EXHIBIT 10.21
[UWINK LOGO]
UWINK(TM)
AREA DEVELOPMENT AGREEMENT
DEVELOPMENT TERRITORY: MIAMI-DADE COUNTY, FLORIDA
UWINK(TM)
AREA DEVELOPMENT AGREEMENT
THIS AREA DEVELOPMENT AGREEMENT ("Agreement") is made this
_________________ day of _________________, ________ ("Effective Date") by and
between uWink Franchise Corporation, a Delaware corporation ("Company") and
____________________________ ("Developer").
RECITALS
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A. Company owns a world-wide, perpetual license to operate, and grant
sublicenses to third parties to operate full service entertainment restaurants
("uWink(TM) Entertainment Restaurants") under the uWink(TM) System as defined in
this Agreement.
B. Developer desires to obtain the exclusive right to develop uWink(TM)
Entertainment Restaurants within the specified geographic area and during the
specified time period set forth in this Agreement.
NOW THEREFORE, the parties agree as follows:
SECTION 1. DEFINITIONS
Unless specifically defined in this Agreement, all capitalized terms in
this Agreement have the same meaning assigned to them in the Franchise Agreement
attached as SCHEDULE C except that, in this Agreement, any references in the
definitions to Franchisee shall mean Developer.
SECTION 2. GRANT OF DEVELOPMENT RIGHTS
2.1. Company grants to Developer the exclusive right to develop the
specific number of uWink(TM) Entertainment Restaurants specified on
SCHEDULE B hereto (the "Development Quota") in the geographic area
identified on SCHEDULE A hereto (the "Development Territory") subject
to the terms and conditions of this Agreement.
2.2. The term of this Agreement (the "Development Term") shall begin on
the Effective Date. Unless sooner terminated in accordance with the
provisions of this Agreement, the Development Term shall expire
automatically on the earlier to occur of (i) the date identified on
SCHEDULE B as the last Development Deadline, or (ii) the date on which
the final uWink(TM) Entertainment Restaurant permitted to open under
this Agreement actually opens for business to the public with Developer
having satisfied all of the conditions to opening specified in the
applicable Franchise Agreement for the final uWink(TM) Entertainment
Restaurant.
2.3. Subject to the terms and conditions of this Agreement, during the
Development Term neither Company nor any Affiliate of Company shall (i)
grant any other person the right to operate a uWink(TM) Entertainment
Restaurant within the Development Territory, or (ii) operate a
uWink(TM) Entertainment Restaurant in the Territory for its own
account, except that the parties agree that the following activities
are expressly permitted:
(a) To the extent any of the following types of locations
are within the geographic area identified on SCHEDULE
A, the locations in their entirety, including
appurtenant parking areas, are excluded from the
Development Territory: any airport properties, mass
transit stations, professional sports stadiums,
military bases, entertainment parks or casinos.
Accordingly, Company and Company's Affiliates may
establish, or award others the right to establish,
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uWink(TM) entertainment restaurants in any type of
format operating under the uWink(TM) Licensed Marks
at excluded airport properties, mass transit
stations, professional sports stadiums, military
bases, entertainment parks or casinos that are, or
may be, located within the Development Territory.
(b) Company, Company's Affiliate or any third party may
operate a uWink(TM) Entertainment Restaurant that
Company, Company's Affiliate or the third party
acquires directly from Developer or Developer's
Affiliate.
2.4. After the Development Term expires or ends for any reason, Company
shall have the complete and unrestricted right to award franchises and
licenses for the operation of uWink(TM) Entertainment Restaurants in
the Development Territory and elsewhere, subject to the terms of any
Franchise Agreements, including, without limitation, the exclusivity
provisions therein, entered into by and between Company and Developer
during the Development Term.
2.5. Company reserves all rights not expressly granted to Developer by
this Agreement or any Franchise Agreement. Without limiting the
foregoing, Company, on behalf of itself and its Affiliates, may
directly or indirectly engage in any of the following activities both
within, and outside, the Development Territory without notice to, or
consent from, Developer:
(a) Produce, license, distribute, market and sell to any
other restaurants, bars and social venues or other
types of users on a "private label" basis any
computer hardware equipment or software applications
that exist now or may be developed in the future,
including, without limitation, any Hardware or
Software, as modified and upgraded by Company
periodically, as long as the computer hardware
equipment or software applications are not identified
by, or display, the uWink(TM) Licensed Marks or any
confusingly similar name.
(b) Open and operate any other type of restaurant, food
service or entertainment business in the Restricted
Area that does not (i) incorporate the distinctive
technology and entertainment dining experience
identified with the uWink(TM) System, or (ii) do
business under any of the uWink(TM) Licensed Marks or
any confusingly similar name.
(c) Offer and sell any items that are now, or in the
future, identified as Collateral Logo Merchandise or
other types of Proprietary Products through any
retail or wholesale channel of distribution,
including from a World Wide Web site, mail order
catalogues, direct mail advertising, and from
supermarkets and other food service business or other
retail stores of any kind that do not do business
under any of the uWink(TM) Licensed Marks or any
confusingly similar name.
2.6. Developer acknowledges that this Agreement does not constitute a
franchise and does not grant Developer any right to use the uWink(TM)
System and that Developer's right to use the uWink(TM) System is
derived solely from each Franchise Agreement which may be entered into
by the parties pursuant to this Agreement.
SECTION 3. DEVELOPMENT SCHEDULE
3.1. During the Development Term, Developer shall open each uWink(TM)
Entertainment Restaurant in the Development Quota by no later than the
date indicated on SCHEDULE B (each deadline identified on SCHEDULE B
for fulfilling a Development Quota is referred to as a "Development
Deadline"). A uWink(TM) Entertainment Restaurant will not be credited
as being opened until Developer satisfies all of the conditions for
opening specified in the Franchise Agreement.
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3.2. If, during the Development Term, any one of Developer's uWink(TM)
Entertainment Restaurants permanently closes for any reason after
having been opened, and as a result of such closure Developer falls
below the Development Quota applicable at the time of closure,
Developer shall have 6 months from the closing date in which to open a
substitute uWink(TM) Entertainment Restaurants within the Development
Territory in its place.
3.3. If Developer does not satisfy a Development Quota by the
applicable Development Deadline, or if Developer falls below the
Development Quota due to the closure of a uWink(TM) Entertainment
Restaurant, Company may terminate this Agreement upon written notice
effective immediately unless Developer agrees to pay Royalty Fees,
Advertising Fees and Continuing Technology Service and Software License
Fees for each unopened uWink(TM) Entertainment Restaurants for which
Developer is below the then-applicable Development Quota. The amount of
Royalty Fees, Advertising Fees and Continuing Technology Service and
Software License Fees that Developer shall pay shall be equal to the
average Royalty Fees, Advertising Fees and Continuing Technology
Service and Software License Fees then being collected by Company from
all uWink(TM) Entertainment Restaurants wherever located, regardless of
how long they have been open. The Royalty Fees, Advertising Fees and
Continuing Technology Service and Software License Fees shall be paid
on the terms set forth in SCHEDULE C. Developer shall be required to
pay Royalty Fees, Advertising Fees and Continuing Technology Service
and Software License Fees from the date of the missed Development
Deadline, or closing date, for as long as Developer desires to retain
the right to open the number of uWink(TM) Entertainment Restaurants in
the Development Quota, until the Development Term expires (or sooner
terminates). After the Development Term expires or terminates, the
parties agree that: (i) Developer shall have no right, or obligation,
to open additional uWink(TM) Entertainment Restaurants or replace a
uWink(TM) Entertainment Restaurant in the Development Territory that
permanently closes without applying to purchase a new franchise; and
(ii) Company shall have no obligation to offer Developer any further
area development or franchise rights so that Developer can open the
number of uWink(TM) Entertainment Restaurants equal to the Development
Quota or replace a uWink(TM) Entertainment Restaurant in the
Development Territory that permanently closes after the Development
Term expires or ends for any reason.
3.4. Anytime at least 30 days before the expiration of the Development
Term, Developer may apply in writing to open one or more additional
uWink(TM) Entertainment Restaurants in the Development Territory above
the number of uWink(TM) Entertainment Restaurants in the Development
Quota. Developer's request shall indicate the proposed Development
Deadline for each additional uWink(TM) Entertainment Restaurant in its
proposal. In evaluating Developer's request, Company shall consider
Developer's (i) performance under this Agreement and the Franchise
Agreements then in effect between the parties, (ii) financial condition
in light of Developer's existing and additional investments, and (iii)
ability to hire or retain qualified personnel to operate the additional
uWink(TM) Entertainment Restaurants. Company shall notify Developer in
writing of its approval or disapproval within 30 days after receiving
Developer's request, and Company's failure to respond within that time
period shall signify its disapproval. If Company approves Developer's
request, the parties shall mutually establish the Development Deadlines
for the additional uWink(TM) Entertainment Restaurants and shall amend
this Agreement to set forth the new Development Deadlines and extended
Development Term. The extended Development Term shall expire on the
last day of the last Development Deadline. For each additional
uWink(TM) Entertainment Restaurant that Company approves, the parties
shall sign the form of Franchise Agreement attached as SCHEDULE C.
SECTION 4. DEVELOPMENT FEE
4.1. Upon execution of this Agreement, in consideration of the rights
granted hereunder, Developer shall pay Company a non-refundable
development fee (the "Development Fee") in an amount equal to the sum
of: (i) $0 (being the Initial Franchise Fee for the first uWink(TM)
Entertainment Restaurant in the Development Quota) less any deposit
previously paid by Developer upon application for area development
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rights; and (ii) $20,000 times the remaining number of uWink(TM)
Entertainment Restaurants in the Development Quota (being one-half of
the Initial Franchise Fee for each additional uWink(TM) Entertainment
Restaurant in the Development Quota). Based on the Development Quota of
3 uWink(TM) Entertainment Restaurants, the parties agree that the
Development Fee is as follows:
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When Due Development Fee Due
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Signing Area Development Agreement $0 + 2 X (1/2 of $40,000)=$40,000
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4.2. If Developer does not fully satisfy the Development Quota for
whatever reason or this Agreement otherwise terminates based upon
Developer's default before expiration of the Development Term,
Developer shall have no right to recover from Company, directly or
indirectly, any portion of the unused Development Fee, it being agreed
that the execution of this Agreement by Company and Company's agreement
to forego other development opportunities in the Development Territory
while this Agreement is in effect is adequate consideration for
Developer's payment of the Development Fee, which is fully earned by
Company upon the parties' execution of this Agreement.
SECTION 5. DEVELOPMENT PROCEDURES; EXECUTION OF FRANCHISE
AGREEMENTS
5.1. Concurrently upon execution of this Agreement, the parties shall
sign the Franchise Agreement for the first uWink(TM) Entertainment
Restaurant in the Development Quota in the form attached hereto as
SCHEDULE C.
5.2. Company shall offer Developer a franchise for each additional
uWink(TM) Entertainment Restaurant in the Development Quota when
Company approves the site proposed by Developer within the Development
Territory for the uWink(TM) Entertainment Restaurant. Developer shall
execute and delivery to Company a separate Franchise Agreement in the
form attached hereto as SCHEDULE C within 15 days after Company gives
written approval of the site proposed by Developer for the uWink(TM)
Entertainment Restaurant. After the first uWink(TM) Entertainment
Restaurant, Company shall not be required to offer Developer a
franchise for any additional uWink(TM) Entertainment Restaurants in the
Development Quota unless and until Company approves Developer's
proposed location in accordance with the site selection and approval
procedures set forth in SCHEDULE C, which approval Company agrees not
to unreasonably withhold.
5.3. When Developer executes this Agreement and the Franchise Agreement
for the first uWink(TM) Entertainment Restaurant in the Development
Quota, Company shall credit Developer with having paid the Initial
Franchise Fee for the first uWink(TM) Entertainment Restaurant. When
Developer executes each additional Franchise Agreement, if any, and
pays the remaining applicable Initial Franchise Fee due for the
franchise in the amount shown below, Company shall credit Developer
with having paid the other one-half of the applicable Initial Franchise
Fee for the particular uWink(TM) Entertainment Restaurant. If Developer
executes a Franchise Agreement, but fails to pay the balance of the
applicable Initial Franchise Fee within 15 days after Company gives
written approval of the site proposed by Developer for the uWink(TM)
Entertainment Restaurant, Company shall have no obligation to sell a
franchise to Developer for the approved site to Developer and Developer
shall run the risk of failing to satisfy the Development Quota set
forth on SCHEDULE B. The Initial Franchise Fee due for each of the
uWink(TM) Entertainment Restaurants in the Development Quota is as
follows:
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When Due Initial Franchise Fee Due Development Fee Credit
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Signing Franchise Agreement #1 $0 $0
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Each Additional Franchise Agreement in the 1/2 of $40,000 = $20,000 $20,000
Development Quota
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5.4. Once the parties execute a Franchise Agreement for an approved
site, their relationship, and the mutual rights and obligations of the
parties, as to the development, ownership, use, occupancy and operation
of that site shall be exclusively governed by the Franchise Agreement
that they execute for that location and any other agreements entered
into as contemplated by, and pursuant to, the Franchise Agreement.
SECTION 6. DEFAULT AND TERMINATION
6.1. Company may terminate this Agreement, in its discretion and
election, effective immediately upon Company's delivery of written
notice of termination to Developer based upon the occurrence of any of
the following events which shall be specified in Company's written
notice, and Developer shall have no opportunity to cure a termination
based on any of the following events:
(a) Should Developer make any general arrangement or
assignment for the benefit of creditors or become a
debtor as that term is defined in 11 U.S.C. P. 101 or
any successor statute, unless, in the case where a
petition is filed against Developer, Developer
obtains an order dismissing the proceeding within 60
days after the petition is filed; or should a trustee
or receiver be appointed to take possession of all,
or substantially all, of Developer's assets, unless
possession of the assets is restored to Developer
within 60 days following the appointment; or should
all, or substantially all, of Developer's assets be
subject to an order of attachment, execution or other
judicial seizure, unless the order or seizure is
discharged within 60 days following issuance.
(b) Should Developer fail to satisfy a Development Quota
by the applicable Development Deadline.
(c) Should Developer, or any duly authorized
representative of Developer, make a material
misrepresentation or omission in obtaining the
development rights granted hereunder, or should
Developer, or any officer, director, shareholder,
member, manager, or general partner of Developer, be
convicted of or plead no contest to a felony charge
or engage in any conduct or practice that, in
Company's reasonable opinion, reflects unfavorably
upon or is detrimental or harmful to the good name,
goodwill or reputation of Company or to the business,
reputation or goodwill of the uWink(TM) System or the
uWink(TM) Licensed Marks.
(d) Should Company terminate any Franchise Agreement
between Developer and Company on account of a
material breach thereof by Developer.
(e) Should Developer make, or attempt to make, an
unauthorized transfer in violation of this Agreement.
(f) Should an order be made or resolution passed for the
winding-up or the liquidation of Developer (if
Developer is a Business Entity) or should Developer
adopt or take any action for its dissolution or
liquidation.
(g) Should Developer fail to comply with Applicable Law
within 10 days after being notified of
non-compliance.
(h) Should Franchisee make any unauthorized use,
publication, duplication or disclosure of any
Confidential Information or any portion of the
Confidential Manual, or should any person required by
this Agreement to execute a Confidentiality Agreement
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with Company or Franchisee breach the Confidentiality
Agreement during the time period that the person is
employed or engaged by Franchisee.
(i) Should Developer commit a material breach of any
other provision of this Agreement, which breach
remains uncured for a reasonable period (which need
not exceed thirty (30) days) after written notice
from Company to Developer.
6.2. Upon termination or expiration of this Agreement, each Franchise
Agreement then in effect by and between Developer and Company
pertaining to a uWink(TM) Entertainment Restaurant owned by Developer
shall remain in full force and effect, unless, in the case of
termination, the grounds upon which termination of this Agreement is
predicated also constitute grounds permitting Company to terminate the
Franchise Agreement and Company has duly terminated the Franchise
Agreement in accordance with its terms.
6.3. Upon termination or expiration of this Agreement, Developer shall
have no further right to develop additional uWink(TM) Entertainment
Restaurants in the Development Territory, nor shall Developer have any
right to prevent Company, or others, from owning and operating, or
granting franchises to others to own and operate, uWink(TM)
Entertainment Restaurants in the Development Territory, subject,
however, to the territorial rights, if any, granted to Developer under
each Franchise Agreement then in effect between the parties pertaining
to a uWink(TM) Entertainment Restaurant owned by Developer.
6.4. In the event of a breach or a threatened or attempted breach of
any of the provisions of this Agreement, Company shall be entitled to
exercise all remedies available under Applicable Law in addition to the
remedies set forth in this Agreement, including, without limitation, to
Provisional Remedies without the requirement that Company post bond or
comparable security.
SECTION 7. COVENANTS
7.1. Nothing in this Agreement obligates Company to disclose
Confidential Information to Developer. To the extent that Company
elects to do so or Developer otherwise independently learns information
that Developer knows, or should reasonably know, Company regards as its
Confidential Information, Developer shall use due care to keep the
information confidential and the following additional terms and
conditions shall apply:
(a) Developer shall: (i) confine disclosure of
Confidential Information to those of its employees
and agents who require access in order to perform the
functions for which they have been hired or retained
in furtherance of Developer's obligations under this
Agreement; and (ii) observe and implement reasonable
procedures prescribed from time to time by Company to
prevent the unauthorized or inadvertent use,
publication or disclosure of Confidential Information
including, without limitation, requiring that
employees with access to Confidential Information
sign a Confidentiality Agreement with Developer. Upon
request from Company, Developer shall deliver to
Company a copy of each executed Confidentiality
Agreement for its records. Company may terminate this
Agreement if Developer, or any person required by
this Agreement to execute a Confidentiality Agreement
with Company or Developer breaches the
Confidentiality Agreement.
(b) All agreements contained in this Agreement pertaining
to Confidential Information shall survive the
expiration, termination or Developer's assignment of
this Agreement.
(c) The provisions concerning non-disclosure of
Confidential Information shall not apply if
disclosure of Confidential Information is legally
compelled in a judicial or administrative proceeding
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if Developer has used its best efforts to provide
Company a reasonable opportunity to obtain an
appropriate protective order or other assurance
satisfactory to Company of confidential treatment for
the information required to be disclosed.
7.2. Developer understands and agrees that Company and Company's
Affiliates and their respective owners will suffer irreparable injury
not capable of precise measurement in money damages if any Confidential
Information is obtained by any individual or Business Entity and used
to compete with Company or any uWink(TM) franchisee or licensee or
otherwise in a manner adverse to Company's interests. Accordingly, in
the event of a breach or a threatened or attempted breach of any
provision regarding use of Confidential Information, Company shall be
entitled to exercise all remedies available under Applicable Law,
including, without limitation, to Provisional Remedies without the
requirement that Company post bond or comparable security.
SECTION 8. ASSIGNMENT AND TRANSFER
8.1. Developer acknowledges that Company maintains a staff to manage
and operate the uWink(TM) System and that staff members can change from
time to time. Developer represents that it has not signed this
Agreement in reliance on any shareholder, director, officer, or
employee remaining with Company in that capacity. Company is free to
transfer and assign all of its rights under this Agreement to any
person or Business Entity, provided the assignee agrees in writing to
assume Company's obligations under this Agreement. Upon such assignment
and assumption, Company shall have no further obligation to Developer.
8.2. Developer understands and agrees that the development rights
awarded by this Agreement are personal and are awarded in reliance
upon, among other considerations, the individual or collective
character, skill, aptitude, attitude, experience, business ability and
financial condition and capacity of Developer and, if Developer is a
Business Entity, that of its officers, directors, shareholders, LLC
managers and members, trustees and partners.
8.3. Without Company's prior written consent, Developer shall not,
directly or indirectly, attempt or complete an Event of Transfer either
voluntarily or by operation of law except in accordance with this
Agreement. Company agrees not to withhold its consent unreasonably if
Developer satisfies the conditions applicable to a transfer identified
in this Agreement.
(a) Any Event of Transfer shall pertain only to
Developer's then-unfulfilled Development Quota for
which the Development Deadline has not yet expired as
of the proposed date for the event of transfer. If
Company consents to the proposed event of transfer,
the proposed transferee shall acquire and assume all
of Developer's remaining unfulfilled development
rights, and all of Developer's obligations, under
this Agreement.
(b) Any attempted or purported transfer which fails to
comply with the requirements of this Agreement shall
be null and void and shall constitute a material
default of this Agreement.
(c) Company's consent to an Event of Transfer is not a
representation of the fairness of the terms of any
contract between Developer and a transferee, a
guarantee of the Franchised Business' or transferee's
prospects for success, or a waiver of any claims that
Company or Company's Affiliates may have against
Developer or any personal guarantor.
8.4. Except with respect to Qualified Transfers, if Developer, or the
person to whom an offer is directed (the "Individual Transferor"),
receives a bona fide written offer ("Third Party Offer") to purchase or
otherwise acquire an interest which will result in an Event of
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Transfer, Developer or the Individual Transferor, shall, within five
(5) days after receiving the Third Party Offer and before accepting it,
apply to Company in writing for Company's consent to the proposed
transfer. Additionally, the following conditions shall apply:
(a) Developer, or the Individual Transferor, shall attach
to its application for consent to the transfer a
complete copy of the Third Party Offer together with
(i) information relating to the transferee's
experience and qualifications, (ii) a copy of the
transferee's current financial statement, and (iii)
any other information material to the Third Party
Offer, transferee and proposed assignment or that
Company reasonably requests.
(b) Company or its nominee shall have the right,
exercisable by written notice ("Notice of Exercise")
given to Developer or the Individual Transferor,
within thirty (30) days following receipt of the
Third Party Offer, all supporting information, and
the application for consent, to notify Developer or
the Individual Transferor that it will purchase or
acquire the rights, assets, equity or interests
proposed to be assigned on the same terms and
conditions set forth in the Third Party Offer, except
that Company may (i) substitute cash for any form of
payment proposed in the offer discounted to present
value based upon the rate of interest stated in the
Third Party Offer, and (ii) deduct from the purchase
price the amount of any commission or fee otherwise
payable to any broker or agent in connection with the
Third Party Offer and all amounts then due and owing
from Developer to Company or Company's Affiliates
under any Franchise Agreement then in effect between
Developer, as Franchisee, and Company. Company shall
purchase all assets that are the subject of the Event
of Transfer free and clear of liens. If any asset is
pledged as security for financing that is then
unpaid, Company may further deduct from the purchase
price the remaining amount payable under the terms of
financing.
(c) The closing shall take place at Company's
headquarters at a mutually agreed upon date and time,
but not later than ninety (90) days following
Company's receipt of the Third Party Offer, all
supporting information, and the application for
consent to transfer.
(d) At the closing, Developer or the Individual
Transferor shall deliver to Company the same
documents, affidavits, warranties, indemnities and
instruments as would have been delivered by Developer
or the Individual Transferor to the transferee
pursuant to the Third Party Offer. Additionally,
Developer and the Individual Transferor shall deliver
a general release, in form satisfactory to Company,
of any and all claims against Company, Company's
Affiliates and their respective officers, directors,
shareholders, employees and agents.
(e) All costs, fees, document taxes and other expenses
incurred in connection with the transfer shall be
allocated between Developer and Company in accordance
with the terms of the Third Party Offer, and any
costs not allocated shall be paid by Developer or the
Individual Transferor.
8.5. If Company does not exercise its right of first refusal, Developer
may not complete the Event of Transfer without Company's prior written
consent. An Event of Transfer, or attempt to complete an Event of
Transfer, in violation of this provision is a material breach of this
Agreement. The requirements of this Section do not apply to a Qualified
Transfer. As a condition to Company's consent to an Event of Transfer,
Developer must satisfy the following conditions:
(a) The proposed transferee must submit a completed
application to Company, and meet Company's
then-current qualifications for area developers
undertaking the remaining development commitment left
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in this Agreement, including qualifications
pertaining to financial condition, credit rating,
experience, moral character and reputation. Company's
evaluation of the proposed transferee's financial
condition shall take into account the proposed
transferee's obligations to Developer for payments
arising out of the Event of Transfer.
(b) As of the date consent is requested and through the
date of closing of the proposed transfer and
assignment, Developer must not be in default under
this Agreement including, without limitation, due to
a failure to satisfy a Development Quota by the
applicable Development Deadline.
(c) Developer and the proposed transferee shall execute a
written assignment and assumption agreement whereby
the proposed transferee shall assume Developer's
remaining development obligations under this
Agreement.
(d) Either Developer or the proposed transferee shall pay
Company a transfer fee equal to $5,000 per Event of
Transfer, unless the Event of Transfer (i) is a
Qualified Transfer, in which case Company agrees to
waive the transfer fee; or (ii) involves a Public or
Private Offering, in which case Developer or the
proposed transferee shall pay Company a transfer fee
shall be an amount not to exceed $20,000 based upon
the additional time which Company will require to
review Developer's offering memorandum, registration
statement or comparable documents. Developer
understands and agrees that in reviewing Developer's
offering memorandum, registration statement or
comparable documents, Developer does not certify that
the statements in Developer's offering memorandum,
registration statement or comparable documents are
true, correct or not misleading or that Developer's
offering memorandum, registration statement or
comparable documents comply with Applicable Laws, but
is for the purpose of reviewing Developer's
statements about Company, uWink(TM) Entertainments
Restaurants, and the uWink(TM) System.
(e) Developer must execute and deliver a general release,
in form satisfactory to Company, of any and all
claims against Company, Company's Affiliates and
their respective officers, directors, shareholders,
employees and agents.
(f) If the proposed transferee is a Business Entity, each
person who at the time of the transfer, or later,
owns or acquires, either legally or beneficially, ten
percent (10%) or more of the equity or voting
interests of the proposed transferee must execute
Company's then-current form of personal guaranty.
(g) Developer's right to receive the sales proceeds from
the proposed transferee shall be subordinate to the
proposed transferee's and Developer's duties owed to
Company and Company's Affiliates under, or pursuant
to, this Agreement or any Franchise Agreement then in
effect between Developer and Company as of the
effective date of the Event of Transfer. All
contracts by and between Developer and the proposed
transferee shall expressly include a subordination
provision permitting payment of the sales proceeds to
Developer only after any outstanding obligations owed
to Company and Company's Affiliates are fully
satisfied.
(h) Neither Company's exercise of its right of first
refusal, its consent to an Event of Transfer, nor
Developer's consummation of an Event of Transfer
shall operate to release Developer of those
obligations that expressly, or by their nature,
survive the effective date of termination or
expiration of this Agreement, including, without
limitation, the provisions regarding non-disclosure
of Confidential Information.
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(i) Developer may only complete the Event of Transfer to
the proposed transferee only on the terms identified
in the Third Party Offer or as otherwise stated in
Developer's application for consent. If there is any
material change in the terms of the Third Party
Offer, Company shall have a new right of first
refusal to accept the new terms subject to the
conditions stated in this Section.
(j) If Company consents to the transfer to a third party,
the transfer must close within sixty (60) days from
the date the Third Party Offer is first submitted to
Company unless Company grants an extension of time in
writing; otherwise, it must again be offered to
Company.
8.6. If Developer is a Business Entity, Developer shall furnish to
Company, upon execution of this Agreement or at such other time as
transfer to the Business Entity is permitted, a copy of its articles of
incorporation, by-laws, operating agreement, partnership agreement or
other governing agreement, and a list of all persons owning an interest
in the equity or voting interests of the Business Entity. Additionally,
Developer shall promptly provide Company with a copy of any amendments
to, or changes in, the documents or other information during the
Development Term. Developer shall maintain stop transfer instructions
against the transfer on its records of any equity or ownership
interests. Each certificate representing an ownership interest in
Developer shall bear a legend, in the form stated in the Confidential
Manuals, that it is held, and further assignment or transfer thereof
is, subject to all restrictions imposed upon transfer set forth in this
Agreement. Developer's Primary Owner shall deliver a certificate to
Company annually, on or before February 15 of each year, which lists
all owners of record and all beneficial owners of any interest in the
equity or voting interests of Developer and identifies all transfers of
equity or voting interests in Developer which have occurred during the
period covered by the annual financial statement.
8.7. Before completing a Qualified Transfer, Developer must do all of
the following: (i) provide Company with written notice of its intent to
complete a Qualified Transfer; (ii) when the Qualified Transfer is to a
newly-formed Business Entity, deliver the documents which this
Agreement requires a Business Entity to deliver to Company; and (iii)
pay a transfer fee of $1,500. The Qualified Transfer shall not be
effective unless and until Developer satisfies conditions (i), (ii) and
(iii). Company shall not have a right of first refusal with respect to
a Qualified Transfer, nor shall Company's prior written consent to a
Qualified Transfer be necessary if Developer satisfies the conditions
stated in this Section.
8.8. Neither Company's exercise of its right of first refusal nor its
consent to a transfer to an approved third party shall operate to
release Developer or the Individual Transferor from this Agreement or
release any guarantor from any personal guaranty given to Company
pursuant to this Agreement.
8.9. Developer's right to transfer its interest in any Franchise
Agreement shall be governed by the terms of the Franchise Agreement.
SECTION 9. RELATIONSHIP OF PARTIES; INDEMNIFICATION.
9.1. This Agreement does not create a fiduciary relationship between
the parties. Company and Developer each are independent contractors.
Nothing in this Agreement is intended to make either party a general or
special agent, joint venturer, partner or employee of the other for any
purpose.
9.2. Developer shall conduct its business using its own judgment and
discretion, subject only to the provisions of this Agreement. Developer
shall conspicuously identify itself in all dealings with third parties
as the owner of this business operating under rights granted by
Company. Developer shall not represent or imply to any person that this
Agreement authorizes Developer to act as agent for Company.
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9.3. Developer shall indemnify and hold Company, Company's Affiliates
and their respective officers, directors, shareholders, LLC managers
and members, employees, agents, successors and assigns, harmless from
and against any and all costs, expenses, losses, liabilities, damages,
causes of action, claims and demands whatsoever, arising from or
relating to Developer's exercise of the rights under this Agreement.
