Exhibit 10.31

CEC ENTERTAINMENT, INC.

FRANCHISE AGREEMENT

[CITY, STATE]

4441 West Airport Freeway

Irving, TX 75062

CEC Entertainment, Inc.

[City, State] Franchise

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TABLE OF CONTENTS

 

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

 

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

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

 

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

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

 

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

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

 

SCHEDULE 1.14

   STATEMENT OF OWNERSHIP INTERESTSAND FRANCHISEE’S PRINCIPALS    53

ATTACHMENT A

   AGREEMENT AND GUARANTY OFFRANCHISEE’S PRINCIPALS    A-1

ATTACHMENT B

   GENERAL RELEASE    B-1

ATTACHMENT C

   LEASE RIDER    C-1

 

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

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ATTACHMENT D

   ADVERTISING COOPERATIVE AGREEMENT    D-1

ATTACHMENT E

   EMPLOYEE’S CONFIDENTIALITY AND NON-COMPETITION AGREEMENT    E-1

ATTACHMENT F

   RENEWAL AMENDMENT TO FRANCHISE AGREEMENT    F-1

 

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

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CEC ENTERTAINMENT, INC.

FRANCHISE AGREEMENT

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

RECITALS

1. Franchisor has developed and is the owner of the System;

2. Franchisor has developed and is the owner of, or licensee with rights to
sublicense, certain Animated Entertainment and Proprietary Marks which are
utilized in connection with and identify the System; and

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

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

 

1. DEFINITIONS

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

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

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

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

1.4 “Animated Entertainment” means the computer hardware and software, artistic
designs, scripts and musical scores, staging and lighting techniques and
configurations, plans, manuals and specifications, manufacturing know-how and
other intellectual property relating to video display, audio or other
entertainment and to computer controlled three dimensional animated characters,
including present and future improvements, patents, trademarks, copyrights and
other intellectual and artistic property.

 

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

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

1.6 “Change in Control” means a Transfer of an Equity Interest in Franchisee
which, directly, indirectly, or combined with prior Transfers, causes a change
in the number of Persons which can vote more than fifty percent (50%) of the
total Equity Interest in Franchisee.

1.7 “Competing Business” means a business which operates a restaurant or food
service outlet in combination with family entertainment, including without
limitation, live entertainment and entertainment in the form of video games,
video displays or computer controlled animated characters.

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

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

1.10 “Equity Interest” means a direct or indirect ownership interest in the
capital stock of, partnership or membership interest in, or other equity or
ownership interest in (including the right to vote) any type of legal entity.

1.11 “Execution Date” means the date upon which the Agreement is deemed duly
executed and entered into by Franchisee and Franchisor, as indicated on the
first page of the Agreement.

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

1.13 “Franchisee” means                             .

 

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

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

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

1.16 “Franchisor” means CEC Entertainment, Inc. or any person or legal entity to
which CEC Entertainment, Inc. assigns or otherwise transfers its rights and
obligations contained in this Agreement.

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

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

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

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

1.21 “Losses and Expenses” means all losses, compensatory, exemplary or punitive
damages, fines, penalties, charges, costs, expenses, lost profits, assessments
and fees (including reasonable attorneys’, experts’, accountants’ and
consultants’ fees); interest, court costs, settlement or judgment amounts,
compensation for damages to Franchisor’s reputation and goodwill, costs of or
resulting from delays, financing costs, costs of advertising material and media
time/space, and costs of changing, substituting or replacing the same, and any
and all expenses of recall, refunds, compensation, public notices and other
similar amounts incurred, charged against or suffered by the Indemnitees in
connection with any Action.

 

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

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1.22 “Minority Interest” means an Equity Interest of less than five percent
(5%) of the capital stock of, partnership interest in, or other Equity Interest
in (including the right to vote) any type of legal entity.

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

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

1.25 “Person” means an individual, corporation, limited liability company,
partnership, association, joint stock company, trust or trustee thereof, estate
or executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.

1.26 “Proprietary Marks” means the trademarks, trade names, service marks,
logos, emblems and other indicia of origin as designated from time to time by
Franchisor, which may be owned by Franchisor or licensed to Franchisor with
sublicensing rights, including, but not limited to, the marks “Chuck E. Cheese”
and “Chuck E. Cheese’s.”

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

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

1.29 “Site Selection Territory” means                     ,
                    .

1.30 “Sky Tubes” means components configured to create sequences of group/social
and independent play, using tubes, windows, entries, climbs, crawls, play
stations, passageways, and slides.

1.31 “System” means the distinctive system developed and owned by Franchisor for
the establishment, development, and operation of family-oriented pizza
restaurants, the distinguishing characteristics of which include without
limitation, Animated Entertainment, Sky Tubes, separate areas with a variety of
rides, amusement games and other attractions, characteristic decorations,
furnishings and materials, specially-designed equipment and equipment layouts,
trade secret food products and other special recipes, menus and food and
beverage designations, food and beverage preparation and service procedures and
techniques, operating procedures for sanitation and maintenance, methods and
techniques for inventory and cost controls, record keeping and reporting,
personnel training and management, and advertising and promotional programs, and
Operational Policies, all of which may be changed, improved or further developed
by Franchisor from time to time.

 

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

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

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

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

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

1.33 “System Restaurant” means a family-oriented pizza restaurant that is
established and operated utilizing the System, the Proprietary Marks and the
Animated Entertainment either in accordance with the terms and conditions of a
franchise agreement or by Franchisor.

1.34 “Transfer” means the sale, assignment, conveyance, pledge, gift, mortgage
or other encumbrance, whether direct or indirect, in whole or in part, or in one
or a series of related transactions or occurrences, of (i) this Agreement or of
any or all rights or obligations of herein, (ii) any Equity Interest in
Franchisee, or (iii) any assets of Franchisee beyond transfers necessary in the
ordinary course of business.

 

2. GRANT OF RIGHTS

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

 

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

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

2.3 Limitation of Rights. Franchisor retains all rights not expressly granted
hereunder. Franchisor, its affiliates, and their respective franchisees and
licensees may, among other things, operate other types of facilities besides
System Restaurants in the Protected Territory, including facilities that are
identified by some or all of the Proprietary Marks. The license granted by this
Agreement is only for the operation of a single System Restaurant at the
approved Site. Franchisor therefore may (or may authorize a third party to)
conduct, among other things, the following activities:

(a) Advertise and promote sales of or by System Restaurants, at any location,
including within the Protected Territory;

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

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

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

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

(f) Operate one or more sites on the World Wide Web portion of the Internet that
advertise System Restaurants, allow customers and potential customers to make
reservations at System Restaurants (including the Franchised Restaurant), sell
any product or service including pre-packaged food products, games, toys,
clothing or memorabilia, or permit other activities (whether or not similar),
even though the Web site is accessible to or viewable by persons in the
Protected Territory.

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

 

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

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3. FEES AND CONTRIBUTIONS

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

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

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

3.4 Payments and Taxes. All franchise and royalty fees shall be paid directly to
Franchisor or its designee. All payments and contributions shall be in United
States dollars and will be made free and clear of any tax, deduction, offset or
withholding of any kind. All taxes and penalties on any payment made by
Franchisee pursuant to this Agreement now or in the future will be fully borne
by Franchisee. In the event of any bona fide dispute as to liability for taxes
assessed or other indebtedness, Franchisee may contest the validity or the
amount of the tax or indebtedness in accordance with procedures of the taxing
authority or applicable law; however, in no event shall Franchisee permit a tax
sale or seizure by levy of execution or similar writ or warrant, or attachment
by a creditor, to occur against the premises of the Franchised Restaurant or any
improvements thereon.

 

    CEC Entertainment, Inc.   7   [City, State] Franchise

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

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

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

 

4. SITE SELECTION

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

Franchisee must submit to Franchisor:

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

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

 

    CEC Entertainment, Inc.   8   [City, State] Franchise

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

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

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

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

4.5 Extensions. Upon Franchisee’s written request, Franchisor, at its sole
discretion and without obligation, may grant a written extension or extensions
to the period for approval of a proposed Site. In the event Franchisor grants
such extension, Franchisee agrees to pay the Franchisor a non-refundable
extension fee of Two-thousand Five Hundred and No/100 Dollars ($2,500.00) for
every thirty (30) day period of the agreed extension.

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

 

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

 

5. CONSTRUCTION AND REFURBISHMENT

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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6. TRAINING

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

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

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

 

7. OPERATION

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

 

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

7.8 Accounting and Records.

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

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

 

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

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

 

8. ADVERTISING

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

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

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

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

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

 

    CEC Entertainment, Inc.   20   [City, State] Franchise

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

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

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

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

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

 

    CEC Entertainment, Inc.   21   [City, State] Franchise

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

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

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

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

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

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

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

 

    CEC Entertainment, Inc.   22   [City, State] Franchise

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9. REPRESENTATIONS AND WARRANTIES

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

9.1.1 Due Incorporation. If Franchisee is a corporation, limited liability
company, general or limited partnership or other form of business entity, it is
duly formed and organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with all requisite power and authority
to enter into this Agreement and perform the obligations contained herein.

9.1.2 Authorization. The execution, delivery and performance by Franchisee of
this Agreement and all other agreements contemplated herein has been duly
authorized by all requisite actions on the part of Franchisee and no further
actions are necessary to make this Agreement or such other agreements valid and
binding upon it and enforceable against it in accordance with their respective
terms.

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

9.1.4 Execution and Performance. Neither the execution, delivery nor performance
by Franchisee of this Agreement or any other agreements contemplated hereby will
conflict with, or result in a breach of any term or provision of Franchisee’s
charter, by-laws, articles of organization, or partnership agreement and/or
other governing documents and any amendments thereto, any indenture, mortgage,
deed of trust or other material contract or agreement to which Franchisee is a
party or by which it or any of its assets are bound, or breach any order, writ,
injunction or decree of any court, administrative agency or governmental body.

9.1.5 Corporate Documents. Certified copies of Franchisee’s charter by-laws,
articles of organization, partnership agreement, membership agreement and/or
other governing documents and any amendments thereto, including board of
director’s or partner’s resolutions authorizing this Agreement have been
delivered to Franchisor. Any amendments or changes to such governing or charter
documents subsequent to the date of this Agreement shall not be undertaken
without Franchisor’s prior written consent.

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

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

 

    CEC Entertainment, Inc.   23   [City, State] Franchise

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maintain stop-transfer instructions against the transfer on Franchisee’s records
of any of its equity securities and each stock certificate will have
conspicuously endorsed upon it a statement in a form satisfactory to Franchisor
that it is held subject to all restrictions imposed upon assignments by this
Agreement; but the requirements of this Section 9.1.7 will not apply to the
transfer of equity securities of a publicly-held corporation. If Franchisee is a
partnership or limited liability company, its written partnership or limited
liability company agreement will provide that ownership of an interest in the
partnership or limited liability company is held subject to all restrictions
imposed upon assignments by this Agreement.

If Franchisee is an individual, then Franchisee represents, warrants and
covenants that neither the execution, delivery nor performance by Franchisee of
this Agreement or any other agreements contemplated hereby conflicts with, or
results in a breach of any contract or agreement to which Franchisee is a party
or a breach of any order, writ, injunction or decree of any court,
administrative agency or governmental body.

9.2 Financial Statements. Franchisee and, at Franchisor’s request, each of
Franchisee’s Principals have provided Franchisor with their most recent
financial statements in the form and for the time periods specified by
Franchisor. The financial statements (i) present fairly Franchisee’s financial
position and the financial position of each of Franchisee’s Principals, as
applicable, at the dates indicated therein and, with respect to Franchisee, the
results of its operations and cash flow for the periods then ended; (ii) are
certified as true and correct by the Franchisee’s Chief Financial Officer or
President, as applicable; and (iii) have been prepared in conformity with
generally accepted accounting principles in the United States, applied on a
consistent basis. No material liabilities, adverse claims, commitments or
obligations of any nature, whether accrued, unliquidated, absolute, contingent
or otherwise, exist as of the date of this Agreement which are not reflected as
liabilities on Franchisee’s financial statements or those of Franchisee’s
Principals.

9.3 Franchisee’s Principals. Franchisee will notify Franchisor within ten
(10) days following the date that any person previously identified as
Franchisee’s Principal ceases to qualify as such or that any new person succeeds
to or otherwise comes to occupy a position which would qualify such person as
one of Franchisee’s Principals. That person will immediately execute all
documents and instruments (including, as applicable, this Agreement) required by
Franchisor to be executed by others in a comparable position; but if there is
any conflict between this provision and the transfer provisions of Section 11,
the provisions of Section 11 will control.

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

 

    CEC Entertainment, Inc.   24   [City, State] Franchise

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

(a) Divert or attempt to divert business of any System Restaurant to any
competitor, or do or perform any other act injurious or prejudicial to the
goodwill associated with Franchisor’s Proprietary Marks, the Animated
Entertainment or the System;

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

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

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

(a) Divert or attempt to divert business of any System Restaurant to any
competitor, or do or perform any other act injurious or prejudicial to the
goodwill associated with Franchisor’s Proprietary Marks, the Animated
Entertainment or the System;

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

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

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

(a) Franchisee and each of Franchisee’s Principals understand and acknowledge
that Franchisor will have the right, in its sole discretion, to reduce the scope
of any covenant set forth in Sections 9.5 and 9.6, or any portion thereof,
without their consent, effective immediately upon notice to Franchisee; and
Franchisee and Franchisee’s Principals agree that they will comply with any
covenant as so modified, which will be fully enforceable notwithstanding the
provisions of Section 17.5 hereof.

 

    CEC Entertainment, Inc.   25   [City, State] Franchise

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(b) Franchisee and each of Franchisee’s Principals expressly agree that the
existence of any claims they may have against Franchisor, whether or not arising
from this Agreement, will not constitute a defense to the enforcement by
Franchisor of the covenants in Sections 9.5 and 9.6.

(c) Franchisee and each of Franchisee’s Principals acknowledge that the
covenants not to compete contained in Sections 9.5 and 9.6 are reasonable and
necessary to protect the business and goodwill of the System and to avoid
misappropriation or other unauthorized use of the System and Franchisor’s other
trade secrets.

