . 10
6.3 Additional Training. . . . . . . . . . . . . . . . . 11
7. OPERATION . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Operational Policies and Cornerstones. . . . . . . . 11
7.2 Suppliers. . . . . . . . . . . . . . . . . . . . . . 12
7.3 General Maintenance. . . . . . . . . . . . . . . . . 12
7.4 Maintenance of Animated Entertainment. . . . . . . . 13
7.5 Scheduled Refurbishment. . . . . . . . . . . . . . . 13
7.6 Inspection . . . . . . . . . . . . . . . . . . . . . 13
7.6.1 Testing. . . . . . . . . . . . . . . . . . 13
7.6.2 Recommendations. . . . . . . . . . . . . . 14
7.6.3 Failure to Correct Deficiencies. . . . . . 14
7.7 Accounting and Records . . . . . . . . . . . . . . . 14
7.7.1 General Accounting Principles. . . . . . . 14
7.7.2 Accounting Statements. . . . . . . . . . . 14
7.7.3 Inspection of Accounting and Records . . . 14
7.7.4 Records of Ownership Interests in Franchisee15
7.7.5 Sales Records. . . . . . . . . . . . . . . 15
8. ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 General Requirements . . . . . . . . . . . . . . . . 15
8.2 Pre-approved Advertising . . . . . . . . . . . . . . 15
8.3 New Advertising. . . . . . . . . . . . . . . . . . . 16
8.4 Minimum Advertising Expenditures . . . . . . . . . . 16
8.5 Advertising and Entertainment Funds. . . . . . . . . 16
8.6 Advertising Cooperative. . . . . . . . . . . . . . . 17
9. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 17
9.1 Representations, Warranties and Covenants of Franchisee17
9.1.1 Due Incorporation. . . . . . . . . . . . . 17
9.1.2 Authorization. . . . . . . . . . . . . . . 18
9.1.3 Execution and Performance. . . . . . . . . 18
9.1.4 Corporate Documents. . . . . . . . . . . . 18
9.1.5 Non-Competition during Term of Agreement . 18
9.1.6 Non-Competition after Termination or
Non-Renewal of Agreement. . . . . . . . .18
9.1.7 Additional Covenants . . . . . . . . . . . 19
9.1.8 Guaranty . . . . . . . . . . . . . . . . . 19
9.2 Representations, Warranties and Covenants of Franchisor . 19
9.2.1 Due Incorporation. . . . . . . . . . . . . 19
9.2.2 Authorization. . . . . . . . . . . . . . . 19
9.2.3 Execution and Performance. . . . . . . . . 19
10. PROPRIETARY RIGHTS AND INFORMATION. . . . . . . . . . . . 20
10.1 Confidential Information . . . . . . . . . . . . . . 20
10.1.1 Confidentiality Agreements . . . . . . . . 20
10.1.2 Improvements . . . . . . . . . . . . . . . 20
10.2 Proprietary Marks. . . . . . . . . . . . . . . . . . 20
10.3 Copyrights . . . . . . . . . . . . . . . . . . . . . 21
11. TRANSFER OF INTEREST. . . . . . . . . . . . . . . . . . . 22
11.1 Transfer by Franchisor . . . . . . . . . . . . . . . 22
11.2. Transfer by Franchisee. . . . . . . . . . . . . 22
11.2.1 General Requisites . . . . . . . . . . . . 22
11.2.2 Transfer involving Controlling Interest. . 23
11.3 Transfer of Interest in Franchisee. . . . . . . . . 23
11.4 Transfer upon Death. . . . . . . . . . . . . . . . . 23
11.5 Public Offerings . . . . . . . . . . . . . . . . . . 23
12. INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . 24
12.1 Insurance. . . . . . . . . . . . . . . . . . . . . . 24
12.2 Insurance Prior to Commencement. . . . . . . . . . . 24
12.3 Indemnities. . . . . . . . . . . . . . . . . . . . . 25
12.2.1 Indemnification. . . . . . . . . . . . . . . 25
12.2.2. Notice and Counsel . . . . . . . . . . . . 26
12.2.3 Settlement and Remedial Actions. . . . . . 26
12.2.4 Expenses . . . . . . . . . . . . . . . . . 26
12.2.5 Third Party Recovery . . . . . . . . . . . 26
12.2.6 Survival . . . . . . . . . . . . . . . . . 26
13. TERM, RENEWAL AND TERMINATION . . . . . . . . . . . . . . 27
13.1 Term . . . . . . . . . . . . . . . . . . . . . . . . 27
13.2 Renewal. . . . . . . . . . . . . . . . . . . . . . . 27
13.3 Termination. . . . . . . . . . . . . . . . . . . . . 27
13.3.1 Termination without Notice . . . . . . . . 27
13.3.2 Termination with Ten Day Notice. . . . . . 28
13.3.3 Termination with Thirty Day Notice . . . 28
13.4 Obligations upon Termination or Expiration . . . . . 28
13.5 Option to Purchase . . . . . . . . . . . . . . . . . 29
14. REMEDIES AND LIQUIDATED DAMAGES . . . . . . . . . . . . . 30
14.1 Remedies . . . . . . . . . . . . . . . . . . . . . . 30
14.1.1 Cure . . . . . . . . . . . . . . . . . . . 30
14.1.2 Specific Enforcement . . . . . . . . . . . 30
14.2 Liquidated Damages . . . . . . . . . . . . . . . . . 30
15. DUE DILIGENCE AND ASSUMPTION OF RISK. . . . . . . . . . . 30
16. DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . 31
16.1 Mediation. . . . . . . . . . . . . . . . . . . . . . 31
16.2 Applicable Law . . . . . . . . . . . . . . . . . . . 31
16.3 Jurisdiction and Venue . . . . . . . . . . . . . . . 31
17. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 32
17.1 Independent Contractors. . . . . . . . . . . . . . . 32
17.2 Entire Agreement . . . . . . . . . . . . . . . . . . 32
17.3 No Waiver. . . . . . . . . . . . . . . . . . . . . . 32
17.4 Severability . . . . . . . . . . . . . . . . . . . . 32
17.5 Notice . . . . . . . . . . . . . . . . . . . . . . . 32
17.6 Counterparts . . . . . . . . . . . . . . . . . . . . 33
17.7 Headings . . . . . . . . . . . . . . . . . . . . . . 33