Developer's obligation to indemnify Company shall extend, without
limitation, to all claims for actual and consequential damages, and
Company's costs and expenses incurred in defending any third party
claim covered by Developer's indemnification, including, without
limitation, attorneys and other professional fees, court costs, and
travel and living expenses. Company shall have the right to retain its
own counsel to defend any third party claim asserted against it which
is covered by this indemnification agreement. Company's retention of
interdependent counsel shall, in no manner or form, diminish
Developer's obligation to indemnify Company and to hold it harmless.
Company shall not be required or obligated to seek recovery from third
parties or otherwise mitigate its losses in order to maintain a claim
against Developer under Developer's indemnification agreement. If a
decision rendered in any matter covered by Developer's indemnification
is against Developer or Company, and Company desires to appeal the
decision, Developer may notify Company within 10 days of the date of
the decision of its intent to abide by the decision, in which event,
Developer shall pay Company the amount required by this Section, and
all future costs related to the appeal or settlement of the claim shall
be Company's sole responsibility. Developer's indemnification
obligation shall survive the expiration, termination or assignment of
this Agreement for any reason.
SECTION 10. DISPUTE RESOLUTION
10.1. The parties hereby incorporate by reference the procedures, terms
and conditions set forth in SCHEDULE C pertaining to dispute resolution
and agree to be bound by those procedures, terms and conditions with
respect to any dispute that may arise between them out of or pertaining
to this Agreement, the relationship created by this Agreement or an
alleged breach of this Agreement. The parties agreement to adopt the
dispute resolution procedures, terms and conditions set forth in
SCHEDULE C shall not operate to modify or cancel the provisions of this
Agreement permitting Company to seek Provisional Remedies.
SECTION 11. ACKNOWLEDGEMENTS
11.1. Developer understands and agrees and represents to Company, to
induce Company to enter into this Agreement, that:
(a) Developer has read this Agreement and Company's
Offering Circular and understands and accepts the
terms, conditions and covenants contained in this
Agreement.
(b) Developer recognizes that the uWink(TM) System may
evolve and change over time; that an investment in a
uWink(TM) franchise involves business risks; and that
the success of the investment depends upon
Developer's business ability and efforts.
(c) Developer has not received or relied upon any promise
or guaranty, express or implied, about the revenues,
profits or success of the business venture
contemplated by this Agreement.
-11-
(d) None of the property or interests of Developer or its
owners is subject to being blocked under, and
Developer's and its owners are not otherwise in
violation of any Applicable Law including (without
limitation) anti-terrorism laws.
(e) No representations have been made by Company,
Company's Affiliates or their respective officers,
directors, shareholders, employees or agents, that
are contrary to statements made in Company's Offering
Circular previously received by Developer or to the
terms contained in this Agreement.
(f) Developer (if an individual) or each person executing
a guaranty of Developer's obligations, is a United
States citizen or a lawful resident alien of the
United States; if Developer is a Business Entity, it
shall remain duly organized and in good standing for
as long as this Agreement is in effect and it owns
the development rights; and all financial and other
information provided to Company in connection with
Developer's application is true and correct and no
material information or fact has been omitted which
is necessary in order to make the information
disclosed not misleading.
SECTION 12. MISCELLANEOUS
12.1. NOTICES. All communications required or permitted to be given to
either party hereunder shall be in writing and shall be deemed duly
given if property addressed on the earlier of (i) the date when
delivered by hand; (ii) the date when delivered by fax or e-mail if
confirmation of transmission is received or can be established by the
sender; (iii) one business day after delivery to a reputable national
overnight delivery service; or (iv) 5 days after being placed in the
United States Mail and sent by certified or registered mail, postage
prepaid, return receipt requested. A "business day" means weekdays
only, excluding Saturdays, Sundays and holidays. Notices shall be
directed to the address shown in EXHIBIT D for the party and its
representative. Either party may change its address for receiving
notices by giving appropriate written notice to the other. All
communications required or permitted to be given by a party in writing
may be given electronically to the party's designated e-mail address in
EXHIBIT D or as subsequently changed by appropriate written notice.
12.2. TIME OF THE ESSENCE. Time is of the essence of this Agreement
with respect to each and every provision of this Agreement in which
time is a factor.
12.3. COMPANY'S PRIOR APPROVAL. Except where this Agreement expressly
requires Company to exercise its reasonable business judgment in
deciding to grant or deny approval of any action or request by
Developer, Company has the absolute right to refuse any request by
Developer or to withhold its approval of any action by Developer in
Company's discretion. Further, whenever the prior consent or approval
of Company is required by this Agreement, Company's consent or approval
must be in writing unless this Agreement expressly specifies otherwise.
12.4. WAIVER. Any waiver granted by Company to Developer excusing or
reducing any obligation or restriction imposed under this Agreement
shall be in writing. The waiver shall become effective when Company
delivers the writing to Developer unless another effective date is
specified in the writing. No waiver granted by Company, and no action
taken by Company, with respect to any third party shall limit Company's
discretion to take action of any kind, or not to take action, with
respect to Developer. Any waiver granted by Company to Developer shall
be without prejudice to any other rights Company may have. The rights
and remedies granted to Company are cumulative. No delay by Company in
exercising any right or remedy under this Agreement or Applicable Laws
shall operate as a waiver, and no single or partial exercise by Company
of any right or remedy shall preclude Company from fully exercising the
right or remedy at another time or from exercising any other right or
-12-
remedy. Company's acceptance of any payment from Developer after
Developer commits an event of default shall not operate as a waiver by
Company of the default or of any term, covenant or condition of this
Agreement.
12.5. SECTION HEADINGS; LANGUAGE. The paragraph headings used in this
Agreement are inserted 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. The language used in this
Agreement shall in all cases be construed simply according to its fair
meaning and not strictly for or against Company or Developer. The term
"Developer" as used herein is applicable to one or more persons or
Business Entities if the interest of Developer is owned by more than
one, and the singular usage includes the plural and the masculine and
neuter usages include the other and the feminine. If 2 or more persons
are at any time Developer hereunder, whether or not as partners or
joint venturers, their obligations and liabilities to Company shall be
joint and several. Nothing in this Agreement is intended, nor shall it
be deemed, to confer any rights or Remedies upon any person or Business
Entity not a party hereto.
12.6. BINDING ON SUCCESSORS. The covenants, agreements, terms and
conditions contained in this Agreement shall be binding upon, and shall
inure to the benefit of, the successors in interest, assigns, heirs and
personal representatives of the parties hereto.
12.7. SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid under Applicable
Laws, but if any provision of this Agreement is declared by a court of
competent jurisdiction to be invalid or prohibited under Applicable
Laws, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement. All provisions
of this Agreement are severable. If the provisions of this Agreement
provide for periods of notice less than those required by Applicable
Laws, or provide for termination or cancellation other than in
accordance with Applicable Laws, the parties agree that the provisions
shall be deemed to be automatically amended to conform them to
Applicable Laws.
12.8. AMENDMENTS. No amendment, change, modification or variance to or
from the terms and conditions set forth in this Agreement shall be
binding on any party unless it is set forth in writing and duly
executed by each party.
12.9. COMPLETE AGREEMENT. This Agreement, including the exhibits, which
are hereby incorporated into this Agreement by this reference, sets
forth the entire agreement between the parties, fully superseding any
and all prior agreements or understandings, whether oral or written,
between them pertaining to the subject matter hereof.
12.10. ADVICE OF COUNSEL. Each party represents that before signing
this Agreement, the party had the opportunity (and was strongly
advised) to seek advice from an attorney of his, her or its own
choosing, and that the party has read and understands all of the terms
and provisions of this Agreement.
12.11. COMPANY'S BUSINESS JUDGMENT. The parties recognize, and any
mediator or judge is affirmatively advised that certain provisions of
this Agreement describe the right of Company to take (or refrain from
taking) certain actions in its discretion, and other actions in the
exercise of its reasonable business judgment. Where this Agreement
expressly requires that Company make a decision based upon Company's
reasonable business judgment Company is required to evaluate the
overall best interests of all uWink(TM) Entertainment Restaurants and
Company's own business interests. If Company makes a decision based
upon its reasonable business judgment, neither a mediator nor a judge
shall substitute his or her judgment for the judgment so exercised by
Company. The fact that a mediator or judge might reach a different
decision than the one made by Company is not a basis for finding that
Company made its decision without the exercise of reasonable business
judgment. Company's duty to exercise reasonable business judgment in
making certain decision does not restrict or limit Company's right
-13-
under this Agreement to make other decisions based entirely on
Company's discretion as permitted by this Agreement. Company's
discretion means that Company may consider any set of facts or
circumstances that it deems relevant in rendering a decision.
12.12. COVENANT AND CONDITION. Each provision of this Agreement
performable by Developer shall be construed to be both a covenant and a
condition.
12.13. SUBMISSION OF AGREEMENT. The submission of this Agreement to
Developer does not constitute an offer to Developer, and this Agreement
shall become effective only upon execution by Company and Developer.
12.14. ANTI-TERRORISM REPRESENTATIONS. Developer agrees to comply with
and/or to assist Company to the fullest extent possible in Company's
efforts to comply with Anti-Terrorism Laws (as defined below). In
connection with such compliance, Developer certifies, represents and
warrants on behalf of itself, each Covered Person and each person who
is a guarantor of Franchisee's obligations to Company that none of
their property or interests are subject to being "blocked" under any of
the Anti-Terrorism Laws and that Developer is not otherwise in
violation of any of the Anti-Terrorism Laws. "Anti-Terrorism Laws"
means Executive Order 13224 issued by the President of the United
States, the USA PATRIOT Act, and all other present and future federal,
state and local laws, ordinances, regulations, policies, lists and any
other requirements of any governmental authority addressing or in any
way relating to terrorist acts and acts of war. Any violation of, or
"blocking" of assets under, the Anti-Terrorism Laws shall constitute
grounds for immediate termination of this Agreement and any other
agreement Developer has entered into with Company or one of its
affiliates, in accordance with the termination provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
COMPANY: DEVELOPER:
uWink Franchise Corporation ___________________________________________
a Delaware corporation
[signature of Developer that is an individual]
By: ___________________________
_____________________________________________,
Its: __________________________
[print name of Developer]
a ____________________________________________
[if Developer is a Business Entity, indicate
type of entity]
By: __________________________________________
Its: _________________________________________
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SCHEDULE A
----------
DEVELOPMENT TERRITORY
The Development Territory consists of the geographic area which is
described below and/or shown in the map attached to this SCHEDULE A:
MIAMI-DADE COUNTY, FLORIDA
A-1
SCHEDULE B
----------
DEVELOPMENT GRANT
The Development Quota is for 3 uWink(TM) Entertainment Restaurants,
which Developer shall open on or before the Development Deadlines indicated
below:
------------------------------ -------------------------------------------------
UWINK(TM) ENTERTAINMENT DEVELOPMENT
RESTAURANTS DEADLINE
------------------------------ -------------------------------------------------
Unit #1 Before the end of 12 months from the Effective
Date of this Agreement
------------------------------ -------------------------------------------------
Unit #2 Before the end of 36 months from the Effective
Date of this Agreement
------------------------------ -------------------------------------------------
Unit #3 Before the end of 48 months from the Effective
Date of this Agreement
------------------------------ -------------------------------------------------
B-1
SCHEDULE C
----------
[UWINK LOGO]
UWINK(TM)
FRANCHISE AGREEMENT
FOR FRANCHISE LOCATIONS WITHIN THE DEVELOPMENT TERRITORY
OF MIAMI-DADE COUNTY, FLORIDA
TABLE OF CONTENTS
PAGE
I. DEFINITIONS 1
II. GRANT 6
III. FRANCHISE LOCATION; RESTRICTED AREA 8
IV. TERM AND RENEWAL 11
V. FRANCHISE LOCATION DEVELOPMENT AND OPENING DATE 12
VI. TRAINING 14
VII. UWINK INTELLECTUAL PROPERTY 16
VIII. TECHNOLOGY SYSTEM 19
IX. CONFIDENTIAL MANUAL 21
X. CONFIDENTIAL INFORMATION 22
XI. ADVERTISING 23
XII. PAYMENTS 27
XIII. ACCOUNTING AND RECORDS 29
XIV. STANDARDS OF QUALITY AND PERFORMANCE 32
XV. COMPANY'S OPERATIONS ASSISTANCE 38
XVI. INSURANCE 40
XVII. DEFAULT AND TERMINATION 41
XVIII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION 44
XIX. ASSIGNMENT AND TRANSFER 46
XX. RELATIONSHIP OF PARTIES: INDEMNIFICATION: SECURITY INTEREST 50
XXI. DISPUTE RESOLUTION 51
XXII. ACKNOWLEDGEMENTS 53
XXIII. MISCELLANEOUS 54
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") is made this_________________
day of_________________, ________ ("Effective Date") by and between uWink
Franchise Corporation, a Delaware corporation ("Company") and
---------------------------.
RECITALS
1. Company owns a world-wide, perpetual license to operate, and grant
sublicenses to third parties to operate, full service entertainment restaurants
("uWink(TM) Entertainment Restaurants") under the uWink(TM) System as defined in
this Agreement.
2. Franchisee desires to obtain a license to use the uWink(TM) System
to operate a uWink(TM) Entertainment Restaurant, and Company is willing to grant
a license to Franchisee on the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
TERMS AND CONDITIONS
SECTION 13.DEFINITIONS
In addition to definitions incorporated in the body of this Agreement,
the following capitalized terms in this Agreement are defined as follows:
13.1. "Accounting Period" means the specific period that Company
designates from time to time in the Confidential Manual or otherwise in writing
for purposes of Franchisee's financial reporting or payment obligations
described in this Agreement. For example, an Accounting Period may, in Company's
sole discretion, be based on a seven-day week (e.g., Monday through Sunday), a
Calendar Month, a quarterly financial calendar (which may, or may not be
subdivided into blocks of 4 or 5 weeks, or a shorter or longer time period that
Company selects in its sole discretion. Company may designate different
Accounting Periods for purposes of paying fees and for discharging reporting
obligations under this Agreement.
13.2. "Addendum to Lease" means the written agreement by and between
Franchisee and the landlord of the Franchise Location that adds specific terms
and conditions required by Company to the Lease and grants Company the right,
but not the obligation, to accept an assignment of the Lease under stated
conditions.
13.3. "Affiliate" means an entity that controls, is controlled by, or
is under common control with, a party to this Agreement.
13.4. "Applicable Law" means and includes applicable common law and all
statutes, laws, rules, regulations, ordinances, policies and procedures
established by any governmental authority with jurisdiction over the operation
of the Franchised Business that are in effect on or after the Effective Date, as
they may be amended from time to time. Applicable Law includes, without
limitation, those relating to building permits and zoning requirements
applicable to the use, occupancy and development of the Franchise Location;
business licensing requirements; hazardous waste; occupational hazards and
health; alcoholic beverages; consumer protection; privacy; trade regulation;
worker's compensation; unemployment insurance; withholding and payment of
Federal and State income taxes and social security taxes; collection and
reporting of sales taxes; and the American With Disabilities Act.
C-1
13.5. "Business Entity" means a corporation, limited liability company,
partnership, limited liability partnership, trust or other type of legal entity
which, under Applicable Law, may enter into contracts in its own name.
13.6. "Calendar Month" means any one of the 12 Calendar Months of the
Calendar Year starting on the first day of the Calendar Month.
13.7. "Calendar Quarter" means the 3-Calendar Month period ending on
March 31, June 30, September 30 or December 31 of each Calendar Year.
13.8. "Calendar Year" means the 12-Calendar Month period starting on
January 1 and ending on December 31.
13.9. "Certified Manager" identifies each management-level employee who
devotes full-time and attention to performing general management and supervisory
responsibilities for one or more uWink(TM) Entertainment Restaurants and meets
either of the following criteria:
------- ---------------------------------- --------------------------------------------- -----------------------------
Training Prior Work Experience at a Certified Manager Test
uWink(TM) Entertainment Restaurant
------- ---------------------------------- --------------------------------------------- -----------------------------
a. Successfully completes General None required Pass Certified Manager test
Manager Track
------- ---------------------------------- --------------------------------------------- -----------------------------
b. Successfully completes Assistant At least 6 months experience at the level Pass Certified Manager
General Manager Track of Assistant General Manager or General
or General Manager (combined)
------- ---------------------------------- --------------------------------------------- -----------------------------
13.10. "Change of Control" means a transaction or series of related
transactions that result in the sale of all or substantially all of the assets
of the Franchise Business. If Franchisee is a Business Entity, "Change of
Control" also means: (i) a transaction or series of related transactions that
result in a transfer of 50% or more of the outstanding voting power of
Franchisee or Franchisee Affiliate, whether voluntarily or by operation of law
or due to a merger or consolidation, (ii) a change in the person identified on
the Effective Date as the Primary Owner; or (iii) the right to appoint, or cause
to be appointed, a majority of the directors, officers or managers of the
Business Entity.
13.11. "Collateral Logo Merchandise" means collectively all merchandise
that Company now or in the future authorizes Franchisee to offer for sale from
the Franchise Location displaying any of the uWink(TM) Licensed Marks including,
without limitation, t-shirts, sweatshirts, caps and other promotional items.
13.12. "Confidential Information" includes, without limitation,
knowledge and information which Franchisee knows, or should reasonably know,
Company regards as confidential concerning (i) the business methods, patents and
other proprietary systems constituting the uWink(TM) interactive restaurant
ordering and entertainment experience; (iii) Company's supply relationships,
inventory requirements and control procedures; (iv) pricing, sales, profit
performance or other results of operations of any individual uWink(TM)
Entertainment Restaurant, including the Franchised Business, or group of
uWink(TM) Entertainment Restaurants or the entire chain; (v) demographic data
for determining sites and territories; (vi) the results of customer surveys and
promotional programs; (vii) Proprietary Products; (viii) the Technology System;
and (viii) in general, business methods, trade secrets, specifications, customer
data, cost data, procedures, information systems and knowledge about the
operation of uWink(TM) Entertainment Restaurants or the uWink(TM) System,
whether it is now known or exists or is acquired or created in the future, and
whether or not the information is included in the Confidential Manual or Company
expressly designates the information as confidential. Confidential Information
does not include (x) information which Franchisee can demonstrate came to its
attention independent of entering into this Agreement, and (y) information that
is, or has become, generally known in the public domain, except where public
knowledge is the result of Franchisee's wrongful disclosure (whether or not
deliberate or inadvertent).
C-2
13.13. "Confidential Manual" refers collectively to all of the
confidential operating manuals, recipe manuals, operations guides, Documentation
and other written instructions loaned or delivered to Franchisee by Company in
confidence during the Term, which may be memorialized in written or electronic
format and modified periodically to reflect changes in the uWink(TM) System.
13.14. "Continuing Fee" means any fee which Franchisee is required to
pay to Company or Company's Affiliates at regular intervals during the Term as
specified by this Agreement (e.g., each Calendar Month) based upon the Gross
Sales of the Franchised Business.
13.15. "Documentation" means and includes the documentation, user
guides, training and instructional manuals and installation instructions
specifically relating to the Software or Hardware, which Company shall furnish
to Franchisee and may modify from time to time during the Term
13.16. "Effective Date" is the date indicated on page 1 of this
Agreement.
13.17. "Event of Transfer" means a transaction or series of related
transactions that, directly or indirectly, voluntarily or by operation of law:
(i) result in the sale, assignment, transfer, pledge, gift, encumbrance or
alienation of any interest in this Agreement or the right to use the uWink(TM)
System or any portion or components; (ii) involves the offer to sell securities
of a Franchisee that is a Business Entity pursuant to a transaction subject to
registration under federal or state securities laws or by private placement
pursuant to a written offering memorandum; or (iii) results in a Change of
Control. For purposes of illustration, an Event of Transfer includes, without
limitation: (a) an order dissolving the marriage of a Franchisee that is an
individual; (b) the issuance of additional equity or voting interests of a
Business Entity resulting in a Change of Control; (c) a financial restructuring
or recapitalization that is secured by a sufficient number of equity or voting
interests of a Business Entity such that, if foreclosed upon, would result in a
Change of Control; or (d) the death of Franchisee if an individual or any person
owning enough equity or voting interests of a Business Entity to result in a
Change of Control.
13.18. "Force Majeure" includes, without limitation, any event caused
by or resulting from conditions that are beyond the reasonable control of a
party whose performance is affected and occurring without the party's fault or
negligence. Events of Force Majeure shall include, without limitation, an act of
God, labor strike or other industrial disturbance, materials shortage, failure
of third party suppliers not under a party's control, transportation delay, war,
insurrection, riot, epidemic, fire, hurricane, flood, earthquake or other
natural disasters, and act of any government.
13.19. "Franchise Location" means the business premises approved by
Company for the operation of the particular uWink(TM) Entertainment Restaurant
that is the subject of this Agreement.
13.20. "Franchised Business" means the particular uWink(TM)
Entertainment Restaurant which Company authorizes Franchisee to operate under
this Agreement at the Franchise Location.
13.21. "Gross Sales" means the aggregate of all revenue and income from
operating the Franchised Business, whether payment is in cash or by credit card,
gift cards or other generally accepted form of payment. Gross Sales includes
revenue and income from the sale of meals, services, products or merchandise of
any kind, including, without limitation, the sale of Proprietary Products. Gross
Sales exclude: (i) sales taxes and other taxes separately stated, if any,
collected from customers and paid to taxing authorities; (ii) refunds and
credits made in good faith to arms' length customers; (iii) the amount of any
checks dishonored or returned and the amount of any charge backs or reversals of
credit card transactions with customers; (iv) proceeds from the sale of
uWink(TM) authorized gift cards to customers; (v) proceeds from isolated sales
of trade fixtures not constituting Collateral Logo Merchandise and having no
material effect on ongoing operations; (vi) employee tips; and (vii) the value
of meals furnished to employees at no cost. Gross Sales include, without
limitation: (a) revenue received from employees for meals furnished to employees
at a discount; (b) the value of goods and services bought by customers by
redeeming uWink(TM) authorized gift cards; and (c) the proceeds from any
business interruption insurance.
C-3
13.22. "Hardware" refers collectively to all of the computers,
monitors, computer equipment, electronic equipment, peripheral equipment,
modems, cordage, and digital storage media which Company now or in the future
authorizes or requires Franchisee to use to operate the Franchised Business with
the uWink(TM) System, subject to Company's right to modify the Hardware at any
time during the Term.
13.23. "Initial Hardware Package" means the Hardware necessary to open
a uWink(TM) Entertainment Restaurant that Company requires Franchisee to
purchase upon execution of this Franchise Agreement, as described in EXHIBIT B.
13.24. "Initial Training Program" refers collectively to the multiple
training modules presently consisting of (i) Owner Orientation; (ii) Restaurant
Management and Technical Training; and (iii) New Store Opening, and the
different tracks of each module, that Company provides before and in connection
with the opening of the Franchised Business.
13.25. "Lease" means the written agreement by and between Franchisee
and the owner of the business premises where the Franchise Location is situated
that grants Franchisee the right to occupy and use the Franchise Location for
the operation of a uWink(TM) Entertainment Restaurant.
13.26. "Local Advertising" means, without limitation, all
communications in all formats which Franchisee creates or adapts and intends to
use, directly or indirectly, to advertise and promote the Franchised Business,
Franchisee's status as an authorized franchisee, or which display the uWink(TM)
Licensed Marks. Local Advertising includes, without limitation: (i) written,
printed and electronic communications; (ii) communications by website and
equivalent electronic technology; (iii) communications by means of a recorded
telephone message, spoken on radio, television or similar communication media;
(iv) promotional items or promotional or publicity events; (v) listings in
approved telephone or business directories; (vi) the use of the uWink(TM)
Licensed Marks on stationery, business cards, order forms, signs, merchandise,
brochures, uniforms, and other tangible personal property; and (vii) the use of
the uWink(TM) Licensed Marks on the World Wide Web.
13.27. "MSA" means a Metropolitan Statistical Area as determined and
designated by the federal Office of Management and Budget or successor agency.
13.28. "Multi-Unit Manager" refers to a Certified Manager whom
Franchisee charges with responsibility for oversight of 3 or more uWink(TM)
Entertainment Restaurants operated by Franchisee or Franchisee's Affiliate.
13.29. "Non-Proprietary Products" refer collectively to any foods,
ingredients, raw materials, condiments, beverages, fixtures, furnishings,
equipment, supplies, menus, packaging or other merchandise or property
authorized by Company which Franchisee may, or must, use, offer, sell or promote
in operating the Franchised Business that are not Proprietary Products.
13.30. "Offering Circular" means the Uniform Franchise Offering
Circular that Franchisee acknowledges that it received before executing this
Agreement or paying any consideration to Company or Company's Affiliates for the
award of franchise rights.
13.31. "Primary Owner" refers to any person who owns at least 25% of
the outstanding equity or voting interests of a Franchisee that is a Business
Entity.
13.32. "Proprietary Products" refer collectively to any ingredients,
dressings, sauces, food products, syrups, beverages, supplies, apparel,
equipment, and any other merchandise or property that Franchisee must use or
sell to operate the Franchised Business in accordance with the uWink(TM) System
which either display the uWink(TM) Licensed Marks or are specially-configured,
manufactured or produced by, or for, Company in accordance with Company's
specifications. As of the Effective Date, Proprietary Products include the
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Technology System (including the Initial Hardware Package), Collateral Logo
Merchandise and uWink(TM) employee uniforms, subject to Company's right to
impose changes as provided in this Agreement.
13.33. "Provisional Remedies" mean any form of interim relief,
including, without limitation, requests for temporary restraining orders,
preliminary injunctions, writs of attachment, appointment of a receiver, for
claim and delivery, or any other orders which a court may issue when deemed
necessary in its sole discretion to preserve the status quo or prevent
irreparable injury, including the claim of either party for injunctive relief to
preserve the status quo.
13.34. "Public or Private Offering" is an Event of Transfer that
involves the offer of a Controlling Interest of Franchisee's shares to the
public pursuant to an offering memorandum, registration statement or comparable
documents.
13.35. "Qualified Transfer" means (i) if Franchisee is an individual,
the transfer by Franchisee of all of his or her rights under this Agreement to a
newly-formed Business Entity if all of the equity or voting interests of the new
Business Entity will be owned by the person or persons identified as the
Franchisee on the Effective Date; (ii) the death of Franchisee if an individual
or any person owning enough equity or voting interests of a Business Entity to
result in a Change of Control; (iii) If Franchisee is a Business Entity, the
sale, assignment, transfer, pledge, donation, encumbrance or other alienation of
equity or voting interests not resulting in a Change of Control; or (iv) an
Event of Transfer where the purchaser is an existing uWink(TM) franchisee with
at least two years experience owning and operating a uWink(TM).
13.36. "Restricted Area" is the area identified on EXHIBIT A.
13.37. "Software" refers to all of the software applications that
Company bundles with the Hardware to perform the functions which Company now or
in the future requires to operate the tabletop entertainment, point-of-sale
system, cash control system and similar functions. "Software" includes both
proprietary applications that Company has created or developed or had others
create or develop for Company, and applications that Company licenses from third
parties.
13.38. "Technology System" refers collectively to the Hardware,
Software, and Documentation.
13.39. "Term" is the 10 year period starting on the Effective Date and
ending on the date that this Agreement terminates or expires, whichever occurs
first.
13.40. "uWink(TM) Intellectual Property" refers collectively to any and
all rights currently existing or that may come into being which Company or
Company's Affiliates now own or later acquire in the uWink(TM) Licensed Marks,
Technology System, Proprietary Products and/or Confidential Information arising
under any patent, trade secret, copyright, trade dress, design protection,
database protection, trademark, or similar laws of the United States or any
other country in which Company or Company's Affiliates now or in the future
operate, and expressly includes any and all improvements, modifications,
derivations, renewals, extensions, or continuations of any of the foregoing.
13.41. "uWink(TM) Licensed Marks" means, collectively, all of the
commercial trade names, trademarks, service marks and other commercial symbols,
including associated logos, which Company now or hereafter uses to identify,
advertise or promote uWink(TM) Entertainment Restaurants or particular goods or
services sold at or from uWink(TM) Entertainment Restaurants, and authorizes or
requires Franchisee to use as a condition of this Agreement.
13.42. "uWink(TM) System means, collectively, all of the distinctive
business methods, Proprietary Products, Confidential Information, Technology
System and uWink(TM) Intellectual Property, which Company now or in the future
authorizes or requires Franchisee to use as a condition of this Agreement, as
Company may modify in its sole discretion at any time.
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13.43. "World Wide Web" means that portion of the Internet used
primarily as a commercial computer network by the general public, and any
successor technology, whether now existing or developed after the Effective
Date, that enables the general public to purchase goods or services from
merchant-controlled World Wide Web sites or through other electronic means.
SECTION 14.GRANT
14.1 AWARD OF RIGHTS.
(a) Company hereby awards to Franchisee, and Franchisee
accepts, the non-exclusive right and license to use the uWink(TM) System in
connection with the operation of one uWink(TM) Entertainment Restaurant at the
Franchise Location, subject to the terms and conditions of this Agreement.
Franchisee may not relocate the Franchised Business except in accordance with
this Agreement.
(b) In accepting the award of rights, Franchisee agrees at all
times to faithfully, honestly and diligently perform its obligations under this
Agreement and to continuously exert its reasonable best efforts to promote and
enhance the Franchised Business and the goodwill associated with the uWink(TM)
System.
14.2. LIMITATIONS.
(a) Company grants Franchisee no rights other than the rights
expressly stated in this Agreement. Franchisee's use of the uWink(TM) System for
any purpose, or in any manner, not permitted by this Agreement shall constitute
a breach of this Agreement.
(b) The franchise and license awarded to Franchisee apply to
the Franchise Location, and to no other location.
(c) Nothing in this Agreement gives Franchisee the right to
sublicense the use of the uWink(TM) System, or any portion or component thereof,
to others.
(d) Nothing in this Agreement gives Franchisee an interest in
Company or the right to participate in Company's business activities, investment
or corporate opportunities.
(e) Nothing in this Agreement gives Franchisee any rights in
or to any uWink(TM) Intellectual Property, other than the limited licenses
expressly granted herein.
(f) This Agreement authorizes Franchisee to engage only in the
sale of authorized goods and services to customers at the Franchise Location.