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

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

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

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

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

 

    CEC Entertainment, Inc.   26   [City, State] Franchise

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

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

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

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

 

10. PROPRIETARY RIGHTS AND INFORMATION

10.1 Confidential Information. Except as expressly provided herein, Franchisee
shall have no right, title or interest in the Confidential Information.
Franchisee and the Franchisee’s Principals shall only communicate, disclose or
use the Confidential Information as expressly permitted herein or as required by
law. Franchisee and Franchisee’s Principals shall disclose the Confidential
Information only to such of Franchisee’s employees, agents, or independent
contractors who must have access to it in connection with their employment. The
covenant in this Section will survive the expiration, termination, or transfer
of this Agreement or any interest in this Agreement and will be perpetually
binding upon Franchisee and each of Franchisee’s Principals.

10.1.1 Confidentiality Agreements. Franchisee shall cause Franchisee’s employees

 

    CEC Entertainment, Inc.   27   [City, State] Franchise

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having access to the Confidential Information to execute confidentiality
agreements substantially in the form of Attachment E, stating that they will
preserve in confidence all Confidential Information. Neither Franchisee,
Franchisee’s Principal’s nor their respective employees may at any time, without
Franchisor’s prior written consent, copy, duplicate, record or otherwise
reproduce the Confidential Information, in whole or in part, nor otherwise make
the same available to any unauthorized person.

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

10.2 Proprietary Marks. Franchisee acknowledges Franchisor’s exclusive ownership
of, or right to sublicense, the Proprietary Marks and shall neither directly or
indirectly, infringe, contest or otherwise impair Franchisor’s exclusive
ownership of, and/or license, with respect to the Proprietary Marks either
during or after the termination or expiration of this Agreement. Franchisee also
expressly 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

 

    CEC Entertainment, Inc.   28   [City, State] Franchise

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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. Franchisee shall not use the Proprietary Marks as part of
its corporate or other legal name, and will obtain Franchisor’s approval of its
corporate or other legal name before applying for or filing it with the
applicable government authority.

(g) This license to use the Proprietary Marks is non-exclusive, and Franchisor
has the right: (i) to grant other franchises for the Proprietary Marks, in
addition to those franchises already granted to existing franchisees, (ii) to
use the Proprietary Marks in connection with the sale of food and other products
through the Internet or at wholesale and/or retail outlets in the Protected
Territory, and (iii) to develop and establish other systems for the same or
similar products and services utilizing the same Proprietary Marks, or any
similar or other proprietary marks, and to grant licenses thereto without
providing Franchisee any right therein.

(h) Franchisee will use, promote and offer for sale under the Proprietary Marks
only those products and services which meet Franchisor’s prescribed standards
and specifications, as they may be revised by Franchisor from time to time.

(i) Franchisee will execute all documents requested by Franchisor or its counsel
that are necessary to obtain protection for the Proprietary Marks or to maintain
their continued validity or enforceability and to take no action that would
jeopardize the validity or enforceability thereof.

10.3 Copyrights. Franchisee and Franchisee’s Principals acknowledge that
Franchisor owns the worldwide copyright and other ownership rights to all
materials provided by Franchisor (in all forms or media now or hereafter known)
including, without limitation the Operational Policies, the Animated
Entertainment, promotional materials and software. Franchisee also agrees:

(a) If registration of the copyright of any of the materials mentioned above is
required by law or deemed advisable by Franchisor, Franchisee agrees to
cooperate with and assist Franchisor in obtaining the registration in the name
of Franchisor and will not register or attempt to register or assist or be
involved in any way with the registration (either directly or indirectly) of
such materials;

(b) Franchisee agrees to use proper copyright and other proprietary notices in
connection with all copyright materials and conform with Franchisor’s standards
for protecting its rights; and

(c) Franchisee agrees to promptly cause the execution of any assignments,
waivers of rights, or other documents, and take any further actions needed or
advisable to ensure that Franchisor has such copyright and other rights
described in this Section 10.

 

    CEC Entertainment, Inc.   29   [City, State] Franchise

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11. TRANSFER OF INTEREST

11.1 Transfer by Franchisor. Franchisor shall have the right to transfer or
assign this Agreement, its rights to the Proprietary Marks, and all or any part
of its rights or obligations herein to any person or legal entity without the
consent of Franchisee or Franchisee’s Principals. Upon such transfer by
Franchisor, any transferee or assignee of Franchisor shall become solely
responsible for all such obligations of Franchisor under this Agreement from the
date of transfer or assignment. Without limiting the foregoing, Franchisee
acknowledges that Franchisor may sell its assets (including its rights in the
Proprietary Marks and the System) to a third party; may offer its securities
privately or publicly; may merge, acquire other legal entities or be acquired by
another legal entity; and may undertake a refinancing, recapitalization,
leveraged buy out or other economic or financial restructuring. With regard to
any or all of the above sales, assignments and dispositions, Franchisee
expressly and specifically waives any claims, demands, or damages against
Franchisor or its affiliates arising from or related to Franchisor’s transfer of
its rights in this Agreement, the Proprietary Marks or the System to any other
party. Nothing contained in this Agreement will require Franchisor to remain in
the business of operating or licensing the operation of the System Restaurants
or other businesses or to offer any services or products to Franchisee, whether
or not bearing or not bearing the Proprietary Marks, if Franchisor transfers or
assigns its rights in or obligations under this Agreement.

11.2 Transfer by Franchisee. Franchisee and Franchisee’s Principals understand
and acknowledge that the rights and duties set forth in this Agreement are
personal to Franchisee and are granted, in part, in reliance upon the skill,
aptitude, business and financial capacity of Franchisee and Franchisee’s
Principals and their intention of complying with its terms and conditions.
Therefore, if the Franchisee and/or Franchisee’s Principals desire to Transfer
any interest to any individual or entity (including a trust), they must first
obtain the prior written approval of Franchisor. Any such attempted Transfer not
approved by Franchisor shall be null and void from its purported inception.

11.2.1 General Requisites. Prior to authorizing a Transfer by Franchisee of any
interest, Franchisor may require, among other things, satisfaction of any or all
of the following:

(a) Franchisee shall be in full compliance with all of the terms and conditions
of this Agreement;

(b) Franchisee and/or any of Franchisee’s Principals shall remain liable for the
performance of its obligations contained in this Agreement through the date of
Transfer and shall execute all instruments reasonably requested by Franchisor to
evidence such liability;

(c) The transferee shall satisfy, in Franchisor’s reasonable judgment,

 

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Franchisor’s then existing criteria for a franchisee including, without
limitation: (i) education; (ii) business skill, experience and aptitude;
(iii) character and reputation; and (iv) financial resources;

(d) The transferee and all owners of any record or beneficial interest in the
capital stock (or other interest) of transferee shall execute all instruments
(including a new franchise agreement and guaranty) reasonably requested by
Franchisor to evidence acceptance and assumption of all of the terms and
conditions of this Agreement. Such new franchise agreement may contain terms
materially different from this Agreement, including higher fees and shall be for
a term equal to the then unexpired term hereof; and

(e) Franchisee and Franchisee’s Principals (if applicable) must have executed a
general release, in a form satisfactory to Franchisor, of any and all claims
against Franchisor, its affiliates, and the officers, directors, members,
shareholders, partners, agents, representatives, independent contractors,
servants and employees of each of them, in their corporate and individual
capacities, including, without limitation, claims arising under this Agreement
and any other agreement between Franchisee or any of Franchisee’s affiliates and
Franchisor or any of its affiliates or under federal, state or local laws,
rules, regulations or orders. Franchisor’s current form of general release is
attached hereto as Attachment B.

(f) Franchisee pays a transfer fee equal to (i) one half ( 1/2) of the then
current initial Franchise Fee for franchise agreements if the Franchisee does
not have a Controlling Interest in the transferee (who is not one of
Franchisee’s Principals); or (ii) an amount equal to the reasonable costs
incurred by Franchisor in connection with the Transfer among Franchisee’s
Principals only, but in no event less than One Thousand and No/100 Dollars
($1,000.00);

(g) At the transferee’s expense, the transferee and any of the transferee’s
employees responsible for the operation of the Franchised Restaurant have
satisfactorily completed such training as Franchisor may then require; and

(h) The transferee has complied with Franchisor’s then-current application
requirements for a new franchise.

11.2.2 Right of First Refusal. In the event that Franchisee and/or any of
Franchisee’s Principals or any holder of an Equity Interest in Franchisee desire
to effectuate a Transfer, Franchisor shall have the right and option,
exercisable within thirty (30) days after Franchisor’s receipt of all materials
and information described in Section 11.2.2(a), (b) and (c) to purchase the
interest proposed to be transferred in accordance with the following:

(a) Franchisee or the proposed transferee shall notify Franchisor in

 

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writing of any bona fide proposed Transfer and set forth a complete description
of all terms and fees of the proposed Transfer in the manner prescribed by the
Franchisor, including the prospective transferee’s name, address, financial
qualifications and previous five years business experience;

(b) Franchisee shall provide the Franchisor with any additional information,
agreements, certifications or documents Franchisor requests for use in its
evaluation of whether to exercise its first refusal right.

(c) Upon receipt of the Franchisor’s request, Franchisee or the proposed
transferee shall promptly provide Franchisor with access to any real or personal
property, documents or records relevant to the transaction and to the interest
which is the subject of the Transfer. Once Franchisor has received all materials
submitted by Franchisee or the proposed transferee and has reviewed all
property, records and documents it has requested, Franchisor shall notify
Franchisee or the proposed transferee of its decision to exercise its option to
acquire the interest being transferred, and the conditions, if any, under which
it will approve the proposed Transfer.

(d) If the Franchisor exercises its first refusal right, the transferor shall
transfer the interest to Franchisor or to its assignee pursuant to an agreement
to purchase which contains the material terms to which the transferor and the
proposed transferee had agreed. If the offer or proposed purchase contract
omitted any terms customarily addressed in a transfer of an interest of the type
which is the subject of the transaction, Franchisor may supply those terms in
the purchase agreement and related documents.

(e) If the proposed transferor wishes to make a Transfer, the transferor shall
provide Franchisor with a copy of any offer or agreement to purchase, signed by
the proposed transferee, together with copies of any documents referenced in the
offer or agreement. If all material terms of the proposed sale are not described
in the offer or agreement, Franchisee shall provide details of all such terms in
its submission to the Franchisor, accompanied by the proposed transferee’s
written agreement to the terms.

(f) In the event the consideration, terms, and/or conditions offered by the
third party are such that Franchisor or its nominee may not reasonably be able
to furnish the same consideration, terms, and/or conditions, then Franchisor or
its nominee, as appropriate, may purchase the interest proposed to be
transferred for the reasonable equivalent in cash. If the parties cannot agree,
within a reasonable time, on the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and such appraiser’s
determination shall be binding.

 

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11.2.3 Death or Disability. Within fifteen (15) days after the death or
permanent disability of Franchisee or any of Franchisee’s Principals, Franchisee
or a representative of Franchisee must notify Franchisor in writing. Any
transfer upon death or permanent disability will be subject to the same terms
and conditions as described in this Section for any inter vivos transfer.

Upon the death of Franchisee (if a natural person) or any Franchisee’s Principal
who is a natural person and who has an interest in this Agreement, in the
Franchised Restaurant, or in Franchisee, the executor, administrator, or other
person representative of the deceased will transfer the interest of the deceased
to a third party approved by Franchisor within twelve (12) months after the date
of death. If no personal representative is designated or appointed and no
probate proceedings are instituted with respect to the estate of the deceased,
then the distributee of the interest of the deceased must be approved by
Franchisor. If the distributee is not approved by Franchisor, then the
distributee will transfer the interest of the deceased to a third party approved
by Franchisor within twelve (12) months after the date of death of the deceased.

Upon the permanent disability of Franchisee (if a natural person) or any of
Franchisee’s Principals who is a natural person and who has an interest in this
Agreement, in the Franchised Restaurant or in Franchisee, Franchisor may require
the interest to be transferred to a third party in accordance with the
conditions described in this Section 11 within six (6) months after notice to
Franchisee. For purposes of this Section 11.2.3, “permanent disability” means
any physical, emotional, or mental injury, illness, or incapacity that would
prevent a person from performing the obligations set forth in this Agreement or
in the Guaranty made part of this Agreement for at least ninety (90) consecutive
days, and from which condition recovery within ninety (90) days from the date of
determination of disability is unlikely. If the parties disagree as to whether a
person is permanently disabled, the existence of permanent disability will be
determined by a licensed practicing physician selected by Franchisor, upon
examination of the person; or if the person refuses to submit to an examination,
then (for the purpose of this Section 11.2.3) the person automatically will be
considered permanently disabled as of the date of refusal. The costs of any
examination required by this Section 11.2.3 will be paid by Franchisor.

If an interest is not transferred upon death or permanent disability as required
in this Section 11.2.3 then the failure will constitute a material event of
default under this Agreement.

11.2.4 Public Offerings. Equity Interests in Franchisee and Franchisee’s
Principals may be offered, only with the prior written consent of Franchisor,
which consent shall not be unreasonably withheld. Such approval will be subject
to the following:

(a) All registration materials required for such offering by federal or state
law shall be submitted to Franchisor for review prior to their being filed with
any government agency;

(b) No offering material (for either a public or private offering) shall

 

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express or imply (by use of the Proprietary Marks or otherwise) that Franchisor
is participating in an underwriting, issuance or public offering of Franchisee,
Franchisee’s Principals, or Franchisor securities. Franchisor may, at its
option, require such offering materials to contain a written statement
prescribed by Franchisor concerning the limitations described in the preceding
sentence;

(c) Franchisee, Franchisee’s Principals and the other participants in the
registration and offering must fully indemnify Franchisor in connection with the
offering;

(d) For each proposed public offering, other than offerings which are exempt
from registration, Franchisee shall pay to Franchisor a non-refundable fee of
Ten Thousand and No/100 Dollars ($10,000.00) or such greater amount as is
necessary to reimburse Franchisor for its reasonable costs and expenses
associated with reviewing the proposed offering, including, without limitation,
legal and accounting fees;

(e) Franchisor’s receipt of a legal opinion from counsel satisfactory to
Franchisor stating (a) that the offering materials and the conduct of the
securities offering comply in all material respects with the laws of the
applicable Territory Segment from which an offer of securities originates or
into which an offer of securities is directed, and (b) that neither the conduct
nor consummation of the securities offering will result in a violation of any
anti-terrorism or anti- money laundering laws.