17.8 Further Assurances . . . . . . . . . . . . . . . . . 33
17.9 Compliance with Laws . . . . . . . . . . . . . . . . 33
Schedule 1.15 - Schedule of Franchisee's Principals. . . . . . 37
Attachment A - Cornerstones. . . . . . . . . . . . . . . . . . 38
Attachment B - Operational Policies. . . . . . . . . . . . . . 39
Attachment C - Site Approval Form. . . . . . . . . . . . . . . 40
Attachment D - Lease Rider . . . . . . . . . . . . . . . . . . 41
Attachment E - Advertising Cooperative Agreement . . . . . . . 42
Attachment F - Guaranty Agreement. . . . . . . . . . . . . . . 43
Attachment G - Principal's Confidentiality Agreement . . . . . 44
Attachment H - Employee's Confidentiality Agreement. . . . . . 45
SHOWBIZ PIZZA TIME, INC.
FRANCHISE AGREEMENT
This Franchise Agreement is entered into this ------- of -----1997,
by and between ShowBiz Pizza Time, Inc., a Kansas
corporation ("Franchisor"), and ------------ a ----------
corporation ("Franchisee").
RECITALS
1. Franchisor has developed and is the owner of a System for the
establishment, development and operation of family-oriented pizza
restaurants;
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;
3. Franchisee desires to obtain from Franchisor certain rights to
use the System, the Animated Entertainment and the Proprietary
Marks to develop and establish a Franchised Restaurant at the Site;
and
4. Franchisor desires like to grant to Franchisee certain rights
to use the System, the Animated Entertainment and the Proprietary
Marks to develop and establish a Franchised Restaurants 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
Franchised Restaurants, as determined by Franchisor, for the
purpose of funding, administering and developing regional
advertising and promotion programs.
1.3 "Advertising Fund" means the fund to which Franchisee will
contribute a stated percentage of Gross Sales on a monthly basis
and which will be administered by the Association for the
maintenance, administration, direction and preparation of
advertising for the System, Proprietary Marks and Animated
Entertainment as more fully discussed in Sections 3.4 and 8.5.
1.4 "Agreement" means this Franchise Agreement and all
attachments.
1.5 "Animated Entertainment" means the computer hardware and
software, artistic designs, scripts and musical scores, staging and
lighting techniques and configurations, plans, manuals and
specifications, manufacturing know-how and other intellectual
property relating to video display entertainment and to three
dimensional computer controlled animated characters, including
present and future improvements, patents, trademarks, copyrights
and other intellectual and artistic property.
1.6 "Area of Dominant Influence" means the geographic area which
includes the Protected Territory and an additional ------(----)
mile zone extending from the boundaries of the Protected Territory.
1.7 "Association" means the International Association of ShowBiz
Pizza Time Restaurants, Inc. which will administer the
Entertainment Fund and the Advertising 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.
1.8 "Change in Control" means a Transfer of an Equity Interest in
Franchisee which, directly or indirectly, causes a change in the
number of Persons which can vote more than fifty percent (50%) of
the total Equity Interests in Franchisee.
1.9 "Competing Business" means a business which operates a
restaurant or food service outlet in combination with entertainment
in the form of video games, video displays or computer controlled
animated characters.
1.10 "Confidential Information" means the terms of this
Franchise Agreement and Attachments and any amendments hereto, the
System, the Animated Entertainment, the Operational Policies,
Cornerstones, 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.
1.11"Cornerstones" means the general principals and guidelines
under which the Franchisee agrees to establish and operate the
Franchised Restaurant, as such principles and guidelines reasonably
modified from time to time by Franchisor in order to improve the
quality and efficiency of the operation of the System and the
Franchised Restaurant. A copy of the current version of the
Cornerstones is attached as Attachment A hereto.
1.12 "Entertainment Fund" means the fund to which Franchisee will
contribute a monthly basis and to be administered by the
Association for the purchase, lease, shipping and installation of
software programs and new hardware for Animated Entertainment
including the cost of shipping and installation as more fully
described in Section 3.3 and 8.5.
1.13 "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.
1.14 "Execution Date" means the date upon which a Franchise
Agreement is duly executed between a franchisee and Franchisor.
1.15 "Franchisee" means -------------------------------------.
1.16 "Franchisee's Principals" means Franchisee's spouse, if
Franchisee is an individual, all officers and directors of
Franchisee and all holders of an ownership interest in Franchisee
and of any entity directly or indirectly controlling Franchisee,
all as listed ion Schedule 1.7 attached hereto..