Franchisee may not (i) engage in off-premises catering or delivery services
other than in accordance with Company's specifications without Company's prior
written consent; (ii) offer or sell goods or services of any kind, including,
without limitation, uWink(TM) gift cards, by mail order, catalog sales or
comparable methods or from any World Wide Web site; or (iv) engage in retail or
wholesale sales or distribution of Proprietary Products. The term "retail or
wholesale sales or distribution" means the direct or indirect sale of goods or
services to consumer or to third parties for further distribution through any
trade method or trade channel. The parties agree that, if Company implements and
offers any other franchisee an on-line ordering system whereby off-premises
customers can place orders for off-premises catering or delivery services,
Company shall offer the same program to Franchisee on comparable terms, subject
to Franchisee's compliance with this Agreement.
(g) Franchisee shall not maintain its own World Wide Web site
promoting the Franchised Business or otherwise maintain a presence or advertise
the Franchised Business or use the uWink(TM) Licensed Marks in any domain name
or on any public computer network. Company shall identify the Franchised
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Business in its list of franchise locations on Company's World Wide Web site and
provide comparable information on its World Wide Web site about the Franchised
Business as Company provides for other uWink(TM) Entertainment Restaurants.
14.3. IMPROVEMENTS; DUTY TO CONFORM TO MODIFICATIONS.
(a) Any improvements, modifications or additions which Company
makes to the uWink(TM) System, or which become associated with the uWink(TM)
System, including, without limitation, ideas suggested or initiated by
Franchisee, shall inure to the benefit, and become the exclusive property, of
Company. Franchisee hereby assigns to Company or its designee all intellectual
property rights, including, without limitation, all copyrights, patent or other
inventorship rights, in and to any improvements or works which Franchisee may
create, acquire or obtain in operating the Franchised Business. Franchisee
agrees that Company may use, and authorize others to use, improvements which
Franchisee suggests, initiates or originates without compensation to Franchisee
and without Franchisee's permission. Franchisee understands and agrees that
nothing in this Agreement shall constitute or be construed as Company's consent
or permission to Franchisee to modify the uWink(TM) System or any portion or
component thereof. Any modification which Franchisee desires to propose or make
to the uWink(TM) System shall require Company's prior written consent.
(b) Any goodwill resulting from Franchisee's use of the
uWink(TM) System shall inure to the exclusive benefit of Company. This Agreement
confers no goodwill or other interest in the uWink(TM) System upon Franchisee,
except a license to use the uWink(TM) System during the Term subject to the
terms and conditions stated in this Agreement. This provision shall not be
construed to prevent Franchisee from receiving the proceeds on the sale of the
Franchised Business if conducted in compliance with the requirements of this
Agreement applicable to an Event of Transfer.
(c) Franchisee understands and agrees that Company may modify
the uWink(TM) System and any of its components from time to time in its sole
discretion as often, and in the manner, that Company believes, in its sole
discretion, is necessary to best promote uWink(TM) Entertainment Restaurants, as
a chain, to the public. Company shall give Franchisee written notice of all
changes either by supplements to the Confidential Manual, in writing or
electrically, or otherwise. Franchisee shall, at its own cost and expense,
promptly adopt and use only those parts of the uWink(TM) System specified by
Company and shall promptly discontinue the use of those parts of the uWink(TM)
System which Company directs are to be discontinued. Franchisee shall not
change, modify or alter the uWink(TM) System in any way, except as Company
directs.
14.4. DEVIATIONS FROM THE UWINK(TM) SYSTEM. Company may allow other
franchisees and licensees to deviate from the uWink(TM) System in individual
cases in the exercise of Company's sole discretion. Franchisee understands and
agrees that it has no right to object to any variances that Company may allow to
itself, Company's Affiliates or other franchisees or licensees, and has no claim
against Company for not enforcing the standards of the uWink(TM) System
uniformly. Franchisee understands and agrees that Company has no obligation to
waive, make any exceptions to, or permit Franchisee to deviate from, the uniform
standards of the uWink(TM) System. Any exception or deviation that Company does
allow Franchisee must be stated in writing and executed by Company in order to
be enforceable against Company.
14.5. ADDITIONAL FRANCHISES. Franchisee understands and agrees that
this Agreement does not grant Franchisee any implied or preferential right of
any kind to acquire an additional franchise to operate another Franchised
Business.
14.6. DELEGATION OF DUTIES. Company has the absolute right to delegate
performance of any portion or all of its obligations under this Agreement to any
third-party designee of its own choosing, whether the designee is Company's
Affiliate, agent or independent contractor. In the event of a delegation of
duties, the third-party designee shall perform the delegated functions in
compliance with this Agreement. When Company delegates its duties (in contrast
to when Company transfers and assigns all
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of its rights under this Agreement to a third party that assumes Company's
obligations), Company shall remain responsible for the performance of the
third-party designee.
SECTION 15. FRANCHISE LOCATION; RESTRICTED AREA
15.1. SELECTION OF FRANCHISE LOCATION.
(a) If the parties have mutually agreed upon the Franchise
Location on or before the Effective Date, they shall indicate the Franchise
Location's street address and the boundaries of the Restricted Area on EXHIBIT A
which they shall execute at the same time they execute this Agreement, in which
case the balance of this Section shall not apply to Franchisee.
(b) If the parties have not identified the Franchise Location
on or before the Effective Date, Franchisee shall be responsible for selecting
the Franchise Location, subject to Company's approval, pursuant to the
procedures stated in this Section. Following Company's written approval of
Franchisee's proposed site as the Franchise Location, the parties shall amend
this Agreement to set forth the Franchise Location's street address and the
boundaries of the Restricted Area on EXHIBIT A. The parties' failure to execute
EXHIBIT A shall not invalidate this Agreement, Company's site approval or the
designation of the Restricted Area.
(c) In evaluating potential sites, Franchisee shall consider
Company's current site selection criteria set forth in the Confidential Manual
as well as Company's current prototype plans and specifications for the design,
appearance, trade dress elements, Technology System, equipment and leasehold
improvements of a typical uWink(TM) Entertainment Restaurant, which Company
shall provide to Franchisee, without charge, following the parties' execution of
this Agreement. Franchisee may request site approval for more than one site; but
it shall not extend the time period for obtaining site approval.
(i) To obtain Company's approval of a proposed site,
Franchisee shall submit a written site proposal to Company, in the form
indicated in the Confidential Manual. Franchisee's site proposal shall be
accompanied by a letter of intent or other evidence satisfactory to Company
which confirms the willingness of the owner or master tenant of the Franchise
Location to offer Franchisee a Lease and to execute an Addendum to Lease in the
form required by Company. Company may condition site approval on its review and
approval of the Lease which Franchisee proposes to enter into with the landlord
of the proposed site.
(ii) Following receipt of Franchisee's written site
proposal, Company may, in its sole discretion, make an on-site visit to the
proposed site at Company's expense if Company reasonably believes that physical
inspection of the demographic conditions of the area, or the proposed site, is
necessary or desirable to evaluate Franchisee's proposal. Franchisee understands
and agrees that the on-site visit is at Company's option and not required by
this Agreement. If Franchisee proposes more than one site and Company determines
that it must make more than one site visit in connection with the site review
process, Company may charge Franchisee a Site Review Fee of $1,000 per diem plus
reimbursement of Company's reasonable travel expenses, including, without
limitation, expenses for air and ground transportation, lodging, meals, and
miscellaneous travel-related personal charges, which shall be payable within 15
days of invoice.
(iii) Company shall have 30 days following receipt of
Franchisee's completed site proposal to complete any site visit that it chooses
to make and approve or disapprove the proposed site by giving written notice to
Franchisee (the "Site Approval Notice"). If Franchisee proposes more than one
site, Company need only approve one site, or it may disapprove all proposed
sites. Company's failure to give timely notice of approval shall constitute
Company's disapproval of all sites proposed by Franchisee.
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(d) Company's approval of a site signifies only that the site
meets Company's current site criteria. Company's approval of a site does not
certify that Franchisee's development, use or occupancy of the site as a
uWink(TM) Entertainment Restaurant will conform to Applicable Law or guaranty or
warrant that operation of a uWink(TM) Entertainment Restaurant at the site will
be successful or profitable. The fact that Company may, in its sole discretion,
offer Franchisee advice, recommendations or site location services of any kind
shall not constitute an admission on Company's part that it is responsible for
identifying potential sites, and Franchisee understands that site selection is
Franchisee's sole responsibility, subject to Company's right to approve the
site. Consistent with Franchisee's responsibility for site selection, Franchisee
is solely responsible for investigating and complying with Applicable Law
concerning development, occupancy and use of the Franchise Location and
evaluating the suitability of a site as a uWink(TM) Entertainment Restaurant.
15.2. DESIGNATION OF RESTRICTED AREA; COMPANY'S RESERVED RIGHTS IN
RESTRICTED AREA.
(a) If Company approves the proposed site, Company's Site
Approval Notice shall identify the boundaries of the Restricted Area that
Company will assign to the proposed site, which the parties shall include on
EXHIBIT A. Company agrees that, on the Effective Date, the Restricted Area shall
include no fewer than 200,000 households. The Restricted Area shall not be
modified during the Term if the number of households in the Restricted Area
declines to less than 200,000 households.
(b) Company agrees not to open or operate, or grant others,
including (without limitation) Company's Affiliates or unrelated persons, the
right to open or operate, a uWink(TM) Entertainment Restaurant under the
uWink(TM) Licensed Marks anywhere in the Restricted Area shown or described on
EXHIBIT A subject to Franchisee's compliance with this Agreement and the
exclusions set forth in this Agreement and Company's reserved rights. Nothing in
this Agreement gives Franchisee the right to object to Company's award of
franchises to others for locations outside the Restricted Area regardless of how
close it may be located to the boundaries of the Restricted Area.
(c) The Restricted Area excludes all of the following types of
properties that now, or in the future, are in the Restricted Area: any airport
properties, mass transit stations, professional sports stadiums, military bases,
entertainment parks or casinos in the Restricted Area.
(d) Company furthermore reserves all other rights to engage in
activities in the Restricted Area not specifically granted to Franchisee
pursuant to this Agreement. Company's reserved rights extend to any retail or
wholesale channel of distribution, whether the channel now exists or is
developed in the future. Without limiting the foregoing, Company, on behalf of
itself, Company's Affiliates and its or their other franchisees or licensees,
may directly or indirectly, engage in any of the following activities in the
Restricted Area without prior notice or compensation to, or consent of,
Franchise
(i) Open and operate uWink(TM) Entertainment
Restaurants at airport properties, mass transit stations, professional sports
stadiums, military bases, entertainment parks or casinos located in the
Restricted Area.
(ii) Produce, license, distribute, market and sell to
any other restaurants, bars and social venues or other types of users on a
"private label" basis any computer hardware equipment or software applications
that exist now or may be developed in the future, including, without limitation,
any Hardware or Software, as modified and upgraded by Company periodically, as
long as the computer hardware equipment or software applications (i) are not
identified by, or display, the uWink(TM) Licensed Marks or any confusingly
similar name, and (ii) do not incorporate the same distinctive electronic games
available at uWink(TM) Entertainment Restaurants. For example, and without
limitation, Company and Company's Affiliates may produce license, distribute,
market and sell to any other restaurants, bars and social venues or other types
of users on a "private label" basis the self-service technology that is an
integral part of the Software.
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(iii) Offer and sell any items that are now, or in
the future, identified as Collateral Logo Merchandise or other types of
Proprietary Products through any retail or wholesale channel of distribution,
including from a World Wide Web site, mail order catalogues, direct mail
advertising, and from supermarkets and other food service business or other
retail stores of any kind that do not do business under any of the uWink(TM)
Licensed Marks or any confusingly similar name.
(iv) Open and operate any other type of restaurant,
food service or entertainment business in the Restricted Area that does not (i)
incorporate the distinctive technology and entertainment dining experience
identified with the uWink(TM) System, or (ii) do business under any of the
uWink(TM) Licensed Marks or any confusingly similar name.
(e) The designation of a Restricted Area does not give
Franchisee the exclusive right (i) to sell authorized goods or services to
persons who reside or work in the Restricted Area, or (ii) to market or
advertise its uWink(TM) Entertainment Restaurant in media that circulates,
broadcasts or otherwise is directed to or accessible by persons in the
Restricted Area.
15.3. LEASE AND ADDENDUM TO LEASE. Promptly following the parties
execution of EXHIBIT A, Franchisee shall execute a Lease and Addendum to Lease
with the real property owner or master tenant of the Franchise Location and
deliver to Company a copy of the fully-executed Lease and Addendum to Lease.
15.4. RELOCATION.
(a) If (i) the Lease expires or terminates for reasons other
than Franchisee's breach; (ii) the Franchise Location or building in which the
Franchised Business is located is destroyed, condemned or otherwise rendered
unusable; or (iii) the parties' mutually believe that relocation will increase
the business potential of the franchise, Franchisee shall relocate the
Franchised Business, at Franchisee's sole expense, to a new location selected by
Franchisee, and approved by Company, in accordance with Company's then-current
site selection procedures as specified in the Confidential Manual. Company shall
indicate its approval of the new site by executing a new Site Approval Notice,
which shall identify the boundaries of the new Restricted Area which shall be
awarded to the new site subject to the conditions, exclusions and reserved
rights stated in this Agreement. The parties shall amend EXHIBIT A to reflect
the address of the new Franchise Location.
(b) At Franchisee's sole expense, Franchisee shall construct
and develop the new premises to conform to Company's then-current specifications
for design, appearance, trade dress elements, Technology System, kitchen and
other equipment, layout, and leasehold improvements for new uWink(TM)
Entertainment Restaurants, and remove any signs, trade dress, kitchen and other
equipment, Hardware or other features of the Technology System and similar
property from the original Franchise Location which identified the original
Franchise Location as belonging to the uWink(TM) System.
(c) Franchisee shall use its reasonable best efforts to
complete relocation without any interruption in the continuous operation of the
Franchised Business unless Company's prior written consent is obtained. As a
condition to consenting to a disruption in operations, Company may impose
maximum time periods, which shall be reasonable under the circumstances
compelling relocation, in which Franchisee must (i) obtain Company's site
selection approval for the new Franchise Location; and (ii) complete
construction and development of the new Franchise Location in accordance with
Company's then-current specifications. If Company consents to a disruption in
operations and such operations temporarily cease, then Franchisee agrees that,
until operations resume at the new location: (x) the term of this Agreement
shall not be abated, and (y) Franchisee shall remain liable to pay Royalty Fees,
Advertising Fees, Technology License Fees and any Regional Advertising Fees in
amounts equal to the average amounts paid by Franchisee for each type of
Continuing Fee during the 4 complete Calendar Quarters immediately preceding the
date that operations cease or the shorter period that Franchisee has been in
business at the original Franchise Location.
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(i) Franchisee shall not be liable for the foregoing
fees if relocation is due to an event
of Force Majeure.
(ii) If relocation is necessitated for reasons other
than an event of Force Majeure, upon Franchisee's written request, Company may,
in its sole discretion, agree in writing to waive the requirement that
Franchisee pay the foregoing fees during the period that the original Franchise
Location closes if Franchisee demonstrates reasonable efforts and progress in
its relocation efforts.
(iii) Franchisee's failure to accept or abide by the
relocation requirements shall constitute a material breach of this Agreement and
grounds for termination.
SECTION 16. TERM AND RENEWAL
TERM. This Agreement shall begin on the Effective Date and shall expire
without notice 10 years from the Effective Date, unless this Agreement is sooner
terminated as provided herein.
16.2. RENEWAL TERM. Franchisee shall have an option ("Renewal Option")
to renew the franchise for an additional 10 years ("Renewal Term") starting on
the day following the last day of the Term subject to the following conditions:
(a) Franchisee must give Company written notice of
Franchisee's election to renew (the "Renewal Notice") at least 9 Calendar
Months, but not more than 12 Calendar Months, before the end of the Term. The
Renewal Option shall be cancelled if Franchisee does not timely and effectively
exercise the Renewal Option.
(b) The Renewal Notice must each be accompanied by a
non-refundable renewal fee ("Renewal Fee") equal to 10% of the Initial Franchise
Fee that Company is then charging to franchisees purchasing their first
franchise awarding the right to operate one uWink(TM) Entertainment Restaurant
in the state where the Franchised Business is located.
(c) Franchisee must not be in material default under this
Agreement at the time it gives the Renewal Notice or on the first day of the
Renewal Term. Further, Franchisee must not have received more than 3 notices of
material default during any 24 Calendar Month period during the Term whether or
not the notices relate to the same or to different defaults, and whether or not
the defaults have each been timely cured by Franchisee.
(d) To exercise the Renewal Option, Franchisee shall execute
Company's then-current form of Franchise Agreement for a 10 year term, which
Franchise Agreement shall supersede this Agreement in all respects except as
follows: (i) Franchisee shall not have the renewal rights set forth in the new
Franchise Agreement, but shall instead have the Renewal Option set forth in this
Agreement; (ii) Franchisee shall not be required to pay the Initial Franchise
Fee stated in the new Franchise Agreement, but shall instead pay the Renewal
Fee; and (iii) Franchisee shall not be required to participate in the Initial
Training Programs described in the new Franchise Agreement then offered by
Company to new franchisees. Franchisee understands that the new Franchise
Agreement may be materially different than this Agreement, including, without
limitation, requiring payment of additional or different fees to Company.
(e) Franchisee shall satisfy Company's then-current training
requirements, if any, for renewing franchisees.
(f) Franchisee shall satisfy Company's then-current
appearance, trade dress elements, design standards, equipment and leasehold
improvement specifications that apply to new uWink(TM) Entertainment
Restaurants, including (without limitation) conforming the Franchised Business
to Company's then-current design, appearance, trade dress elements, Technology
System, equipment, leasehold improvements, imaging requirements, signs, and
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accounting and recordkeeping systems. The parties acknowledge that, with the
exception of Franchisee's duty to purchase a new, then-current Initial Hardware
Package, it is the intent of this provision not to require Franchisee to make a
significant investment in new leasehold improvements if, during the Term,
Franchisee has complied with the duty to (i) incorporate all of changes that
Company may make to the uWink(TM) System, and (ii) maintain the condition and
appearance of the Franchise Location, and all tangible property, in the highest
degree of cleanliness, orderliness and repair.
(g) Franchisee shall purchase from Company a new, then-current
Initial Hardware Package at Company's then-current Initial Hardware Fee. The
Initial Hardware Fee for the new Initial Hardware Package shall be the same as
Company then offers to other similarly situated new or renewing franchisees.
(h) Franchisee shall execute and deliver a mutual general
release, in form satisfactory to Company, of any and all claims against Company,
Company's Affiliates and their respective officers, directors, shareholders,
employees and agents. The mutual general release shall exclude any bona fide
claims that a party may have against the other which are expressly identified in
the mutual general release.
16.3. INEFFECTIVE EXERCISE OF RENEWAL OPTION. Franchisee's failure to
deliver the agreements and release required by this Section within 30 days after
Company delivers them to Franchisee shall be deemed an election by Franchisee
not to exercise the Renewal Option.
16.4. EXTENSION. If Company is in the process of revising, amending or
renewing its franchise disclosure documents or registration to sell franchises
in the state where the Franchised Business is located, or, under Applicable Law,
cannot lawfully offer Franchisee its then-current form of Franchise Agreement at
the time Franchisee delivers the Renewal Notice, Company may, in its sole
discretion, offer to extend the terms and conditions of this Agreement on a
Calendar Month-to-Calendar Month basis following the expiration of the Term for
a maximum period of 12 months from the expiration date so that Company may
lawfully offer its then-current form of Franchise Agreement. If Franchisee has
otherwise satisfied the conditions for renewal and is in compliance with the
provisions of this Agreement, and if, after 12 months, Company cannot lawfully
offer its then-current form of Franchise Agreement, the parties shall be deemed
to have extended this Agreement for the remainder of the Renewal Term. Nothing
in this Section shall require Company to extend this Agreement if, at the time
Franchisee delivers the Renewal Notice Franchisee is in material default under
this Agreement.
16.5. FAILURE TO SATISFY RENEWAL CONDITIONS. If any renewal condition
is not timely satisfied, this Agreement will expire on the last day of the Term
without further notice from Company; provided, however, Franchisee shall remain
obligated to comply with all provisions of this Agreement which expressly, or by
their nature, survive the expiration or termination of this Agreement.
SECTION 17. FRANCHISE LOCATION DEVELOPMENT AND OPENING DATE
17.1. FRANCHISEE'S DESIGN PLANS.
(a) Company shall provide Franchisee with one set of Company's
prototype plans and specifications for the design, appearance, trade dress
elements, Technology System, equipment and leasehold improvements of uWink(TM)
Entertainment Restaurants after the parties execute this Agreement, which
Franchisee shall use to evaluate potential sites for the Franchise Location.
Franchisee understands that Company's prototype plans and specifications may not
reflect the requirements of Applicable Law governing pubic accommodations for
persons with disabilities or similar rules, zoning restrictions, building codes,
permit requirements or applicable Lease restrictions.
(b) At Franchisee's sole expense, Franchisee shall retain the
services of competent architectural, design and contracting services of
Franchisee's own choosing to prepare design and construction plans
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("Franchisee's Design Plans") that adapt Company's prototype plans and
specifications to the specific dimensions, square footage and conditions of the
Franchise Location and to the requirements of the Lease and Applicable Laws. At
a minimum, Franchisee's Design Plans shall address, without limitation, exterior
signs, lighting, flooring, mechanical systems, electrical systems, the
Technology Systems, plumbing, carpentry, wall coverings, ceiling treatments,
exhaust/ventilation systems, restaurant dinning, cooking and storage areas,
general trade dress components and other improvements that Franchisee intends to
install and use in the Franchise Location, together with such other information
as may be specified in the Confidential Manual. Franchisee shall have the right
to use Franchisee's Design Plans for any purpose consistent with this Agreement.
(c) Franchisee is solely responsible for investigating the
requirements of Applicable Law governing pubic accommodations for persons with
disabilities or similar rules, zoning restrictions, building codes, permit
requirements or applicable Lease restrictions and conforming Franchisee's Design
Plans to such requirements.
(d) Franchisee shall submit Franchisee's Design Plans to
Company for approval before Franchisee may begin permitting, construction or
development of the Franchise Location. In reviewing Franchisee's Design Plans,
Company agrees not to withhold its approval unreasonably. Company shall have 15
days to review Franchisee's Design Plans and notify Franchisee in writing of its
rejection or approval of Franchisee's Design Plans or its approval subject to
specified modifications. Company's failure to give Franchisee timely notice
shall constitute Company's disapproval of Franchisee's Design Plans as
submitted. Company's approval of Franchisee's Design Plans, with or without
additional conditions, does not certify that Franchisee's development, use or
occupancy of the site as a uWink(TM) Entertainment Restaurant pursuant to
Franchisee's Design Plans as approved will conform to Applicable Law or guaranty
or warrant that operation of a uWink(TM) Entertainment Restaurant at the site
will be successful or profitable.
17.2. DEVELOPMENT OF FRANCHISE LOCATION.
(a) Franchisee shall cause all construction and other
development work to be carried out in compliance with the version of
Franchisee's Design Plans that Company approves without any material variation.
Franchisee shall not make any material changes to the Franchisee's Design Plans
without first submitting the changes in writing to Company for its approval.
(b) Franchisee shall cause all construction and development
work to conform with the Lease and Applicable Law, including, without
limitation, all government and utility permit requirements (such as, for
example, zoning, sanitation, building, utility and sign permits). Franchisee
shall complete development of the Franchise Location diligently, expeditiously
and in a first-class manner at Franchisee's sole expense.
(c) Franchisee is solely responsible for purchasing, leasing
or licensing all of the equipment, fixtures, furniture, trade dress elements,
signs, supplies, materials, software applications and decorations required for
development and operation of uWink(TM) Entertainment Restaurants, including the
Technology System, from recommended, approved or required sources as directed by
Company in the Confidential Manual and this Agreement.
(d) Franchisee understands and agrees that it is solely
responsible for selecting competent construction personnel and for supervising,
and for the acts and omissions of, its construction personnel. Franchisee shall
obtain all customary contractors' lien waivers for the work performed. The fact
that Company may recommend an architect, designer or construction personnel to
assist Franchisee in preparing Franchisee's Design Plans or with the performance
of actual construction work shall not (i) excuse Franchisee from the duty to
obtain Company's approval of Franchisee's Design Plans; (ii) constitute an
admission on Company's part to responsibility for preparing Franchisee's Design
Plans; or (iii) make Company liable for design or construction work, delays or
defects of any kind.
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(e) Company shall have no responsibility for any delays in
development or opening of the Franchised Business or for any loss resulting from
the design of the Franchise Location or approval of Franchisee's Design Plans.
Company shall have access to the Franchise Location to inspect the work and
performance by Franchisee's construction personnel, but is not obligated to
inspect the project periodically during development or upon completion.
Franchisee understands and agrees that if Company inspects the work and
performance of Franchisee's construction personnel, the inspection is not for
purposes of reviewing or certifying that development is in compliance with the
Lease or Applicable Laws, but solely to evaluate that development conforms with
the version of Franchisee's Design Plans that Company has approved and otherwise
with Company's specifications for design, appearance, trade dress elements,
Technology System, equipment and leasehold improvements.
17.3. OPENING DATE.
(a) Franchisee shall use its reasonable best efforts to open
the Franchise Location for business to the public within 270 days after the
Effective Date. Franchisee shall not open the Franchise Location for business to
the public under the uWink(TM) Licensed Marks unless and until Company issues a
written completion certificate. The certificate shall signify that Company finds
that the Franchise Location, as built, substantially conforms to the version of
Franchisee's Design Plans that Company has approved and that Franchisee has met
all other pre-opening requirements including, without limitation, completing the
Owner Orientation and have at least one person qualify as a Certified Manager,
and supplying Company with proof of all required insurance coverage all in
accordance with the requirements of this Agreement. The date after Company
issues a written completion certificate on which the Franchised Business
actually opens for business to the public is the opening date ("Opening Date").
(b) Company agrees to use its reasonable best efforts to
review Franchisee's Design Plans, conduct inspections of the work and
performance by Franchisee's personnel, complete installation of the Initial
Hardware Package, and inspect the Franchise Location as built reasonably
promptly to avoid causing an undue delay in Franchisee's ability to open the
Franchised Business.
(c) If Franchisee believes Company has failed to adequately
provide any services required by this Agreement to be performed by Company
before or in connection with the Franchised Business' opening, whether in regard
to site selection, site development, Initial Training or any other matter
affecting the establishment of the Franchised Business, Franchisee shall so
notify Company in writing within 90 days following the Opening Date. Absent
timely notice to Company, Franchisee shall be deemed to acknowledge conclusively
that all required services to be performed by Company before or in connection
with the Franchised Business' opening were provided sufficiently and
satisfactorily in Franchisee's judgment.
SECTION 18. TRAINING
18.1. INITIAL TRAINING PROGRAM
(a) The parties shall mutually schedule the Owner Orientation
module, and the General Manager, Assistant General Manager and Kitchen Manager
tracks of the Restaurant Management and Technical Training module, of the
Initial Training Program so that all modules are completed at least 8 weeks
before the contemplated Opening Date. The Owner Orientation and Restaurant
Management and Technical Training modules shall take place at a location which
Company designates. Company shall provide the New Store Opening module at the
Franchise Location during the period before and after the Opening Date.
(b) Company shall not charge any tuition or training fee in
connection with providing the Initial Training Program regardless of the number
of individuals whom Franchisee enrolls in each module or track. Company limits
enrollment in the Owner Orientation module to an individual who is the
Franchisee or a Primary Owner of the Franchisee. Company may also limit
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enrollment in the separate tracks of the Restaurant Management and Technical
Training module and New Store Opening module according to the person's job
category.
(c) At a minimum, Company requires that the following
individuals complete the following portions of the Initial Training Program: (i)
Franchisee or at least one Primary Owner must complete the Owner Orientation
module; (ii) at least 3 different individuals (any one or more of whom may be a
Primary Owner) must complete each one of the separate General Manager, Assistant
General Manager and Kitchen Manager tracks of the Restaurant Management and
Technical Training module according to their job category; (iii) at least 8
different individuals must complete each one of the 8 different tracks of the
New Store Opening module according to their job category, which, as of the
Effective Date, consist of the following 8 tracks: Lead Trainer, Kitchen
Trainer, Hot Kitchen, Cold Kitchen, Prep Kitchen, Bar Trainer, Entertainment and
Production; and (iv) the individuals who complete the Owner Orientation module
and the General Manager and Assistant General Manager tracks of the Restaurant
Management and Technical Training module must complete the General Opening track
of the New Store Opening Module. Company encourages that Franchisee include all
of its opening employees in the General Opening track of the New Store Opening
Module.
(d) If Franchisee is executing this Agreement in connection
with exercising the Renewal Option, in consideration of Franchisee's payment of
a renewal fee, Franchisee shall be entitled to participate in any training
program that Company then provides for renewing franchisees on the same basis as
other franchisees renewing contemporaneously.
(e) Franchisee understands and agrees that Company may modify
the Initial Training Program at any time without prior notice to Franchisee.
Although, the Initial Training Program, as of the Effective Date, consists of
separate modules and tracks, Company's modifications may involve adding,
deleting, shortening or lengthening modules or tracks, changing the location,
duration, content or scope of the Initial Training Program, or changing
instructors or mandatory training requirements.
18.2. MANAGEMENT-LEVEL EMPLOYEES; CERTIFIED MANAGER QUALIFICATIONS.
(a) All newly hired and replacement personnel whose employment
responsibilities include day-to-day management of the Franchised Business shall
demonstrate the requisite competency to operate and manage a uWink(TM)
Entertainment Restaurant in Company's judgment, based on Company's sole
subjective evaluation. At all times after the Opening Date, the Franchised
Business must be under the direct supervision of at least one Certified Manager.
Franchisee shall notify Company in writing of the name of the Certified Manager
of the Franchised Business (or names of each Certified Manager if Franchisee
qualifies more than one person as a Certified Manager of the Franchised
Business) and any changes in the identity of the Certified Manager during the
Term promptly after they occur.
(b) Company may change the Certified Manager qualification
criteria at any time effective upon notice to Franchisee. Company's notice shall
specify any additional training or other requirements applicable to new
Certified Managers which an existing Certified Manager must complete in order to
maintain his or her designation as a Certified Manager. Company shall allow each
existing Certified Manager 90 days after the new criteria become effective in
which to satisfy the additional training and other requirements without
suffering a lapse in their designation as a Certified Manager.