(f) Franchisee and Franchisee’s Principals shall give Franchisor at least sixty
(60) days’ prior written notice before the effective date of any offering or
other transaction covered by this Section 11.2.4.

 

12. INSURANCE AND INDEMNITY

12.1 Insurance. Prior to the commencement of construction of the Franchised
Restaurant and for the entire term of this Agreement, Franchisee shall obtain
and maintain insurance protecting Franchisee and the Indemnitiees against any
demand or claim arising or occurring in connection with the construction and
operation of the Franchised Restaurant. Such policies shall: (i) be of the types
and for the minimum amounts of coverage indicated in the Operational Policies;
(ii) contain a waiver of subrogation in favor of Franchisor; (iii) name the
Indemnitees as additional insureds; (iv) contain no provision which limits or
reduces coverage in the event of a claim by any one (1) or more of the
Indemnitees; (v) provide that policy limits shall not be reduced, coverage
restricted, canceled, allowed to lapse or otherwise altered or such policy(ies)
amended without Franchisor’s consent; and (vi) be obtained from reputable
insurance companies approved by Franchisor and authorized to do business in all
jurisdictions in which the Franchised Restaurant is located. Franchisee also
acknowledges and agrees to:

(a) furnish Franchisor with evidence that Franchisee has obtained the required
insurance at least fifteen (15) days prior to the commencement of construction
of the Franchised Restaurant, and each year afterwards, and at any other time a
carrier or coverage is changed;

 

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(b) increase the insurance coverage amounts in the amounts indicated by
Franchisor upon thirty (30) days prior written notice from Franchisor; and

(c) reimburse Franchisor for any insurance policies obtained by Franchisor on
behalf of Franchisee if Franchisee fails to obtain the insurance required by
this Section.

12.2 Indemnities.

12.2.1 Indemnification. Franchisee and Franchisee’s Principals agree to and
hereby, jointly and severally, indemnify, defend (by counsel chosen by
Franchisor) and agree to hold harmless each Indemnitee from all Losses and
Expenses alleged, incurred or assessed in connection with:

(a) Franchisee’s or any Franchisee’s Principal’s alleged infringement or alleged
violation of any trademark or other proprietary name, 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 operating under the System, by Franchisee or by any of
Franchisee’s Principals;

(d) The violation or breach by Franchisee or any of Franchisee’s Principals, of
any warranty, representation, agreement or obligation in this Agreement or in
any other agreement, between Franchisee, its subsidiaries and affiliates and
Franchisor, its subsidiaries and affiliates or the officers, directors,
shareholders, partners, agents, representatives, independent contractors and
employees thereof; and

(e) Acts, errors or omissions of Franchisee, any of Franchisee’s subsidiaries or
affiliates or any of Franchisee’s Principals and the officers, directors,
shareholders, partners, agents, representatives, independent contractors and
employees of Franchisee and its subsidiaries and affiliates in connection with
the activities contemplated under this Agreement, including the operation of the
Franchised Restaurant.

 

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12.2.2 Notice and Counsel. Franchisee and each of Franchisee’s Principals agree
to give Franchisor immediate notice of any Action. Franchisor may engage, at its
expense, separate counsel to represent the Indemnitees in such Action and/or
elect to assume (but under no circumstance is obligated to undertake) the
defense and/or reasonable settlement of any Action. Franchisor’s election to
settle shall not diminish Franchisee’s and each of Franchisee’s Principal’s
obligation to defend, indemnify and hold the Indemnitees harmless from all
Losses and Expenses.

12.2.3 Settlement and Remedial Actions. In order to protect persons or property,
or its reputation or goodwill, or the reputation or goodwill of others,
Franchisor may, at any time and without notice, as it, in its judgment deems
appropriate, consent or agree to settlements or take such other remedial or
corrective actions it deems expedient with respect to any Action if, in
Franchisor’s sole judgment, there are reasonable grounds to believe that:

(a) any of the acts or circumstances enumerated in Section 12.2.1 ((a) through
(d)) above have occurred; and

(b) any act, error, or omission as described in Section 12.2.1 (e) may result
directly or indirectly in damage, injury, or harm to any person or any property.

12.2.4 Expenses. All Losses and Expenses incurred under this Section 12 shall be
chargeable to and paid by Franchisee or any of Franchisee’s Principals pursuant
to Franchisee’s obligations of indemnity under this Section 12 regardless of any
actions, activity or defense undertaken by Franchisor or the subsequent success
or failure of such actions, activity, or defense.

12.2.5 Third Party Recovery. Under no circumstances shall the Indemnitees be
required or obligated to seek recovery from third parties or otherwise mitigate
their losses in order to maintain a claim against Franchisee or any of
Franchisee’s Principals. Franchisee and each of Franchisee’s Principals agree
that the failure to pursue such recovery or mitigate loss will in no way reduce
the amounts recoverable from Franchisee or any of Franchisee’s Principals by the
Indemnitees.

12.2.6 Survival. Franchisee and Franchisee’s Principals expressly agree that the
terms of this Section 12 shall survive the termination, expiration or transfer
of this Agreement or any interest herein.

 

13. TERM, RENEWAL AND TERMINATION

13.1 Term. Unless terminated as provided for herein, the term of this Agreement
shall commence upon the Execution Date and shall expire fifteen (15) years
thereafter.

13.2 Renewal. Franchisee may, at Franchisee’s option, renew this Agreement for
one (1) additional period of ten (10) years, provided that at the end of the
initial term:

(a) Franchisee has given Franchisor written notice of election to renew not less
than nine (9) months nor more than twelve (12) months prior to the end of the
initial term;

 

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(b) Franchisee shall have completed to Franchisor’s satisfaction all
maintenance, refurnishing, renovating and remodeling of the premises and
equipment as Franchisor shall require in order to meet Franchisor’s then-current
standards for System Restaurants;

(c) Franchisee is in compliance with all of the terms of this Agreement and any
other agreement between Franchisee and Franchisor;

(d) Franchisee shall have executed upon renewal hereunder Franchisor’s then
current form of franchise agreement, which agreement may have different terms
from this Agreement including, without limitation, the royalty fee,
contributions and System assessments, for a term equal to the renewal terms
hereof (unless otherwise agreed to by Franchisor), and any other ancillary
agreements as Franchisor may then require; provided, however, Franchisee shall
be required to pay, in lieu of the then-current initial Franchise Fee, a renewal
fee which shall be fifty percent (50%) of the then-current initial Franchise Fee
as then charged by Franchisor; and

(e) Franchisee and Franchisee’s Principals shall execute a general release, in a
form prescribed by Franchisor, of any and all claims the against the
Indemnitees. Franchisor’s current form of general release is attached hereto as
Attachment B.

13.3 Termination.

13.3.1 Automatic Termination. Franchisee will be in default under this
Agreement, and all rights granted by this Agreement will automatically terminate
without notice to Franchisee:

(a) If Franchisee becomes insolvent or makes a general assignment for the
benefit of creditors;

(b) If Franchisee files a voluntary petition under any section or chapter of the
federal bankruptcy law or under any similar law or statute of the United States
or any state, or admits in writing its inability to pay its debts when due;

(c) If Franchisee is adjudicated bankrupt or insolvent in proceedings filed
against Franchisee under any section or chapter of the federal bankruptcy laws
or under any similar law or statute of the United States or any state; or if a
bill in equity or other proceeding for the appointment of a receiver of
Franchisee or other custodian for Franchisee’s business or assets is filed and
consented to by Franchisee; or if a receiver or other custodian (permanent or
temporary) of Franchisee’s assets or property, or any part thereof, is appointed
by any court of competent jurisdiction;

 

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(d) If proceedings for a composition with creditors under any state or federal
law is instituted by or against Franchisee;

(e) If a final judgment against Franchisee in any amount Franchisor deems
material (but in no event more than $25,000.00) remains unsatisfied or of record
for thirty (30) days or longer (unless a supersedeas bond is filed);

(f) If Franchisee is dissolved;

(g) If Franchisee, or any of Franchisee’s Principals, makes any offer, attempts
to offer, solicits an offer, or takes steps to offer publicly any interest in
Franchisee in violation of Section 11 of this Agreement;

(h) If execution is levied against Franchisee’s business or property in any
amount Franchisor deems material (but in no event more than $25,000.00);

(i) If suit to foreclose any lien or mortgage against the Franchised Restaurant
premises or equipment in any amount Franchisor deems material (but in no event
more than $25,000.00) is instituted against Franchisee and not dismissed within
thirty (30) days; or

(j) If the real or personal property of Franchised Restaurant will be sold after
levy thereupon by any sheriff, marshal, or constable.

13.3.2 Termination upon Notice. This Agreement shall terminate immediately upon
notice from Franchisor to Franchisee and without providing Franchisee the right
to cure such default, if Franchisee:

(a) Ceases to do business at the Franchised Restaurant;

(b) Or any of Franchisee’s Principals cause a threat or danger to the public
health or safety in the construction or operation of the Franchised Restaurant;

(c) Or any of Franchisee’s Principals is convicted of, or pleads nolo conendere
to a felony or any other crime or offense that is reasonably likely, in the
opinion of Franchisor, to adversely affect the System, the Proprietary Marks,
the Animated Entertainment, the goodwill associated therewith, or Franchisor’s
interest therein;

(d) Or any of Franchisee’s Principals copies or duplicates any Animated

 

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Entertainment programs or materials or purports to transfer ownership or
possession of any Animated Entertainment components or materials without the
prior written consent of Franchisor;

(e) Or any of Franchisee’s Principals, except as described in Section 13.3.1(g),
violates the requirements for Transfers contained in Section 11;

(f) Or any of Franchisee’s Principals, as applicable, fails to comply with the
representations and warranties in Sections 9 and 17 hereof;

(g) Or any of Franchisee’s Principals discloses or divulges the contents of the
Operational Policies or other trade secret or confidential information provided
Franchisee by Franchisor contrary to the provisions of this Agreement;

(h) Fails to maintain the insurance(s) required by Section 12;

(i) Knowingly maintains false books or records, or submits any false reports to
Franchisor;

(j) Operates the Franchised Restaurant or sells products or services authorized
by Franchisor for sale at the Franchised Restaurant from a location which has
not been approved by Franchisor;

(k) Fails to construct or refurbish the Franchised Restaurant in accordance with
Section 5 hereof;

(l) Fails to open the Franchised Restaurant for business as a System Restaurant
by the date described in Section 5.9;

(m) At any time ceases to operate or otherwise abandons the Franchised
Restaurant, or loses the right to possession of the premises, or otherwise
forfeits the right to do or transact business in the jurisdiction where the
Franchised Restaurant is located. This provision will not apply if through no
fault of Franchisee, the premises are damaged or destroyed by an event of Force
Majeure, provided that Franchisee applies for Franchisor’s approval to relocate
or reconstruct the premises within thirty (30) days after the event and
Franchisee diligently pursues the reconstruction or relocation after
Franchisor’s approval. Franchisor will not unreasonably withhold its approval to
relocate or reconstruct the premises after an event of Force Majeure, but
Franchisor may condition its approval upon Franchisee’s payment of an agreed
minimum fee to Franchisor during the period in which the Franchised Restaurant
is not in operation;

(n) Or any of Franchisee’s Principals fails to comply with the in-term

 

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covenants in Section 9.5 or if Franchisee fails to obtain execution of the
covenants and related agreements required under Section 9.8 within thirty
(30) days after being requested to do so by Franchisor;

(o) Misuses or makes any unauthorized use of the Proprietary Marks or otherwise
materially impairs the goodwill associated therewith or Franchisor’s rights
therein and Franchisee fails to cure that default within twenty-four (24) hours
after notice from Franchisor;

(p) Or Franchisee’s Principals engage in any act, conduct, or practice which
Franchisor, in its sole judgment, deems to be deceptive, misleading, unethical
or otherwise contrary to or in conflict with the reputation and image of the
System; or

(q) Fails to cure any default of which it has been given prior notices on two
(2) occasions.

13.3.3 Termination with Ten Day Notice. Franchisee shall have ten (10) days
after its receipt from Franchisor of a written notice to remedy Franchisee’s
failure, refusal, or neglect to pay promptly any monies due under this Agreement
or to submit the financial information or other reports required by Franchisor
under this Agreement. If such default is not cured within that time, this
Agreement shall terminate without further notice to Franchisee effective
immediately upon the expiration of the ten (10) day period.

13.3.4 Termination with Thirty Day Notice. Except as otherwise provided in this
Section 13, Franchisee shall have thirty (30) days after its receipt from
Franchisor of a written notice within which to remedy any default of the terms
of this Agreement and the attachments hereunder and provide evidence thereof to
Franchisor. If any such default is not cured within that time, this Agreement
shall terminate without further notice to Franchisee effective immediately upon
the expiration of the thirty (30) day period.