1.17 "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.
1.18 "Franchisor" means ShowBiz Pizza Time, Inc. or any person or
legal entity to which ShowBiz Pizza Time, Inc. assigns or otherwise
transfers its rights and obligations contained in this Agreement.
1.19 "Gross Sales" means the total of all sales (not including
taxes collected) 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.
1.20 "Indemnitees" means the Association, Franchisor and its
subsidiaries and affiliates and their respective directors,
officers, employees, shareholders, affiliates, successors and
assigns.
1.21 "Losses and Expenses" means compensatory, exemplary or
punitive damages, fines, penalties, charges, assessments and fees
(including reasonable attorneys', experts', accountants' and
consultants' fees); interest, court costs, settlement or judgment
amounts and other similar amounts incurred, charged against or
suffered by the Indemnitees in connection with any Action.
1.22 "Media Fee" means a monthly contribution by Franchisee to the
Advertising Fund as more fully discussed in Section 3.4 and 8.5 of
this Agreement, the proceeds of which will be used exclusively by
the Association for the purpose of purchasing national network
television advertising.
1.23 "Minority Interest" means a direct or indirect ownership
interest of less than five percent (5%) of the capital stock of,
partnership interest in, or other equity interest in (including the
right to vote) any type of legal entity.
1.24 "Operational," used in reference to the Franchised Restaurant,
means that the Franchised Restaurant that 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.
1.25 "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, the current version of which is attached as
Attachment B hereto.
1.26 "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.
1.27 "Proprietary Marks" means the trademarks, trade names, service
marks, logos, emblems and other indicia of origin as designated
from time to time by Franchisor, which may be owned by Franchisor
or licensed to Franchisor with sublicensing rights, including, but
not limited to, the marks: "Chuck E. Cheese" and "ShowBiz Pizza
Time".
1.28 "Protected Territory" means ------------ in which the
Franchisor, so long as Franchisee complies with this Agreement,
agrees not to establish or operate other Franchised Restaurants.
1.29 "Site" means the location for the establishment and operation
of the Franchised Restaurant which is approved as per Section 4.2
of this Agreement.
1.30 "System" means the unique system developed and owned by
Franchisor for the establishment, development, and operation of
family-oriented pizza restaurants, the distinguishing
characteristics of which include without limitation, Animated
Entertainment; separate areas with a variety of rides, amusement
games and other attractions; characteristic decorations,
furnishings and materials; specially-designed equipment and
equipment layouts; trade secret food products and other special
recipes, menus and food and beverage designations; food and
beverage preparation and service procedures and techniques;
operating procedures for sanitation and maintenance; methods and
techniques for inventory and cost controls, record keeping and
reporting, personnel training and management, and advertising and
promotional programs; Cornerstones; and Operational Policies; all
of which may be changed, improved or further developed by
Franchisor from time to time.
1.31 "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 this (i) Agreement or of any or all rights or
obligations of herein, (ii) any Equity Interests in Franchisee, or
(iii) in the assets of Franchisee.
2. GRANT OF RIGHTS
2.1 Grant Franchisor hereby grants to Franchisee the right, and
Franchisee undertakes the obligation, pursuant to the terms and
conditions of this Agreement, to establish and operate the
Franchised Restaurant at duly approved Site in the Protected
Territory.
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 Franchised
Restaurant(s) in the Protected Territory during the term of this
Agreement.
2.3 Limitation of Rights Notwithstanding the provision of
Section 2.2, Franchisor reserves the right to sell, market, and
distribute goods and services, without obtaining the prior approval
of Developer, under any marks (including the Proprietary Marks)
through any retail, wholesale, or other channel of distribution,
regardless of whether the goods or services are: (i) now existing
or hereinafter developed; (ii) part of the System; or (iii) now or
at any time hereafter authorized for use or sale at any Franchised
Restaurant.
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 a franchise fee of Sixty Five
Thousand Dollars (US$65,000.00) in readily available funds. In the
event that this Agreement is terminated by Franchisor due to a
default of Franchisee, upon Franchisor's receipt of written
acknowledgment of termination from Franchisee (including a waiver
of claims against Franchisor and a continuing confidentiality and
noncompetition undertaking as set forth herein), Franchisor and
Franchisee agree to observe the following:
3.1.1 Termination prior to Site Approval Franchisor will
refund eighty percent (80%) of the Franchise Fee if the Agreement
is terminated prior to Site approval in accordance with Section
4.2.
3.1.2 Termination after Site Approval Franchisor will
refund fifty percent (50%) of the franchisee fee after the Site has
been approved but prior to commencement of construction of the
Franchised Restaurant.
3.1.3 Termination after Construction After construction
of the Franchised Restaurant commences, both Franchisor and
Franchisee agree that the franchise fee will be fully earned by
Franchisor and nonrefundable.
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 [five percent (5%)]
of the Gross Sales for the immediately preceding calendar month.
3.3 Entertainment 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
contribute to the Entertainment Fund a continuing monthly
contribution equal to four tenths of one percent (.4%) of the Gross
Sales for the immediately preceding calendar month.
3.4 Advertising 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
contribute to the Advertising Fund a continuing monthly
contribution equal to four tenths of one percent (.4%) of the Gross
Sales for the previous calendar month.