(c) The award of a Certified Manager designation does not
constitute a warranty, guaranty or endorsement by Company or its Affiliates of
the person's skills, performance ability or business acumen. Neither Company nor
its Affiliates shall have any responsibility for the operating results of the
Franchised Business or the performance of Franchisee's employees or agents.
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18.3. ADDITIONAL TRAINING. After the Opening Date, Franchisee may
request permission to enroll additional persons in one or more of the tracks of
the Restaurant Management and Technical Training module (or then-current
equivalent) or receive additional training and on-site assistance. Franchisee
understands and agrees that all additional training shall be at mutually
scheduled times, subject to space availability and Company's other training
commitments, and that, as a condition to receiving additional training,
Franchisee must pay Company's then-current per person training fees stated in
the Confidential Manual. In connection with additional instruction provided at
the Authorized Location, Franchisee shall also reimburse Company for Company's
reasonable travel expenses, including, without limitation, expenses for air and
ground transportation, lodging, meals, and miscellaneous travel-related personal
charges.
18.4. CONTINUING TRAINING.
(a) Company may periodically offer continuing training
programs at one or more locations that it shall designate and require attendance
by Franchisee, a Primary Owner of a Franchisee that is a Business Entity, a
Certified Manager or a particular employee category, such as General Manager,
Assistant General Manager, Kitchen Manager or so forth; provided, however,
Company shall not require that more than 2 persons designated by Company
complete more than 3 days of continuing training during any 12 Calendar Month
period. Franchisee shall be solely responsible for covering the personal
expenses of its employees attending continuing and additional training programs,
including transportation, lodging, food, salary and other personal charges.
(b) In connection with any Event of Transfer, the proposed
franchisee or its Primary Owner must complete Company's then-current Initial
Training Program to Company's satisfaction, qualify at least one
management-level employee as a Certified Manager, and pay Company's then-current
per person training fee as stated in the Confidential Manual. The transferee
shall be solely responsible for all personal expenses that the transferee and
its employees incur in connection with such training, including transportation,
lodging, food, salary and other personal charges. Franchisee shall remain
responsible for operation and management of the Franchised Business until the
transferee qualifies at least one person as a Certified Manager.
18.5. ADDITIONAL PROVISIONS. Franchisee understands and agrees that (i)
it is solely responsible for all personal expenses that it and its employees
incur to attend any of the training program provided by Company whether before
or after the Opening Date, including, without limitation, costs for air and
ground transportation, lodging, meals, personal expenses and salaries, and (ii)
Company will not pay compensation for any services performed by trainees during
any training program provided by Company. Franchisee agrees to allow Company to
train persons unaffiliated to Franchisee at the Franchise Location at a time
mutually convenient to Franchisee and Company and without compensation or
reimbursement to Franchisee, not to exceed 30 days in any year.
SECTION 19. UWINK INTELLECTUAL PROPERTY
19.1. OWNERSHIP. Company owns all rights in the uWink(TM) System and
its various components, and Franchisee owns no rights in the uWink(TM) System
except for the license granted by this Agreement. Franchisee agrees not to
contest, or assist any other person to contest, the validity of Company's rights
and interest in the uWink(TM) System, or any component thereof, either during
the Term or after this Agreement terminates or expires. If Franchisee discovers
facts leading Franchisee to reasonably believe that Company has misrepresented
its rights in the uWink(TM) System and its various components, it shall notify
Company of those facts in writing immediately after discovery and may pursue its
rights and remedies under Applicable Law.
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19.2. USE OF THE UWINK(TM) SYSTEM.
(a) In operating the Franchised Business, Franchisee shall (i)
use only the elements of the uWink(TM) System designated by Company and only in
the manner authorized and permitted by Company; (ii) use the uWink(TM) System
only in connection with the operation of the Franchised Business and not in
connection with other unrelated activities; (iii) display notices of trademark
and service xxxx registrations in the exact manner that Company specifies; (iv)
obtain fictitious or assumed name registrations as required by Applicable Law;
and (v) prominently post notices to customers, suppliers and others with whom
Franchisee deals informing them that Franchisee is the independent owner of the
Franchised Business operating under a license from Company.
(b) Franchisee shall not use any of the uWink(TM) Licensed
Marks or any part thereof: (i) in its corporate or legal name (if Franchisee is
a Business Entity); (ii) with any prefix, suffix or other modifying words,
terms, designs, colors or symbols; (iii) in any modified form; (iv) in
connection with the sale of any unauthorized goods or services; (v) in any
manner not expressly authorized in writing by Company; or (v) in any manner that
may result in Company's liability for Franchisee's debts or obligations.
(c) Franchisee shall not cover up, remove or alter any patent,
copyright, trademark or other notices that Company requires Franchisee to use to
signify Company's ownership of, or rights in, the uWink(TM) Intellectual
Property.
(d) Franchisee shall not, directly or indirectly, itself or
through any Affiliate, agent or other third party acting under its direction or
control: (i) analyze, decompile, disassemble, reverse engineer, or otherwise
attempt to (x) derive any source code or underlying ideas, algorithms, structure
or organization from the Software, or (y) defeat, avoid, bypass, remove,
deactivate or otherwise circumvent any protection mechanisms in the Software or
Hardware, including, without limitation, any mechanism used to restrict or
control the functionality of the Software or Hardware; (ii) sell, lease,
license, sublicense, distribute or otherwise provide to any third party use of
any part of the Technology System except as necessary to enable Franchisee to
operate the Franchised Business in accordance with this Agreement; or (iii) use
the Technology System or any element or component to provide processing services
to any third party or otherwise use any part of the Technology System on a
service bureau basis.
(e) Company reserves the right to: (i) modify or discontinue
licensing any of the uWink(TM) Intellectual Property or other features of the
uWink(TM) System; (ii) add new names, marks, designs, logos or commercial
symbols to the uWink(TM) Licensed Marks and require that Franchisee use them;
(iii) modify or discontinue practices, components or requirements incorporated
within the scope of the uWink(TM) System as of the Effective Date; and (iv)
require that Franchisee introduce or observe new practices as part of the
uWink(TM) System in operating the Franchised Business. Franchisee understands
that Company at any time, without notice to Franchisee, may modify the uWink(TM)
System, in which case, Franchisee shall comply, at Franchisee's sole expense,
with Company's directions regarding changes in the uWink(TM) System within a
reasonable time after written notice from Company. Company shall have no
liability to Franchisee for any cost, expense, loss or damage that Franchisee
incurs in complying with Company's directions and conforming to required changes
to the uWink(TM) System.
(f) Franchisee understands and agrees that any unauthorized
use of the uWink(TM) System or its components by Franchisee shall constitute
both a breach of this Agreement and an infringement of Company's intellectual
property rights.
19.3. DEFENSE OF THE UWINK(TM) SYSTEM.
(a) Company shall have the sole right to handle disputes with
third parties, challenging Company's or Company's Affiliates', or their
respective owners', rights in, or Franchisee's use of, the Wink(TM) System or
its components.
(b) Franchisee shall immediately notify Company in writing if
Franchisee receives notice, or is informed, of any: (i) improper use of any of
the components of the uWink(TM) System; (ii) use by any third party of any xxxx,
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design, logo or commercial symbol which, in Franchisee's sole discretion, may be
confusingly similar to any of the uWink(TM) Licensed Marks; (iii) use by any
third party of any business practice which, in Franchisee's sole discretion,
unfairly simulates the uWink(TM) System in a manner likely to confuse or deceive
the public; or (iv) claim, challenge, suit or demand asserted against Franchisee
based upon Franchisee's use of any of the components of the uWink(TM) System. A
legal proceeding, demand or threat encompassing the subject matters described in
(i), (ii), (iii) and (iv) is collectively referred to as a "Third Party Claim."
(c) Company shall have sole discretion to take such action as
it deems appropriate, including, without limitation, to take no action, and the
sole right to control any legal proceeding or negotiation arising out of a Third
Party Claim.
(d) Franchisee shall not settle or compromise any Third Party
Claim and agrees to be bound by Company's decisions over how to handle a Third
Party Claim. Franchisee shall cooperate fully with Company and execute such
documents and perform such actions as may, in Company's sole discretion, be
necessary, appropriate or advisable in the defense of a Third Party Claim and to
protect and maintain Company's or Company's Affiliates', or their respective
owners', rights in, or Franchisee's use of, the Wink(TM) System or its
components.
(e) Except as provided in this Section, Company agrees to
defend Franchisee against the Third Party Claim, provided Franchisee has
notified Company immediately after learning of the Third Party Claim and fully
cooperates in the defense of the Third Party Claim. Because Company will defend
the third party claim, Franchisee is not entitled to be reimbursed for legal or
other professional fees or costs paid to independent legal counsel or others in
connection with the matter. Notwithstanding Company's agreement to defend
Franchisee under the conditions stated in this Section, Franchisee understands
and agrees that Company is not liable to indemnify or reimburse Franchisee for
any liability, costs, expenses, damages or losses that Franchisee may sustain as
a result of the Third Party Claim, with the exception that Company shall (i)
reimburse Franchisee for Franchisee's actual direct costs to change any signs,
uniforms or other materials that bear the uWink(TM) Licensed Marks or change any
property incorporating any other feature of the uWink(TM) System that is found
to infringe the rights of a third party, and (ii) if a judgment is rendered
against Franchisee, indemnify Franchisee for the amount of any damages awarded
as part of the judgment. Franchisee shall assign to Company any claims that it
may have against the third party asserting the infringement claim. Franchisee,
on behalf of itself and its Affiliates hereby waives any claim against Company,
Company's Affiliates, and their respective officers, directors, shareholders,
employees and agents for lost profits or consequential damages of any kind based
on Third Party Claims involving the uWink(TM) System.
(f) Company's indemnity obligation set forth in this Section
shall not extend to any Third Party Claim which (i) is based, directly or
indirectly, upon Franchisee's misuse of the uWink(TM) System, or (ii) arises out
of or relates to anything specifically excluded from Company's limited warranty
set forth in the Section entitled TECHNOLOGY SYSTEM. Furthermore, Company's
indemnity obligation set forth in this Section shall not extend to any Third
Party Claim which arises out of or relates to any of the following: (w) misuse
of the uWink(TM) System by any of Franchisee's employees, agents, customers or
other invitees or due to the unauthorized physical entry into the Authorized
Location by a third party; (x) modification of any element of the Technology
System by Franchisee or anyone else doing so at Franchisee's request without
Company' prior written consent; (y) the combination of any element of the
Technology System with any third party software or equipment where such
combination is the cause of the third party infringement (unless Company
originates or approves the combination in writing); or (z) use of any part of
the Technology System if infringement would have been avoided by with the
installation or implementation of any Maintenance Release or Upgrade as defined
in this Agreement.
(g) If any element of the Technology System is held or
believed by Company to infringe the rights of a third party, Company may, at
Company's sole option and expense, elect to: (i) modify the Technology System so
that it is non-infringing; (ii) replace the disputed element of the Technology
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System with non-infringing products or services that are functionally equivalent
or superior in performance; (iii) obtain a license for Franchisee to continue to
use the disputed element of the Technology System in accordance with this
Agreement; or (iv) terminate this Agreement.
(h) The rights granted to Franchisee under this Section shall
be Franchisee's sole and exclusive remedy for any infringement by any part of
the uWink(TM) System.
SECTION 20. TECHNOLOGY SYSTEM
SALE OF INITIAL HARDWARE PACKAGE. In consideration for Franchisee's
payment of the Initial Technology Fee and Initial Hardware Fee, Company agrees
to sell to Franchisee, and Franchisee agrees to purchase, the Initial Hardware
Package described in EXHIBIT B on the terms of this Agreement. (a) At Company's
expense, Company shall arrange for the Initial Hardware Package to be
pre-configured with the Software and delivered to, and installed in, the
Authorized Location before the Opening Date; provided, however, Company shall
not be liable to Franchisee for any delay in delivery or installation due to any
event of Force Majeure.
(b) Company will choose the common carrier to deliver the
Initial Hardware Package to the Authorized Location and may designate the method
and route of shipment. Company shall bear all risk of loss in transit until the
common carrier completes delivery to the Authorized Location.
20.2. SUPPORT AND MAINTENANCE.
(a) Company will provide telephone support (by toll call) for
questions or problems with the use of the Technology System during the time
periods and in the manner set forth in the Confidential Manual.
(b) Company shall use reasonable efforts to release bug fixes,
minor modifications, or security patches to the Software (collectively,
"Maintenance Releases"). Company shall determine the method for delivering
Maintenance Releases to Franchisee, which may be accomplished remotely or by
distributing a computer disc.
(c) During the Term, if Company develops upgraded versions of
the Technology System with new or enhanced functionality, materially modifies
the customer interface experience, such as by adding new games or graphics, or
discontinuing existing games or graphics, or replaces outdated Hardware
(collectively, "Upgrades"), and makes the Upgrades generally available to all
owners of uWink(TM) Entertainment Restaurants, Company shall provide the
Upgrades to Franchisee at no additional charge. Nothing in this Section
obligates Company to develop Upgrades. If Company develops Upgrades, Company
shall have sole discretion to test the Upgrades at select uWink(TM)
Entertainment Restaurants before making the Upgrades generally available to all
owners of uWink(TM) Entertainment Restaurants. Furthermore, Company shall have
sole discretion over the timing of the release of any Upgrades and may release
Upgrades to uWink(TM) Entertainment Restaurants in select markets outside of the
market area served by the Authorized Location before releasing the Upgrades to
Franchisee.
(d) At Franchisee's request, Company shall use reasonable
efforts to customize the proprietary games incorporated in the Software to fit
Franchisee's particular purpose with respect to appealing to a particular market
or customer segment involving services outside of normal maintenance and
upgrading. Franchisee shall pay Company for the customization services at
Company's then-current hourly rate published in the Confidential Manual. Company
agrees not to charge Franchisee to customize the Software to include a Spanish
language version of the menu/ordering features for customer use.
(e) Unless installed or implemented remotely by Company,
Franchisee shall install or otherwise implement all Maintenance Releases and
Upgrades in accordance with Company's instructions promptly after Company
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delivers the Maintenance Release or Upgrade to Franchisee. Failure to install or
otherwise implement any Maintenance Release or Upgrade promptly shall constitute
a material breach of this Agreement.
(f) Franchisee understands and agrees that Company's
maintenance duties exclude ordinary wear and tear to the Technology System and
damage or failure due to accident, abuse or misapplication by Franchisee or a
third party. Furthermore, Company shall not be liable to Franchisee for any
liability, costs, expenses, damages or losses that Franchisee may sustain as a
result of problems that occur in the operation of the Technology System not
within Company's reasonable control including, without limitation (i) errors,
failures, or malfunctions due to events of Force Majeure and other outside
factors, including (without limitation) connectivity problems; (ii) unauthorized
modifications to the Technology System; (iii) problems with data on electronic,
optical, and/or magnetic media; or (iv) operator error. Company will not be
obligated to work on any problems that have been previously corrected by Company
and delivered to Franchisee, but not installed by Franchisee, or that are
corrected in the next subsequent Upgrade or Maintenance Release of the
Technology System then offered by Company, but not installed by Franchisee.
Company shall provide maintenance and support services only for the latest
version of the Technology System made available to Franchisee, and Company shall
not be obligated to provide maintenance or support services in connection with
any component of the Technology System for which a Maintenance Release or
Upgrade has been provided by Company but not installed or implemented by
Franchisee.
(g) Franchisee shall provide Company with access to the
Authorized Location and Technology System in order to perform maintenance and
support services. Franchisee understands and agrees that the Software will be
hosted on Franchisee's own servers, which are included in the Hardware, and not
on Company's servers, and that as a result, Company must have remote access to
Franchisee's Authorized Location and Technology System to provide maintenance
and support services. Franchisee must maintain continuous on-line remote access
capability acceptable to Company. Upon request, Franchisee will identify its
personnel who are authorized to request maintenance and support services from
Company. Company shall only be responsible for communicating with Franchisee's
authorized personnel.
20.3. EXPORT RESTRICTIONS. Franchisee agrees not to transfer, export,
re-export, transship, or use, directly or indirectly, any part of the Technology
System, or any direct product of such data, media, or products, in violation of
Applicable Laws, including, without limitation, the U.S. Export Administration
Regulations, unless Franchisee obtains prior written authorization from Company
and the appropriate United States and/or foreign government agency.
Additionally, if the Technology System or its components are identified as
export controlled items under any relevant export law, Franchisee represents and
warrants that Franchisee is not a citizen, or otherwise located within, an
embargoed nation or otherwise prohibited under Applicable Law from receiving the
Technology System or its components.
20.4. LIMITED WARRANTY. Company warrants to Franchisee that, during the
Term, the Technology System shall operate substantially in accordance with the
functional specifications published in the Documentation. This limited warranty
is conditioned upon Franchisee's proper use of the Technology System and each of
its components in strict accordance with this Agreement, the Documentation and
any other instructions provided by Company and shall be null and void if
Franchisee alters or modifies the Technology System or its components, does not
use the Technology System or its components in accordance with this Agreement,
the Documentation and Company's instructions, or uses the Technology System or
its components in connection with any unauthorized hardware or software, or if
the Technology System or its components fail because of any accident, abuse or
misapplication whether or not caused by Franchisee or a third party. Company
does not warrant that operation of the Technology System or its components will
be uninterrupted or error free, or that defects in the Technology System or its
components can be corrected. Franchisee acknowledges that the Technology System
and its components are of such complexity that they may have inherent defects
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and agree that, as Company's sole liability and Franchisee's sole remedy for the
Technology System's or its components' nonconformance with this limited
warranty, Company shall use reasonable efforts to repair or replace the
Technology System or its components so that it performs as expressly warranted
for the remainder of the Term. FRANCHISEE AGREES THAT THE FOREGOING PROVISIONS
OF THIS SECTION STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF COMPANY.
20.5. WARRANTY DISCLAIMER. COMPANY REPRESENTS THAT AS OF THE EFFECTIVE
DATE, TO COMPANY'S KNOWLEDGE, THE TECHNOLOGY SYSTEM DOES NOT INFRINGE ON THE
PATENT, CONTRACT OR COPYRIGHT OF ANY THIRD PARTY. APART FROM THE LIMITED
REPRESENTATION THAT COMPANY IS NOT AWARE OF ANY INFRINGEMENT, COMPANY AND ITS
SUPPLIERS AND LICENSORS HEREBY DISCLAIM ALL IMPLIED WARRANTIES OF SATISFACTORY
QUALITY AND NON-INFRINGEMENT. THE COMPANY'S AGREEMENT TO INDEMNIFY FRANCHISEE
AGAINST CERTAIN INFRINGEMENT CLAIMS, SET FORTH ELSEWHERE IN THIS AGREEMENT,
SHALL NOT BE CONSTRUED AS EXPANDING THE LIMITED REPRESENTATION PROVIDED IN THIS
SECTION OR AS VOIDING OR MODIFYING THE DISCLAIMER OF IMPLIED WARRANTIES OF
NON-INFRINGEMENT SET FORTH IN THIS SECTION. COMPANY AND ITS SUPPLIERS AND
LICENSORS DO NOT REPRESENT OR WARRANT THAT THE TECHNOLOGY SYSTEM OR ANY OF ITS
COMPONENTS PROVIDED UNDER THIS AGREEMENT WILL ASSIST FRANCHISEE IN COMPLYING
WITH ANY DATA PROTECTION LAWS OR REQUIREMENTS (INCLUDING, WITHOUT LIMITATION,
THE UNITED KINGDOM DATA PROTECTION ACT OF 1998), OR THAT THE OPERATION OF THE
TECHNOLOGY SYSTEM OR ANY OF ITS COMPONENTS WILL BE UNINTERRUPTED OR ERROR FREE.
20.6. LIMITATION OF LIABILITY. TO THE MAXIMUM EXTENT ALLOWED UNDER
APPLICABLE LAW, IN NO EVENT WILL COMPANY OR ITS SUPPLIERS OR LICENSORS BE LIABLE
FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE
DAMAGES ARISING OUT OF OR IN CONNECTION WITH FRANCHISEE'S USE OF THE TECHNOLOGY
SYSTEM, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST DATA, LOST PROFITS OR
COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, HOWEVER CAUSED AND UNDER
ANY THEORY OF LIABILITY, WHETHER BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE),
STATUTE OR OTHERWISE, AND WHETHER OR NOT COMPANY WAS OR SHOULD HAVE BEEN AWARE
OR ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE FOREGOING LIMITATIONS SHALL
APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
STATED IN THIS AGREEMENT.
SECTION 21.CONFIDENTIAL MANUAL
21.1. LOAN.
(a) Company will loan Franchisee one copy of its current
Confidential Manual for as long as this Agreement is in effect. The Confidential
Manual is, and at all times shall remain, Company's sole property and shall
promptly be returned to Company upon expiration, termination or an assignment of
this Agreement.
(b) Franchisee shall treat all information contained in the
Confidential Manual as confidential, and shall use all reasonable efforts to
keep the information secret. Franchisee shall not, without Company's prior
written consent, copy, duplicate, record or otherwise reproduce the Confidential
Manual, in whole or in part, or otherwise loan or make it available to any
person not required to have access to its contents in order to carry out his or
her employment functions. To the extent that the Confidential Manual is
furnished in a printed "hard" copy rather than electronically, Franchisee shall
take adequate precautions to ensure that when the Confidential Manual is not in
use by authorized personnel, Franchisee shall keep the Confidential Manual in a
locked receptacle at the Franchise Location and shall only grant authorized
personnel, as defined in the Confidential Manual, access to the key or lock
combination of the receptacle. To the extent that the Confidential Manual is
furnished in electronically or in an equivalent format, Franchisee shall only
share the access password with authorized personnel.
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(c) The Confidential Manual contains both mandatory and
recommended specifications, standards, procedures, rules and other information
pertinent to the uWink(TM) System and Franchisee's obligations under this
Agreement. The Confidential Manual, as modified by Company from time to time, is
an integral part of this Agreement and all provisions now or hereafter contained
in the Confidential Manual or otherwise communicated to Franchisee in writing
are expressly incorporated in this Agreement by this reference and made a part
hereof. Franchisee shall fully comply with all mandatory requirements now or
hereafter included in the Confidential Manual, and understands and agrees that a
breach of any mandatory requirement shall constitute a breach of this Agreement
and grounds for termination.
21.2. UPDATING. Company reserves the right to modify the Confidential
Manual from time to time to reflect changes that it may implement in the
mandatory and recommended specifications, components, standards and operating
procedures of the uWink(TM) System. All revisions will be reflected in written
or electronic supplements to the Confidential Manual or in other written or
electronic communications delivered to Franchisee, and each supplement or
communication shall become effective upon receipt or on the later date specified
by Company . If updates are provided by "hard" copy (as opposed to
electronically or in some comparable format), Franchisee shall insert any
updated pages in its copy of the Confidential Manual upon receipt and remove
superseded pages and return them to Company within 5 days following receipt.
Franchisee shall immediately conform its operations to all revisions in
mandatory specifications, standards, operating procedures and rules prescribed
by Company.
21.3. LOST OR DESTROYED CONFIDENTIAL MANUAL. Franchisee shall promptly
notify Company if any volume or part of its copy of the Confidential Manual is
lost or destroyed for any reason. Provided (i) the loss is not the result of
Franchisee's breach of its duty to keep the contents of the Confidential Manual
confidential, and (ii) Franchisee is not otherwise in default under this
Agreement, Company shall furnish Franchisee with the needed replacement copy or
portion of the current Confidential Manual. Franchisee shall pay Company a
replacement Confidential Manual fee of $250, per volume, plus all shipping
expenses, in full within 10 days following receipt of invoice. If either (i) or
(ii) is not satisfied, Company may terminate this Agreement on account of the
loss or destruction of the Confidential Manual or any portion thereof.
SECTION 22. CONFIDENTIAL INFORMATION
22.1. LIMITATIONS ON USE OF CONFIDENTIAL INFORMATION. Franchisee
acknowledges that Company will disclose Confidential Information to Franchisee
by loaning Franchisee a copy of Confidential Manual, providing other written
instructions and bulletins, arranging for the supply of Proprietary Products,
and otherwise through the performance of Company's obligations and the exercise
of its rights under this Agreement. Franchisee shall acquire no interest in
Confidential Information, other than a license to utilize it in the operation of
the Franchised Business subject to the terms of this Agreement.
(a) Franchisee's use, publication or duplication of
Confidential Information for any purpose not authorized by this Agreement
constitutes an unfair method of competition by Franchisee and, additionally,
grounds for termination of this Agreement.
(b) Franchisee agrees to: (i) confine disclosure of
Confidential Information to those of its management, employees and agents who
require access in order to perform the functions for which they have been hired
or retained; and (ii) observe and implement reasonable procedures prescribed
from time to time by Company to prevent the unauthorized or inadvertent use,
publication or disclosure of Confidential Information including, without
limitation, requiring that any employee with access to Confidential Information,
who are not otherwise required to sign a Confidentiality Agreement, execute
Company's current form of Confidentiality Agreement with Franchisee. Upon
request from Company, Franchisee shall deliver to Company a copy of each
executed Confidentiality Agreement for its records. Company may terminate this
C-22
Agreement if Franchisee, or any person required by this Agreement to execute a
Confidentiality Agreement with Company or Franchisee, breaches the
Confidentiality Agreement. All agreements contained in this Agreement pertaining
to Confidential Information shall survive the expiration, termination or
Franchisee's assignment of this Agreement.
(c) The provisions concerning non-disclosure of Confidential
Information shall not apply if disclosure of Confidential Information is legally
compelled in a judicial or administrative proceeding if Franchisee has used its
reasonable best efforts to provide Company a reasonable opportunity to obtain an
appropriate protective order or other assurance satisfactory to Company of
confidential treatment for the information required to be disclosed.
22.2. ASSIGNMENT OF COPYRIGHTS. Franchisee and Company acknowledge
that, during the Term, Company may authorize Franchisee to use certain works in
operating the Franchised Business for which Company owns a copyright or owns a
license to use a copyrighted work granted by a third party (collectively
referred to as the "Copyrighted Works"). Any Copyrighted Works which Company
permits Franchisee to use pursuant to this Agreement are, and shall remain, part
of the uWink(TM) Intellectual Property and Franchisee shall acquire no interest
in the Copyrighted Works, other than a license to use those Copyrighted Works
that Company designates in the operation of the Franchised Business subject to
the terms of this Agreement.
(a) Franchisee understands and agrees that the Copyrighted
Works may include, without limitation, the Confidential Manual, advertising and
promotional materials supplied by Company, the Technology System, and other
categories of works eligible for protection under federal trademark, patent or
copyright laws that are created by, or for, Company and are designated by
Company for use in connection with operating a uWink(TM) Entertainment
Restaurant.
(b) To the extent Franchisee creates, or arranges to have
created for Franchisee's benefit, any improvement or work eligible for
protection under federal trademark, patent or copyright laws, Franchisee shall
execute, or have the creator execute, all documents necessary to assign all
intellectual property and ownership rights in the improvement or work to
Company. Franchisee understands and agrees that the consideration for the
assignment is the grant of the franchise to Franchisee.
(c) Franchisee understands and agrees that nothing in this
Agreement shall constitute or be construed as Company's consent to Franchisee
modifying, or creating any derivative work based upon, any of the Copyrighted
Works. Franchisee must obtain Company's prior written consent before modifying
or creating, directly or indirectly, any type of derivative work based on any
Copyrighted Works.
SECTION 23. ADVERTISING
Recognizing the value of advertising and the importance of
standardizing advertising to maximize goodwill in the uWink(TM) Licensed Marks,
enhance general consumer awareness of uWink(TM) Entertainment Restaurants, and
promote the Franchised Business, Franchisee agrees as follows:
23.1. UWINK(TM) PROMOTIONAL FUND.
(a) Company shall develop the uWink(TM) Promotional Fund
("Promotional Fund") for the purpose of underwriting expenses associated with
the creation, development and publication of advertising and promotional
programs designed to enhance consumer awareness and identity of the uWink(TM)
Licensed Marks and uWink(TM) Entertainment Restaurants generally for the benefit
of all uWink(TM) Entertainment Restaurants and their owners. Company shall
maintain the Promotional Fund in a separate bank account segregated from the
Company's other funds. Franchisee understands and agrees that the Promotional
Fund is not a trust and Company does not owe Franchisee a fiduciary duty based
on Company's authority to administer the Promotional Fund or for any other
reason.
C-23
(b) Franchisee shall pay to Company, without offset, credit or
deduction of any nature, an Advertising Fee equal to 1% of Franchisee's Gross
Sales, subject to Company's right to increase the Advertising Fee to a maximum
of four percent (4%) of Gross Sales (the "Advertising Fee") effective upon 30
days written notice to Franchisee. The Advertising Fee shall be due and payable
in the manner provided by this Agreement. Company may increase the Advertising
Fee rate by up to 1/2 of one percent (.5%) of Gross Sales in any Calendar Year.
No increase in the Advertising Fee rate shall be imposed before the completion
of 12 Calendar Months after the Opening Date. Company shall deposit all
Advertising Fees into the Promotional Fund.
(c) Company shall use the Promotional Fund to pay costs to
maintain, administer, create and prepare advertising and marketing programs,
public relations and market research. Company will not be restricted with
respect to what, where and how the Promotional Fund will be applied for these
purposes. Company will retain complete sole discretion over the form, content,
time, location, market and choice of media and markets for all advertising and
promotion paid for from the Promotional Fund proceeds. Without limiting the
scope of Company's general authority and sole discretion, Company may use the
Promotional Fund to pay for the cost to (i) create, prepare and produce
advertising and promotional formats, materials and samples including, without
limitation, point of sale materials, advertising slicks and copy, promotional
graphics, brochures, mailers, and authorized gift cards and coupons; (ii)
administer local, regional and national advertising programs, including buying
media space or time, outdoor advertising art and space, direct mail lists, and
electronic listings in print and electronic directories; (iii) maintain
Company's World Wide Web site; (iv) employ advertising, public relations and
media buying agencies; (v) support public relations, market and consumer
research; and (vi) pay expenses directly associated with maintaining and
administering the Promotional Fund, including, without limitation, the cost to
prepare annual accountings, expenses to collect Advertising Fees from delinquent
franchisees, and the cost of conducting the Annual Meeting if Company elects to
hold one.