13.4 Obligations upon Termination or Expiration. Upon termination or expiration
of this Agreement for any reason, all rights of Franchisee under this Agreement
will immediately terminate and Franchisee will have the following duties which
will survive termination of this Agreement:

(a) Amounts Due. Franchisee will promptly pay to Franchisor and its affiliates
all sums due under this Agreement and any other agreements, including, without
limitation, all damages, costs, expenses, and reasonable attorneys’ fees
incurred by Franchisor by reason of default on the part of Franchisee, whether
or not the expenses occur before or after the termination or expiration of this
Agreement;

(b) Franchised Restaurant. Franchisee will immediately cease to operate the
Franchised Restaurant and cease to use the Proprietary Marks, the Animated
Entertainment,

 

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the System, and the Operational Policies in any manner including any
advertising, equipment, format, confidential methods, procedures and techniques
associated with the Franchised Restaurant, the Proprietary Marks, the Animated
Entertainment, the System, and the Operational Policies, and shall not
thereafter hold itself out as a former franchisee of Franchisor;

(c) Operational Policies. Franchisee shall immediately return all manuals,
including the Operational Policies, records, files, instructions,
correspondence, all materials related to operating the Franchised Restaurant,
and shall retain no copy or record of any of the foregoing, excepting only
Franchisee’s copy of this Agreement and of any correspondence between the
parties, and any other documents which Franchisee and Franchisee’s Principals
reasonably need for compliance with any provision of law;

(d) Proprietary Marks. Franchisee will immediately cease to use in any manner
whatsoever, any Proprietary Marks and distinctive trade dress, forms, slogans,
signs, symbols, devices, or animated character costumes associated with the
System;

(e) Assumed Name. Franchisee shall take such action as may be necessary to
cancel any assumed name or equivalent registration which contains any of the
Proprietary Marks, and Franchisee and Franchisee’s Principals shall furnish
Franchisor with evidence satisfactory to Franchisor of compliance with this
obligation within thirty (30) days after termination or expiration of this
Agreement; and

(f) Payments. Franchisee and Franchisee’s Principals will promptly pay all sums
owing to Franchisor and its affiliates, including all damages, costs, and
expenses, including reasonable attorneys’ fees, incurred by Franchisor as a
result of any default by Franchisee. Until those amounts are paid in full, the
obligation to pay them will give rise to and remain a lien in favor of
Franchisor against all of the personal property, furnishings, equipment, signs,
fixtures, and inventory owned by Franchisee and on the premises of the
Franchised Restaurant at the time of default.

In addition, Franchisee and Franchisee’s Principals will pay to Franchisor all
damages, costs, and expenses, including reasonable attorneys’ fees, incurred by
Franchisor in connection with obtaining any remedy available to Franchisor for
any violation of this Agreement and subsequent to the termination or expiration
of this Agreement in obtaining injunctive or other relief for the enforcement of
any provisions of this Section13.4.

(g) Confidentiality and Non-Competition. Franchisee and Franchisee’s Principals
will comply with the non-competition covenants and the restrictions on
confidential information contained in Sections 9.6 and 10.1 of this Agreement.
Any other person required to execute similar covenants pursuant to Sections 9.8
and 10.1 will also comply with those covenants.

 

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(h) Leases. If Franchisee leases the Franchised Restaurant premises or leases
any equipment used in the operation of the Franchised Restaurant from a third
party, then Franchisee will, at Franchisor’s option, assign to Franchisor any
interest that Franchisee has in the lease or sublease. Franchisor may exercise
this option at any time within thirty (30) days from and including either the
date of termination or (subject to any existing right to renew) expiration of
this Agreement. The time for closing on the assignment of the lease described in
this Section13.4(h) will be on the date of or no later than ten (10) days after
Franchisor’s exercise of its option hereunder unless Franchisor is also
exercising its purchase options under Section13.4(i), in which case the date of
the closing will be on the same closing date prescribed for the purchase option.
In any event, closing will take place at Franchisor’s corporate offices or at
such other location Franchisor may designate.

(i) Purchase Options. Except as provided in Section13.4(h) (with respect to
leased equipment), Franchisor will have the option, to be exercised within
thirty (30) days from and including either the date of termination or expiration
of this Agreement (unless appraisals are needed as described below, in which
case such option shall be exercised within thirty (30) days after such
appraisals are provided), to purchase from Franchisee any or all of the
furnishings, equipment, signs, fixtures, motor vehicles, supplies, and inventory
of Franchisee related to the operation of the Franchised Restaurant, at
Franchisee’s cost or fair market value, whichever is less. Franchisor will
purchase Franchisee’s assets only and will assume no liabilities whatsoever,
unless otherwise agreed to in writing by the parties. If the parties cannot
agree on the fair market value within thirty (30) days after Franchisor’s
exercise of its option, fair market value will be determined by two appraisers,
with each party selecting one appraiser, and the average of their determinations
will be binding. In the event of such appraisal, each party will bear its own
legal and other costs and will split the appraisal fees equally. Within thirty
(30) days after Franchisor’s receipt of such appraisal, the parties agreement as
to fair market value or Franchisor’s receipt of such information and materials
from Franchisee as Franchisor may prescribe evidencing Franchisee’s cost, as
applicable, Franchisor shall have the right to rescind its exercise of such
option. If Franchisor elects to exercise any option to purchase herein provided,
it will have the right to set off all amounts due from Franchisee to Franchisor
or any of its affiliates (including any costs for the appraisal) and any costs
incurred in connection with any escrow arrangement (including reasonable legal
fees) against any payment therefor and will pay the remaining amount in cash.

With respect to the option described in this Section13.4(i) Franchisee will
deliver to Franchisor, in a form satisfactory to Franchisor, such warranties,
deeds, releases of lien, bills of sale, assignments, and any other documents and
instruments necessary in order to perfect Franchisor’s title and possession in
and to the properties being purchased or assigned and to meet the requirements
of all tax and government authorities. If, at the time of closing, Franchisee
has not obtained all of these certificates and other documents, Franchisor may,
in its sole discretion, place the purchase price or rent in escrow pending
issuance of any required certificates or documents.

 

    CEC Entertainment, Inc.   42   [City, State] Franchise

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The time for closing of the purchase and sale of the properties described in
this Section13.4(i) will be a date not later than sixty (60) days after the
purchase price is determined by the parties or the determination of the
appraisers, or such date Franchisor receives and obtains all necessary permits
and approvals, whichever is later, unless the parties mutually agree to
designate another date. Closing will take place at Franchisor’s corporate
offices or at such other location as Franchisor may designate.

(j) Modification of Premises. If Franchisor does not elect to exercise the
options under Sections13.4(h) or 13.4(i) as applicable, to acquire the lease or
sublease for the Franchised Restaurant premises, then Franchisee will make all
modifications or alterations to the Franchised Restaurant premises that are
necessary to distinguish the appearance of the Franchised Restaurant from that
of other System Restaurants and will make any specific additional changes that
Franchisor reasonably requests. If Franchisee fails or refuses to comply with
the requirements of this Section13.4(j), then Franchisor may enter upon the
premises of the Franchised Restaurant, without being guilty of trespass or any
other crime or tort, to make or cause to be made the changes required, at the
expense of Franchisee, which expense Franchisee agrees to pay upon demand.

(k) Assignments. If requested by Franchisor, Franchisee will (at Franchisee’s
expense) assign to Franchisor all rights to the: (i) telephone numbers of the
Franchised Restaurant and any related Yellow Pages or other business listings;
and (ii) all e-mail addresses, URLs, domain names, Internet listings, and
Internet accounts related to the Franchised Restaurant. Franchisee will execute
all forms and documents required by Franchisor, by any telephone company, or by
any Internet service provider at any time to transfer those services and numbers
to Franchisor. In addition to any forms and documents which may have been
executed by Franchisee hereunder, Franchisee hereby appoints Franchisor its true
and lawful agent and attorney-in-fact with full power and authority for the sole
purpose of taking such action as is necessary to complete these assignments.
This power of attorney will survive the expiration or termination of this
Agreement. Franchisee will thereafter use different telephone numbers and e-mail
addresses or listings at or in connection with any subsequent business conducted
by Franchisee.

(l) Cease to Use and Cease to Operate. For purposes of the Section 13.4, “cease
to use” as referring to the Proprietary Marks, Animated Entertainment, System,
Operational Policies, and distinctive trade dress, forms, slogans, signs,
symbols and devices or animated character costumes associated with the System,
shall include without limitation, refraining from deriving any economic benefit
therefrom or displaying to the public and, at Franchisor’s option and as
applicable, destroying or relinquishing and delivering to Franchisor or its
designee title and possession of the Animated Entertainment, all items bearing
the Proprietary Marks, the Operational Policies and all embodiments thereof, and
any distinctive trade dress, forms, slogans, signs, symbols, devices, or
animated character costumes associated with the System. “Cease to Operate” as
referring to the Franchised Restaurant shall include, without limitation,
refraining from offering or selling any goods or services therefrom.

 

    CEC Entertainment, Inc.   43   [City, State] Franchise

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14. REMEDIES

14.1 Remedies. Upon the occurrence of an uncured breach, Franchisor may exercise
one or more of the following remedies or such other remedies as may be available
at law or in equity:

14.1.1 Cure. Franchisor, at Franchisor’s discretion and without obligation, may
cure such breach at Franchisee’s expense and, in connection therewith,
Franchisee (i) hereby grants to Franchisor all rights and powers necessary or
appropriate to accomplish such cure; (ii) shall indemnify and hold the
Indemnitees harmless from and against all costs, expenses (including reasonable
fees of counsel and other engaged professionals), liabilities, claims, demands
and causes of action (including actions of third parties) incurred by or alleged
against any Indemnitee in connection with Franchisor’s cure; and (iii) shall
reimburse or pay such costs or damages within ten (10) days of receipt of
Franchisor’s invoice therefor; or

14.1.2 Specific Enforcement. Franchisor may, in addition to pursuing any other
remedies, specifically enforce Franchisee’s and Franchisee’s Principal’s
obligations, covenants and agreements or obtain injunctive or other equitable
relief in connection with the violation or anticipated violation of such
obligations, covenants and agreements without the necessity of showing
(i) actual or threatened harm; (ii) the inadequacy of damages as a remedy; or
(iii) likelihood of success on the merits, and without being required to furnish
bond or other security. Nothing in this Agreement shall impair Franchisor’s
right to obtain equitable relief.

 

15. DISPUTE RESOLUTION

15.1 Mediation. Except for infringement of Proprietary Marks, Animated
Entertainment or other violation of Franchisor’s intellectual property rights,
regarding which Franchisor may apply for emergency, special, or injunctive
relief, both Franchisor and Franchisee will attempt in good faith to settle any
dispute related to the execution of or performance under this Agreement and the
operation of the Franchised Restaurant. If Franchisor and Franchisee are unable
to do so, they hereby agree to submit to non-binding mediation prior to bringing
such claim, controversy or dispute in a court. The mediation shall be conducted
through either an individual mediator or a mediator appointed by a mediation
services organization or body, experienced in the mediation of food service
business disputes, as agreed upon by Franchisor and Franchisee. The costs and
expenses of mediation, including compensation of the mediator, shall be borne by
the parties equally. If the parties are unable to resolve the claim, controversy
or dispute within ninety (90) days after the mediator has been appointed, unless
such time period is extended by written agreement of the parties, then either
party may bring a legal proceeding under the following Sections, 15.2 through
15.4, to resolve such claim.

15.2 Applicable Law. Franchisor and Franchisee agree that this Agreement shall
be governed by, construed and enforced in accordance with the laws of the State
of Texas without regard to its conflicts of laws provisions.

 

    CEC Entertainment, Inc.   44   [City, State] Franchise

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15.3 Jurisdiction and Venue. FRANCHISOR AND FRANCHISEE HEREBY IRREVOCABLY SUBMIT
THEMSELVES TO THE JURISDICTION OF THE STATE COURTS OF DALLAS COUNTY, TEXAS AND
THE FEDERAL DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION.
FRANCHISEE AND FRANCHISEE’S PRINCIPALS FURTHER AGREE THAT VENUE FOR ANY
PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT WILL BE DALLAS COUNTY,
TEXAS; PROVIDED, HOWEVER THAT WITH RESPECT TO ANY ACTION (I) FOR MONIES OWED,
(II) FOR INJUNCTIVE OR OTHER EXTRAORDINARY RELIEF, (III) INVOLVING OWNERSHIP OR
USE OF THE PROPRIETARY MARKS OR THE ANIMATED ENTERTAINMENT, OR (IV) INVOLVING
POSSESSION OR DISPOSITION OF, OR OTHER RELIEF RELATING TO THE PREMISES OF THE
FRANCHISED RESTAURANT, FRANCHISOR MAY BRING SUCH ACTION IN ANY STATE OR FEDERAL
DISTRICT COURT WHICH HAS JURISDICTION.

15.4 Mutual Benefit. FRANCHISEE, FRANCHISEE’S PRINCIPALS AND FRANCHISOR
ACKNOWLEDGE THAT THE PARTIES’ AGREEMENT REGARDING APPLICABLE STATE LAW AND FORUM
IN SECTIONS 15.2 AND 15.3 PROVIDES THE PARTIES WITH THE MUTUAL BENEFIT OF
UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF THIS
AGREEMENT OR THE PARTIES’ RELATIONSHIP CREATED BY THIS AGREEMENT. FRANCHISEE,
FRANCHISEE’S PRINCIPALS AND FRANCHISOR FURTHER ACKNOWLEDGE THE RECEIPT AND
SUFFICIENCY OF MUTUAL CONSIDERATION FOR THAT BENEFIT.

 

16. MISCELLANEOUS

16.1 Independent Contractors. In performing this Agreement, the parties
specifically agree that Franchisor and Franchisee’s relationship is and always
will be solely that of independent contractors. Neither Franchisor or Franchisee
shall not represent itself or permit any of its employees, agents, servants, or
representatives to represent itself as an employee, agent, servant, or joint
venturer of the other. Neither party shall have no right to and shall not
attempt to enter into contracts or commitments in the name of or on behalf of
the other in any respect whatsoever.

16.2 Entire Agreement. This Agreement and the attachments hereto constitute the
entire agreement between Franchisor, Franchisee and Franchisee’s Principals
concerning the subject matter hereof. All prior agreements, discussions,
representations, warranties and covenants are merged herein. THERE ARE NO
WARRANTIES, REPRESENTATIONS, COVENANTS OR AGREEMENTS, EXPRESS OR IMPLIED,
BETWEEN THE PARTIES EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. Except
those permitted to be made unilaterally by Franchisor, any amendments or
modifications of this Agreement shall be in writing and executed by Franchisor
and Franchisee.