Franchisee also agrees to contribute to the Advertising Fund
a continuing monthly Media Fee equal to one percent (1%) of the
Gross Sales for the previous calendar month to be used exclusively
for the purchase of national network television advertising.
3.5 Payments and Taxes All franchise and royalty fees shall be
paid directly to Franchisor or its designee. All contributions to
the Entertainment Fund and Advertising Fund shall be made directly
to the Association unless the Association directs Franchisee
otherwise. 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.
3.6 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.
4. SITE SELECTION
4.1 Criteria for Site Approval Franchisor agrees that prior to or
within one hundred and twenty (120) days after the execution of
a Franchise Agreement, it will locate and obtain the approval of
Franchisor for a Site within the Protected Territory for the
establishment and operation of the Franchised Restaurant.
To qualify for approval, Franchisee must submit to Franchisor:
(a) a completed site review form substantially in the form of
Attachment C.
(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
D; 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 30 (thirty) days from Franchisor's receipt of the
complete information requested. Franchisor agrees that it will 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 necessary, Franchisor will
undertake for Franchisee one (1) on-site evaluation of a proposed
Site free of charge. For all subsequent on-site evaluations,
Franchisee agrees to re-imburse 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 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 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 an extension, Franchise agrees to pay the Franchisor a non-
refundable extension fee of US ---------- (--------) for every
seven (7) 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 may
relocate the Franchise Restaurant only upon the prior written
consent of Franchisor. Franchisor will not unreasonably withhold
its approval of such relocation if: (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; (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; and (v) Franchisee agrees to execute the then-
current form of the Franchise Agreement. The 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
5.1 Pre-Construction Approval Criteria Prior to commencing
construction on the Site, Franchisor shall provide Franchisee, with
plans and specifications for a standard Franchised Restaurant as
well as a floor plan for the Site. Franchisee, at its own cost,
shall submit to Franchisor for its prior written approval:
(a) Complete plans and specifications which adapt the
Franchisor's standard plans and specifications for a Franchised
Restaurant in accordance with local or state laws, regulations or
ordinances, and which conform to Franchisor's floor plan for the
Site. 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 to
prepare construction documents and supervise the construction of
the Franchised Restaurant and completion of all improvements (such
statement shall also identify the architect or engineer and
describe his qualifications in detail);
iii. obtained all such permits and certifications
required for lawful construction 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, and to operate rides, amusement
games and other attractions as required herein.
(c) A construction schedule acceptable to Franchisor.
5.2 Pre-Construction Approval Upon receipt of the above
documents, Franchisor will notify Franchisee of its approval or
disapproval in writing within a period of --------- (----) days.
Franchisor agrees that it will act reasonably in approving or
disapproving any plans, specifications, statements and schedules.
However, given that the construction and appearance of Franchise
Restaurants 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 and Extensions Once the pre-construction
approval has been obtained and within six (6) months
from the date of execution of this Agreement, Franchisee will
commence construction and provide Franchisor with written notice of
such commencement within ------ (----) days of such commencement of
construction.
Franchisor, at its sole discretion and without obligation, may
grant to Franchisee written extensions of this six (6) month period
with the understanding that, if granted, Franchisee shall pay to
Franchisor a non-refundable extension fee of Two Thousand Five
Hundred Dollars ($2,500) for each thirty (30) day period of
extension.
5.4 Construction Franchisee shall complete construction,
including 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 of commencement of construction if the
construction is a space conversion of existing premises, or
(b) twelve (12) months of commencement of construction if the
construction is the erection of a free-standing building.
Franchisor, at its sole discretion and without obligation, may
extend these periods in writing and pursuant to the terms and
conditions imposed by Franchisor as consideration for granting such
extension.
5.5 Opening Assistance. Franchisor shall provide one (1)
representative to provide on-site opening assistance and
supervision for a period of seven (7) to ten (10) days, at no
charge to Franchisee, if Franchisee requires any additional opening
assistance, Franchisor reserves the right to charge an additional
fee for such assistance, in addition to obtaining reimbursement
from related travel, meals and lodging expenses.
5.6 Inspection Franchisee agrees that Franchisor and its agents
shall have the right to inspect the construction at all reasonable
times.
5.7 Continuing Statements Beginning with the calendar month offer
the pre-construction approval issued by Franchisor and each
calendar month thereafter until one (1) calendar month the
Franchised Restaurant is Operational, 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 of the Franchised Restaurant, Franchisee
shall order the Animated Entertainment and related components
specified by Franchisor from the supplier or suppliers designated
by Franchisor. 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 ten
(10) days, the Franchisee will pay Franchisor a fee of --------
(------) 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 date for
installation.
5.9 Approval for Opening Once construction is completed and
within ------- (----) days of obtaining Franchisor's written
approval for opening, Franchisee shall open the Franchised
Restaurant to the public.
6. TRAINING
6.1 Minimum Training. Franchisee shall at all times employ at
least one general manager for the Franchised Restaurant and one
technician for the maintenance of the Animated Entertainment.
Prior to rendering their services, both the general manager and
technician shall attend and complete, to Franchisor's satisfaction,
initial training conducted by Franchisor.