(i) Company makes no representation that any amount
of the Promotional Fund will be spent in any given geographic region or area,
that monies will be spent on advertising or promotion which is national in
scope, or that monies will be spent in Franchisee's market area in proportion to
Franchisee's contributions to the Promotional Fund.
(ii) Company may (i) collect rebates, credits or
other payments from suppliers based on purchases or sales by Franchisee, and
(ii) condition its approval of a supplier on the supplier's willingness to agree
to make such payments to Company or Company's Affiliates on account of
Franchisee's purchases. Company shall have sole discretion to refund the
supplier payments to Franchisee, contribute the supplier payments to the
Promotional Fund, or retain the supplier payments for Company's own use,
regardless of any designation given to the payments by the supplier. If Company
elects to contribute a supplier payment to the Promotional Fund, the
contribution shall not reduce Franchisee's obligation for Advertising Fees. In
other words, if a particular supplier pays Company a .01% rebate on account of
Franchisee's purchases from the supplier (regardless of whether the supplier
requires Company to deposit the rebate into the Promotional Fund or Company
elects to do so on its own), the amount of the rebate which Company contributes
to the Promotional Fund shall not reduce Franchisee's obligation for Advertising
Fees.
(iii) As long as Franchisee is not in default under
this Agreement, Company shall make marketing, advertising and promotional
formats and sample materials created by the Promotional Fund available to
Franchisee with, or without, additional reasonable charge, in Company's sole
discretion on the same terms which Company offers to other uWink(TM)
Entertainment Restaurant owners and franchisees. Franchisee shall be solely
responsible for all costs to reproduce the formats and materials for its own use
and distribution. In connection with reproduction and use of formats and
materials created by the Promotional Fund, Franchisee shall observe Company's
requirements with respect to protecting Company's rights in the uWink(TM)
Intellectual Property.
C-24
(iv) Company shall prepare an annual accounting of
the Promotional Fund, and will furnish a copy of it to Franchisee upon request.
While Company will attempt to expend Promotional Fund collections on a current
basis, it may recover over-expenditures from subsequent years and may carry
forward under-expenditures. Company may reimburse itself for internal expenses
that it and its Affiliate incur directly associated with maintaining and
administering the Promotional Fund including, without limitation, expenses to
collect contributions and general operating expenses (such as for rent and
salaries in proportion to time devoted to Promotional Fund matters) and for
attorneys fees and other costs related to claims by, or against, the Promotional
Fund; provided, however, the amount that Company pays to itself as reimbursement
for internal expenses incurred in any Calendar Year of the kind described in
this paragraph shall not exceed 15% of the aggregate Advertising Fees actually
collected during that Calendar Year.
(v) Company may, but is not obligated to, loan money
to the Promotional Fund in the event desired expenditures for any period exceed
the balance in the Promotional Fund. Any funds loaned to the Promotional Fund
will be repayable upon demand when funds are available and bear interest at no
more than 2 points over the prime lending rate of Bank of America, its
successor, or, if no longer in operation, another national banking institution
with headquarters in the United States.
(vi) Although Company intends the Promotional Fund to
be of perpetual duration, Company reserves the right to terminate the
Promotional Fund at any time. If there is a balance in the Promotional Fund
after payment of final expenses when Company terminates the Promotional Fund,
Company shall refund part of the balance to all uWink(TM) Entertainment
Restaurant owners and franchisees who paid Advertising Fees for the Accounting
Period before Company announced the Promotional Fund's termination in proportion
to the amount of each operator's payment. Company shall determine the allocation
of any refund in its sole discretion. Company may reinstate the Promotional Fund
on the terms and conditions stated in this Agreement effective upon no less than
30 days written notice to Franchisee.
(d) For each uWink(TM) Entertainment Restaurant that Company
or Company's Affiliates own, Company or Company's Affiliates shall contribute to
the Promotional Fund on the terms and in an amount equal to then-current rate of
contribution set forth in Company's then-current Offering Circular for the sale
of new franchisees. During any time when Company does not have a current
Offering Circular and administers the Promotional Fund, Company shall make
contributions to the Promotional Fund on the terms and at the rate in Company's
last Offering Circular.
23.2. REGIONAL ADVERTISING FEES. At such time as Company determines
that there are a sufficient number of uWink(TM) Entertainment Restaurants
operating in an advertising market that includes the Franchise Location, Company
may establish a Regional Advertising Cooperative that includes all uWink(TM)
Entertainment Restaurants in the advertising market, including the Franchised
Business. Company shall determine the boundaries of the Regional Advertising
Cooperative in its discretion and may modify the boundaries at any time based on
changes in media penetration, marketing zones, demographic considerations and
other factors that Company determines, in the exercise of reasonable business
judgment, are relevant to the effectiveness of advertising directed to consumers
within the advertising market. Among other things, Company shall have authority
to require that one Regional Advertising Cooperative merge with another Regional
Advertising Cooperative servicing an adjacent advertising market or subdivide a
Regional Advertising Cooperative into smaller groupings. In no event will the
Franchised Business be assigned to more than one Regional Advertising
Cooperative.
(a) All advertising created by a Regional Advertising
Cooperative is subject to Company's prior written approval according to the
procedure for Local Advertisements before Franchisee may use, distribute or
publish it.
(b) Franchisee shall pay regional advertising fees of up to 2%
of Gross Sales in any Calendar Month ("Regional Advertising Fees"), unless 65%
of the owners of uWink(TM) Entertainment Restaurants in the Regional Advertising
Cooperative approve an increase or special assessment, in which case Franchisee
shall be bound by the decision.
C-25
(c) Company shall notify Franchisee in writing of the
Franchised Business' assignment to a Regional Advertising Cooperative. The
notice shall specify the initial amount of Regional Advertising Fees payable by
Franchisee, the period and payment date for Regional Advertising Fees, and the
first date when Regional Advertising Fees shall become payable, which shall not
be earlier than 30 days after notice is given.
(d) If Company or any one of Company's Affiliates own a
uWink(TM) Entertainment Restaurant in the advertising market to which the
Franchised Business is assigned, it shall contribute to the Regional Advertising
Cooperative on the same basis as Franchisee.
(e) Company shall provide each Regional Advertising
Cooperative with standard governing and voting rules. Members of the Regional
Advertising Cooperative may modify certain governing and voting rules with
Company's prior approval, but may not modify those rules that establish voting
rights, the duty to pay Regional Advertising Fees, Franchisee's rights or
obligations under this Agreement, or Company's right to approve all advertising
in advance. Franchisee understands that (i) the governing rules shall permit
Regional Advertising Cooperative members to elect their own leadership; (ii) the
Regional Advertising Cooperative shall be responsible for its own administrative
expenses; and (iii) the Regional Advertising Cooperative must assign any rights
in the materials that it creates to Company without compensation. The Regional
Advertising Cooperative shall be responsible for preparing and distributing to
Company and to Regional Advertising Cooperative members quarterly and annual
financial statements meeting Company's financial reporting standards.
(f) Upon no less than 60 days written notice, Company shall
have authority to dissolve the Regional Advertising Cooperative to which the
Franchised Business is assigned, but only simultaneously with Company's
dissolution of all other Regional Advertising Cooperatives then in existence.
23.3. GRAND OPENING ADVERTISING. Franchisee shall spend a minimum of
$20,000 on grand opening promotional activities that publicizes the opening of
the Franchised Business and creates consumer awareness of the uWink(TM) Licensed
Marks. Company shall count towards the minimum grand opening advertising budget
sums that Franchisee documents that it spends for Local Advertising and related
promotional activities within the first 30 days after the Opening Date,
excluding Franchisee's normal operating expenses including, without limitation,
general and administrative expenses and food costs or the value of any price
discounts offered to the public. Franchisee shall substantiate its grand opening
advertising expenditures upon request. All grand opening advertising activities
shall constitute Local Advertising, subject to Company's prior written consent.
Company shall offer Franchisee specific advice and advertising strategies for
Franchisee's grand opening advertising program.
23.4. LOCAL ADVERTISING.
(a) Starting with the second Calendar Month after the Opening
Date and continuing for the remainder of the Term, Franchisee shall spend,
without offset, credit or deduction of any nature, an amount equal to one
percent (1.0%) of Franchisee's Gross Sales on advertising and promotion in
Franchisee's market to publicize the Franchised Business ("Local Advertising
Expenditures"). Franchisee shall substantiate its Local Advertising expenditures
upon request using Company's forms.
(i) Company shall monitor Franchisee's compliance
with the obligation for Local Advertising each Calendar Quarter recognizing
that, from one month to the next, Franchisee's Local Advertising Expenditures
may exceed or be less than one percent (1.0%) of Franchisee's Gross Sales, but
should average 1% over the course of each Calendar Quarter. The parties agree
that if, at the end of any given Calendar Year, Franchisee has not spent one
percent (1.0%) of Franchisee's Gross Sales on Local Advertising Expenditures,
C-26
then, in addition to, and not in lieu of, Company's right to declare Franchisee
to be in breach of this Agreement, Franchisee shall promptly pay the difference,
plus an amount equal to 25% of the difference, to Company, which funds shall be
deposited into the Promotional Fund.
(ii) Company shall credit Franchisee's payments for
white and yellow page paper and electronic listings towards the Local
Advertising Expenditure. Company shall also credit Franchisee's payments of
Regional Advertising Fees, if any, not to exceed .5% (one-half of one percent)
of Gross Sales, towards the Local Advertising Expenditure. However, amounts that
Franchisee spends on grand opening advertising or pays as Advertising Fees shall
not be credited toward the Local Advertising Expenditure.
(b) Franchisee shall comply with the written guidelines for
Local Advertising set forth in the Confidential Manual. Franchisee understands
that Company's written guidelines for Local Advertising may include (without
limitation) the requirement that Local Advertising contain notices of Company's
website domain name or similar information indicating the availability of
uWink(TM) Entertainment Restaurant franchises from Company in the manner that
Company designates. All Local Advertising must be clear, factual and not
misleading and conform to both the highest standards of ethical advertising and
marketing and Company's written guidelines and other marketing policies that
Company prescribes from time to time.
(c) Franchisee shall not use, disseminate, broadcast or
publish any Local Advertising without first obtaining Company's written approval
of the copy, proposed media, method of distribution and marketing plan for the
proposed Local Advertising. To apply for Company's approval of a proposed Local
Advertising, Franchisee shall submit a true and correct copy, sample or
transcript of the proposed Local Advertising, together with a written business
plan which explains the proposed media plan, promotional event or other intended
use of the proposed Local Advertising. Company shall have 20 days from the date
of receipt in which to approve or disapprove of the submitted materials. If
written approval is not received by the end of 20 days, Company shall be deemed
to have rejected the proposed Local Advertising. If written approval is given on
or before the end of 20 days, Franchisee may use the proposed Local Advertising,
but only in the exact form submitted to Company.
(d) Franchisee shall have the right to determine the prices at
which Franchisee sells all authorized goods and services. Submission of a
proposed Local Advertising to Company for approval shall not be for purposes of
allowing Company to approve Franchisee's prices, over which Company shall have
no control.
(e) At a minimum, Franchisee shall maintain a white page
listing for the Franchised Business in the form approved by Company, in one or
more print and online telephone directories which Company designates, the cost
of which shall be credited to the minimum Local Advertising Expenditure for the
Calendar Month in which payment is made. All telephone directory advertising
that Franchisee chooses to engage in shall be considered Local Advertising
subject to Company's prior approval, but only the cost of the designated white
page listing or listings shall be credited to the minimum Local Advertising
Expenditure.
(f) At Franchisee's expense, Franchisee shall immediately
remove from circulation and cease using any previously approved Local
Advertising if Company determines, in its sole discretion, that continued
circulation or use may, or will, damage the integrity or reputation of the
uWink(TM) Licensed Marks, is otherwise necessary to protect the goodwill of the
uWink(TM) System and Company's and Company's Affiliates' reasonable business
interests, or otherwise violates this Agreement.
SECTION 24. PAYMENTS
24.1. INITIAL FRANCHISE FEE. In consideration of the franchise and
license awarded to Franchisee pursuant to this Agreement, Franchisee shall pay
to Company in full upon execution of this Agreement an initial franchise fee
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(the "Initial Franchise Fee") in the amount shown below depending on the number
of Franchise Agreements which the parties have entered into before the Effective
Date (including this Agreement), reduced by (i) any deposit previously paid by
Franchisee before the Effective Date for the rights awarded by this Agreement;
and/or (ii) credit for Development Fees on the terms of any Area Development
Agreement entered into by parties before, or simultaneously with, this
Agreement. The Initial Franchise Fee shall be fully earned when paid and no
portion of it is refundable under any circumstance.
---------------------------------------------------------- ---------------------------------------------------------
Number of Franchise Agreements Amount (less any deposit or credits for Development
Fees previously paid by Franchisee)
---------------------------------------------------------- ---------------------------------------------------------
If this Agreement is the first Franchise Agreement $0
entered into by the parties
---------------------------------------------------------- ---------------------------------------------------------
If this Agreement is the second or subsequent $40,000 per Franchise Agreement
Franchise Agreement entered into by the Parties
---------------------------------------------------------- ---------------------------------------------------------
24.2. INITIAL TECHNOLOGY FEE. In consideration of the franchise and
license awarded to Franchisee pursuant to this Agreement, upon execution of this
Agreement, Franchisee shall pay an Initial Technology Fee in the amount shown
below for the right, during the Term, to use the Software that is pre-configured
and bundled with the Hardware comprising the Initial Hardware Package on the
terms of this Agreement. The Initial Technology Fee is non-refundable unless (i)
this Agreement terminates for any reason before Franchisee signs the Lease for
the Authorized Location, and (ii) Franchisee executes and delivers a mutual
general release, in form satisfactory to Company, of any and all claims against
Company, Company's Affiliates and their respective officers, directors,
shareholders, employees and agents. The Initial Technology Fee is as follows:
------------------------------------------------------------ ---------------------------------------------------------
Number of Franchise Agreements Initial Technology Fee
------------------------------------------------------------ ---------------------------------------------------------
If this Agreement is the first Franchise Agreement $50,000
entered into by the parties
------------------------------------------------------------ ---------------------------------------------------------
If this Agreement is the second or subsequent Franchise $100,000 per Franchise Agreement
Agreement entered into by the Parties
------------------------------------------------------------ ---------------------------------------------------------
24.3. INITIAL HARDWARE FEE.
(a) In consideration of the franchise and license awarded to
Franchisee pursuant to this Agreement and the sale, delivery and installation of
the Initial Hardware Package on the terms of this Agreement, Franchisee shall
pay Company a Initial Hardware Fee computed in accordance with this Section. The
Initial Hardware Fee shall be computed based upon the actual number of dining
seats that Franchisee installs in the Franchise Location on or before the
Opening Date. Franchisee shall pay the Initial Hardware Fee in three
non-refundable installments as follows:
---------------------------------------------------------- -----------------------------------------------------------
50% of the Initial Hardware Fee based upon the number Within 30 days after Franchisee signs the Lease for the
of dining seats specified in the Site Approval Notice Authorized Location
---------------------------------------------------------- -----------------------------------------------------------
25% of the actual Initial Hardware Fee Upon delivery of the Initial Hardware Package
---------------------------------------------------------- -----------------------------------------------------------
Balance of the actual Initial Hardware Fee Within 30 days after the Opening Date
---------------------------------------------------------- -----------------------------------------------------------
(b) If this is Agreement is the first Franchise Agreement
entered into by the parties, Company agrees to discount the Initial Hardware Fee
by 20%. This discount shall not apply to any later Franchise Agreements entered
into by the parties, nor shall it change the time for when each non-refundable
installment is due.
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(c) Company's Site Approval Notice shall indicate the minimum
number of dining seats that Company will require for operation of a uWink(TM)
Entertainment Restaurant at the approved site so that Franchisee may decide if
it wants to proceed with developing that site or propose another site.
(d) The fact that Franchisee may, with Company's approval,
remodel the Authorized Location during the Term and reduce the number of dining
seats below the number used to calculate the Initial Hardware Fee, shall not
entitle Franchisee to a refund of any portion of the Initial Hardware Fee.
(e) If Franchisee desires to add additional dining seats
during the Term, Franchisee shall pay an additional Initial Hardware Fee for the
additional dining seats in full upon delivery according to the rates that
Company then-charges to new franchisees or otherwise then publishes in the
Confidential Manual depending on the specific additional configuration and
equipment and other components which Company determines Franchisee will require
in connection with adding additional dining seats.
24.4. CONTINUING FEES: In consideration of the franchise and license
awarded to Franchisee, beginning on the Opening Date and for the remainder of
the Term, Franchisee shall pay to Company the following Continuing Fees, without
offset, credit or deduction of any nature, the following Continuing Fees, each
of which shall be due and payable on the 10th day of each Calendar Month after
the Opening Date based upon the Franchised Business' aggregate Gross Sales
during the prior Calendar Month, except as noted below. Company may change the
frequency of payment of Continuing Fees at any time upon 30 days prior written
notice. Franchisee shall pay Continuing Fees by automatic bank debit in
accordance with Company's current electronic funds transfer procedures described
in this Agreement:
(a) A Royalty Fee equal to 4% of Gross Sales.
(b) A Technology License Fee of 2% of Gross Sales.
(c) An Advertising Fee of 1% of Gross Sales, subject to
Company's right to increase the Advertising Fee and the additional terms set
forth in this Agreement.
(d) A Regional Advertising Fee of up to 2% of Gross Sales if
Company assigns Franchisee to a Regional Advertising Cooperative, subject to
adjustment by vote of the members and the additional terms set forth in this
Agreement.
24.5. LATE CHARGE. If Franchisee fails to pay any amount due to Company
under this Agreement by the date payment is due, Franchisee shall additionally
be obligated to pay, as a late charge, the product of the total amount past due
multiplied by 1.5% per Calendar Month (but not to exceed the maximum legal rate
of interest then permitted under Applicable Law) calculated starting on the date
payment was due and continuing until the entire sum and late charge is paid in
full. Franchisee understands and agrees that the late charge is not an agreement
by Company to accept any payment after the date payment is due or a commitment
by Company to extend credit to, or otherwise finance, the Franchised Business.
Franchisee's failure to pay all amounts when due shall constitute grounds for
termination of this Agreement in accordance with the requirements of this
Agreement notwithstanding Franchisee's obligation to pay a late charge. The
parties understand that Company's right to terminate Franchisee based upon
Franchisee's failure to pay all amounts when due shall require that Company give
Franchisee written notice and a right to cure as provided in Section
XVII.B.1.b., except that no right to cure shall be given if termination for
failure to pay is based on the grounds set forth in Section XVII.B.1.k.
24.6. APPLICATION OF CONTINUING FEES AND OTHER PAYMENTS.
Notwithstanding any designation given to a payment by Franchisee, Company shall
have the sole discretion to apply any payments from Franchisee to any past due
indebtedness owed to Company or Company's Affiliates in the amounts and in such
order as Company shall determine.
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SECTION 25. ACCOUNTING AND RECORDS
25.1. MAINTENANCE OF BUSINESS RECORDS. During the Term, Franchisee
shall maintain full, complete and accurate business records in accordance with
the standards stated in the Confidential Manual or otherwise prescribed by
Company in writing. Franchisee shall keep all business records and required
business equipment and business software systems together at the place where
notices to Franchisee are required to be sent, unless Company grants Franchisee
permission to keep its business records elsewhere. All business records that
this Agreement requires Franchisee to maintain shall be retained by Franchisee
for a minimum of 5 years during, and following, the expiration, termination, or
Franchisee's assignment, of this Agreement.
25.2. REPORTS.
(a) After the Opening Date, Franchisee shall submit to Company
on or before the 10th day of each Calendar Month financial, operational and
statistical reports and information as Company may require to (i) provide
Franchisee with consultation and advice in accordance with this Agreement; (ii)
monitor Franchisee's performance under this Agreement and Franchisee's
purchases, revenue, operating costs, expenses and profitability; (iii) develop
chain-wide statistics; (iv) develop new operating procedures; (v) develop new
Proprietary Products, remove unsuccessful authorized products, including
unsuccessful Proprietary Products, and improve and enhance Proprietary Products;
and (vi) implement changes in the uWink(TM) System to respond to competitive and
marketplace changes. Without limiting the types of reports that Company may
require, Franchisee shall prepare and submit the following financial reports in
accordance with the accounting, recordkeeping and bookkeeping procedures and in
the format prescribed in the Confidential Manual:
(i) Financial reports substantiating and documenting
actual Gross Sales of the Franchised Business, including a profit and loss
statement and balance sheet showing the results of operation during the prior
Calendar Month just ended and cumulative information for the Calendar
Year-to-date, together with such additional information as Company may request.
All financial reports shall follow the format and accounting guidelines
prescribed by Company in the Confidential Manual and submitted to Company on or
before the 10th day of each Calendar Month based upon the Franchised Business'
Gross Sales during the prior Calendar Month.
(ii) On or before February 15 of each Calendar Year
during the Term, a profit and loss statement and balance sheet as of the last
day of the Calendar Year.
(b) Nothing herein shall prevent Company from electronically
polling Franchisee's point of sale cash collection system and other financial
records daily, or more frequently, by electronic or other remote means and
Franchisee hereby grants Company authority to do so. Franchisee shall observe
the mandatory requirements set forth in the Manual to enable Company's remote
access to Franchisee's operating records.
(c) Franchisee shall promptly comply with Company's requests
for additional information. This obligation includes, without limitation, (i)
supplying Company with an exact copy of all sales and income tax returns
relating to the Franchised Business at the time Franchisee files them with
governmental authorities or within 10 days after Company requests a copy, and
(ii) complying with Company's inventory control procedures to enable Company to
evaluate food, beverage and other operating costs.
(d) All reports submitted to Company pursuant to this
Agreement shall be executed by Franchisee or a duly authorized representative of
Franchisee, certifying that the information is true and correct and that no
material fact has been omitted which is necessary in order to make the
information disclosed not misleading.
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25.3. RECORDING OF TRANSACTIONS. Franchisee shall track and record all
sales and transactions with customers of the Franchised Business utilizing the
computer and cash control systems prescribed by Company in the Confidential
Manual, which Company may modify in its sole discretion from time to time.
Franchisee shall utilize designated Software programs to record business
activities, sales and inventories and prepare operating and financial reports
and records in accordance with the requirements of the Confidential Manual.
Except for Company's duty to provide Upgrades, Maintenance Releases and the
other support services for the Technology System as described in this Agreement,
exclusive of ordinary wear and tear, Franchisee is solely responsible for
maintaining and upgrading all other computer equipment and software that
Franchisee uses to record business activities, sales and inventories and prepare
operating and financial reports and records in accordance with the requirements
of the Confidential Manual, at Franchisee's sole expense.
25.4. AUDIT RIGHTS.
(a) Company and its representatives shall have full access to
examine, audit and copy Franchisee's business records relating to the Franchised
Business, including Franchisee's federal and state income tax returns and sales
tax returns, bank statements (including deposit slips and canceled checks), data
stored on Franchisee's computer terminal, point-of-sale systems or on disk, and
any other documents and information that Company reasonably requests in order to
verify Gross Sales and the other business activities of the Franchised Business
required to be reported to Company.
(b) Company may conduct its examination and audit in
Franchisee's business office where the records are kept or request that copies
of documents be made by Franchisee and sent to Company or to its representatives
for examination and audit at a location that Company specifies. Franchisee
understands and agrees that Company or its representatives may also access
Franchisee's business records kept on disk or stored on Franchisee's computers
at any time, without notice, by remote electronic means and shall cooperate with
the examination by enabling electronic and remote connections.
(c) Additionally, Company may, at its expense, have an audit
made at any time of Franchisee's business records by an independent certified
public accountant chosen by Company. Company may terminate this Agreement if
Company discovers that Franchisee has reported materially false information
about the Franchised Business to Company. If any examination or audit conducted
by Company reveals an understatement in the Gross Sales or other information
reported by Franchisee to Company, then Franchisee shall, within 10 days after
notice from Company, pay to Company any additional Royalty Fees and Advertising
Fees which are owed, together with interest and late charges as provided in this
Agreement. Additionally, Company may require that, until further notice from
Company, all future reports and financial statements submitted by Franchisee
pursuant to this Agreement be prepared by an independent certified public
accountant, or such other independent accountant acceptable to Company.
(d) If Company discovers that Franchisee has underreported
Gross Sales by an amount which is 2% or more of the actual Gross Sales for the
period, Franchisee shall also pay and reimburse Company for all expenses that
Company incurs connected with Company's examination and audit, including, but
not limited to, Company's accounting and legal fees and travel expenses.
(e) If 2 or more audits or examinations of Franchisee's
business records conducted within any 24 Calendar Month period disclose that
Franchisee has underreported Gross Sales by an amount which is 2% or more of the
actual Gross Sales for the period, then the second understatement shall be
conclusively presumed to have been intentional for purposes of this Agreement.
In addition to the consequences identified in this Agreement arising because of
the understatement, Company may terminate this Agreement upon discovery of the
second understatement based upon Franchisee's intentional underreporting of
Gross Sales.
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25.5. ELECTRONIC PAYMENT SYSTEMS.
(a) All required payments to Company and any of Company's
Affiliates must be made through a designated payment system using pre-authorized
transfers from Franchisee's designated operating account through the use of
electronic fund transfers, or, if Company requests, by special checks or other
equivalent payment system that Company designates in the Confidential Manual or
otherwise in writing. Franchisee shall give its financial institution
instructions in a form provided or approved by Company and obtain the financial
institution's agreement to follow the instructions to effectuate the electronic
payment system meeting Company's requirements. Without Company's prior written
consent, the financial institution's agreement may not be withdrawn, modified or
cancelled. Franchisee must also execute any other documents or agreements
relating to establishing or maintaining an electronic payment system as Company
or the financial institution may reasonably request from time to time.
Franchisee understands that Company may modify the electronic payment system at
any time upon written notice and agrees to promptly conform to the changes at
its sole expense, which may require changes to the financial institution's
agreement.
(b) Franchisee shall deposit all revenue and income from the
Franchised Business into the operating account accessed by the electronic
payment system by no later than the close of business on the day after receipt.
Franchisee shall maintain sufficient funds in the designated operating account
to ensure full payment of all Continuing Fees required by this Agreement based
upon Gross Sales of the Franchised Business, interest and all other obligations
payable to Company, Company's Affiliates and third parties when due. In the
event a payment cannot be made due to insufficient funds in Franchisee's
operating account, Company may, in its sole discretion or election, declare a
breach of this Agreement in which case Company may (i) terminate this Agreement
in accordance with the procedures for termination, or (ii) require that
Franchisee direct its financial institution to send Company a monthly or
periodic statement showing all account activity at the same time that it sends
such statements to Franchisee or give Company electronic access to Franchisee's
account activity if the financial institution makes electronic access available
to its account holders. The parties understand that Company's right to terminate
Franchisee based upon Franchisee's failure to pay all amounts when due shall
require that Company give Franchisee written notice and a right to cure as
provided in Section XVII.B.1.b., except that no right to cure shall be given if
termination for failure to pay is based on the grounds set forth in Section
XVII.B.1.k.
(c) Franchisee understands and agrees that its failure to
report Gross Sales for any period will prevent Company from debiting
Franchisee's operating account with the appropriate amount due to Company. In
that event, Franchisee authorizes Company to debit its operating account for
120% of the last payment of the particular Continuing Fee paid to Company
(whether by debit or otherwise) together with the late fees and interest
permitted by this Agreement. Unless Franchisee notifies Company in writing
within 10 days after Company debits Franchisee's operating account of an error
in the amount of the Royalty Fees and Promotional Fund Fees which Company debits
for any Accounting Period, Franchisee shall be barred from challenging the
amount so debited at a later date. However, if Company discovers that the
amounts which Company debits from Franchisee's operating account are less than
the amounts actually due to Company based on the Franchised Business' actual
Gross Sales for the relevant Accounting Period, Company may immediately debit
Franchisee's operating account for the balance. Company agrees that if the
amounts which Company debits from Franchisee's operating account exceed the
amounts actually due to Company for the relevant Accounting Period, Company will
credit the excess to the next payment of Royalty Fees and Promotional Fund Fees
due from Franchisee. Nothing in this Section is intended to excuse Franchisee's
obligation to report Gross Sales for any Accounting Period in a timely and
accurate fashion.
(d) Franchisee shall bear all costs to establish and maintain
the required electronic payment system meeting Company's requirements and all
fees and charges resulting from insufficient funds being in Franchisee's bank
accounts at the time funds are withdrawn to pay obligations owed to Company or
Company's Affiliates. The duty to maintain an electronic payment system shall
not change the date on which payments are due under this Agreement.
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SECTION 26. STANDARDS OF QUALITY AND PERFORMANCE
26.1. STRICT AND PUNCTUAL PERFORMANCE. Franchisee understands and
agrees that its strict and punctual performance of all obligations set forth in
this Agreement, the Confidential Manual or otherwise communicated to Franchisee
in writing is a condition of the franchise granted to Franchisee. Without
Company's prior written consent, Franchisee shall not offer for sale or transfer
at public or private auction any of the individual assets of the Franchised
Business. Franchisee operation of any type of restaurant, bar or tavern during
or after the Term that simulates Company's trade dress or operating methods, or
failure to abide by Company's standards of quality and performance shall not
only constitute a breach of this Agreement, but infringement of the uWink(TM)
Intellectual Property.
26.2. PROPRIETARY PRODUCTS.
(a) Franchisee shall (i) purchase, lease or license the
particular Proprietary Products that Company designates and introduces into the
uWink(TM) System from time to time only from the suppliers that Company
specifies, which may include, or be limited to, Company and Company's
Affiliates, and (ii) use the Proprietary Products only in the manner that
Company authorizes and for no other purpose.
(b) Franchisee understands and agrees that Company may add new
products and delete existing products from the items that Company identifies as
Proprietary Products and change the specifications, features, methods of use,
formula, recipes, ingredients, designations, price and other features of any
Proprietary Products as frequently as Company deems necessary in its sole
discretion. Company may withdraw its designation of a particular item as a
Proprietary Product at any time if Company, in its sole discretion, determines
that doing so is in the best interests of Company or the uWink(TM) System.