 

    CEC Entertainment, Inc.   45   [City, State] Franchise

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16.3 Judgment; Discretion. FRANCHISEE AND FRANCHISOR ACKNOWLEDGE THAT VARIOUS
PROVISIONS OF THIS AGREEMENT SPECIFY CERTAIN MATTERS THAT ARE WITHIN THE
DISCRETION OR JUDGMENT OF FRANCHISOR OR ARE OTHERWISE TO BE DETERMINED
UNILATERALLY BY FRANCHISOR. IF THE EXERCISE OF FRANCHISOR’S DISCRETION OR
JUDGMENT AS TO ANY SUCH MATTER IS SUBSEQUENTLY CHALLENGED, THE PARTIES TO THIS
AGREEMENT EXPRESSLY DIRECT THE TRIER OF FACT THAT FRANCHISOR’S RELIANCE ON A
BUSINESS REASON IN THE EXERCISE OF ITS DISCRETION OR JUDGMENT IS TO BE VIEWED AS
A REASONABLE AND PROPER EXERCISE OF SUCH DISCRETION OR JUDGMENT, WITHOUT REGARD
TO WHETHER OTHER REASONS FOR ITS DECISION MAY EXIST, WITHOUT REGARD TO WHETHER
THE TRIER OF FACT WOULD INDEPENDENTLY ACCORD THE SAME WEIGHT TO THE BUSINESS
REASONS, AND WITHOUT REGARD TO WHETHER SUCH DISCRETION OR JUDGMENT IS EXERCISED
IN THE BEST INTERESTS OF FRANCHISEE.

16.4 No Waiver. Either party’s failure to exercise any right or remedy or to
enforce any obligation, covenant or agreement herein shall not constitute a
waiver by, or estoppel of, such party’s right to enforce strict compliance with
any such obligation, covenant or agreement. No custom or practice shall modify
or amend this Agreement. Either party’s waiver of, or failure or inability to
enforce, any right or remedy shall not impair such party’s rights or remedies
with respect to subsequent default of the same, similar or different nature.
Acceptance of any payment shall not waive any default.

16.5 Severability. If all or any portion of any covenant contained herein are
held unreasonable or unenforceable by a court or agency having valid
jurisdiction in an unappealed final decision to which Franchisor is a party,
Franchisee and Franchisee’s Principals expressly agree to be bound by any lesser
covenant subsumed within the terms of the covenant that imposes the maximum duty
permitted by law, as if the resulting covenant were separately stated in and
made a part of this Agreement. Notwithstanding the above, should any term,
covenant or provision hereof, or the application thereof, be determined by a
valid, final, non-appealable order to be invalid or unenforceable, the remaining
terms, covenants or provisions hereof shall continue in full force and effect
without regard to the invalid or unenforceable provision. In such event such
term, covenant or provision shall be deemed modified to impose the maximum duty
permitted by law and such term, covenant or provision shall be valid and
enforceable in such modified form as if separately stated in and made a part of
this Agreement. Notwithstanding the foregoing, if any term hereof is so
determined to be invalid or unenforceable and such determination adversely
affects, in Franchisor’s reasonable judgment, Franchisor’s ability to preserve
its rights in, or the goodwill underlying, the Proprietary Marks, the Animated
Entertainment, the System and/or the Confidential Information, or materially
effects Franchisor’s other rights hereunder, Franchisor may terminate this
Agreement upon notice to Franchisee.

16.6 Notice. All notices required or desired to be given hereunder shall be in
writing and shall be sent by personal delivery, expedited delivery service,
return receipt requested or facsimile to the following addresses or such other
addresses as designated by Franchisor or Franchisee in writing pursuant to this
Section:

 

    CEC Entertainment, Inc.   46   [City, State] Franchise

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Notices to Franchisor:    Director of Franchise    CEC Entertainment, Inc.   
4441 W. Airport Freeway    Irving, Texas 75062    Tel. (972) 258-8507    Fax.
(972) 258-5528 Notices to Franchisee:   

 

        

 

        

 

        

 

         Tel. (    )   

                         

         Fax. (    )   

 

     

Notices posted by personal delivery or given by facsimile shall be deemed given
upon receipt. Notice to Franchisee shall constitute notice to Franchisee’s
Principals.

16.7 Counterparts. This Agreement may be executed in any number of counterparts
each of which when so executed shall be an original, but all of which together
shall constitute one (1) and the same instrument.

16.8 Headings. The section headings in this Agreement are for convenient
reference only and shall be given no substantive or interpretive effect.

16.9 Further Assurances. Franchisor and Franchisee shall execute and deliver any
and all additional papers, documents, and other assurances and shall do any and
all acts and things reasonably necessary in connection with the performance of
their obligations hereunder and to carry out the intent of the parties hereto.

16.10 Compliance with Laws. Franchisee agrees to comply at its sole expense with
all laws and regulations applicable to this Agreement and the operation of the
Franchised Restaurant. Copies of all inspection reports, warnings, certificates
and ratings, issued by any governmental entity during the term of this Agreement
in connection with the conduct of the Franchised Restaurant which indicate
Franchisee’s failure to meet or maintain the highest governmental standards
(such as, without limitation, a Grade A sanitation rating or its equivalent) or
less than full compliance by Franchisee with any applicable law, rule or
regulation, shall be forwarded to Franchisor by Franchisee within five (5) days
of Franchisee’s receipt thereof.

 

    CEC Entertainment, Inc.   53   [City, State] Franchise

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17. ACKNOWLEDGMENTS

17.1 Independent Investigation. Franchisee and Franchisee’s Principals
acknowledge that they have conducted an independent investigation of the
business venture contemplated by this Agreement and recognize that the success
of this business venture involves substantial business risks and will largely
depend upon the ability of Franchisee. Franchisor expressly disclaims making,
and Franchisee and Franchisee’s Principals acknowledge that they have not
received or relied on, any warranty or guaranty, express or implied, as to the
potential volume, profits or success of the business venture contemplated by
this Agreement.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.2 Opportunity to Assess Risks. Franchisee and Franchisee’s Principals
acknowledge that they have received, read, and understand this Agreement and the
related Attachments and agreements and that Franchisor has afforded them
sufficient time and opportunity to consult with advisors selected by Franchisee
about the potential benefits and risks entering into this Agreement.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.3 Receipt of Disclosure Document. Franchisee and Franchisee’s Principals
acknowledge that they have received a complete copy of this Agreement and all
related attachments and agreements at least five (5) business days before the
date on which this Agreement was executed. Franchisee and Franchisee’s
Principals further acknowledge that they have received the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission entitled
“Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures” at least ten (10) business days before the date of on
which this Agreement was executed.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.4 No Extraneous Promises. Franchisee and Franchisee’s Principals confirm and
acknowledge that no written or oral agreements, promises, commitments,
undertakings or understandings were made to or with Franchisee that are not
expressly set forth in this Agreement and any duly executed amendment or
addendum attached to this Agreement.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

 

    CEC Entertainment, Inc.   48   [City, State] Franchise

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17.5 No Extraneous Inducements . Franchisee and Franchisee’s Principals confirm
and acknowledge that no representation, warranty, guaranty or promise other than
those expressly set forth in this Agreement and in the disclosure document
described in Section 17.3 was made by Franchisor or any other person to induce
Franchisee to sign this Agreement. Franchisee and Franchisee’s Principals
recognize that neither Franchisor nor any other party can guarantee Franchisee’s
business success or state the exact costs of opening and operating the
Franchised Restaurant, and that such success and costs will depend primarily
upon Franchisee’s own efforts and business ability. Franchisee and Franchisee’s
Principals also recognize that any new business venture is speculative.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.6 Commercial Relationship. Franchisee and Franchisee’s Principals acknowledge
that this Agreement creates an arm’s length commercial relationship that cannot
and will not be transformed into a fiduciary or other “special” relationship by
course of dealing, by any special indulgences or benefits that Franchisor
bestows on Franchisee, or by inference from a party’s conduct.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.7 Compliance with Anti-Corruption and Anti-Money Laundering Laws. Franchisee
and Franchisee’s Principals represent, covenant and warrant to Franchisor that,
to the best of their knowledge, neither Franchisee nor any of Franchisee
Principals or managerial employees thereof is identified, either by name or an
alias, pseudonym or nickname, on the lists of “Specially Designated Nationals”
or “Blocked Persons” maintained by the U.S. Treasury Department’s Office of
Foreign Assets Control (texts currently available at
www.treas.gov/offices/enforcement/ofac/). Further, Franchisee and Franchisee’s
Principals represent, covenant and warrant that, to the best of their knowledge,
they have not violated and agree that they will not violate any law (in effect
now or which may become effective in the future) prohibiting corrupt business
practices, money laundering or the aid or support of persons or entities who
conspire to commit acts of terror against any person or government, including
acts prohibited by the U.S. Patriot Act, Public Law No. 107-56 (text currently
available at http://www.epic.org/privacy/terrorism/hr3162.html), U.S. Executive
Order

 

    CEC Entertainment, Inc.   49   [City, State] Franchise

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13244 (text currently available at http://treas.gov/offices/enforcement/ofac/
sanctions/terrorism.html), or similar law. The foregoing constitute continuing
representations and warranties, and Franchisee shall notify Franchisor
immediately in writing of the occurrence of any event or the development of any
circumstance that might render the foregoing representation and warranty false,
inaccurate or misleading.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

17.8 No Claims. Franchisee and Franchisee’s Principals represent, covenant and
warrant to Franchisor that, to the best of their knowledge, neither they nor an
affiliate of either hold or are due, as applicable, any claims, debts,
liabilities, demands, obligations, expenses, actions, or causes of action of any
nature, character or description related to this Agreement against Franchisor,
and its affiliates and each of their respective successors, partners and the
partners, shareholders, representatives, assigns, agents, servants, employees,
independent contractors, officers and directors of each of them, in their
corporate and individual capacities.

 

Franchisee’s Principals Initials, individually and on behalf of Franchisee  

 

 

[Signatures appear on following pages]

 

    CEC Entertainment, Inc.   50   [City, State] Franchise

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IN WITNESS WHEREOF, the parties hereto have fully executed, sealed and delivered
this Agreement in duplicate on the day and year first above written.

 

FRANCHISOR: CEC ENTERTAINMENT, INC. By:  

 

Name:  

 

Title:  

 

STATE OF TEXAS

COUNTY OF DALLAS

Before me personally appeared                                  who, after being
duly sworn, says that he is the                                  of CEC
Entertainment, Inc., a corporation, organized and existing under the laws of
Kansas, and that he has authority to execute under oath and has so executed the
above Agreement for and on behalf of such corporation for such purposes therein
contained.

WITNESS my hand and official seal this        day of                     ,
20    .

 

   

 

  (SEAL)     Notary Public  

 

    CEC Entertainment, Inc.   51   [City, State] Franchise

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FRANCHISEE:

 

By:  

 

Name:  

 

Title:  

 

STATE OF                     

COUNTY OF                     

Before me personally appeared                              who, after being duly
sworn, says that he is the                                  of
                            , a (corporation) (partnership), organized and
existing under the laws of                             , and that he has
authority to execute under oath and has so executed the above Agreement for and
on behalf of such corporation for the purposes therein contained.

WITNESS my hand and official seal this        day of                     ,
20    .

 

   

 

  (SEAL)     Notary Public  

 

    CEC Entertainment, Inc.   52   [City, State] Franchise

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SCHEDULE 1.14

STATEMENT OF OWNERSHIP INTERESTS

AND FRANCHISEE’S PRINCIPALS

A. The following is a list of stockholders, partners or other investors in
Franchisee, including all investors who own or hold a direct or indirect
interest in Franchisee, and a description of the nature of their interest. All
such individuals and entities shall be deemed to be “Franchisee’s Principals”
described in and designated pursuant to the Franchise Agreement, each of whom
will execute the Agreement and Guaranty of Franchiser’s Principals:

 

Name

       

Percentage of Ownership/Nature of Interest

                                          

    

 

 

    

 

B. The following is a list of all other of “Franchisee’s Principals” not
described in “A”, above, described in and designated pursuant to the Franchise
Agreement, each of whom will execute the Agreement and Guaranty of Franchisee’s
Principals.

 

    CEC Entertainment, Inc.   53   [City, State] Franchise

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ATTACHMENT A

AGREEMENT AND GUARANTY OF

FRANCHISEE’S PRINCIPALS

Each of the undersigned acknowledges and agrees as follows:

(1) Each has read the terms and conditions of the Franchise Agreement and
acknowledges that the execution of this Guaranty and the undertakings of the
Franchisee’s Principals in the Franchise Agreement are in partial consideration
for, and a condition to, the granting of the franchise, and that Franchisor
would not have granted the franchise without the execution of this Guaranty and
the other undertakings by each of the undersigned;

(2) Each is included in the term “Franchisee’s Principals”;

(3) Each individually, jointly, and severally, makes all of the covenants,
representations, warranties and agreements of Franchisee’s Principals set forth
in the Franchise Agreement and is obligated to perform thereunder; and

(4) Each individually, jointly and severally, unconditionally, and irrevocably
guarantees to Franchisor and its successors and assigns that all of Franchisee’s
obligations under the Franchise Agreement will be punctually paid and performed.
Upon default by Franchisee or upon notice from Franchisor, each will immediately
make each payment and perform each obligation required of Franchisee under the
Franchise Agreement.

(5) Without affecting the obligations of any of Franchisee’s Principals under
this Guaranty, Franchisor may, without notice to the Franchisee’s Principals,
waive, renew, extend, modify, amend, or release any indebtedness or obligation
of Franchisee or settle, adjust, or compromise any claims that Franchisor may
have against Franchisee.

(6) Each of the Franchisee’s Principals waives all demands and notices of every
kind with respect to the enforcement of this Guaranty, including notices of
presentment, demand for payment or performance by Franchisee, any default by
Franchisee or any guarantor, and any release of any guarantor or other security
for this Guaranty or the obligations of Franchisee.

(7) Franchisor may pursue its rights against any of Franchisee’s Principals
without first exhausting its remedies against Franchisee and without joining any
other guarantor and no delay on the part of Franchisor in the exercise of any
right or remedy will operate as a waiver of the right or remedy, and no single
or partial exercise by Franchisor of any right or remedy will preclude the
further exercise of that or any other right or remedy.

 

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

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(8) Upon receipt by Franchisor of notice of the death of any of Franchisee’s
Principals, the estate of the deceased will be bound by the foregoing Guaranty,
but only for defaults and obligations under the Franchise Agreement existing at
the time of death, and in that event, the obligations of the remaining
Franchisee’s Principals will continue in full force and effect.

ATTEST: FRANCHISEE’S PRINCIPALS

 

Name:  

 

   

 

  Name:  

 

   

 

  Name:  

 

   

 

 

 

STATE OF

 

 

 

COUNTY OF

 

 

 

Before me personally appeared the following persons:
                            ,                              and
                             who are known to me to be the persons who executed
the foregoing Agreement and Guaranty of Franchisee’s Principals and each
acknowledged the same to be his or her free act and deed for the purpose s
therein contained.