6.2 Location and Expenses. Franchisor will not charge Franchisee
any fee for the training of Franchisee's first restaurant 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 Operational Policies and Cornerstones. 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
franchisees under the System, and to protect Franchisor's
reputation and goodwill. As such, Franchisee agrees to:
(a) Operate the Franchised Restaurant in accordance with the
Operational Policies and Cornerstones 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 Cornerstones and Operational
Policies within a period of ----- (-----) 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 only such products, materials, ingredients, supplies and paper
goods as conform with Franchisor's standards and specifications;
(d) Sell or offer for sale only such 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;
(e) Use at the Franchised Restaurant only such menus and
animated character costumes which comply with the style, pattern
and design prescribed by Franchisor;
(f) Purchase and install, at Franchisee's expense, all
fixtures, furnishings, signs, and equipment (including, without
limitation, video display software which must be updated from time
to time, point-of-sale computer hardware and software control
systems, and a telephone modem) as Franchisor may reasonably direct
from time to time in the Operational Policies or otherwise in
writing;
(g) Employ security officers if necessary for secure
operation of the Franchised Restaurant;
(h) Employ at least the minimum number of other employees as
may be prescribed by Franchisor and to comply with all applicable
federal, state and local laws, rules and regulations with respect
to such employees;
(i) Cause all employees to wear uniforms of the color,
style, and design prescribed by Franchisor;
(j) Make daily and regular use of a Chuck E. Cheese walk-around
character costume and all other animated character costumes
designated by Franchisor and to maintain such costumes in good
condition, as provided in the Operational Policies;
(k) Use the Site only for the operation of the Franchised
Restaurant as well as keep and maintain the Franchised Restaurant
open and operational for the minimum number of hours and days as
reasonably required by Franchisor;
(l) Meet and maintain the highest health standards and
ratings 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, in the understanding that Franchisee is prohibited from
leasing any of the foregoing on a "shared revenue" or "coin
sharing" basis.
7.2 Suppliers Franchisee shall purchase all equipment, supplies
and other products and materials (including animated character
costumes) required for the operation of the Franchised Restaurant
solely from suppliers approved in writing by Franchisor. To
qualify for approval, such suppliers should (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 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.
7.3 General Maintenance Franchisee shall at all times maintain
the Franchised Restaurant in the highest degree of sanitation,
repair and condition. Nevertheless, within three (3) months after
receipt of notice from Franchisor, Franchisee agrees to make any
additions, alterations repairs and replacements that Franchisor
reasonably requires for that purpose, 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.
7.4 Maintenance of Animated Entertainment Franchisee shall at all
times maintain the Animated Entertainment and its components in
good repair and working order. Franchisee shall also assist in the
installation of all retrofits and replacements to the Animated
Entertainment components which are required by Franchisor and paid
for out of the Entertainment Fund. Franchisee shall relinquish and
deliver to the Entertainment Fund title and possession of any
existing components which are replaced by the Fund, and all such
replacements shall become the property of Franchisee.
7.5 Scheduled Refurbishment Commencing on January 1 of the second
calendar year following the opening of the Franchised Restaurant,
Franchisee, at its own expense, shall upgrade and refurbish the
Franchised Restaurant annually. 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 such upgrades and/or refurbishments shall
be at least the lesser of:
(a) Fifty Thousand Dollars ($50,000), 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.
Franchisor may, in its sole discretion, defer in writing all
or any portion of Franchisee's obligations to upgrade or refurbish
the Franchised Restaurant.
7.6 Inspection 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.
7.6.1 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.
7.6.2 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).
7.6.3 Failure to Correct Deficiencies In the event
Franchisee fails or refuses to implement recommendations or
resolutions, Franchisor shall have the right 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.
7.7 Accounting and Records
7.7.1 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 and in the
form and manner prescribed by Franchisor from time to time in the
Operational Policies or otherwise in writing.
7.7.2 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; and
(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.
7.7.3 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.
7.7.4 Records of Ownership Interests in Franchisee During
the term of this Agreement, within ninety (90) days after the end
of the Franchisee's fiscal year, Franchisee shall provide
Franchisor a list of all Persons owning an Equity Interest in the
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.
7.7.5 Sales Records. Franchisee shall record all food,
beverage and token sales 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.
Within eighteen (18) 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 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 at all reasonable times for the purpose of inspecting,
monitoring and retrieving information concerning the operation of
the Franchised Restaurant. Franchisor shall have telephone access
as provided herein at such times, and in such manner as Franchisor
shall from time to time specify.
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, the 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. Television commercials and other
advertising material are periodically produced through the
Advertising Fund and are available for use by each Franchisee.
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.
8.4 Minimum Advertising Expenditures Franchisee shall spend a
monthly a minimum of three percent (3.0%) of the Gross Sales of the
Franchised Restaurant for local advertising and promotion in
Franchisee's Area of Dominant Influence at least two-thirds (2/3)
of which amount shall be spent for television advertising or
advertising in some other media approved by Franchisor.
[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 5.0% 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 Media Fee while the Media Fee remains in
effect.