Franchisee shall conform to all changes pertaining to Proprietary Products
promptly following written notice from Company unless Company's written notice
specifies a later implementation date. If Company withdraws its approval of any
Proprietary Products that constitute inventory sold to the public, Company shall
allow Franchisee a reasonable amount of time to deplete its existing inventory
to avoid waste except when Company withdraws its approval for reasons relating
to public health or safety, in which case (i) Franchisee shall cease using or
selling the Proprietary Products identified in Company's notice immediately or
by the date indicated in Company's notice, and (ii) if Company actually sold the
Proprietary Products to Franchisee that Company withdraws for public health or
safety reasons, Company shall reimburse Franchisee for Franchisee's costs to buy
the Proprietary Products in question.
(c) Nothing in this Agreement shall obligate Company to reveal
the specifications, features, formulas, recipes, ingredients, or other
non-public information regarding Proprietary Products or information regarding
Company's relationship with third party suppliers of Proprietary Products, all
of which Franchisee understands and agrees constitute Confidential Information.
(d) Franchisee shall maintain sufficient quantities of
Collateral Logo Merchandise in stock at the Franchise Location in order to meet
reasonably anticipated consumer demand and avoid shortages.
26.3. NON-PROPRIETARY PRODUCTS AND ALTERNATIVE SUPPLIERS.
(a) Company shall designate all Non-Proprietary Products which
Franchisee may, or must, use, offer, sell or promote in operating the Franchised
Business by brand name or other means of identification in the Confidential
Manual or otherwise in writing. If any Non-Proprietary Products constitute
inventory sold to the public, or ingredients or raw materials used to prepare
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foods or beverages sold to the public, Franchisee shall maintain sufficient
quantities of the Non-Proprietary Products in stock at the Franchise Location in
order to meet reasonably anticipated consumer demand.
(b) Franchisee shall purchase or lease Non-Proprietary
Products meeting Company's specifications only from suppliers recommended or
approved by Company, which Company may revise in its sole discretion at any
time. All changes in specifications for Non-Proprietary Products, or to the list
of approved suppliers, shall be communicated to Franchisee by written
supplements to the Confidential Manual or otherwise in writing. Specification
changes to Non-Proprietary Products may include replacing a Non-Proprietary
Product with a Proprietary Product that performs or satisfies the same or
similar function or purpose or adding, deleting or changing a particular brand
name. Franchisee shall not place a new order for any Non-Proprietary Products
with a supplier after receiving written notice of changes in the Non-Proprietary
Products' specifications or that Company's approval of the supplier has been
withdrawn or revoked unless the supplier complies with Company's requirements.
(c) If Franchisee desires to offer for sale or use at the
Franchised Business any item which does not, at that time, meet Company's
specifications for Non-Proprietary Products, or desires to purchase
Non-Proprietary Products from a supplier not on Company's approved supplier
list, Franchisee shall submit a written request to Company identifying the
proposed item or supplier, together with (i) samples of the item for examination
and/or testing so that Company may evaluate if the item meets its specifications
and quality standards, and/or (ii) information supporting the proposed
supplier's financial capability, business reputation, delivery performance and
credit rating. Company currently charges a testing fee of $500 per alternative
product, service or supplier to cover its direct costs to approve an alternative
product, service or supplier. Franchisee's payment of the testing fee shall be a
condition to obtaining approval to offer for sale, or use, an item or buy from a
supplier not previously approved by Company.
(i) Company will notify Franchisee in writing within
30 days after all requested information and required testing fee is received and
inspection or testing is completed if it approves the proposed item and/or
supplier. Company's failure to timely respond shall constitute its approval.
Each supplier designated or approved by Company must comply with Company's usual
and customary requirements regarding insurance, indemnification and
non-disclosure.
(ii) Franchisee understands and agrees that it is
generally advantageous to the uWink(TM) System to limit the number of suppliers
of certain Non-Proprietary Products in any given market area and that, among the
factors Company may consider in deciding whether to approve a proposed supplier,
is the effect its approval may have on the ability of Company and its
franchisees to obtain the lowest prices and on the quality and uniformity of
Non-Proprietary Products used or sold from uWink(TM) Entertainment Restaurants.
(iii) At any time, Company may re-inspect the
facilities of an approved supplier and revoke its approval of a supplier or item
if Company, in Company's sole discretion, Company determines that doing so is in
the best interests of Company or the uWink(TM) System. Revocation shall be
effective immediately upon written notice or by the date specified in Company's
written notice; provided, however, that to the extent any Non-Proprietary
Products that are revoked constitute inventory sold to the public, Company shall
allow Franchisee a reasonable time to deplete its existing inventory, not to
exceed 60 days. Following receipt of Company's written revocation notice,
Franchisee shall not place any new orders for the Non-Proprietary Product or
with the supplier.
(iv) Franchisee understands and agrees that Company's
recommendation or approval of a supplier does not constitute a representation or
warranty of the supplier's ability to meet Franchisee's purchasing requirements
nor of the fitness or merchantability of the Non-Proprietary Products sold by
the supplier. Franchisee understands and agrees that its sole remedy in the
event of any shortages, delays or defects in the Non- Proprietary Products
purchased shall be against the manufacturer or supplier of the Non-Proprietary
Products, and not against Company or Company's Affiliates.
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(v) While Company will use its reasonable best
efforts to identify more than one recommended supplier per category of
Non-Proprietary Products and to secure favorable pricing terms from third party
suppliers whom Company recommends, Company makes no representation or warranty
that the prices of Non-Proprietary Products offered for sale by recommended
suppliers will be the lowest prices available for the same Non-Proprietary
Products meeting its specifications.
26.4. PURCHASES FROM COMPANY, COMPANY'S AFFILIATES OR RECOMMENDED
SUPPLIERS.
(a) If Company or Company's Affiliate is designated as the
supplier of Proprietary Products or as a recommended supplier of Non-Proprietary
Products, Franchisee understands and agrees that Company and Company's
Affiliates, as supplier, shall have sole discretion to establish and change
prices and other terms of sale, shipment and delivery, which shall be stated on
their invoice or purchase order forms, in the Confidential Manual or
communicated to Franchisee by other means; provided, however, the prices that
Franchisee shall pay shall be the same as the prices charged to similarly
situated franchisees. Company will use its reasonable best efforts to source
Proprietary Products with suppliers so that Company can price Proprietary
Products favorably, but Franchisee understands that Company and any Affiliate of
Company may receive a profit from the sale of Proprietary Products or
Non-Proprietary Products to Franchisee.
(b) Company or Company's Affiliate, as supplier, shall use
reasonable commercial efforts to fill and ship Franchisee's orders for
Proprietary Products reasonable promptly, but shall not be (i) liable to
Franchisee for delays or shortages in the supply of Proprietary Products that
they elect to sell, lease or license to Franchisee due to causes beyond their
control; or (ii) obligated to fill or ship any orders to Franchisee if
Franchisee is in breach of any obligation under this Agreement, or after the
Effective Date of Termination or Expiration of this Agreement. At any time,
Company or Company's Affiliates, as supplier, may discontinue the sale of any
Proprietary Products or Non-Proprietary Products for any reason on a regional or
national basis without prior notice to Franchisee and thereby discontinue the
sale of such items to Franchisee..
26.5. IMPROVEMENTS TO UWINK(TM) SYSTEM GENERALLY. With the exception of
Maintenance Releases and Upgrades to the Technology System which Company will
furnish on the terms of this Agreement at no cost to Franchisee beyond the
Technology License Fee, Franchisee understands that Company may make general
improvements from time to time to Proprietary Products, Non-Proprietary
Products, mandatory menu items, entertainment services or other mandatory
features of the uWink(TM) System that may necessitate that Franchisee make
capital expenditures during the Term in amounts that Company cannot forecast.
Franchisee understands and agrees that Company has no ability to identify with
specificity the nature of these future general improvements or their expected
cost and accepts the risk that future general improvements may be imposed that
will require significant capital expenditures in an amount that is unknown on
the Effective Date. Franchisee agrees to adopt all material changes that
Company's may impose during the Term in the specifications for mandatory
components of the uWink(TM) System at Franchisee's sole expense reasonably
promptly after receiving written notice of the change. In evaluating whether to
impose new mandatory changes, Company shall consider the overall benefits which
may result from improving operating efficiencies and the competitive position of
the uWink(TM) chain as a whole and the additional cost of the mandatory change
in light of previously imposed mandatory improvements.
26.6. STANDARDS OF SERVICE. Franchisee shall (i) offer for sale, and
sell, only the specific foods, beverages, Proprietary Products, Non-Proprietary
Products, digital and other entertainment services, and Collateral Logo
Merchandise designated by Company; (ii) label and identify all items offered for
sale by the specific name designation given to them by Company; (iii) use only
the equipment, supplies, utensils, materials, signs, menu boards, order taking
and delivery services prescribed by Company or which conform to Company's
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current specifications and standards; (iv) adhere to Company's business
operating methods, instructions for using the Technology System and delivering
and playing games and other entertainment, instructions for storing, handling,
preparing, serving and delivering foods and beverages, requirements for public
safety, guidelines for Local Advertising, and specifications for reproducing the
uWink(TM) Licensed Marks; (v) adhere to Company's instructions regarding signs,
awnings, lighting and security; (vi) utilize the specific point of sale cash
collection system specified in the Confidential Manual or otherwise by Company
in writing; and (vii) operate the Franchised Business in accordance with
Company's inventory, restocking, and customer service standards and
specifications. All specifications shall be set forth in the Confidential Manual
or otherwise communicated to Franchisee and may be revised by Company as
frequently as Company deems necessary in its sole discretion to promote the
uWink(TM) System and respond to competitive and marketplace changes.
(a) Franchisee understands and agrees that (i) Company's
authorized menu and menu formats may include, in Company's sole discretion,
requirements concerning organization, graphics, use of brand names and other
menu or product descriptions, illustrations and other design and content
features; (ii) Company may vary the menu, menu format, descriptions and other
designations depending on market size, geographic region, restaurant size and
other factors in Company's sole discretion; and (iii) Company may implement
changes in (among other things) the menu, menu formats, order taking and
delivery systems, entertainment systems and services and authorize tests and
special promotions of new foods, beverages, entertainment services and
Collateral Logo Merchandise at selected uWink(TM) Entertainment Restaurants or
within selected regions, all in Company's sole discretion. Company may, from
time to time, authorize Franchisee to test new entertainment systems, specific
menu items, recipes, goods or other services and Franchisee agrees to cooperate
in any test marketing programs in compliance with Company's guidelines without
reimbursement or compensation of any kind.
(b) Franchisee shall, at its sole expense, conform to all
changes implemented by Company to Company's standards of service immediately
upon written notice from Company unless Company's written notice specifies a
later implementation date. Franchisee shall not offer for sale or sell any other
kind of products, merchandise or services, or otherwise deviate from Company's
current operating standards or specifications for services, products or
merchandise, except with Company's prior written consent.
(c) Franchisee shall operate the Franchised Business on all of
the days and during the hours prescribed in the Confidential Manual, unless
Company's prior written approval of different days or hours is obtained or
unless prohibited by the Lease. Before the Opening Date, Franchisee shall advise
Company of the Franchised Business' operating hours and promptly notify Company
of any changes in its operating hours required by the Lease. Franchisee shall
prominently disclose its operating hours to the public in the manner required by
the Confidential Manual, and shall be open and fully prepared to conduct
business during all posted operating hours.
(d) Franchisee shall, at its sole expense maintain (i) an
active e-mail account and e-mail address with an established internet service
provider, keep Company informed of its current e-mail address and manage its
e-mail account so that it does not become full or otherwise incapable of
accepting new messages, and (ii) an electronic data exchange service designated
by Company to enable Company to remotely retrieve sales, inventory and other
operating data for the Franchised Business as frequently as Company deems
necessary.
(e) Franchisee shall not install or maintain on the Franchise
Location any newspaper racks, pay-to-play video games, ATM machines, juke boxes,
other gaming machines, vending machines rides or other similar devices except
with Company's prior written consent. Franchisee shall not display any
"for-sale" signs or other words indicating or implying that the Franchise
Business is for sale or that Franchisee is seeking or desires any form or type
of Event of Transfer.
26.7. OPERATING EXPENSES. Franchisee shall pay all of the operating
expenses of the Franchised Business in a timely manner and understands and
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agrees that its failure to do so could materially harm the reputation of the
uWink(TM) Licensed Marks and the ability of Company and other franchisees to
obtain the same favorable purchase, lease or finance terms. If Franchisee has a
bona fide dispute with any supplier or vendor which Franchisee believes
justifies non-payment or partial payment, Franchisee must promptly notify the
supplier or vendor of the particulars of its claim and diligently pursue
resolution of the claim or prosecution of appropriate legal action. Any trade
debt which remains unpaid for more than 60 days after the date it is due shall
constitute a breach of this Agreement unless, before the end of the 60-day
period (i) Franchisee and the supplier or vendor agree to alternative payment
terms; or (ii) Franchisee initiates appropriate legal action to contest the
trade debt. Company shall have no liability for Franchisee's debts or
obligations to third parties.
26.8. FRANCHISE LOCATION AND TANGIBLE PROPERTY.
(a) Franchisee shall, at its sole expense, maintain the
condition and appearance of the Franchise Location and all tangible property
used to operate the Franchised Business in the highest degree of cleanliness,
orderliness and repair, consistent with the standards, specifications and
requirements of the uWink(TM) System and as Company may from time to time
direct. Franchisee shall promptly replace any tangible property used to operate
the Franchised Business which becomes worn, damaged and non-repairable, or
mechanically impaired to the extent that it no longer adequately performs the
function for which it was originally intended. All replacement items shall be of
the same type, model and quality then specified in the Confidential Manual at
the time replacement is required.
(b) Although Company agrees to provide Maintenance Releases
and Upgrades to the Technology System on the terms of this Agreement at no cost
to Franchisee beyond the Technology License Fee, Franchisee must use due care
and adhere to Company's operating instructions in using the Technology System.
At Franchisee's sole expense, Franchisee shall promptly replace any Hardware or
other furniture or equipment components if damaged beyond ordinary wear and tear
or disabled due to accident, abuse or misapplication whether or not caused by
Franchisee or a third party. The cost of the replacement parts shall be based
upon Franchisee's then-current price list as published in the Confidential
Manual.
(c) Franchisee understands and agrees that its failure to
repair or maintain the Franchise Location and the tangible property of the
Franchised Business in accordance with Company's standards shall constitute a
breach of this Agreement. Without waiving its right to terminate this Agreement
for such reason, Company may notify Franchisee in writing specifying the action
to be taken by Franchisee to correct the deficiency. If Franchisee fails or
refuses to initiate a bona fide program to complete any required repair,
maintenance or corrective work within 30 days after receiving Company's written
notice, Company shall have the right, in addition to all other remedies, to
enter the Franchise Location and complete the required repair, maintenance or
corrective work on Franchisee's behalf. Company shall have no liability to
Franchisee for any work performed. If Company elects to perform required repair,
maintenance or corrective work, or replace non-conforming property with
conforming property, Franchisee shall be invoiced for labor and materials, plus
a 25% service charge and an amount sufficient to reimburse Company for Company's
actual direct costs to supervise, perform and inspect the work and procure any
replacement items, including (without limitation) labor, materials,
transportation, lodging, meals, contractor fees and other direct expenses, all
of which shall be due and payable upon receipt of invoice.
(d) Franchisee shall not alter or modify the Franchise
Location or any of the tangible property used to operate the Franchised Business
in a manner contrary to Company's then-current standards.
(e) In addition to maintaining the Franchise Location and
tangible property in continuous good condition and repair in accordance with
this Agreement, Franchisee shall, at its sole expense, periodically make
reasonable capital expenditures to remodel, modernize and redecorate the
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Franchise Location so that the Franchised Business at all times reflects the
then-current image of the uWink(TM) System. All remodeling, modernization or
redecoration of the Franchise Location must be done in accordance with the
standards and specifications that Company prescribes, subject to Company's right
to modify those standards and specifications reasonably in its sole discretion.
26.9. COMPLIANCE WITH LAWS. Franchisee shall at all times operate the
Franchised Business in strict compliance with all Applicable Laws. At
Franchisee's sole expense, Franchisee shall secure and maintain in good standing
all necessary licenses, permits, deposits and certificates required to operate
the Franchised Business lawfully, including (without limitation) liquor
licenses, and shall provide Company with proof of compliance promptly following
Company's request.
26.10. CREDIT CARDS: GIFT CARD AND OTHER SYSTEM-WIDE MARKETING PROGRAM.
Franchisee shall honor all credit cards designated by Company and enter into and
maintain, at Franchisee's sole expense, all necessary credit card agreements
with the issuers of designated cards. Franchisee shall participate in, and abide
by, the uWink(TM) gift card program described in the Confidential Manual, as
Company may revise it from time to time. Franchisee shall additionally
participate in system-wide marketing programs identified by Company, including,
without limitation, the delivery of entertainment services that enable customers
of uWink(TM) Entertainment Restaurants to play against each other, customer and
marketing surveys, direct marketing programs and designated e-commerce programs;
provided, however, nothing herein shall limit Franchisee's right to establish
the resale price of goods and services offered for sale at the Franchised
Business.
26.11. COMPLAINTS AND OTHER ACTIONS. Franchisee shall promptly report
to Company any incidents involving personal injury by customers of the
Franchised Business sustained at the Franchise Location. Franchisee shall submit
to Company promptly upon receipt copies of all customer complaints and notices
and communications received from any government agency relating to alleged
violations of Applicable Laws and hereby authorizes the government agency to
provide the same information directly to Company upon Company's request.
Additionally, Franchisee shall promptly notify Company of any written threat, or
the actual commencement, of any action, suit or proceeding against Franchisee,
any person who is required by this Agreement to personally guaranty Franchisee's
obligations to Company or involving the Franchise Location or the business
assets which might adversely affect the operation or financial condition of the
Franchised Business, and provide Company with a copy of all relevant documents.
26.12. EMPLOYEES.
(a) The Franchised Business shall at all times be under the
direct, personal supervision of at least one Certified Manager at all times
during the Term. Additionally, Franchisee shall employ a sufficient number of
competent employees and cause each of them to receive appropriate training to
perform their job in accordance with the standards and specifications of the
uWink(TM) System as Company may require. Franchisee's Certified Manager shall be
responsible for training Franchisee's other employees who do not participate in
the New Store Opening module of the Initial Training Program. All employees
whose duties include customer service shall have sufficient literacy and fluency
in the English language, in Company's judgment, to serve the public. All
employees, while working in the Franchised Business, shall present a neat and
clean appearance and wear the uniforms that Company designates for their jobs,
in the color, style and design then specified by Company. Franchisee shall be
responsible for the acts and omissions of its employees and agents, including,
without limitation, its Certified Manager, arising during the course of their
employment or, as to agents, their engagement by Franchisee.
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(b) Franchisee is solely responsible for hiring, firing and
establishing employment policies applicable to its employees, and understands
and agrees that this Agreement does not impose any controls, or otherwise
impinge, on Franchisee's sole discretion to make all employment-related
decisions.
(c) If Franchisee owns three or more uWink(TM) Entertainment
Restaurants, one of Franchisee's Certified Managers must perform the additional
supervisory duties of a Multi-Unit Manager set forth in the Confidential Manual
and as Company may instruct from time to time.
(d) Franchisee shall not, directly or indirectly, for itself
or on behalf of any other person: (i) divert, or attempt to divert, any business
or customer of the Franchised Business to any competitor by direct or indirect
inducement or perform any act which directly or indirectly could, or may, injure
or prejudice the goodwill and reputation of the uWink(TM) System; or (ii) employ
or seek to employ any person who is at that time employed by Company, Company's
Affiliates or another franchisee of Company or otherwise directly or indirectly
induce or seek to induce the person to leave his or her employment.
SECTION 00.XXXXXXX'S OPERATIONS ASSISTANCE
In addition to obligations stated elsewhere in this Agreement, and
provided Franchisee is not in default under the terms of this Agreement, Company
shall provide the following services:
27.1. MANAGEMENT AGREEMENT. Franchisee has requested, and Company has
agreed, to furnish Franchisee with a general manager, who shall remain Company's
employee and shall perform the general manager duties described in the
Confidential Manual on Franchisee's behalf on the terms of the Management
Agreement attached hereto as EXHIBIT E. The Management Agreement shall be for a
term of 3 months from the Opening Date, but Franchisee shall have an option to
extend the Management Agreement for an additional 3 months by giving Company
written notice of its election to extend at least 30 days before the Management
Agreement's expiration date. As provided in the Management Agreement, in lieu of
paying Royalty Fees during the term of the Management Agreement, Franchisee
shall pay to Company a Management Fee, without offset, credit or deduction of
any nature, equal to 6% of Gross Sales, which shall be due and payable in the
same manner, on the same day and for the same time period as the other
Continuing Fees. This Section shall only apply if this Agreement is the first
Franchise Agreement entered into by them and shall not apply to any later
Franchise Agreements which the parties may enter into.
27.2. CONTINUING CONSULTATION AND ADVICE. As and to the extent required
in Company's sole discretion, Company shall provide regular consultation and
advice to Franchisee in response to Franchisee's inquiries about specific
administrative and operating issues that Franchisee brings to Company's
attention. Company shall have sole discretion to determine the method for
communicating the consultation or advice, which may differ from the methods used
for other uWink(TM) franchisees. For example and without limitation,
consultation and advice may be provided by telephone, in writing (in which case
Company may furnish the written information electronically), on-site in person,
or by other means. Additionally, upon Franchisee's request during the Term,
Company may agree to provide additional on-site instruction and assistance after
completion of the New Store Opening module of the Initial Training Program at a
mutually-scheduled time, provided Franchisee pays Company its then-current per
diem fee set forth in the Confidential Manual and reimburses Company for
Company's reasonable travel expenses, including, without limitation, expenses
for air and ground transportation, lodging, meals, and miscellaneous
travel-related personal charges.
27.3. SALES OF ADDITIONAL TECHNOLOGY EQUIPMENT. Company shall offer to
sell additional equipment and component parts that it now or in the future
includes in the Technology System as Franchisee may require during the Term in
connection with interior remodeling, expansion of the Franchise Location or for
similar reasons at the prices and other terms of sale, shipment and delivery
that Company then offers similarly situated franchisees .
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27.4. INSPECTIONS. In addition to Company's audit rights described in
this Agreement, Franchisee expressly authorizes Company and its representatives,
at any reasonable time, and without prior notice to Franchisee, to enter the
premises of the Franchise Location and conduct regular inspections of the
Franchised Business and Franchisee's methods of operation, including, without
limitation, using digital and other monitoring services to observe and conduct
discussions with Franchisee's employees, observe customer interaction and
services, and review Franchisee's books and records (including, without
limitation, data stored on Franchisee's business computer) in order to verify
compliance with this Agreement and the Confidential Manual. In order to enable
Company and its representatives to conduct inspections, Franchisee shall provide
free of charge reasonable quantities of ingredients, foods, beverages,
inventory, equipment, advertising and other samples for inspection and
evaluation purposes to make certain that the items conform with Company's
then-current standards. Further, Franchisee will allow Company unrestricted
access to the Technology System and each of its components, audiovisual
equipment or supplies and data storage media for inspection and evaluation so
that Company can verify that Franchisee's use conforms with Company's
then-current standards and the terms of this Agreement. Franchisee shall
cooperate fully with Company's inspections and promptly cure all deviations from
Company's standards, specifications and operating procedures of which Franchisee
is notified either orally or in writing. Franchisee, on behalf of itself and, as
applicable, its directors, officers, managers, employees, consultants,
representatives and agents, hereby waives any claim that Company's inspections
or recordings violate any person's rights of privacy.
27.5. ANNUAL MEETING. In addition to additional training, Company may
conduct an annual meeting at a location that Company selects (the "Annual
Meeting") to address recently-implemented changes in the uWink(TM) System and
other topics of common interest to franchisees, including, without limitation,
upgrades to the Technology System, new merchandising approaches, changes in
Proprietary Products and Non-Proprietary Products, industry trends, customer
relations, personnel administration, local advertising and promotional
strategies, and competitive changes. If Company chooses to conduct an Annual
Meeting, Company will determine the content, location and length of the Annual
Meeting; provided, however, the Annual Meeting shall not exceed 3 days in any 12
Calendar Month period. Company may require the attendance of Franchisee's
Certified Manager, Primary Owner or other designated personnel at one or more
Annual Meetings, provided, however, Company shall not require that more than 2
persons designated by Company complete more than 3 days of continuing training
during any 12 Calendar Month period. Company may impose a fee to attend the
Annual Meeting. Franchisee shall pay the transportation, lodging, personal
expenses and salary for each employee who attends an Annual Meeting.
27.6. RESEARCH AND NEW DEVELOPMENTS. As and to the extent required in
Company's sole discretion, Company will investigate and conduct market research;
improvements in gaming technology and delivery systems; monitor the activities
of competitors; and monitor advances in products that compete with Proprietary
Products in order to maintain and enhance the reputation and demand for
uWink(TM) franchises and the products and merchandise sold there from.
SECTION 28. INSURANCE
28.1. MINIMUM COVERAGE. Before the Opening Date, Franchisee shall
procure, at its own expense, and maintain in full force and effect during the
Term policies of insurance in accordance with the requirements of this
Agreement, including the following terms and conditions:
(a) Comprehensive general liability insurance product
liability, motor vehicle liability, bodily and personal injury/death, and
property damage liability with minimum liability coverage of $1,000,000.00 per
occurrence and $2,000,000 aggregate, combined single limit (including broad form
contractual liability), or the higher amount required by the Lease, insuring
Company and Franchisee against all claims, suits, obligations, liabilities and
damages, including attorneys' fees, based upon or arising out of actual or
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alleged personal injuries or property damage resulting from, or occurring in the
course of, or otherwise relating to the Franchised Business or the activities of
Franchisee's employees. The required liability coverage shall not be limited in
any way by reason of any insurance which Company maintains.
(b) Workers' compensation and employer's liability insurance,
together with any other insurance at the minimum limits required by law or
$500,000 per accident, $500,000 per disease, and $500,000 policy limit,
whichever is higher.
(c) All "Risks" or "Special" form general casualty insurance
coverage insurance including (without limitation) fire and extended coverage,
vandalism and malicious mischief insurance, personal and advertising injury,
coverage for any vehicle that Franchisee uses in operating the Franchised
Business and for additional perils (including, without limitation, flood and
earthquake coverage if applicable to the area where the Franchised Business is
located), for the full replacement value of the Franchised Business and its
contents based on the cost of replacing the damaged or destroyed property with
property meeting Company's current specifications at the time replacement is
required. The minimum coverage shall be no less than the amounts specified in
the Confidential Manual on the Effective Date. In view of the Southern Florida
area in which Franchisee shall operate the Franchised Business and the perils of
hurricanes that exist in that area, Company shall require Franchisee to use
commercially reasonable efforts to obtain the greatest amount of flood insurance
coverage available during the Term if Franchisee is unable, despite reasonable
commercial efforts, to obtain the minimum coverage level specified in the
Confidential Manual.
(d) Any person that Franchisee hires as a general contractor
or to perform comparable services at the Franchise Location must maintain
general liability and builder's risk insurance with comprehensive automobile
liability coverage and worker's compensation insurance in the minimum amount of
$1,000,000 plus additional insurance that protects against damage to the
premises and structure and other course of construction hazards.
(e) Additional types and amounts of insurance coverage as may
be required by the Lease, including coverage for all parties that the Lease
requires be covered as additional insureds.
28.2. ADDITIONAL INSURANCE SPECIFICATIONS.
(a) Company shall specify the deductible limits for each
required insurance policy and may, from time to time, increase the minimum
insurance requirements, establish and change deductible limits, require that
Franchisee procure and maintain additional forms of insurance, and otherwise
modify the insurance requirements contained in this Agreement based upon
inflation, general industry standards, Company's experience with claims, or for
other commercially reasonable reasons. Franchisee shall comply with any change
imposed by Company within 30 days after written notice from Company and shall
submit written proof of compliance to Company upon request.
(b) Each insurance policy required by this Agreement shall be
written by insurance companies of recognized responsibility meeting the
standards stated in the Manual. Before the Opening Date, or the earlier date
specified in the Lease, and then not less than annually thereafter on or before
January 1 of each Calendar Year after the Opening Date, Franchisee shall submit
to Company certificates of insurance showing compliance with Company's insurance
requirements. Franchisee shall not begin any work or installation of equipment
in the Franchise Location pursuant to Franchisee's Design Plans until Franchisee
submits proof of its general contractor's insurance required by this Agreement.
All certificates of insurance shall state that the policy will not be canceled
or altered without at least 30 days prior written notice to Company. Maintenance
of required insurance shall not relieve Franchisee of liability under the
indemnity provisions set forth in this Agreement.
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(c) Company and any Affiliates that Company designates shall
each be named as an additional insured on all required insurance. Franchisee
shall additionally cause each policy of insurance required by this Agreement to
include a waiver of subrogation, which shall provide that Franchisee, on the one
hand, and Company, on the other hand, each releases and relieves the other, and
each waives its entire right to recover damages, in contract, tort and
otherwise, against the other for any loss or damage occurring to Franchisee's
property arising out of or resulting from any of the perils required to be
insured against under this Agreement. The effect of these releases and waivers
shall not be limited by the amount of insurance carried by Franchisee or as
otherwise required by this Agreement or by any deductible applicable thereto.
(d) Should Franchisee not procure or maintain the insurance
required by this Agreement, Company may, without waiving its right to declare a
breach of this Agreement based on the default, procure the required insurance
coverage at Franchisee's expense, although Company has no obligation to do so.
Franchisee shall pay Company an amount equal to the premiums and related costs
for the required insurance in full upon receipt of invoice, plus a 25% service
charge and an amount sufficient to reimburse Company for its actual direct costs
in obtaining the required insurance.
(e) Franchisee understands and agrees that the minimum
insurance requirements set forth in this Agreement do not constitute a
representation or warranty by Company that the minimum coverage and specified
types of insurance will be sufficient for the Franchised Business. Franchisee
understands and agrees that it is solely responsible for determining if the
Franchised Business requires higher coverage limits or other types of insurance
protection.