WITNESS my hand and official seal this        day of                 , 20    .

 

   

 

  (SEAL)     Notary Public  

 

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

--------------------------------------------------------------------------------

ATTACHMENT B

GENERAL RELEASE

(UPON RENEWAL OF FRANCHISE AGREEMENT)

THIS GENERAL RELEASE (this “Release”) is made and entered into this        day
of                     , 20    , by                              (“Franchisee”),
and                              and                              (the
“Franchisee’s Principals”).

RECITALS

WHEREAS, CEC Entertainment, Inc. (“Franchisor”) and Franchisee entered into that
certain Franchise Agreement dated                      (the “Franchise
Agreement”), for the establishment of a Chuck E. Cheese’s located at
                            ;

WHEREAS, the Franchisee’s Principals are described in the Franchise Agreement as
“Franchisee’s Principals” and as such, have among other things, agreed to be
bound by certain of the obligations contained in the Franchise Agreement; and

WHEREAS, Franchisee desires to renew or otherwise extend the term of the
Franchise Agreement and the Franchise Agreement provides that as a condition to
such renewal, Franchisee and the Franchisee’s Principals shall, among other
things, execute a general release as contained herein.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged by each of the parties hereto, Franchisee and the Franchisee’s
Principals agree as follows:

AGREEMENT

1. RELEASE. Franchisee, and each of the Franchisee’s Principals, individually
and collectively, jointly and severally, do hereby release and forever discharge
Franchisor and its affiliates, and each of their respective successors,
partners, and the shareholders, partners, representatives, assigns, agents,
servants, employees, independent contractors, officers, and directors of each of
them, in their corporate and individual capacities (“Designees”), of and from
any claims, debts, liabilities, demands, obligations, costs, expenses, actions,
and causes of action of every nature, character, and description, known or
unknown, vested or contingent, which the Franchisee and the Franchisee’s
Principals now own or hold, or have at any time heretofore owned or held, or may
at any time own or hold against the Franchisor, or each of the respective
Designees of the Franchisor, arising under or in connection with any agreement,
law, rule, regulation ordinance, or any other context whatsoever, including,
without limitation, the Franchise Agreement or the operation of the Chuck E.
Cheese’s store established thereunder, and any state or federal franchise or
business opportunity law; provided, however, that this release shall not serve
to terminate any agreement currently effective by an among Franchisee or any or
all of the Franchisee’s Principals and Franchisor.

 

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

--------------------------------------------------------------------------------

[The parties intend this paragraph 1 to cover, encompass, release, and
extinguish all claims and matters that might otherwise be reserved by California
Civil Code section 1542, which provides as follows:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected the settlement with the debtor.”]

2. AUTHORITY. By executing this Release, the parties represent and warrants that
each have the right and authority to enter into and to accept the terms and
covenants of this Release, and that no third party has or claims an interest in
any claim released hereby.

3. NO CONFLICTS. Each of the undersigned hereby represents and warrants that its
execution of this Release does not violate any other agreement to which it is a
party.

4. MISCELLANEOUS.

4.1 Counterparts. This Release may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

4.2 Opportunity to Review. Franchisee and the Franchisee’s Principals represent
and warrant that they: (i) have had an opportunity to review this Release;
(ii) have had an opportunity to consult with an attorney; and (iii) fully
understand the content and legal effect of this Release; and

4.3 Governing Law. This Release shall be governed by the laws of the State of
                        , which laws shall be controlling in the event of any
conflict of law.

4.4 Section Headings. The section headings of this Release are for the
convenience of the parties only shall have no force or effect.

4.5 Severability. The provisions of this release are severable, and, in the
event that any of them is held void and unenforceable as a matter of law, the
remainder shall continue in full force and effect.

[Signatures appear on following pages]

 

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

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Franchisee and the Franchisee’s Principals have executed and
delivered this Release.

FRANCHISEE:

 

By:  

 

              Name:  

 

              Title:  

 

             

FRANCHISEE’S PRINCIPALS:

 

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

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

--------------------------------------------------------------------------------

GENERAL RELEASE

(UPON TRANSFER)

THIS GENERAL RELEASE (this “Release”) is made and entered into this        day
of                     , 20    , by                              (“Franchisee”),
                             and                              (the “Franchisee’s
Principals”).

RECITALS

WHEREAS, CEC Entertainment, Inc. (“Franchisor”) and Franchisee entered into that
certain Franchise Agreement (the “Franchise Agreement”) for the establishment
and operation of a Chuck E. Cheese’s restaurant located at
                            ;

WHEREAS, the Franchisee and/or one or more of Franchisee’s Principals desire to
effect a Transfer, as such term is defined in the Franchise Agreement; and

WHEREAS, the Franchise Agreement provides, as a condition to Franchisor’s
approval of such Transfer, Franchisee and Franchisee’s Principals shall execute
a release of certain claims.

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged by each of the parties hereto, Franchisee and the Franchisee’s
Principals agree as follows:

AGREEMENT

1. RELEASE. Franchisee, each of the Franchisee’s Principals, individually and
collectively, jointly and severally, do hereby release and forever discharge
Franchisor and its affiliates, and each of their respective successors,
partners, and the shareholders, partners, representatives, assigns, agents,
servants, employees, independent contractors, officers, and directors of each of
them, in their corporate and individual capacities (“Designees”), of and from
any claims, debts, liabilities, demands, obligations, costs, expenses, actions,
and causes of action of every nature, character, and description, known or
unknown, vested or contingent (“Claims”), which the Franchisee and the
Franchisee’s Principals now own or hold, or have at any time heretofore owned or
held, or may at any time own or hold against the Franchisor, or each of the
respective Designees of the Franchisor, arising under or in connection with any
agreement, law, rule, regulation ordinance, or any other context whatsoever,
including, without limitation, the Franchise Agreement and any other franchise
agreement or the operation of the Chuck E. Cheese’s restaurant established
thereunder, and any state or federal franchise or business opportunity law;
provided, however, that this release shall not serve to terminate any agreement
currently effective by an among Franchisee or any or all of the Franchisee’s
Principals and Franchisor.

 

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

--------------------------------------------------------------------------------

[The parties intend this paragraph 1 to cover, encompass, release, and
extinguish all claims and matters that might otherwise be reserved by California
Civil Code section 1542, which provides as follows:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected the settlement with the debtor.”]

2. AUTHORITY. By executing this Release, the parties represent and warrants that
each have the right and authority to enter into and to accept the terms and
covenants of this Release, and that no third party has or claims an interest in
any claim released hereby.

3. NO CONFLICTS. Each of the undersigned hereby represents and warrants that its
execution of this Release does not violate any other agreement to which it is a
party.

4. MISCELLANEOUS.

4.1 Counterparts. This Release may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.

4.2 Opportunity to Review. Franchisee and the Franchisee’s Principals represent
and warrant that they: (i) have had an opportunity to review this Release;
(ii) have had an opportunity to consult with an attorney; and (iii) fully
understand the content and legal effect of this Release; and

4.3 Governing Law. This Release shall be governed by the laws of the State of
                            , which laws shall be controlling in the event of
any conflict of law.

4.4 Section Headings. The section headings of this Release are for the
convenience of the parties only shall have no force or effect.

4.5 Severability. The provisions of this release are severable, and, in the
event that any of them is held void and unenforceable as a matter of law, the
remainder shall continue in full force and effect.

[Signatures appear on following page]

 

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

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Franchisee, the Franchisee’s Principals and the Affiliates
have executed and delivered this Release.

FRANCHISEE:

 

By:  

 

              Name:  

 

              Title:  

 

             

FRANCHISEE’S PRINCIPALS:

 

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

   

 

  Name:  

 

      Name:  

 

    Date:  

 

      Date:  

 

   

 

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

--------------------------------------------------------------------------------

ATTACHMENT C

LEASE RIDER

This Lease Rider is made and entered into                     , 20    , by and
between CEC Entertainment, Inc., a Kansas corporation (“Franchisor”),
                            , a                              corporation
(“Franchisee”) and                                  (“Landlord”).

WHEREAS, Franchisor and Franchisee are parties to that certain Franchise
Agreement dated                     , 20     (“Franchise Agreement”);

WHEREAS, Franchisee and Landlord desire to enter into a lease (the “Lease”)
pursuant to which Franchisee will occupy the premises located at
                             (the “Premises”) for a family-oriented pizza
restaurant (hereinafter “Restaurant”) licensed under the Franchise Agreement;
and

WHEREAS, as a condition to entering into the Lease, the Franchisee is required
under the Franchise Agreement to execute this Lease Rider along with the
Landlord and Franchisor;

NOW, THEREFORE, the parties in consideration of the mutual undertakings and
commitments of each party to the other party set forth herein and in the
Franchise Agreement, mutually agree as follows:

1. During the term of the Franchise Agreement, the Premises shall be used only
for the operation of the Restaurant.

2. Landlord consents to Franchisee’s use of such marks and signs, decor items,
color schemes and related components of the Chuck E. Cheese system as Franchisor
may prescribe for the Restaurant.

3. Landlord agrees to furnish Franchisor with copies of any and all letters and
notices sent to Franchisee pertaining to the Lease and the Premises, at the same
time that such letters and notices are sent to Franchisee.

4. Franchisor shall have the right to enter the Premises to make any
modification or alteration necessary to protect the Chuck E. Cheese system and
marks or to cure any default under the Franchise Agreement or any development
agreement entered into between Franchisor and Franchisee or under the Lease,
without being guilty of trespass or any other crime or tort, and Landlord shall
not be responsible for any expenses or damages arising from Franchisor’s action
in connection therewith.

5. Franchisee shall not assign the Lease or renew or extend the term thereof
without the prior written consent of Franchisor.

 

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

--------------------------------------------------------------------------------

6. Landlord and Franchisee shall not amend or otherwise modify the Lease in any
manner that could materially affect any of the foregoing requirements without
the prior written consent of Franchisor.

7. In the event of Franchisee’s default under the terms of the Lease, Franchisor
may, but is not required, to cure the default and may assume the Lease in
Franchisor’s name. Within thirty (30) days after Franchisor receives notice of
the default, Franchisor will have the option, in its sole discretion, to cure
the default and assume the Lease. If Franchisor elects to cure the default and
assume the Lease, Franchisor will notify Landlord of its intent to cure such
default and to assume the Lease. Franchisor will cure the default within thirty
(30) days of such election or, if the default cannot be reasonably cured within
such thirty (30) day period, then Franchisor will commence and proceed to cure
the default within such time as is reasonably necessary to cure the default. If
Franchisor elects to assume the Lease, Landlord agrees to recognize Franchisor
as the tenant under the Lease and Franchisee will no longer have any rights
thereunder. Landlord shall provide to Franchisor an estoppel certificate
confirming that no additional defaults exist and no acts or omissions have
occurred which, with the passage of time, would result in default.

8. Franchisee will be permitted to assign the Lease to Franchisor or its
affiliates upon the expiration or earlier termination of the Franchise Agreement
and the Landlord hereby consents to such assignment and agrees not to impose or
assess any assignment fee or similar charge or accelerate rent under the Lease
in connection with such assignment, or require Franchisor to pay any past due
rent or other financial obligation of Franchisee to Landlord, it being
understood that Landlord will look solely to the Franchisee for any rents or
other financial obligations owed to Landlord prior to such assignment. Landlord
and Franchisee acknowledge that Franchisor is not a party to the Lease and will
have no liability under the Lease, unless and until the Lease is assigned to, or
assumed by, Franchisor.

9. Except for the Franchisee’s obligations to Landlord for rents and other
financial obligations accrued prior to the assignment of the Lease, in the event
of such assignment, Franchisor or any affiliate designated by Franchisor will
agree to assume from the date of assignment all obligations of Franchisee
remaining under the Lease, and in such event Franchisor or any affiliate will
assume Franchisee’s occupancy rights, and the right to sublease the Premises,
for the remainder of the term of the Lease.

10. Notwithstanding anything contained in this Lease, Franchisor is expressly
authorized, without the consent of the Landlord, to sublet the Premises to an
unauthorized franchisee, provided such subletting is specifically subject to the
terms of this Lease and further provided Franchisor remains liable for the
performance of the terms of this Lease and provided the franchisee expressly
assumes all obligations of the Lease. Franchisor agrees to notify Landlord as to
the name of the franchisee within ten (10) days after such subletting.

11. The terms of this Lease Rider will supersede any conflicting terms of the
Lease.

 

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

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Lease Rider as of the date first above written.

 

 

FRANCHISOR:             CEC ENTERTAINMENT, INC.
a Kansas corporation             By:  

 

            Name:  

 

            Title:  

 

           

 

FRANCHISEE:

             

 

           

a                      (corporation) (partnership)

           

 

By:  

 

            Name:  

 

            Title:  

 

           

 

LANDLORD:

             

 

           

a                      corporation

           

 

By:  

 

            Name:  

 

            Title:  

 

           

 

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

--------------------------------------------------------------------------------

ATTACHMENT D

ADVERTISING COOPERATIVE AGREEMENT

THIS                              DMA ADVERTISING COOPERATIVE AGREEMENT
(hereinafter referred to as “Agreement”) is made and entered into this       
day of                     , 20    , by and between the undersigned franchisees
(“Members”), and CEC Entertainment, Inc., a Kansas corporation (“Franchisor”) or
any of its affiliates to the extent they are operating a Chuck E. Cheese’s
restaurant (“Franchised Restaurant”) as such term is defined in the Franchise
Agreement (“Franchise Agreement”) located in the                             
Designated Marketing Area, or DMA (as such term is defined in the Franchise
Agreement), then Franchisor shall be included in the term “Member” and shall
execute this Agreement as a Member, with reference to the following facts:

WHEREAS, each of the Members is engaged in the operation of a Franchised
Restaurant, pursuant to the terms of a Franchise Agreement entered into by and
between the Member and the Franchisor;

WHEREAS, the Franchised Restaurants operated by the Members are located within
the                          DMA (“DMA”);

WHEREAS, the Franchisor is requiring the Members to form a cooperative
advertising association (the “Cooperative”) for the purpose of advertising and
promoting the Franchised Restaurants in the DMA pursuant to specified
advertising and promotional activities, and each Member is required to
contribute a portion of the Member’s Gross Sales (as defined in the Franchise
Agreement) to the Cooperative for this purpose;

WHEREAS, the Members acknowledge and agree that the formation of the Cooperative
is in the best interest of the Members and the System (as defined in the
Franchise Agreement), and that the formation of the Cooperative by the Members
will provide each Member with greater and more effective exposure of the
products and services marketed by each Member to the general public than would
otherwise be available; and

THEREFORE, in consideration of the mutual covenants and agreements contained
herein, Members have agreed as follows:

SECTION 1. ORGANIZATION.