8.5 Advertising and Entertainment Funds Franchisee and Franchisor
agree that the Association or its designee shall maintain and
administer an Advertising Fund and Entertainment Fund in accordance
with the Association's bylaws. However, the Association and the
administration of the Funds will have the following
characteristics:
(a) Franchisee will have the right to be a voting member of
the Association if it is in compliance with this Agreement and the
Association's bylaws;
(b) Except for the Media Fees which will be used as
discussed in Section 8.5(c), the Advertising Fund shall be used
exclusively to meet any and all costs of maintaining,
administering, directing and preparing any type of advertising
campaign and other public relations activities;
(c) The Media Fees which are contributed to the
Advertising Fund shall only be used to purchase national network
television advertising;
(d) The Entertainment Fund shall be used to purchase or lease
software programs and new hardware for Animated Entertainment for
all System restaurants, including the cost of shipping and
installation. The Entertainment Fund may also be used to design,
test and implement new entertainment concepts which may not be
directly related to the current Animated Entertainment;
(e) All sums paid by Franchisee to the Advertising and
Entertainment Fund shall be deposited in accounts with financial
institutions maintained by the Association, separate from funds of
Franchisor and shall not be used to pay for any of Franchisor's
general operating expenses, except for such reasonable
administrative costs and overhead, if any, as Franchisor may incur
from time to time related to the administration or direction of the
Advertising Fund and Entertainment Fund, including, without
limitation, conducting market research, preparing marketing and
advertising materials, negotiating purchase and lease contracts and
collecting and accounting for assessments for the Advertising and
Entertainment Funds;
(f) Excess amounts remaining in the Advertising and
Entertainment Funds at the end of any taxable year, shall be
applied to expenditures in the following taxable year(s);
(g) The Advertising and Entertainment Fund shall not be an
asset of Franchisor or its designee.;
(h) Franchisor has the right to terminate the Advertising
Fund. The Advertising Fund shall not be terminated, however, until
all monies in the Advertising Fund have been expended for
advertising and/or promotional purposes, or returned to
contributing franchised businesses or those operated by Franchisor
or an affiliate, without interest, on the basis of their respective
contributions; and
(i) Franchisee and Franchisor agree and acknowledge that the
Association or its designees undertake no obligation in
administering the Advertising and Entertainment Fund to make
expenditures which yield benefits to Franchisee which are
equivalent or proportionate to Franchisee's contributions or to
ensure that any particular franchisee benefits directly or pro rata
from the placement of advertising.
8.6 Advertising Cooperative Franchisor shall have the right, in
its discretion, to designate any geographical area as a region for
purposes of establishing an Advertising Cooperative to which
Franchisee will be a member. Such Cooperative will be established
and operated in accordance with an advertising cooperative
agreement which is attached hereto as Attachment "E"
9. REPRESENTATIONS AND WARRANTIES
9.1 Representations, Warranties and Covenants of Franchisee
9.1.1 Due Incorporation Franchisee is a corporation,
limited liability company or general or limited partnership duly
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 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.
9.1.4 Corporate Documents Certified copies of
Franchisee's charter by-laws, articles of organization, partnership
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.
9.1.5 Non-Competition during Term of Agreement Unless
approved by Franchisor in writing, 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
Franchised Restaurant established pursuant to a Franchise Agreement
to any competitor, or do or perform any other act injurious or
prejudicial to the goodwill associated with Franchisor's
Proprietary Marks, the Animated Entertainment and the System;
(b) Employ or seek to employ any person who is employed
by Franchisor or by any other franchisee of Franchisor; 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.
9.1.6 Non-Competition after Termination or Non-Renewal of
Agreement Unless approved by Franchisor in writing, for a period
of one (1) year after the expiration and non-renewal or termination
of this Agreement or after the approved transfer by Franchisee of
its interest in this Agreement, Franchisee and Franchisee's
Principals shall not, directly or indirectly:
(a) Divert or attempt to divert business of any
Franchised Restaurant established pursuant to a Franchise Agreement
to any competitor, or do or perform any other act injurious or
prejudicial to the goodwill associated with Franchisor's
Proprietary Marks, the Animated Entertainment and the System;
(b) Employ or seek to employ any person who is employed
by Franchisor or by any other franchisee of Franchisor; and
(c) Except as provided for herein, own, maintain, engage
in, or have within a twenty five (25) mile radius of the 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.
9.1.7 Additional Covenants At Franchisor's request,
Franchisee shall require and obtain for the benefit of Franchisor
execution of covenants similar to those set forth in this Section
from any and all of its employees having access to materials or
information furnished or disclosed to Franchisee by Franchisor.
9.1.8 Guaranty As an inducement and as a condition to
Franchisor's execution and acceptance of this Agreement, Franchisor
may require any or all of Franchisee's Principals to execute a
Guaranty in the form of Attachment F hereto.
9.2 Representations, Warranties and Covenants of Franchisor
9.2.1 Due Incorporation Franchisor is a corporation duly
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.
9.2.2 Authorization The execution, delivery and
performance by Franchisor of this Agreement and all other
agreements contemplated herein has been duly authorized by all
requisite corporate actions 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.
9.2.3 Execution and Performance Neither the execution,
delivery nor performance by Franchisor of this Agreement or any
other agreements contemplated hereby will conflict with, or result
in a breach of any term or provision of Franchisor's articles of
incorporation or by-laws, or any indenture, mortgage, deed of trust
or other contract or agreement to which Franchisor 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.
10. PROPRIETARY RIGHTS AND INFORMATION
10.1 Confidential Information The 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.
10.1.1 Confidentiality Agreements Franchisee shall cause
Franchisee's Principals and employees having access to the
Confidential Information to execute confidentiality agreements
substantially in the form of Attachments G and H stating that they
will preserve in confidence all Confidential Information. Neither
Franchisee, Franchisee's Principal's or their respective employees
may at any time, without Franchisor's prior written consent, copy,
duplicate, record or otherwise reproduce the Confidential
Information, in whole or in part, nor otherwise make the same
available to any unauthorized person.