SECTION 29. DEFAULT AND TERMINATION
29.1. TERMINATION BY FRANCHISEE.
(a) Franchisee may terminate this Agreement by written notice
to Company for any reason constituting good cause, provided (i) Franchisee is
not in default of any obligation under this Agreement when it serves written
notice of default on Company, and (ii) termination is accomplished in accordance
with the requirements of this Agreement. Any attempt by Franchisee to terminate
this agreement except on the grounds, or according to the procedures, stated in
this Agreement shall be void.
(b) Good cause means that Company has committed a material and
substantial breach of this Agreement that it has not cured within the period
allowed by this Agreement. Franchisee's written notice must specify with
particularity the matters cited to be in default and provide Company with a
minimum of 30 days in which to cure the default. Additional time to cure must be
provided as is reasonable under the circumstances if a default cannot reasonably
be cured within the minimum 30-day period. Franchisee's written notice of
termination of this Agreement for good cause shall not entitle it to a refund of
any money that Franchisee has paid to Company or Company's Affiliates pursuant
to this Agreement.
29.2. TERMINATION BY COMPANY WITHOUT OPPORTUNITY TO CURE.
(a) Company may terminate this Agreement, in its sole
discretion and election, effective immediately upon Company's delivery of
written notice of termination to Franchisee based upon the occurrence of any of
the following events which shall be specified in Company's written notice, and
Franchisee shall have no opportunity to cure a termination based on any of the
following events:
(i) Should Franchisee fail to use its reasonable best
efforts to open the Franchised Business to the public on or before the Opening
Date as specified in this Agreement taking into account delays due to events
beyond Franchisee's reasonable control;
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(ii) Should Franchisee fail or refuse to pay, on or
before the date payment is due, any Continuing Fees or other amounts payable to
Company, Company's Affiliates or the Promotional Fund, and should the default
continue for a period of 10 days after written notice of default is given by
Company to Franchisee;
(iii) Should Franchisee fail or refuse to submit any
report or financial statement on or before the date due, and should the default
continue for a period of 10 days after written notice of default is given by
Company to Franchisee;
(iv) Should any person who is required by this
Agreement to personally guaranty Franchisee's obligations to Company fail or
refuse to execute and delivery Company's form of personal guaranty or deliver
the financial statements required by this Agreement for a period of 10 days
after written notice of default is given by Company to Franchisee;
(v) Should Franchisee lose the right to possession of
the Franchise Location due to Franchisee's breach of the Lease which either
cannot be cured or which Franchisee has failed to cure within the allowed time
period;
(vi) Should Franchisee commit an event of default
under any other agreement by and between Franchisee and Company pertaining to
the Franchised Business and franchise awarded by this Agreement which, by its
terms, cannot be cured or which Franchisee fails to cure within the allowed time
period;
(vii) Should Franchisee make any general arrangement
or assignment for the benefit of creditors or become a debtor as that term is
defined in 11 U.S.C. ss. 101 or any successor statute, unless, in the case where
a petition is filed against Franchisee, Franchisee obtains an order dismissing
the proceeding within 60 days after the petition is filed; or should a trustee
or receiver be appointed to take possession of all, or substantially all, of the
assets of the Franchised Business, unless possession of the assets is restored
to Franchisee within 60 days following the appointment; or should all, or
substantially all, of the assets of the Franchised Business or the franchise
rights be subject to an order of attachment, execution or other judicial
seizure, unless the order or seizure is discharged within 60 days following
issuance;
(viii) Should Franchisee, or any duly authorized
representative of Franchisee, make a material misrepresentation or omission in
obtaining the franchise rights granted hereunder, or should Franchisee, or any
officer, director, shareholder, member, manager, or general partner of
Franchisee, be convicted of or plead no contest to a felony charge or engage in
any conduct or practice that, in Company's reasonable opinion, reflects
unfavorably upon or is detrimental or harmful to the good name, goodwill or
reputation of Company or to the business, reputation or goodwill of the
uWink(TM) System;
(ix) Should Franchisee fail to comply with the
conditions governing the transfer of rights under this Agreement in connection
with an Event of Transfer;
(x) If Franchisee is a Business Entity. should an
order be made or resolution passed for the winding-up or the liquidation of
Franchisee or should Franchisee adopt or take any action for its dissolution or
liquidation;
(xi) Should Franchisee have received from Company,
during any consecutive 24-Calendar Month period, 3 or more notices of default
(whether or not the notices relate to the same or to different defaults and
whether or not each default is timely cured by Franchisee);
(xii) Should Franchisee make any unauthorized use,
publication, duplication or disclosure of any Confidential Information or any
portion of the Confidential Manual, or should any person required by this
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Agreement to execute a Confidentiality Agreement with Company or Franchisee
breach the Confidentiality Agreement during the time period that the person is
employed or engaged by Franchisee;
(xiii) Should Franchisee abandon or fail or refuse to
actively operate the Franchised Business for any period such that Company may
reasonably conclude that Franchisee does not intend to continue operating it,
unless Franchisee obtains Company's written consent to close the Franchised
Business for a specified period of time before Franchisee ceases regular
activities;
(xiv) Should Franchisee materially misuse or make an
unauthorized use of any of the components of the uWink(TM) System or commit any
other act which does, or can reasonably be expected to, materially impair the
goodwill or reputation associated with any aspect of the uWink(TM) System;
(xv) Should Franchisee intentionally underreport
Gross Sales under the criteria established in this Agreement; or
(xvi) Should Franchisee fail to comply with any
violation of federal, state or local law within 30 days after being notified of
non-compliance.
q. Should Company make a reasonable determination
that Franchisee's continued operation of the Franchised Business will result in
imminent danger to public health and safety.
29.3. TERMINATION BY COMPANY WITH RIGHT TO CURE.
(a) Should Franchisee breach, or refuse to fulfill or perform,
any obligation arising under this Agreement not identified in Subsection B
above, or fail or refuse to adhere to any mandatory operating procedure,
specification or standard prescribed by Company in the Confidential Manual or
otherwise communicated to Franchisee, Company may terminate this Agreement, in
its sole discretion and election, effective at the close of business 30 days
after giving written notice of default to Franchisee which specifies the grounds
of default, if Franchisee fails to cure the default cited in the notice by the
end of the 30-day cure period. Company may indicate its decision to terminate by
written notice given to Franchisee anytime before, or after, the end of the
30-day cure period including in the original notice of default.
(b) If a default cannot reasonably be cured within 30 days,
Franchisee may apply to Company for additional time to complete the cure. The
length of the additional cure period, if any, allowed by Company shall be stated
in writing signed by Company. If Company grants an extension and if Franchisee
does not complete the required cure within the extended cure period, termination
of this Agreement shall be effective at the close of business on the last day of
the extended cure period without further notice from Company.
29.4. EFFECT OF TERMINATION OR EXPIRATION. Termination or expiration of
this Agreement shall result in the concurrent, and automatic, termination of all
agreements between the parties pertaining to the Franchised Business or the
franchise granted by this Agreement and shall also permit Company to enforce any
Personal Guaranty of Franchisee's obligations given to Company as required by
this Agreement. Notwithstanding the termination of this Agreement, the parties
agree that any other Franchise Agreements then in effect between the parties
concerning other uWink(TM) Entertainment Restaurants owned by Franchisee shall
remain in full force and effect, unless the grounds which Company has relied
upon to terminate this Agreement also constitute grounds for terminating the
other Franchise Agreements and Company has satisfied all requirements to
terminate the other Franchise Agreements.
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29.5. EFFECTIVE DATE OF TERMINATION OR EXPIRATION OF THIS AGREEMENT.
For purposes of this Agreement, (i) the Effective Date of Termination is: (x)
the date on which Franchisee receives written notice of termination based on an
event of default which this Agreement identifies as not being curable, or (y)
the last day of the applicable cure period based on an event of default for
which this Agreement grants Franchisee the right to cure; and (ii) the Effective
Date of Expiration of this Agreement is the last day of the Term. In any
proceeding in which the validity of termination of this Agreement is at issue,
Company shall not be limited to the reasons set forth in any notice of
termination or default given to Franchisee.
SECTION 30.RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION
30.1. FRANCHISEE'S OBLIGATIONS. On and after the Effective Date of
Termination or Expiration of this Agreement, Franchisee must comply with the
following duties:
(a) Within 10 days following the Effective Date of Termination
or Expiration of this Agreement, Franchisee shall pay all Continuing Fees and
other amounts owed to Company, including, without limitation, late charges and
interest on any late payments. Continuing Fees shall continue to be due and
payable (and late charges thereon assessed) after the Effective Date of
Termination or Expiration of this Agreement until the date that Franchisee
completes all post-termination obligations required by this Agreement. When
termination is based upon Franchisee's default, Franchisee shall also pay to
Company all damages, costs and expenses which it incurs to enforce its rights
under this Agreement in the event of a default and/or termination whether or not
mediation or judicial action is commenced. Franchisee's payments shall be
accompanied by all reports required by Company regarding business transactions
and the results of operations through the Effective Date of Termination or
Expiration of this Agreement or until the date that Franchisee completes all
post-termination or expiration obligations required by this Agreement, whichever
occurs later. The parties agree that, if Company prevails in an action under
this Agreement to enforce its rights under this Agreement, Franchisee shall
additionally reimburse Company for its reasonable attorneys and other
professional fees to retain attorneys, accountants or other experts in
connection with the enforcement proceeding.
(b) Franchisee shall permanently cease using, in any manner
whatsoever, all rights and property incorporated within or associated with the
uWink(TM) System in a manner that suggests or indicates that Franchisee is, or
was, an authorized uWink(TM) franchisee or continues to remain associated with
the uWink(TM) System. Franchisee shall cancel all Local Advertising and other
promotional activities which associate Franchisee with the uWink(TM) System.
Franchisee shall cancel all fictitious or assumed name or equivalent
registrations relating to its use of the uWink(TM) Licensed Marks. Continued use
by Franchisee of rights or other property incorporated within or associated with
the uWink(TM) System shall constitute willful trademark infringement and unfair
competition by Franchisee.
(c) Franchisee shall cease using all telephone numbers and
business directory listings used in operating the Franchised Business and take
all steps necessary to remove all telephone and other business directory
listings that display any of the uWink(TM) Licensed Marks. Franchisee shall
furnish Company with evidence satisfactory to Company demonstrating Franchisee's
compliance with this obligation within 10 days after the Effective Date of
Termination or Expiration of this Agreement. Company shall have the right to
demand an assignment of the telephone numbers and listings, in which case
Franchisee hereby consents to the assignment, without compensation, as of the
Effective Date of Termination or Expiration.
(d) Franchisee shall immediately cease using and, within 48
hours after the Effective Date of Termination or Expiration of this Agreement,
deliver to Company all copies of the Confidential Manual in Franchisee's
possession.
(e) Franchisee shall sell and assign to Company all of the
Hardware and any replacement items, whether purchased in connection with the
Franchised Business' opening or during the Term, to Company in AS IS condition.
If the sale occurs within the first three years after the Effective Date, the
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price paid for the Hardware and any replacement items shall be (i) the fair
market value as determined by an independent appraiser who shall be mutually
selected by the parties and whose fees shall be shared equally by the parties;
or (ii) the amount determined by straight line depreciation if the parties are
either unable to mutually agree upon an appraiser within 30 days after the
Effective Date of Termination or Expiration or either party is unwilling to pay
for one-half of the appraiser's fees despite good faith negotiation. If the sale
occurs after three years from the Effective Date, Company shall pay Franchisee
$1.00 for the Hardware and any replacement items.
(f) Franchisee understands and agrees that Company shall
immediately disable by remote access the Technology System, and Franchisee shall
return all Documentation that Company has provided to Franchisee pursuant to
this Agreement, and shall retain no copy or record of any of the foregoing.
Franchisee shall immediately stop selling all Collateral Logo Merchandise and
shall resell its inventory of all Proprietary Products in useable or salable
condition to Company at Franchisee's actual cost.
(g) With respect to the Franchise Location, Company may,
pursuant to the Addendum to Lease, accept an assignment of the Lease, in which
case, upon written notice from Company, Franchisee shall forthwith vacate the
Franchise Location, leaving it in good condition and repair with all fixtures
and equipment not capable of being removed without damage to the Franchise
Location, or which the Lease forbids to be removed, left in good working order.
Company shall give Franchisee written notice of its election to accept an
assignment of the Lease within 10 days after the Effective Date of Termination
or Expiration. Company's failure to timely notify Franchisee shall signify its
decision not to accept an assignment of the Lease. If Company does not accept an
assignment of the Lease, Franchisee shall, at its sole cost and expense, within
20 days after the Effective Date of Termination or Expiration, remove all signs
and other physical and structural features that readily identify the site as a
uWink(TM) Entertainment Restaurant, in a manner acceptable to Company, so that
the former Franchise Location no longer suggests or indicates a connection with
the uWink(TM) System. Company's right to accept an assignment of the Lease is
independent of Company's right to acquire the physical assets in the Franchise
Location on the terms of this Agreement.
(h) Franchisee shall execute and deliver a mutual general
release, in form satisfactory to Company, of any and all claims against Company
and its officers, directors, shareholders, employees and agents. The mutual
general release shall exclude any bona fide claims that a party may have against
the other which are expressly identified in the mutual general release.
(i) Franchisee shall keep and maintain all business records
pertaining to the business conducted at the Franchised Business for 5 years
after the Effective Date of Termination or Expiration of this Agreement. During
this period, Franchisee shall permit Company to inspect such business records as
frequently as Company deems necessary.
30.2. COMPANY'S RIGHT TO PURCHASE PHYSICAL ASSETS OF THE FRANCHISED
BUSINESS.
(a) In addition to Franchisee's duty to sell all of the
Hardware and any replacement items to Company in AS IS condition as provided in
this Agreement, Company shall have the right, but not the obligation, to
purchase all, or any, of Franchisee's physical assets relating to the Franchised
Business that are not treated by the Lease as fixtures of the Franchise Location
and part of the realty, at Franchisee's original cost less depreciation, based
upon the depreciation schedule which Company or Company's Affiliates use for
like or comparable property, less the remaining balance, if any, of any
financing that Franchisee owes to third parties for which the physical asset is
pledged as security. Company may exercise this option by giving Franchisee
written notice within 10 days after the Effective Date of Termination or
Expiration of this Agreement, specifying in the notice the specific physical
assets that it desires to purchase. Within 10 days following receipt of
Company's written notice, Franchisee shall furnish Company with documentation
substantiating the original cost of each item identified by Company and
depreciation taken as reported by Franchisee in its federal and state income tax
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returns. Within 10 days following receipt of Franchisee's documentation, Company
shall notify Franchisee of the particular assets it will purchase and calculate
the purchase price for the items in accordance with this Section, and within 10
days after giving the notice, Company will pay Franchisee the purchase price,
less permitted set-offs. Franchisee shall deliver possession of the physical
assets to Company upon Company's payment of the net purchase price free and
clear of all liens and encumbrances not approved by Company in writing.
Company's failure to serve written notice of its election within 10 days after
the Effective Date of Termination or Expiration of this Agreement shall signify
its decision not to purchase any remaining physical assets of Franchisee.
(b) With respect to the physical assets that Company
purchases, Company shall have the absolute right to set off from the purchase
price all sums then owed by Franchisee to Company, Company's Affiliates or the
Promotional Fund under this Agreement, including damages, costs and expenses and
reasonable attorneys' fees in enforcing the default and termination. The right
to set off shall not limit Company's remedies under this Agreement or Applicable
Law.
30.3. SURVIVAL OF OBLIGATIONS. All obligations of the parties that
expressly, or by their nature, survive the Effective Date of Termination or
Expiration of this Agreement shall continue in full force and effect subsequent
to the Effective Date of Termination or Expiration of this Agreement until they
are satisfied in full. Franchisee shall remain fully liable for any and all
obligations of the Franchised Business, whether incurred before, or after, the
Effective Date of Termination or Expiration of this Agreement, including,
without limitation, obligations arising under this Agreement, the Lease, and all
obligations owed to Company's Affiliates and other third parties including,
without limitation, obligations for Proprietary Products, other inventory,
services, equipment, supplies, materials, payments to independent contractors,
salaries to employees and taxes.
30.4. THIRD PARTY RIGHTS; AVAILABLE REMEDIES. No person acting for the
benefit of Franchisee's creditors or any receiver, trustee in bankruptcy,
sheriff or any other officer of a court or other person in possession of
Franchisee's assets or business shall have the right to assume Franchisee's
obligations under this Agreement without Company's prior consent. Company's
right to terminate this Agreement shall not be its exclusive remedy in the event
of Franchisee's default, and Company shall be entitled, in its sole discretion
and election, alternatively or cumulatively, to affirm this Agreement in the
event of Franchisee's default and obtain damages arising from the default,
injunctive relief to compel Franchisee to perform its obligations under this
Agreement or to prevent Franchisee from breaching this Agreement, and any other
remedy available under Applicable Law.
SECTION 31. ASSIGNMENT AND TRANSFER
31.1. ASSIGNMENT BY COMPANY. Franchisee acknowledges that Company
maintains a staff to manage and operate the uWink(TM) System and that staff
members can change from time to time. Franchisee represents that it has not
signed this Agreement in reliance on any shareholder, director, officer, or
employee remaining with Company in that capacity. Company is free to transfer
and assign all of its rights under this Agreement to any person or Business
Entity, provided the assignee agrees in writing to assume Company's obligations
under this Agreement. Upon such assignment and assumption, Company shall have no
further obligation to Franchisee.
31.2. ASSIGNMENT BY FRANCHISEE: IN GENERAL. Franchisee understands and
agrees that the franchise rights awarded by this Agreement are personal and are
awarded in reliance upon, among other considerations, the individual or
collective character, skill, aptitude, attitude, experience, business ability
and financial condition and capacity of Franchisee and, if Franchisee is a
Business Entity, that of its officers, directors, shareholders, LLC managers and
members, trustees, and partners.
(a) Without Company's prior written consent, Franchisee shall
not, directly or indirectly, attempt or complete an Event of Transfer either
voluntarily or by operation of law except in accordance with this Agreement.
Company agrees not to withhold its consent unreasonably if Franchisee satisfies
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the conditions applicable to a transfer identified in this Agreement. Any
attempted or purported transfer which fails to comply with the requirements of
this Agreement shall be null and void and constitute a material default of this
Agreement.
(b) Company's consent to an Event of Transfer is not a
representation of the fairness of the terms of any contract between Franchisee
and a transferee, a guarantee of the Franchised Business' or transferee's
prospects for success, or a waiver of any claims that Company or Company's
Affiliates may have against Franchisee or any personal guarantor.
31.3. COMPANY'S RIGHT OF FIRST REFUSAL.
(a) Except with respect to Qualified Transfers, if Franchisee,
or the person to whom an offer is directed (the "Individual Transferor"),
receives a bona fide written offer ("Third Party Offer") to purchase or
otherwise acquire an interest which will result in an Event of Transfer,
Franchisee or the Individual Transferor, shall, within 5 days after receiving
the Third Party Offer and before accepting it, apply to Company in writing for
Company's consent to the proposed transfer. Additionally, the following
conditions shall apply:
(i) Franchisee, or the Individual Transferor, shall
attach to its application for consent to the transfer a complete copy of the
Third Party Offer together with (i) information relating to the transferee's
experience and qualifications, (ii) a copy of the transferee's current financial
statement, and (iii) any other information material to the Third Party Offer,
transferee and proposed assignment or that Company requests.
(ii) Company or its nominee shall have the right,
exercisable by written notice ("Notice of Exercise") given to Franchisee or the
Individual Transferor, within 30 days following receipt of the Third Party
Offer, all supporting information, and the application for consent, to notify
Franchisee or the Individual Transferor that it will purchase or acquire the
rights, assets, equity or interests proposed to be assigned on the same terms
and conditions set forth in the Third Party Offer, except that Company may (i)
substitute cash for any form of payment proposed in the offer discounted to
present value based upon the rate of interest stated in the Third Party Offer,
and (ii) deduct from the purchase price the amount of any commission or fee
otherwise payable to any broker or agent in connection with the Third Party
Offer and all amounts then due and owing from Franchisee to Company, Company's
Affiliates or the Promotional Fund under this Agreement or otherwise. If Company
gives timely Notice of Exercise, the assets that Company purchases shall be free
and clear of liens. If any asset is pledged as security for financing that is
then unpaid, Company may further deduct from the purchase price the remaining
amount payable under the terms of financing.
(iii) The closing shall take place at Company's
headquarters at a mutually agreed upon date and time, but not later than 90 days
following Company's receipt of the Third Party Offer, all supporting
information, and the application for consent to transfer.
(iv) At the closing, Franchisee or the Individual
Transferor shall deliver to Company the same documents, affidavits, warranties,
indemnities and instruments as would have been delivered by Franchisee or the
Individual Transferor to the transferee pursuant to the Third Party Offer.
Additionally, Franchisee and the Individual Transferor shall deliver a mutual
general release, in form satisfactory to Company, of any and all claims against
Company, Company's Affiliates and their respective officers, directors,
shareholders, employees and agents.
(v) All costs, fees, document taxes and other
expenses incurred in connection with the transfer shall be allocated between
Franchisee and Company in accordance with the terms of the Third Party Offer,
and any costs not allocated shall be paid by Franchisee or the Individual
Transferor.
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31.4. CONDITIONS OF ASSIGNMENT TO THIRD PARTY.
(a) If Company does not exercise its right of first refusal,
Franchisee may not complete the Event of Transfer without Company's prior
written consent. An Event of Transfer, or attempt to complete an Event of
Transfer, in violation of this provision is a material breach of this Agreement.
The requirements of this Section do not apply to a Qualified Transfer. As a
condition to Company's consent to an Event of Transfer, the following conditions
must be satisfied:
(i) The transferee must submit a completed franchise
application to Company, and meet Company's then-current qualifications for new
uWink(TM) franchisees, including qualifications pertaining to financial
condition, credit rating, experience, moral character and reputation. Company's
evaluation of the transferee's financial condition shall take into account the
transferee's obligations to Franchisee for payments arising out of the Event of
Transfer.
(ii) As of the date consent is requested and through
the date of closing of the proposed transfer and assignment, Franchisee must not
be in default under this Agreement, the Lease, or any other agreements with
Company, and must be current with all monetary obligations owed to third
parties, including (without limitation) Company's Affiliates.
(iii) The transferee must sign Company's then-current
form of Franchise Agreement, the terms of which may differ materially from this
Agreement; provided, however: (i) in lieu of paying a new Initial Franchise Fee,
the transferee or Franchisee shall pay Company a transfer fee of $5,000 per
Event of Transfer; and (ii) the term of the new Franchise Agreement shall be
equal to the remaining Term under this Agreement and the Renewal Term if the
time to exercise the Renewal Option has not expired when Franchisee requests
consent to complete the Event of Transfer.
(1) Alternatively, if Company is not
offering new uWink(TM) franchises in the state where the Franchise Business is
located when Franchisee requests consent to complete the Event of Transfer, the
transferee must (x) agree in writing to assume all of Franchisee's obligations
under this Agreement and succeed to Franchisee's rights under this Agreement;
and (y) pay a transfer fee of $5,000 per Event of Transfer.
(2) If Franchisee owns and transfers more
than one franchise simultaneously, as part of the same transaction, to the same
transferee, Franchisee shall pay a separate transfer fee for each of the
separate franchises being transferred and comply with any additional transfer
conditions set forth in the applicable Franchise Agreements.
(3) If the Event of Transfer involves a
Public or Private Offering, the transfer fee shall be an amount not to exceed
$20,000 based upon the additional time which Company will require to review
Franchisee's offering memorandum, registration statement or comparable
documents. Franchisee understands and agrees that in reviewing Franchisee's
offering memorandum, registration statement or comparable documents, Franchisee
does not certify that the statements in Franchisee's offering memorandum,
registration statement or comparable documents are true, correct or not
misleading or that Franchisee's offering memorandum, registration statement or
comparable documents comply with Applicable Laws, but is for the purpose of
reviewing Franchisee's statements about Company, uWink(TM) Entertainments
Restaurants, and the uWink(TM) System.
(iv) Franchisee must simultaneously transfer its
rights under the Lease and all other contracts whose continuation is necessary
for operation of the Franchise Business to the same transferee and satisfy any
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separate conditions to obtain any third party consents required to accomplish
the transfers, including, without limitation, the consent of the landlord of the
Franchise Location.
(v) Franchisee must execute and deliver a mutual
general release, in form satisfactory to Company, of any and all claims against
Company, Company's Affiliates and their respective officers, directors,
shareholders, employees and agents.
(vi) The transferee must execute all other documents
and agreements required by Company to consummate the transfer of this Agreement.
If the transferee is a Business Entity, each person who at the time of the
transfer, or later, owns or acquires, either legally or beneficially, 10% or
more of the equity or voting interests of the transferee must execute Company's
then-current form of personal guaranty.
(vii) Franchisee's right to receive the sales
proceeds from the transferee shall be subordinate to the transferee's and
Franchisee's duties owed to Company and Company's Affiliates under, or pursuant
to, this Agreement or any other agreement as of the effective date of the Event
of Transfer. All contracts by and between Franchisee and the transferee shall
expressly include a subordination provision permitting payment of the sales
proceeds to Franchisee only after any outstanding obligations owed to Company
and Company's Affiliates are fully satisfied.
(viii) Until the proposed transferee satisfies
minimum training requirements, Franchisee shall remain responsible for
day-to-day management of the Franchised Business. At a minimum, (i) the proposed
transferee or its Primary Owner must complete the next available Owner
Orientation module (or equivalent); (ii) at least one management-level employee
must qualify as a Certified Manager; and (iii) the proposed transferee's General
Manager, Assistant General Manager and Kitchen Manager must complete the next
available Restaurant Management and Technical Training module (or equivalent)
tracks of Company's then-current Initial Training Program. Company shall
schedule training to start reasonably promptly following the closing date.
Franchisee and the proposed transferee must arrange for the Franchised Business
to remain under the direct supervision of a previously-qualified Certified
Manager during the period following the closing date during which the proposed
transferee and its employees complete the foregoing training programs.
(ix) Within a reasonable period of time following the
closing date, the transferee shall conform the Franchised Business to Company's
then-current appearance and design standards and equipment specifications then
applicable to new uWink(TM) Franchised Businesses.
(x) Neither Company's exercise of its right of first
refusal, its consent to an Event of Transfer, nor Franchisee's consummation of a
transfer shall operate to release Franchisee of those obligations that
expressly, or by their nature, survive the effective date of termination or
expiration of this Agreement, including, without limitation, the provisions
regarding non-disclosure of Confidential Information.
(b) Franchisee may only complete the Event of Transfer to the
transferee on the terms identified in the Third Party Offer or as otherwise
stated in Franchisee's application for consent. If there is any material change
in the terms of the Third Party Offer, Company has a right of first refusal to
accept the new terms subject to the conditions stated in this Section.
(c) If Company consents to the transfer to a third party, the
transfer must close within 60 days from the date the Third Party Offer is first
submitted to Company unless Company grants an extension of time in writing;
otherwise, it must again be offered to Company.
31.5. BUSINESS ENTITY FRANCHISEE. If Franchisee is a Business Entity,
Franchisee shall furnish to Company, upon execution of this Agreement or at such
other time as transfer to the Business Entity is permitted, a copy of its
articles of incorporation, by-laws, operating agreement, partnership agreement
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or other governing agreement, and a list of all persons owning an interest in
the equity or voting interests of the Business Entity. Additionally, Franchisee
shall promptly provide Company with a copy of any amendments to, or changes in,
the documents or other information during the Term. Franchisee shall maintain
stop transfer instructions against the transfer on its records of any equity or
ownership interests. Each certificate representing an ownership interest in
Franchisee shall bear a legend, in the form stated in the Confidential Manual,
that it is held, and further assignment or transfer thereof is, subject to all
restrictions imposed upon transfer set forth in this Agreement. Franchisee's
Primary Owner shall deliver a certificate to Company annually, when Franchisee's
annual financial statements are delivered, which lists all owners of record and
all beneficial owners of any interest in the equity or voting interests of
Franchisee and identifies all transfers of equity or voting interests in
Franchisee which have occurred during the period covered by the annual financial
statement. If Franchisee engages in a Public or Private Offering, in which case
Franchisee or the proposed transferee shall pay Company a transfer fee equal to
$20,000 per Public or Private Offering reflecting the additional time which
Company will require to review Developer's offering memorandum, registration
statement or comparable documents.
31.6. QUALIFIED TRANSFERS. Before completing a Qualified Transfer,
Franchisee must do all of the following: (i) provide Company with written notice
of its intent to complete a Qualified Transfer; and (ii) when the Qualified
Transfer is to a newly-formed Business Entity, deliver the documents which this
Agreement requires be delivered by a Business Entity that is the Franchisee. The
Qualified Transfer shall not be effective unless and until Franchisee satisfies
conditions (i) and (ii). Company shall not have a right of first refusal with
respect to a Qualified Transfer, nor shall Company's prior written consent to a
Qualified Transfer be necessary if Franchisee satisfies the conditions stated in
this Section. Company agrees to waive payment of a transfer fee in connection
with a Qualified Transfer.
SECTION 32.RELATIONSHIP OF PARTIES: INDEMNIFICATION: SECURITY INTEREST
32.1. INDEPENDENT CONTRACTOR. This Agreement does not create a
fiduciary relationship between the parties, nor does it make either party a
general or special agent, joint venturer, partner or employee of the other for
any purpose. With respect to all matters, Franchisee relationship to Company is
as an independent contractor. Franchisee understands and agrees that it is the
independent owner of the Franchised Business and in sole control of all aspects
of its operation, and shall conduct its business using its own judgment and sole
discretion, subject only to the provisions of this Agreement. Franchisee shall
conspicuously identify itself in all advertising and all dealings with
customers, suppliers and other third parties as the owner of the Franchised
Business operating under a license from Company.
32.2. INDEMNIFICATION BY FRANCHISEE. Franchisee shall indemnify and
hold Company, Company's Affiliates and their respective officers, directors,
shareholders, employees, agents, successors and assigns, harmless from and
against any and all costs, expenses, losses, liabilities, damages, causes of
action, claims and demands whatsoever, arising from or relating to the
Franchised Business or Franchisee's occupancy of the Franchise Location, whether
or not arising from bodily injury, personal injury or property damage,
infringement (other than Third Party Claims within the scope of Company's
agreement to indemnify Franchisee as set forth in his Agreement), or any other
violation of the rights of others, or in any other way, subject to the
provisions of this Agreement. Franchisee's obligation to indemnify Company shall
extend, without limitation, to all claims for actual and consequential damages,
and to Company's costs and expenses incurred in defending any claim brought or
threatened by a third party that is within the scope of Franchisee's
indemnification including, without limitation attorneys and other professional
fees, court costs, and travel and living expenses. Company shall have the right
to retain its own counsel to defend any third party claim asserted against it
which is covered by this indemnification agreement. Franchisee's indemnification
and defense obligations shall survive the expiration, termination or assignment
of this Agreement for any reason.