1.1 Formation. The Members agree that they shall hereby form and participate in
the Cooperative for the exclusive purposes of funding and administering regional
advertising and promotion programs, and developing, subject to Franchisor’s
approval, standardized advertising materials for use by the Members in regional
advertising.

 

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

--------------------------------------------------------------------------------

1.2 Use of Funds. The Cooperative shall be operated solely as a conduit for
funds contributed for the purpose referenced above and as otherwise set forth
herein.

SECTION 2. MEMBERSHIP.

2.1 Establishing Cooperative. Franchisor shall have the right, in its
discretion, to designate any geographic area (i.e., DMA) as a region for
purposes of establishing a Cooperative and to determine whether a Cooperative is
applicable to the Members. Throughout the term of this Agreement, the geographic
area encompassed by the DMA shall be subject to change in accordance with the
boundaries as established by Nielsen Media Research, Inc. A Cooperative shall be
composed of any two or more restaurants, whether such restaurants are operated
by Franchisor or franchisees. If a Cooperative has been established for the
geographic area in which the Franchised Restaurant is located at the time a
System Restaurant (as defined in the Franchise Agreement) commences business
hereunder, the operator of such System Restaurant (franchisee, Franchisor (or
any of its affiliates) shall immediately become a member of such Cooperative not
later than thirty (30) days after the date on which the Cooperative commences
operation, as provided below. If the System Restaurant is within the geographic
area of more than one Cooperative, the franchisee shall be required to be a
member of only one such Cooperative as designated by Franchisor.

2.2 Termination of Membership. The membership of any Member in the Cooperative
shall terminate upon the termination, expiration, or transfer of the Franchise
Agreement applicable to the Member’s Franchised Restaurant located in the DMA,
or in the event the Member’s Franchised Restaurant ceases to be located in the
DMA due to a change in the geographic area constituting the DMA, at the time of
such change. In the event the Member operates more than one System Restaurant
located in the DMA, the Member’s membership shall terminate upon the
termination, expiration, or transfer of all of the Franchise Agreements
applicable to such System Restaurants or upon all such System Restaurants
ceasing to be located within the DMA; provided, however, that a Member shall not
be required to pay a cooperative fee and shall not have any voting rights in the
Cooperative with respect to any System Restaurant for which the Franchise
Agreement has terminated, expired, or been transferred or which is no longer
located in the DMA. Any Member whose membership in the Cooperative has been
terminated as provided herein shall have no further rights of membership in the
Cooperative.

SECTION 3. CONTRIBUTIONS.

3.1 Amount of Contributions. Commencing upon the date of this Agreement (or upon
the effective date of membership with respect to a new Member) and continuing
until the dissolution of the Cooperative or the earlier termination of a
Member’s membership in the Cooperative, each Member shall pay directly to the
Cooperative contributions in such amounts as are determined by the Cooperative;
provided, however, that Member shall be required to contribute to the
Cooperative at least three percent (3.0%) of the Member’s monthly gross sales of
each System Restaurant located in the DMA.

 

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

--------------------------------------------------------------------------------

3.2 Payment Date. Each Member shall submit to the Cooperative, no later that the
fifteenth (15th) day of each month, for the preceding calendar month, its
contribution as provided herein, together with such other statements or reports
as may be required by Franchisor or by the Cooperative with Franchisor’s prior
approval.

3.3 Overdue Contributions. Any cooperative fee which is not received by the
Cooperative on or before the date on which it is due shall be deemed overdue. In
addition to the overdue amount, the Member shall pay to the Cooperative interest
on such amount from the date it was due until paid at the rate of twelve percent
(12%) per annum, provided that in no event shall such interest rate be more than
the maximum rate allowed by the applicable law. In addition, each Member agrees
to pay all costs and expenses (including reasonable attorneys’ fees) incurred by
the Cooperative and/or the Franchisor in connection with the recovery of any
cooperative fee due hereunder. Except as described below with respect to the
dissolution of the Cooperative, no cooperative fee paid by any Member hereunder
shall be refundable in whole or in part upon termination of membership in the
Cooperative or otherwise.

3.4 Default. The failure to pay any cooperative fee for any System Restaurant
when due hereunder shall constitute a default by the Member and shall result in
the suspension of the right of the Member to receive any advertising and
promotional materials and services provided by the Cooperative, the suspension
of the right to participate in any advertising and marketing activities
conducted by the Cooperative and in the suspension of voting rights with respect
to the Cooperative.

SECTION 4. GOVERNMENT AND MANAGEMENT.

4.1 Membership Meetings. The Members shall have at least one regularly scheduled
meeting (which may be conducted through a telephonic conference call) during
every fiscal year and shall hold additional meetings from time to time as the
Members or Franchisor deems necessary to conduct the business of the
Cooperative. Such meetings shall be necessary for all matters to be acted on by
the Cooperative, including, but not limited to, the funding and administration
of regional advertising and promotion programs and developing, subject to
Franchisor’s approval, standardized advertising materials for use by the Members
in regional advertising. Notice of any meeting shall be given to each Member
entitled to vote at the meeting.

The holders of a majority of those votes entitled to be cast shall constitute a
quorum at a meeting of Members. Any and all matters to be acted on by the
Cooperative shall be determined by the affirmative vote of the majority of votes
entitled to be cast at a meeting at which a quorum is present. Any CEC
Entertainment, Inc. franchisee who has executed a Franchise Agreement but whose
System Restaurant is not yet open for business may attend any meeting of
Members, notwithstanding that such franchisee’s membership in the Cooperative is
not yet effective and the franchisee has no voting privileges.

 

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

--------------------------------------------------------------------------------

4.2 Voting. Each Member shall be entitled to one (1) vote, in person, by written
consent, or by proxy, for each System Restaurant operated by the Member that is
located in the DMA. The voting rights of any Member shall be automatically
suspended upon the failure to pay any cooperative fee when due hereunder and
such suspension shall continue until such time as all overdue amounts (including
interest, attorneys’ fees and other costs and expenses due hereunder) are paid
in full. In addition, the voting rights of any Member shall be automatically
suspended upon the occurrence of an event of default by the Member under any
applicable Franchise Agreement to which such Member is a party. Such suspension
shall continue until such default is cured within the time and in the manner
specified in the applicable Franchise Agreement. Each Member’s obligation to pay
cooperative fees hereunder shall continue notwithstanding any suspension of
voting rights.

4.3 General Manager. If Franchisor is a member of the Cooperative it will be the
General Manager; otherwise, the Cooperative will elect an individual to serve as
General Manager. The Cooperative hereby appoints the General Manager as its true
and lawful agent to collect all sums due the Cooperative, maintain and make
disbursements from an account established for such sums collected, prepare an
operating budget, including an advertising and marketing plan for each fiscal
year, expend funds from the Cooperative’s account as necessary to conduct
advertising and marketing activities for the Cooperative in accordance with
standards and specifications set forth by the Franchisor, engage such
advertising and marketing personnel (on an independent contractor basis) as the
General Manager deems necessary, and conduct the meetings of the Members.

SECTION 5. BOOKS AND RECORDS; REPORTS.

General Manager shall maintain a comprehensive system of just and true books of
account in which shall be entered fully and accurately each and every
transaction with respect to the operation of the Fund. Such records, accounts,
and books shall be maintained either at the office of the General Manager or at
some other location, as the General Manager shall decide, or at such other place
as Cooperative and Franchisor shall mutually determine, and each party shall at
all reasonable times have access to such records, accounts, and books. Such
records, accounts, and books shall be kept on a calendar year basis and on such
method of accounting as Cooperative may direct. The books may be audited by a
certified public accountant selected by Cooperative at the close of each such
year and/or at such other times as Cooperative may direct. The cost of any such
audit shall be borne by Cooperative.

SECTION 6. ACT OF COOPERATIVE.

All matters to be acted on by the Cooperative shall be determined by the General
Manager or vote of the Members as described herein. Except as provided herein,
no individual Member shall be an agent of the Cooperative for any purpose and no
action taken by any individual Member, of whatever nature or kind, shall bind
the Cooperative in any manner unless such action is specifically authorized by
the Members as described below.

 

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

--------------------------------------------------------------------------------

SECTION 7. DISSOLUTION.

The Cooperative shall exist and operate hereunder until dissolved by the
Franchisor. Upon dissolution and after payment of all liabilities of the
Cooperative, all funds remaining in the Cooperative’s bank account shall be
disbursed by the General Manager to the Members on a pro rata basis in
accordance with cooperative fees respectively paid by the Members at the time
the last cooperative fee was required to be paid hereunder.

SECTION 8. INDEMNIFICATION.

The Cooperative shall, at all times, indemnify and hold harmless the Franchisor,
its designee(s) which administer the System Fund (as defined in the Franchise
Agreement), and their respective subsidiaries, affiliates, successors, and
assigns, and their respective directors, officers, shareholders, partners,
servants, employees, agents, and representatives from and against any and all
causes of action, suits, debts, costs, expenses, liabilities, claims, or
demands, of whatever nature or kind, in law or in equity, arising out of or in
connection with the existence and operation of the Cooperative. In addition, the
Cooperative shall, at all times, indemnify and hold harmless any current or
former General Manager of the Cooperative from and against any and all causes of
action, suits, debts, costs, expenses, liabilities, claims, or demands, of
whatever nature or kind, whether known or unknown, in law or in equity, arising
because such person is or was an officer of the Cooperative. The Cooperative may
additionally indemnify any person covered by the foregoing grant of mandatory
indemnification to such further extent as is permitted by law and may indemnify
any other person to the fullest extent permitted by law.

SECTION 9. NOTICES.

Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by expedited delivery
service or certified or registered mail, return receipt requested, first class
postage prepaid, or sent by prepaid facsimile or telex to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:

 

If to Franchisor:    If to Cooperative: Director of Franchise    International
Association of CEC Entertainment, Inc. CEC Entertainment, Inc.    c/o CEC
Entertainment, Inc. 4441 West Airport Freeway    4441 West Airport Freeway
Irving, Texas 75062    Irving, Texas 75062 (214) 258-8507    (214) 258-8507
(214) 258-5528 (Fax)    (214) 258-8845 (Fax)

If to any Member:

The address set forth in the applicable Franchise Agreement

 

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

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Any notice shall be deemed to have been given at the time of personal delivery
or, in the case of facsimile or telex, upon receipt or, in the case of expedited
delivery service or registered or certified mail, three (3) business days after
the date and time of mailing.

SECTION 10. MISCELLANEOUS PROVISIONS

10.1 Relationship with Franchisor. It is understood and agreed by the parties
hereto that this Agreement does not constitute the Franchisor as a member of the
Cooperative or as a partner, joint venturer, principal or affiliate of the
Cooperative for any purpose; provided that the foregoing shall not apply in the
event the Franchisor is a Member of the Cooperative as provided in Section 2
above.

10.2 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto, subject to the
restrictions on assignment contained herein.

10.3 Assignment. The rights and obligations of each of the Members under this
Agreement are personal and may not be transferred or assigned; provided that the
Franchisor, in its capacity as a Member or otherwise, shall have the right to
transfer or assign all or any part of its rights or obligations hereunder to any
person or legal entity.

10.4 Waiver and Delay. The failure of the Cooperative or the Franchisor to
exercise any right, power, or option of it hereunder, or to insist upon strict
compliance with the terms hereof shall not constitute a waiver of any term
and/or condition of this Agreement with respect to any other or subsequent
breach thereof, nor a waiver of rights at any time thereafter to require exact
and strict compliance with the terms and/or conditions set forth herein. The
remedies hereunder are cumulative to any other rights or remedies which may be
granted by law.

10.5 Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or any breach thereof, including, without limitation, any claim that
any of said Agreement, or any part thereof, is invalid, illegal or otherwise
voidable or void, shall be submitted to arbitration in accordance with the
Commercial Rules of the American Arbitration Association; provided, however,
this clause shall not be construed to limit or to preclude either party from
bringing any action in any court of competent jurisdiction for injunctive or
other provisional relief as is necessary or appropriate. The arbitration shall
be conducted in Dallas, Dallas County, Texas, in the United States of America.
Any award or determination of the arbitration tribunal shall be final,
non-appealable, and conclusive upon the parties, and judgment thereon may be
entered by any court of competent jurisdiction.

10.6 Attorneys’ Fees. If any arbitration or other legal action is initiated by
either of the parties hereto, the prevailing party shall be entitled to recover
from the other party reasonable attorneys’ fees in addition to any other relief
that may be awarded.

 

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

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10.7 Titles for Convenience. Titles used in this Agreement are for convenience
only and shall not be deemed to affect the meaning or construction of any of the
terms, provisions, covenants, or conditions of this Agreement.

10.8 Choice of Law and Forum. All disputes concerning the validity,
interpretation, or performance of this Agreement and any of its terms or
provisions, or any rights or obligations of the parties hereto, shall be
governed by and resolved in accordance with the laws of the State of Texas, and
be resolved in the courts located within Dallas, Dallas County, Texas.

10.9 Severability. Nothing contained in this Agreement shall be construed as
requiring the commission of any act contrary to law. Whenever there is any
conflict between any provision of this Agreement and any present or future
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, the latter shall prevail, but in such event the
provision(s) of this Agreement thus affected shall be curtailed and limited only
to the extent necessary to bring it within the requirements of the law. In the
event that any part, article, paragraph, sentence or clause of this Agreement
shall be held to be indefinite, invalid or otherwise unenforceable, the
indefinite, invalid or unenforceable provision(s) shall be deemed deleted, and
the remaining part of the Agreement shall continue in full force and effect. If
any tribunal or court of competent jurisdiction deems any provision(s) hereof
unenforceable, such provision(s) shall be modified only to the extent necessary
to render it enforceable and this Agreement shall be valid and enforceable and
the parties hereto agree to be bound by and perform same as thus modified.