10.1.2 Improvements If Franchisee makes any improvements
(as determined by Franchisor) to the Confidential Information,
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, or right to sublicense, of 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 mark and shall refrain from using any of the Proprietary Marks
in conjunction with any word or symbol without Franchisor's prior
written consent.
(g) This license to use the Proprietary Marks is
nonexclusive, 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 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
Cornerstones, 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.
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 obligations of Franchisor under this Agreement
from the date of transfer or assignment.
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 in this Agreement, they must first obtain
the prior written approval of Franchisor.
11.2.1 General Requisites Prior to authorizing a Transfer
by Franchisee of any interest in this Agreement, Franchisor may
require satisfaction of the following:
(a) Franchisee shall be in compliance with all of the terms
and conditions of this Agreement;
(b) Franchisee and/or any Franchisee's Principal 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 Franchisee to evidence such
liability;
(c) The transferee shall satisfy, in Franchisor's 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; and
(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 guarantee) reasonably requested by Franchisor to evidence
acceptance and assumption of all of the terms and conditions of
this Agreement.
11.2.2 Transfer involving Controlling Interest If the
Franchisee does not have a Controlling Interest (as reasonably
determined by Franchisor) in the transferee, in addition to the
requisite in Section 11.2.1, Franchisor may also require:
(a) Franchisee pay a transfer fee equal to one-half (1/2) of
the then current initial franchise fee for Franchise Agreements;
(b) 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
(c) The transferee has complied with Franchisor's then-current
application requirements for a new franchise.
11.3 Transfer of Interest in Franchisee In the event that
Franchisee and/or any of Franchisee's Principals desire to accept
a bona fide offer from a third party to purchase an Equity Interest
in Franchisee, Franchisee and Franchisee's Principals shall notify
Franchisor in writing of each such offer, and Franchisor shall have
the right and option, exercisable within twenty-one (21) days after
receipt of such written notice, to send written notice to the
seller that Franchisor or its nominee intends to purchase seller's
interest on the same terms and conditions offered by the third
party.
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 sold 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.
11.4 Transfer upon Death If the interest of the Franchisee or any
of Franchisee's Principals is transferred upon death or permanent
disability of Franchisee or Franchisee's Principal to the spouse,
parents, siblings, nieces, nephews, descendants or spouse's
descendants of such Franchisee or Franchisee's Principal, the
transferee shall be required to execute a copy of this Agreement,
the Guaranty and any ancillary documents required by Franchisor in
its sole discretion. All other transfers upon death will be
subject to the same conditions as any other inter-vivos transfer.
11.5 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 nonrefundable fee of Ten Thousand Dollars ($10,000) 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; and
(e) Franchisee and Franchisee's Principals shall give
Franchisor at least sixty (60) days' prior written notice prior to
the effective date of any offering or other transaction covered by
this Section 11.5.
12. INSURANCE AND INDEMNITY
12.1 Insurance. Franchisee shall obtain at least thirty (30) days
prior to commencement of Restaurant construction of the Franchised
Restaurant, and maintain throughout the term, such property,
casualty and general liability insurance as may be (i) required by
law; or (ii) reasonably to protect Franchisee from the risks
inherent in construction and operation of the Franchised
Restaurant. Franchisor shall have the right to reasonably consent
to the types and amounts of coverage and the issuing companies.
Such insurance shall:
(a) name the Indemnitees as additional insured parties;
(b) contain no provision which limits or reduces
coverage in the event of a claim by any one (1) or more of the
Indemnitees;
(c) 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
(d) be obtained from reputable insurance companies
authorized to do business in all jurisdictions in which the
Restaurant is located.
12.2 Insurance Prior to Commencement. Prior to the commencement of
construction and 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 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; and
(iii) shall name the Indemnitees as additional insureds. 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) re-imburse Franchisor for any insurance policies obtained
by Franchisor on behalf of Franchisee if Franchisee fails to obtain
the insurance required by this Section.
12.3 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, mark, 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 or
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 development
activities contemplated under this Agreement or
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 sole 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;
(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 shall be chargeable to and paid by Franchisee or any
of Franchisee's Principals pursuant to Franchisee's obligations of
indemnity under this paragraph 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 8 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 franchise shall be fifteen (15) years starting from the date
of opening of the Franchised Restaurant which date shall be
specified in writing by Franchisor.
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
Franchised 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, a royalty fee, contributions and
System assessments; 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 set by Franchisor;
(e) Franchisee and Franchisee's Principals shall execute
a general release, in a form prescribed by Franchisor, of any and
all claims against Indemnitees.
13.3 Termination
13.3.1 Termination without Notice This Agreement shall
automatically terminate without notice to Franchisee if Franchisee:
(a) ceases to do business at the Franchised Restaurant;
(b) causes 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 a
felony or any other crime or offense that is reasonably likely, in
the sole opinion of Franchisor, to adversely affect the System, the
Proprietary Marks, the Animated Entertainment, the goodwill
associated therewith, or Franchisor's interest therein;
(d) 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) violates the requirements for Transfers contained in
Section 11;
(f) fail to comply with the representations and warranties in
Section xxx hereof;
(g) 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
9.1;
(i) knowingly maintains false books or records, or submits
any false reports to Franchisor; or
(j) fails to cure any default of which it has been given
prior notices on two occasions.
13.3.2 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.