10.10 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

10.11 Entire Agreement. With the exception of each Franchise Agreement to which
the various Members are a party, this Agreement contains all of the terms and
conditions agreed upon by the parties hereto with reference to the subject
matter hereof. No other agreements, oral or otherwise, shall be deemed to exist
or to bind either of the parties hereto, and all prior agreements and
understandings are suspended hereby. Except for those amendments and
modifications permitted to be made unilaterally by the Franchisor under this
Agreement, this Agreement may only be amended or modified pursuant to the
written agreement of all Members of the Cooperative, subject to the prior
approval of the Franchisor.

[Signatures appear on following pages]

 

    CEC Entertainment, Inc.   D–7   [City, State] Franchise

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MEMBER:

 

a                              (corporation) (partnership) By:  

 

Name:  

 

Title:  

 

Restaurant(s):  

 

Date:  

 

APPROVED AND AGREED TO: FRANCHISOR: CEC ENTERTAINMENT, INC. By:  

 

Name:  

 

Title:  

 

Date:  

 

 

    CEC Entertainment, Inc.   D–8   [City, State] Franchise

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ATTACHMENT E

EMPLOYEE’S CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

(For Managers, Assistant Managers, Directors of Operations, District Managers
and others)

This Confidentiality and Non-Competition Agreement (“Agreement”) is made and
entered into this          day of                     , 20    , by and between
CEC Entertainment, Inc., a Kansas corporation (“Franchisor”),
                     (“Franchisee”), and                             
(“Covenantor”).

RECITALS

WHEREAS, Franchisor and Franchisee have entered into a Franchise Agreement dated
                     (the “Franchise Agreement”), pursuant to which Franchisor
has granted Franchisee the right to establish and operate a family-oriented
pizza restaurant (the “Franchised Restaurant”) and to use the Proprietary Marks
and System solely in connection therewith; and

WHEREAS, Franchisor has provided, or will provide to Franchisee, a confidential
operations manual and such other written or printed material to explain the
operation of the System and aid in its use (the “Documentation”) and certain
confidential information, knowledge, and know-how concerning the construction
and methods of operation of the Franchised Restaurant relating to the System,
including the Documentation, drawing, materials, equipment, techniques,
products, recipes, and other data of Franchisor (“Trade Secrets”); and

WHEREAS, the Proprietary Marks and Trade Secrets provide economic advantages to
Franchisor and the Trade Secrets are not generally known to, and are not readily
ascertainable by proper means by, Franchisor’s competitors who could obtain
economic value from knowledge and use of the Trade Secrets; and

WHEREAS, Covenantor or acknowledges that receipt of and the right to use the
Trade Secrets constitutes independent valuable consideration for the
representations, promises and covenants made by Covenantor or herein;

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the parties agree as follows:

Confidentiality Agreement

1. Franchisor and Franchisee shall disclose to Covenantor some or all of the
Trade Secrets. All information and materials, including, without limitation, the
Documentation, which Franchisor provides to Franchisee and/or Covenantor shall
be deemed confidential Trade Secrets for purposes of this Agreement.

 

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

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2. Covenantor shall at all times treat as confidential, and shall not at any
time disclose, distribute, copy, duplicate, record, or otherwise reproduce, in
whole or in part, or otherwise make available to any person or source or
otherwise use in any manner except for the operation of the Franchised
Restaurant, the contents of the Trade Secrets without the prior written consent
of Franchisor.

3. Covenantor agrees that any goodwill that may arise from Covenantor’s use of
the Trade Secrets shall at all times remain the sole and exclusive property of
Franchisor and shall inure to the sole benefit of Franchisor.

4. Covenantor agrees to notify Franchisor and Franchisee promptly in writing of
any loss, theft, or unauthorized disclosure or use of any of the Trade Secrets
of which Covenantor has knowledge.

5. Covenantor shall surrender any material containing some or all of the Trade
Secrets, including the Documentation, to Franchisee or Franchisor, upon request,
or upon termination of employment by Franchisee, or upon conclusion of the use
for which such information or material may have been furnished to Covenantor.

Covenants Not to Compete

1. Covenantor specifically acknowledges that, pursuant to Covenantor’s
employment or association with Franchisee, Covenantor will receive valuable,
specialized training and/or confidential information. In consideration for the
disclosure of the Trade Secrets, Covenantor covenants that during Covenantor’s
employment or association with Franchisee, and for one (1) year following the
earlier of the expiration, termination or transfer of all of Franchisee’s
interest in the Franchise Agreement or the termination of Covenantor’s
association with or employment by Franchisee, except as otherwise approved in
writing by Franchisor, Covenantor shall not, either directly or indirectly, for
itself, or through, on behalf of, or in conjunction with, any person or legal
entity:

(a) Divert or attempt to divert any business or customer of the Franchised
Restaurant to any competitor, by direct or indirect inducement or otherwise, or
do or perform, directly or indirectly, any other act injurious or prejudicial to
the goodwill associated with the Proprietary Marks, the Animated Entertainment
or the System;

(b) Employ or seek to employ any person who is at that time employed by
Franchisor, or by any Licensee of Franchisor (other than Franchisee), or
otherwise directly or indirectly induce such person to leave his or her
employment; or

(c) Own, maintain, operate, engage in, be employed by, provide any assistance
to, or have any interest in (as owner or otherwise) any business, which operates
a restaurant or food service outlet in combination with family entertainment,
including without limitation,

 

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

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live entertainment and entertainment in the form or video tapes, video displays
or computer controlled animated characters; provided, however, that this
provision shall not apply to the operation by Covenantor of any license which
may be granted by Franchisor to Covenantor; and provided, further, that this
provision shall not apply to any ownership by Covenantor, of less than five
percent (5%) of the outstanding equity securities in any publicly-held
corporation, and which business is located within the United States and any
foreign jurisdiction where Franchisor or its licensees do business (during the
term of Covenantor’s employment) or within a twenty-five (25)-mile radius from
the Franchised Restaurant.

(d) Covenantor understands and acknowledges that Franchisor will have the right,
in its sole discretion, to reduce the scope of any non-competition covenant set
forth above, or any portion thereof, without its consent, effective immediately
upon notice to Covenantor; and Covenantor agrees that he or she will comply with
any covenant as so modified, which will be fully enforceable notwithstanding the
provisions of Section 4 under the heading entitled “Miscellaneous.”

Miscellaneous

1. Franchisee and Covenantor agree that in the event of a breach of this
Agreement, Franchisor and/or Franchisee shall be entitled to enforce the
provisions of this Agreement and shall be entitled, in addition to any other
remedies which are made available to it at law or in equity, to a temporary
and/or permanent injunction and a decree for the specific performance of the
terms of this Agreement, without the necessity of showing actual or threatened
harm and without being required to furnish a bond or other security.

2. Covenantor agrees to pay all expenses (including court costs and reasonable
attorneys’ fees) incurred by Franchisor and Franchisee in enforcing this
Agreement.

3. THIS AGREEMENT SHALL BE INTERPRETED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF                     , WITHOUT REFERENCE TO
                     CHOICE OF LAW PRINCIPLES.

4. This Agreement contains the entire agreement of the parties regarding the
subject matter hereof. This Agreement may be modified only by a duly authorized
writing executed by all parties.

5. Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:

 

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

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Notices to Franchisor:

 

    

Notices to Franchisee:

 

      Director of Franchise     

 

      CEC Entertainment, Inc.     

 

      4441 West Airport Freeway     

 

      Irving, Texas 75062     

 

      (214) 258-8507      (    )   

 

      (214) 258-5528 (Fax)      (    )   

 

   (Fax)    Notices to Covenantor:              

 

             

 

             

 

             

Any notice by certified mail shall be deemed to have been given at the date and
time of mailing.

IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
witnessed by their signatures below.

 

FRANCHISOR:      FRANCHISEE:   CEC ENTERTAINMENT, INC.,     

 

  , a Kansas corporation      a                      (corporation) (partnership)
  By:   

 

     By:  

 

  Name:   

 

     Name:  

 

  Title:   

 

     Title:  

 

  COVENANTOR:         

By:

  

 

        

Name:

  

 

        

 

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

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ATTACHMENT F

RENEWAL AMENDMENT

TO

FRANCHISE AGREEMENT

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

RECITALS

1. On                     , Franchisor and Franchisee entered into that certain
franchise agreement (the “Expiring Franchise Agreement”), pursuant to which
Franchisee established and operates Chuck E. Cheese’s restaurant located at
                             (the “Franchised Restaurant”);

2. The Expiring Franchise Agreement provides for an initial term of         
years and grants Franchisee the conditional right to renew the Expiring
Franchise Agreement for          consecutive renewal term(s) of          years
each.

3. Such renewal is conditioned on, among other things, Franchisee’s execution of
Franchisor’s then-current form of franchise agreement;

4. Franchisee desires to renew the Expiring Franchise Agreement and Franchisor
and Franchisee have, contemporaneous with the execution of this Amendment,
executed Franchisor’s then-current form of franchise agreement (the “Franchise
Agreement”), which supercedes the Expiring Franchise Agreement; and

5. Franchisor and Franchisee desire to amend the terms of the Franchise
Agreement to reflect the renewal conditions contained in the Expiring Franchise
Agreement and Franchisee’s continued operation of the Franchised Restaurant.

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

1. Section 1.28 of the Franchise Agreement shall be deleted in its entirety and
shall have no force effect and the following shall be substituted in lieu
thereof:

1.28 “Site” means the existing location of the Franchised Restaurant as of the
date first above written.

2. Section 3.1 of the Franchise Agreement shall be deleted in its entirety and
shall have no force or effect and the following shall be substituted in lieu
thereof:

 

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

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

3. Section 4 of the Franchise Agreement, entitled “Site Selection” shall be
amended by the addition of the following Section 4.7, which shall deemed an
integral part thereof:

4.7 Franchisor hereby approves the site described in Section 1.28 hereof as the
Site for the Franchised Restaurant, and acknowledges receipt of a fully executed
copy of the lease or purchase agreement as described in Section 4.4 hereof.

4. Section 6 of the Franchise Agreement, entitled “Training” shall be amended by
the addition of the following Section 6.4, which shall be deemed an integral
part thereof:

6.4 Franchisor and Franchisee acknowledge and agree that Franchisor has
provided, and Franchisee’s current general manager and technician have attended
and completed to Franchisor’s satisfaction, initial training conducted by
Franchisor and that Franchisor has provided to Franchisee a copy of the
Operational Policies. Franchisor shall not charge any additional fee for such
training previously provided by Franchisor.

5. Section 12.1 of the Franchise Agreement shall be deleted in its entirety and
shall have no force or effect and the following shall be substituted in lieu
thereof:

12.1 Insurance. For the entire term of this Agreement, Franchisee shall obtain
and maintain insurance protecting Franchisee and the Indemnitees against any
demand or claim arising or occurring in connection with the operation of the
Franchised Restaurant. Such policies shall: (i) be of the types and for the
minimum amounts of coverage indicated in the Operational Policies; (ii) contain
a waiver of subrogation in favor of Franchisor; (iii) name the Indemnitees as
additional insureds; (iv) contain no provision which limits or reduces coverage
in the event of a claim by any one (1) or more of the Indemnitees; (v) provide
that policy limits shall not be reduced, coverage restricted, canceled, allowed
to lapse or otherwise altered or such policy(ies) amended without Franchisor’s
consent; and (vi) be obtained from reputable insurance companies approved by
Franchisor and authorized to do business in all jurisdictions in which the
Franchised Restaurant is located. Franchisee also acknowledges and agrees to:

(a) furnish Franchisor with evidence that Franchisee has obtained the required
insurance each year afterwards, and at any other time a carrier or coverage is
changed;

 

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

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(b) increase the insurance coverage amounts in the amounts indicated by
Franchisor upon thirty (30) days prior written notice from Franchisor; and

(c) reimburse Franchisor for any insurance policies obtained by Franchisor on
behalf of Franchisee if Franchisee fails to obtain the insurance required by
this Section.

6. Section 13.1 of the Franchise Agreement shall be deleted in its entirety and
shall have no force or effect and the following shall be substituted in lieu
thereof:

13.1 Term. Unless terminated as provided for herein, the term of this Agreement
shall expire                      (        ) years thereafter.

7. That portion of Section 13.2 of the Franchise Agreement prior to
Section 13.2(a) shall be deleted in its entirety and shall have no force or
effect and the following shall be substituted in lieu thereof:

13.2 Renewal. Franchisee may, at Franchisee’s option, renew this Agreement for
                     (        ) additional period(s) of                     
(        ) years [each], provided that at the end of the initial term:

8. All other provisions of the Franchise Agreement are hereby verified and
confirmed.

IN WITNESS WHEREOF, the parties hereto have fully executed, sealed and delivered
this Agreement in duplicate on the day and year first above written.

[Signatures appear on following pages]

 

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

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FRANCHISOR: CEC ENTERTAINMENT, INC. By:  

 

Name:  

 

Title:  

 

STATE OF TEXAS

COUNTY OF DALLAS

Before me personally appeared                                 , who, after being
duly sworn, says that he is the                                  of CEC
Entertainment, Inc., a corporation, organized and existing under the laws of
Kansas, and that he has authority to execute under oath and has so executed the
above Agreement for and on behalf of such corporation for such purposes therein
contained.

WITNESS my hand and official seal this          day of                     ,
20    .

 

    

 

(SEAL)      Notary Public

 

FRANCHISEE:

 

By:  

 

Name:  

 

Title:  

 

STATE OF                             

COUNTY OF                             

Before me personally appeared                                 , who, after being
duly sworn, says that he is the                                  of
                                , a (corporation) (partnership), organized and
existing under the laws of                                 , and that he has
authority to execute under oath and has so executed the above Agreement for and
on behalf of such (corporation) (partnership) for the purposes therein
contained.

WITNESS my hand and official seal this          day of                         ,
20    .

    

 

(SEAL)      Notary Public

 

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