13.3.3 Termination with Thirty Day Notice Except as
otherwise provided in this Section, 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) 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) Franchisee will immediately cease to operate the
Franchised Restaurant and use of 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;
(c) 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) 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) 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) Franchisee and Franchisee's Principals shall make such
modifications or alterations to the Franchised Restaurant premises
and contents operated hereunder immediately upon termination or
expiration of this Agreement as may be necessary to prevent the
operation of any business thereon by Franchisee, Franchisee's
Principals, or others after expiration or termination.
13.5 Option to Purchase Franchisor shall have the right, but not
the obligation, to purchase at fair market value (as determined
below) any or all of Franchisee's interest in the Franchised
Restaurant, including but not limited to (i) the Animated
Entertainment components and software, (ii) rides, amusement games
and other attractions, (iii) the real estate component of the
Franchised Restaurant, (iv) furnishings, fixtures and equipment,
and (v) signs, advertising materials and supplies.
Franchisor shall exercise its rights under this Section by
giving written notice thereof to Franchisee within thirty (30) days
after termination or expiration of this Agreement. Within thirty
(30) days after such notice is given by Franchisor, Franchisee and
Franchisor shall each, at its own cost, appoint an appraiser who
has at least five (5) years of relevant commercial appraisal
experience to make an appraisal of the fair market value of
Franchisee's interest in each component of the Franchised
Restaurant as indicated in Franchisor's initial notice and cause
such appraiser to deliver a copy of his appraisal to the other
party. The "fair market value" shall be the average of the two
appraisals and Franchisor will notify Franchisee if it plans on
exercising such right.
14. REMEDIES AND LIQUIDATED DAMAGES
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, a 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.
14.2 Liquidated Damages Franchisee acknowledges that its uncured
breach of any of the terms of this Agreement will materially and
adversely affect Franchisor and that the quantum of such damages
may not be easily ascertainable. Accordingly, Franchisee agrees
that, as liquidated damages for the non-performance of its
obligations under this Agreement, in addition to any other remedy
available to Franchisor, Franchisee shall pay to Franchisor US$---
- ------------------ initially and US$------------------- per month
per violation for so long as each such violation remains uncured;
provided, however, that this provision will only be operative upon
material breaches of this Agreement which are in Franchisee's or
Franchisee's Principals' control.
15. DUE DILIGENCE AND ASSUMPTION OF RISK
Franchisee and Franchisee's Principals have received, read and
understood this Agreement, the documents referred to herein and the
Attachments and Schedules hereto including the bylaws of the
Association. Franchisee and Franchisee's Principals further
acknowledge that they have received the disclosure documents
required by the Federal Trade Commission trade regulation rule
entitled Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, at least ten (10)
business days prior to the date on which this Agreement was
executed. Franchisee and Franchisee's Principals: (i) have had
ample time and opportunity to consult with their advisors
concerning the potential benefits and risks of entering into this
Agreement (ii) have conducted such due diligence and investigation
as they desire; (iii) recognize that the business venture described
herein involves risks; and (iv) acknowledge that the success of
such business venture is dependent upon, among other factors
unrelated to Franchisor, the abilities of Franchisee and
Franchisee's Principals. FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING
OF, AND FRANCHISEE AND EACH OF FRANCHISEE'S PRINCIPALS ACKNOWLEDGE
THAT THEY HAVE NOT RECEIVED OR RELIED UPON, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO THE POTENTIAL PERFORMANCE OR
VIABILITY OF THE BUSINESS VENTURE CONTEMPLATED BY THIS AGREEMENT.
16. DISPUTE RESOLUTION
16.1 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 this Agreement. 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 ------ (-----)
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 to resolve such
claim,
16.2 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.
16.3 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. However, with
respect to any action (i) for monies owed, (ii) for injunctive or
other extraordinary relief, or (iii) involving ownership or use of
the Proprietary Marks or the Animated Entertainment, Franchisor may
bring such action in any state or federal district court which has
jurisdiction.
17. MISCELLANEOUS
17.1 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.
17.2 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.
17.3 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.
17.4 Severability 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.
17.5 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 Franchising
ShowBiz Pizza Time, Inc.
4441 W. Airport Freeway
Post Office Box 152077
Irving, Texas 75062
Tel.
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.
17.6 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.
17.7 Headings The section headings in this Agreement are for
convenient reference only and shall be given no substantive or
interpretive effect.
17.8 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.
17.9 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 Restaurants.
[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.
SHOWBIZ PIZZA TIME, INC.
FRANCHISOR
By:------------------------
Name:----------------------
Title:---------------------
STATE OF TEXAS S
S
COUNTY OF DALLAS S
Before me personally appeared -------------- who, after being
duly sworn, says that he is the ------------- of ShowBiz Pizza
Time, 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 ----------,
19--.
(SEAL)
Notary Public
FRANCHISEE
By: ---------------------------
Name:---------------------------
Title:--------------------------
STATE OF ---------- S
S
COUNTY OF --------- S
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 -------,
199-.
(seal) Notary Public
Schedule 1.15
Schedule of Franchisee's Principals
Attachment A
Cornerstones
Attachment B
Operational Policies
Attachment C
Site Approval Form
Attachment D
Lease Rider
Attachment E
Advertising Cooperative Agreement
Attachment F
Guaranty Agreement
Attachment G
Principal's Confidentiality Agreement
Attachment H
Employee's Confidentiality Agreement