SECURITY INTEREST. To secure Franchisee's performance under this
Agreement, Franchisee hereby grants to Company a security interest in and to all
of Franchisee's tangible and intangible property used to operate the Franchised
Business. Company shall record appropriate financing statements to protect and
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perfect Company's rights as a secured party under Applicable Law. Except with
Company's prior written consent, which Company shall not unreasonably withhold,
it shall be a breach of this Agreement for Franchisee to grant another person a
security interest in Franchisee's tangible or intangible assets of the
Franchised Business even if subordinate to Company's security interest. Company
agrees to subordinate Company's own security interest if requested by a lender
providing financing to Franchisee on commercially reasonable terms in connection
with the purchase of the franchise.
SECTION 33. DISPUTE RESOLUTION
33.1 AGREEMENT TO MEDIATE DISPUTES. Except as otherwise provided in
this Agreement, neither party to this Agreement shall bring an action or
proceeding to enforce or interpret any provision of this Agreement, or seeking
any legal remedy based upon the relationship created by this Agreement or an
alleged breach of this Agreement, until the dispute has been submitted to
mediation conducted in accordance with the procedures stated in this Agreement.
(a) The mediation shall be conducted pursuant to the rules of
the National Franchise Mediation Program, a dispute resolution program for
franchising administered under the auspices of the CPR Institute for Dispute
Resolution ("the Mediation Service"). Either party may initiate the mediation
(the "Initiating Party") by notifying the Mediation Service in writing, with a
copy to the other party (the "Responding Party"). The notice shall describe with
specificity the nature of the dispute and the Initiating Party's claim for
relief. Thereupon, both parties will be obligated to engage in the mediation,
which shall be conducted in accordance with the Mediation Service's then-current
rules, except to the extent the rules conflict with this Agreement, in which
case this Agreement shall control.
(b) The mediator must be either a practicing attorney with
experience in business format franchising or a retired judge.
(c) Except as otherwise provided in this Agreement: (i) the
fees and expenses of the Mediation Service, including (without limitation) the
mediator's fee and expenses, shall be shared equally by the parties, and (ii)
each party shall bear its own attorney's fees and other costs incurred in
connection with the mediation irrespective of the outcome of the mediation or
the mediator's evaluation of each party's case.
(d) The mediation conference shall begin as soon as possible
with the goal of beginning the mediation within 30 days after selection of the
mediator. Regardless of whether Company or Franchisee is the Initiating Party,
the mediation shall be conducted at Company's headquarters, unless the parties
agree upon a mutually acceptable alternative location.
(e) The parties shall participate in good faith in the entire
mediation, including the mediation conference, with the intention of resolving
the dispute, if at all possible. The parties shall each send at least one
representative to the mediation conference who has authority to enter into a
binding contract on that party's behalf and on behalf of all principals of that
party who are required by the terms of the parties' settlement to be personally
bound by it. The parties recognize and agree, however, that the mediator's
recommendations and decision shall not be binding on the parties.
(f) If one party breaches this Agreement by refusing to
participate in the mediation or not complying with the requirements for
conducting the mediation, the non-breaching party may immediately file suit and
take such other action to enforce its rights as permitted by law and the
breaching party shall be obligated to pay: (i) the mediator's fees and costs,
(ii) the non-breaching party's reasonable attorneys' fees and costs incurred in
connection with the mediation, and (iii) to the extent permitted by law, the
non-breaching party's reasonable attorneys' fees and costs incurred in any suit
arising out of the same dispute, regardless of whether the non-breaching party
is the prevailing party. Additionally, in connection with (iii), the breaching
party shall forfeit any right to recover its attorneys' fees and costs should it
prevail in the suit. The parties agree that the foregoing conditions are
necessary in order to encourage meaningful mediation as a means for efficiently
resolving any disputes that may arise.
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33.2. EXCEPTIONS TO DUTY TO MEDIATE DISPUTES. The obligation to mediate
shall not apply to any disputes, controversies or claims (i) where the monetary
relief sought is under $10,000; (ii) in which a party seeks or applies for any
kind of Provisional Remedies; or (iii) in which Company or the holder of rights
under any lease or sublease seeks to enforce rights of unlawful detainer or
similar remedies available to a landlord or for the enforcement of Company's
other rights under any Addendum to Lease with Debtor. The party that is awarded
Provisional Remedies shall not be required to post bond or comparable security.
Once Provisional Remedies are obtained, the parties agree to submit the dispute
to, or continue, the mediation or action in accordance with this Agreement.
33.3. JUDICIAL RELIEF.
(a) The parties agree that (i) all disputes arising out of or
relating to this Agreement which are not resolved by negotiation or mediation,
and (ii) all claims which this Agreement expressly excludes from mediation,
shall be brought in the Superior Court of California located closest to
Company's headquarters, unless the subject matter of the dispute arises
exclusively under federal law or diversity jurisdiction exists, in which event
the dispute shall be submitted to the United States District Court located
closest to Company's headquarters. As of the date of this Agreement, the parties
acknowledge that the Superior Court of the County of Los Angeles, and the United
States District Court of the Central District of California are, respectively,
the state and federal courts that are located closest to Company's headquarters;
however, the parties further acknowledge that Company may relocate its
headquarters in its sole discretion at any time without notice to the
undersigned party. The parties agree to submit to the jurisdiction of the courts
mutually selected by them pursuant to this Section and mutually acknowledge that
selecting a forum in which to resolve disputes arising between them is important
to promote stability in their relationship.
(b) To the fullest extent that it may effectively do so under
Applicable Laws, Franchisee waives the defense of an inconvenient forum to the
maintenance of an action in the courts identified in this Section and agrees not
to commence any action of any kind against Company, Company's Affiliates and
their respective officers, directors, shareholders, LLC managers and members,
employees and agents or property arising out of or relating to this Agreement
except in the courts identified in this Section.
33.4. WAIVER OF JURY TRIAL. COMPANY AND FRANCHISEE EACH HEREBY WAIVE
THEIR RESPECTIVE RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM,
COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT
BY EITHER COMPANY OR FRANCHISEE ON ANY MATTER WHATSOEVER ARISING OUT OF, OR IN
ANY WAY CONNECTED WITH, THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, THE USE
OF THE PROPRIETARY MARKS OR THE uWINK(TM) SYSTEM, OR ANY CLAIM OF INJURY OR
DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, REGULATION,
EMERGENCY OR OTHERWISE, NOW OR HEREAFTER IN EFFECT, TO THE FULLEST EXTENT
PERMITTED UNDER APPLICABLE LAW.
33.5. CHOICE OF LAW. Except as otherwise provided in this Agreement
with respect to the possible application of Local Laws, the parties agree that
California law shall govern the construction, interpretation, validity and
enforcement of this Agreement and shall be applied in any mediation or judicial
proceeding to resolve all disputes between them, except to the extent the
subject matter of the dispute arises exclusively under federal law, in which
event the federal law shall govern.
33.6. LIMITATIONS PERIOD. To the extent permitted by Applicable Laws,
any legal action of any kind arising out of or relating to this Agreement or its
breach, including without limitation, any claim that this Agreement or any of
its parts is invalid, illegal or otherwise voidable or void, must be commenced
by no later than one year after the act, event, occurrence or transaction which
constituted or gave rise to the alleged violation or liability; provided,
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however, the applicable limitations period shall be tolled during the course of
any mediation which is initiated before the last day of the limitations period
with the tolling beginning on the date that the Responding Party receives the
Initiating Party's demand for mediation and continuing until the date the
mediation is concluded.
33.7. PUNITIVE OR EXEMPLARY DAMAGES. Company and Franchisee, on behalf
of themselves and their respective Affiliates, directors, officers,
shareholders, members, managers, employees and agents, as applicable, each
hereby waive to the fullest extent permitted by law, any right to, or claim for,
punitive or exemplary damages against the other and agree that, in the event of
a dispute between them, each is limited to recovering only the actual damages
proven to have been sustained by it.
33.8. ATTORNEYS' FEES. Except as expressly provided in this Agreement,
in any action or proceeding brought to enforce any provision of this Agreement
or arising out of or in connection with the relationship of the parties
hereunder, the prevailing party shall be entitled to recover against the other
its reasonable attorneys' fees and court costs in addition to any other relief
awarded by the court. As used in this Agreement, the "prevailing party" is the
party who recovers greater relief in the action.
33.9. WAIVER OF COLLATERAL ESTOPPEL. The parties agree they should each
be able to settle, mediate, litigate or compromise disputes in which they may
be, or become, involved with third parties without having the dispute affect
their rights and obligations to each other under this Agreement. Company and
Franchisee therefore each agree that a decision of an arbitrator or judge in any
proceeding or action in which either Company or Franchisee, but not both of
them, is a party shall not prevent the party to the proceeding or action from
making the same or similar arguments, or taking the same or similar positions,
in any proceeding or action between Company and Franchisee. Company and
Franchisee therefore waive the right to assert that principles of collateral
estoppel prevent either of them from raising any claim or defense in an action
or proceeding between them even if they lost a similar claim or defense in
another action or proceeding with a third party.
SECTION 34. ACKNOWLEDGEMENTS
Franchisee understands and agrees and represents to Company, to induce
Company to enter into this Agreement, that:
34.1. ACCEPTANCE OF CONDITIONS.
Franchisee has read this Agreement and Company's Offering Circular and
understands and accepts the terms, conditions and covenants contained in this
Agreement as being reasonably necessary to maintain Company's standards of
service and quality and the uniformity of those standards at all uWink(TM)
Franchised Businesses in order to protect and preserve Company's rights in the
uWink(TM) System and the goodwill of the uWink(TM) Licensed Marks;
34.2. INDEPENDENT INVESTIGATION.
Franchisee has conducted an independent investigation of the business
contemplated by this Agreement. Franchisee recognizes that the uWink(TM) System
may evolve and change over time; that an investment in this franchise involves
business risks; and that the success of the investment depends upon Franchisee's
business ability and efforts;
34.3. RELIANCE.
Franchisee has not received or relied upon any promise or guaranty,
express or implied, about the revenues, profits or success of the business
venture contemplated by this Agreement;
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34.4. COMPLIANCE WITH APPLICABLE LAW.
None of the property or interests of Franchisee or its owners is
subject to being blocked under, and Franchisee's and its owners are not
otherwise in violation of any Applicable Law including (without limitation) any
anti-terrorism laws.
34.5. NO REPRESENTATIONS: STATUS OF FRANCHISEE.
(a) No representations have been made by Company, Company's
Affiliates or their respective officers, directors, shareholders, employees or
agents, that are contrary to statements made in the Offering Circular previously
received by Franchisee or to the terms contained in this Agreement; and
(b) Franchisee (if an individual) or each person executing a
guaranty of Franchisee's obligations, is a United States citizen or a lawful
resident alien of the United States; if Franchisee is a Business Entity, it
shall remain duly organized and in good standing for as long as this Agreement
is in effect and it owns the franchise rights; and all financial and other
information provided to Company in connection with Franchisee's application is
true and correct and no material information or fact has been omitted which is
necessary in order to make the information disclosed not misleading.
SECTION 35. MISCELLANEOUS
35.1. NOTICES.
(a) All communications required or permitted to be given to
either party hereunder shall be in writing and shall be deemed duly given if
property addressed on the earlier of (i) the date when delivered by hand; (ii)
the date when delivered by fax or e-mail if confirmation of transmission is
received or can be established by the sender; (iii) one business day after
delivery to a reputable national overnight delivery service; or (iv) 5 days
after being placed in the United States Mail and sent by certified or registered
mail, postage prepaid, return receipt requested. A "business day" means weekdays
only, excluding Saturdays, Sundays and holidays. Notices shall be directed to
the address shown in EXHIBIT D for the party and its representative. Either
party may change its address for receiving notices by giving appropriate written
notice to the other. All communications required or permitted to be given by a
party in writing may be given electronically to the party's designated e-mail
address in EXHIBIT D or as subsequently changed by appropriate written notice.
(b) All payments and reports required to be delivered to
Company shall be directed to Company at the above address or to an electronic
address or account otherwise designated by Company. Notwithstanding the parties'
agreement regarding when notices shall be deemed to be given, any required
payment or report not actually received by Company on the date it is due shall
be deemed delinquent.
35.2. TIME OF THE ESSENCE. Time is of the essence of this Agreement
with respect to each and every provision of this Agreement in which time is a
factor.
35.3. WITHHOLDING OF CONSENT. Except where this Agreement expressly
requires Company to exercise its reasonable business judgment in deciding to
grant or deny approval of any action or request by Franchisee, Company has the
absolute right to refuse any request by Franchisee or to withhold its approval
of any action by Franchisee in Company's sole discretion. Further, whenever the
prior consent or approval of Company is required by this Agreement, Company's
consent or approval must be in evidence by a writing unless this Agreement
expressly states otherwise.
35.4. WAIVER. Any waiver granted by Company to Franchisee excusing or
reducing any obligation or restriction imposed under this Agreement shall be in
writing and shall be effective upon delivery of such writing by Company to
Franchisee or upon such other effective date as specified in the writing, and
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only to the extent specifically allowed in such writing. No waiver granted by
Company, and no action taken by Company, with respect to any third party shall
limit Company's sole discretion to take action of any kind, or not to take
action, with respect to Franchisee. Any waiver granted by Company to Franchisee
shall be without prejudice to any other rights Company may have. The rights and
remedies granted to Company are cumulative. No delay on the part of Company in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Company of any right or remedy shall preclude
Company from fully exercising such right or remedy or any other right or remedy.
Company's acceptance of any payments made by Franchisee after a breach of this
Agreement shall not be, nor be construed as, a waiver by Company of any breach
by Franchisee of any term, covenant or condition of this Agreement.
35.5. SECTION HEADINGS: LANGUAGE. The Section headings used in this
Agreement are inserted 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. The language used in this Agreement shall in all
cases be construed simply according to its fair meaning and not strictly for or
against Company or Franchisee. The term "Franchisee" as used herein is
applicable to one or more persons or Business Entities if the interest of
Franchisee is owned by more than one, and the singular usage includes the plural
and the masculine and neuter usages include the other and the feminine. If two
or more persons are at any time the Franchisee hereunder, whether or not as
partners or joint venturers, their obligations and liabilities to Company shall
be joint and several. Nothing in this Agreement is intended, nor shall it be
deemed, to confer any rights or remedies upon any person or Business Entity not
a party hereto.
35.6. BINDING ON SUCCESSORS. The covenants, agreements, terms and
conditions contained in this Agreement shall be binding upon, and shall inure to
the benefit of, the successors, assigns, heirs and personal representatives of
the parties hereto.
35.7. VALIDITY; CONFORMITY WITH APPLICABLE LAW. Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be valid
under Applicable Law, but if any provision of this Agreement shall be invalid or
prohibited under Applicable Law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. If the provisions
of this Agreement provide for periods of notice less than those required by
Applicable Law, or provide for termination, cancellation, non-renewal or the
like other than in accordance with Applicable Law, such provisions shall be
deemed to be automatically amended to conform them to the provisions of such
Applicable Law. If any provision of this Agreement is deemed unenforceable by
virtue of its scope in terms of geographic area, business activity prohibited or
length of time, but could be enforceable by reducing any or all thereof: the
parties agree that the provision shall be enforced to the fullest extent
permissible under the laws of the jurisdiction in which enforcement is sought.
35.8. AMENDMENTS. No amendment, change, modification or variance to or
from the terms and conditions set forth in this Agreement shall be binding on
any party unless it is set forth in writing and duly executed by Company and
Franchisee.
35.9. COMPANY'S BUSINESS JUDGMENT. The parties recognize, and any
mediator or judge is affirmatively advised that certain provisions of this
Agreement describe the right of Company to take (or refrain from taking) certain
actions in its sole discretion, and other actions in the exercise of its
reasonable business judgment. Where this Agreement expressly requires that
Company make a decision based upon Company's reasonable business judgment,
Company is required to evaluate the overall best interests of all uWink(TM)
Entertainment Restaurants and Company's own business interests. If Company makes
a decision based upon its reasonable business judgment, neither a mediator nor a
judge shall substitute his or her judgment for the judgment so exercised by
Company. The fact that a mediator or judge might reach a different decision than
the one made by Company is not a basis for finding that Company made its
decision without the exercise of reasonable business judgment. Company's duty to
exercise reasonable business judgment in making certain decision does not
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restrict or limit Company's right under this Agreement to make other decisions
based entirely on Company's sole discretion as permitted by this Agreement.
Company's sole discretion means that Company may consider any set of facts or
circumstances that it deems relevant in rendering a decision.
35.10. COMPLETE AGREEMENT. This Agreement, including all exhibits
attached hereto, and all agreements or documents which by the provisions of this
Agreement are expressly incorporated herein or made a part hereof, sets forth
the entire agreement between the parties, fully superseding any and all prior
agreements or understandings between them pertaining to the subject matter
hereof.
35.11. COVENANT AND CONDITION. Each provision of this Agreement
performable by Franchisee shall be construed to be both a covenant and a
condition.
35.12. SUBMISSION OF AGREEMENT. The submission of this Agreement to
Franchisee does not constitute an offer to Franchisee, and this Agreement shall
become effective only upon execution by Company and Franchisee.
35.13. SUCCESS OF FRANCHISE BUSINESS. By executing this Agreement,
Franchisee represents and warrants that no person acting on Company's behalf has
made any representations or promises to Franchisee that are not contained in
this Agreement, including, without limitation, representations or promises about
actual or potential sales, earnings, gross profits or net profits, and
Franchisee is not relying on any representations or promises except those
representations set forth in this Agreement. Franchisee understands and agrees
that owning the Franchised Business involves business risks and the success of
the Franchise Business will depend primarily on Franchisee's investment of time,
capital and personnel, the desirability of the Franchise Location in
Franchisee's local market, and factors beyond Company's or Franchisee's control
including, without limitation, local competition, consumer preferences,
inflation, labor costs, the terms of the Lease terms, and market conditions,
which may be difficult to anticipate.
35.14. ANTI-TERRORISM REPRESENTATIONS. Franchisee agrees to comply with
and/or to assist Company to the fullest extent possible in Company's efforts to
comply with Anti-Terrorism Laws (as defined below). In connection with such
compliance, Franchisee certifies, represents and warrants on behalf of itself,
each Covered Person and each person who is a guarantor of Franchisee's
obligations to Company that none of their property or interests are subject to
being "blocked" under any of the Anti-Terrorism Laws and that Franchisee is not
otherwise in violation of any of the Anti-Terrorism Laws. "Anti-Terrorism Laws"
means Executive Order 13224 issued by the President of the United States, the
USA PATRIOT Act, and all other present and future federal, state and local laws,
ordinances, regulations, policies, lists and any other requirements of any
governmental authority addressing or in any way relating to terrorist acts and
acts of war. Any violation of, or "blocking" of assets under, the Anti-Terrorism
Laws shall constitute grounds for immediate termination of this Agreement and
any other agreement Franchisee has entered into with Company or one of its
affiliates, in accordance with the termination provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Company: Franchisee:
uWink Franchise Corporation OCC Partners LLC
a Florida limited liability company
By: __________________________________ By: _________________________________
Name: _______________________________ Name: _______________________________
Title: ______________________________ Title: ______________________________
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EXHIBIT A
FRANCHISE LOCATION AND RESTRICTED AREA
The street address of the Franchise Location is as follows:
________________________________________________________________________________
________________________________________________________________________________
The Restricted Area consists of the geographic area which is described
below and/or shown in the map attached to this EXHIBIT A:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Dated: ______________________________
Company: Franchisee:
uWink Franchise Corporation OCC Partners LLC
a Florida limited liability company
By: __________________________________ By: _________________________________
Name: _______________________________ Name: _______________________________
Title: ______________________________ Title: ______________________________
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EXHIBIT B
INITIAL HARDWARE PACKAGE
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EXHIBIT C
PERSONAL GUARANTY
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EXHIBIT D
ADDRESSES FOR NOTICE
----------------------------------------- --------------------------------------
TO COMPANY TO FRANCHISEE
----------------------------------------- --------------------------------------
UWINK FRANCHISE CORPORATION OCC PARTNERS LLC
00000 XXXX XXXXXX X XXXXXXX LIMITED LIABILITY COMPANY
XXX XXXX, XXXXXXXXXX 00000-0000 0000 XX 000 XXXXXXX
ATTENTION XX. XXXXX XXXXXXXX XXXXX, XXXXXXX 00000
TELEPHONE: 818/000-0000 XXXXXXION: XXXX XXXXXXXXXX
FAX: (000) 000-0000 TELEPHONE: _________________
E-MAIL: XXXXX.XXXXXXXX@XXXXX.XXX FAX: _______________________
E-MAIL: _____________________
----------------------------------------- --------------------------------------
WITH A COPY TO: WITH A COPY TO:
----------------------------------------- --------------------------------------
XXXXXXXX X. XXXXXXXX, ESQ. XXXXXX X. XXXXXX, ESQ.
XXXXXXXXXXXX XXXX & XXXXXXXXX XXXXX, MCCLOSKY, SMITH, XXXXXXXX
000 XXXXX XXXXXXXX XXXXXX, XXXXX 0000 & XXXXXXX, P.A.
XXX XXXXXXX, XX 00000 000 XXXXXXXX XXXXXX, XXXXX 0000
DIRECT LINE: 213/892-5036 XXXXX, XXXXXXX 00000
MAIN LINE: 213/623-9300 TELEPHONE: 305/000-0000
FAX: 213/000-0000 FAX: 305/000-0000
E-MAIL: XXXXXXXXX@XXXXXXXXXXXX.XXX E-MAIL: XXXXXX.XXXXXX@XXXXX.XXX
----------------------------------------- --------------------------------------
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EXHIBIT E
MANAGEMENT AGREEMENT
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EXHIBIT D
ADDRESSES FOR NOTICE
------------------------------------------- ------------------------------------
TO COMPANY TO FRANCHISEE
------------------------------------------- ------------------------------------
UWINK FRANCHISE CORPORATION OCC PARTNERS LLC
00000 XXXX XXXXXX X XXXXXXX LIMITED LIABILITY COMPANY
XXX XXXX, XXXXXXXXXX 00000-0000 0000 XX 000 XXXXXXX
ATTENTION XX. XXXXX XXXXXXXX XXXXX, XXXXXXX 00000
TELEPHONE: 818/000-0000 XXXXNTION: XXXX XXXXXXXXXX
FAX: (000) 000-0000 TELEPHONE: _________________
E-MAIL: XXXXX.XXXXXXXX@XXXXX.XXX FAX: _______________________
E-MAIL: _____________________
------------------------------------------- ------------------------------------
WITH A COPY TO: WITH A COPY TO:
------------------------------------------- ------------------------------------
XXXXXXXX X. XXXXXXXX, ESQ. XXXXXX X. XXXXXX, ESQ.
XXXXXXXXXXXX XXXX & XXXXXXXXX XXXXX, MCCLOSKY, SMITH, XXXXXXXX
000 XXXXX XXXXXXXX XXXXXX, XXXXX 0000 & XXXXXXX, P.A.
XXX XXXXXXX, XX 00000 000 XXXXXXXX XXXXXX, XXXXX 0000
DIRECT LINE: 213/892-5036 XXXXX, XXXXXXX 00000
MAIN LINE: 213/623-9300 TELEPHONE: 305/000-0000
FAX: 213/000-0000 FAX: 305/000-0000
E-MAIL: XXXXXXXXX@XXXXXXXXXXXX.XXX E-MAIL: XXXXXX.XXXXXX@XXXXX.XXX
------------------------------------------- ------------------------------------
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EXHIBIT E
FRANCHISE AGREEMENT
[UWINK LOGO]
June ____, 2007
Xxxx Xxxxxxxxxx
OCC Partners LLC, a Florida limited liability company
0000 XX 000 Xxxxxxx
Xxxxx, Xxxxxxx 00000
RE: uWink Franchise Agreement
Dear Xxxx;
The Franchise Agreement that you and we intend to enter into in
connection with the 3 store area development undertaking that we have been
discussing obligates us to provide continuing consultation and advice to help
you open and operate your first uWink(TM) Entertainment Restaurant
("Restaurant").
The purpose of this letter agreement is to articulate the nature and
level of additional support services that we promise to provide to you during
the period from the Effective Date of the Franchise Agreement through the end of
the first 3 months after the Opening Date (we refer to this period as the "term
of this letter agreement").
You may, at your option, extend the term of this letter agreement for
an additional 3 months, or until the end of the first 6 months after the Opening
Date, if you give us written notice by no later than 60 days after the Opening
Date.
After the term of this letter agreement expires, you and we shall
continue to perform our respective duties under the Franchise Agreement. If you
request additional support services not contemplated by the Franchise Agreement,
we shall consider your request and may provide those services on mutually
acceptable terms.
This letter agreement shall have no force or effect unless you and we
enter into an Area Development Agreement and Franchise Agreement, in which case
this letter agreement shall become effective concurrently upon the Effective
Date of the Franchise Agreement. The Franchise Agreement shall be the primary
source of our respective rights and duties, and only to the extent that this
letter agreement conflicts with the Franchise Agreement or specifies our
agreement to perform additional services during the term of this letter
agreement not identified in the Franchise Agreement does this letter agreement
amend the Franchise Agreement. The letter agreement shall only apply to the
first Franchise Agreement that you and we enter into for your first Restaurant.
Unless defined in this letter agreement, all capitalized terms shall have the
meaning assigned to them in the Franchise Agreement.
You acknowledge that, under the Franchise Agreement, you are solely
responsible for a variety of duties relating to the development and operation of
your Restaurant, which you must complete at your own expense. These duties
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include, without limitation, evaluating potential sites for the Franchise
Location, hiring restaurant management; overseeing construction and development
of the Franchise Location diligently, expeditiously and in a first-class manner
so that your Restaurant complies with our standards for equipment, fixtures,
furniture and trade dress; operating your Restaurant in accordance with our
specifications; and observing our requirements for use of our trademarks,
confidential information and other intellectual property.
This letter agreement does not eliminate or modify your duties under
the Franchise Agreement, but expresses our agreement to provide the following
additional services during the term of this letter agreement above the basic
level that we are obligated to provide under the Franchise Agreement:
- Preparing for your review and approval a preliminary
proposed operating and capital expenditures budget and a business plan within
thirty (30) calendar days of the effective date of the agreement and be updated
on a quarterly basis or as more information becomes available.
- Making recommendations and providing advice to help you
identify and evaluate potential sites for the Franchise Location.
- Consulting with your architect, designer and contractor on
space plans, layout and improvements to your Franchise Location.
- Providing the non-exclusive services of Xxxx Xxxxxxx to
directly oversee all aspects of the opening and operation of your Restaurant
during the term of this letter agreement.
- Making recommendations regarding management, staff-level and
supervisory personnel hiring decisions and general employment policies and human
resource benefits.
- Providing specific recommendations for your grand opening
promotional program to stimulate brand name awareness and publicity in your
market.
- Helping you negotiate contracts and leases for equipment,
POS terminals, soft drinks, laundry services, utility services, vermin
extermination, telephone services, computer and computer support services, food
purveyors, concessions and maintenance services for your Restaurant.
We will provides these services at no additional charge above the
Initial Fees and Continuing Fees specified in the Franchise Agreement. You agree
to reimburse us for our reasonable travel expenses, including, without
limitation, expenses for air and ground transportation, lodging, meals, and
miscellaneous travel-related personal charges which our employees incur in
traveling to your area to perform duties during the term of this letter
agreement, with the exception that we will not charge for our travel expenses in
connection with sending an opening team to your Restaurant for the New Store
Opening portion of the Initial Training Program. Additionally, if you elect to
extend the term of this letter agreement, in addition to reimbursing us for
reasonably travel expenses, you agree to pay our current per diem fee for each
day that each one of our employees travels to or spends in your area performing
services. There will be no per diem fee for visits that our staff makes to your
area during the term of this letter agreement before the end of the first 3
months after the Opening Date.
We furthermore agree not to charge a Site Review Fee in connection with
our review and approval of the site for your first Restaurant.
By undertaking to provide you with a greater level of support services
during the term of this letter agreement, you agree that we do not act as your
agent and you shall not represent that we are your agent to third parties or
suggest that we are financially responsible for the obligations of your
Restaurant or other investments. Among other things, you understand that, by
undertaking these duties, we do not modify the indemnity provisions of the
Franchise Agreement.
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In helping you develop an operating budget after we sign the Franchise
Agreement, we shall not be deemed to have made any guaranty, representation or
warranty about expected, likely or possible revenues, profits or success of the
Restaurant during the term of this letter agreement or afterwards.
Please indicate your agreement to the foregoing terms and conditions by
signing below where indicated.
Company:
uWink Franchise Corporation
By: _____________________________________
Name: __________________________________
Title: _________________________________
AGREED AND ACCEPTED
Franchisee
OCC Partners LLC
A Florida limited liability company
By: _____________________________________
Name: __________________________________
Title: _________________________________
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[UWINK LOGO]
June ____, 2007
Xxxx Xxxxxxxxxx
OCC Partners LLC, a Florida limited liability company
0000 XX 000 Xxxxxxx
Xxxxx, Xxxxxxx 00000
RE: uWink Franchise Corporation - Amendment of Area
Development Agreement
Dear Xxxx;
This letter confirms our mutual agreement to amend the Area Development
Agreement previously delivered to you in certain respects. We each agree to
execute this letter in the spaces below simultaneously with our execution of the
Area Development Agreement. This letter shall be of no force and effect unless
this letter and the Area Development Agreement are executed by both of us.
If there is any inconsistency between the Area Development Agreement
and this letter agreement, this letter agreement shall control. All capitalized
terms in this letter agreement shall have the same meaning assigned to them in
the Area Development Agreement.
The amendments we agree to are as follows:
1. Notwithstanding anything in the Area Development Agreement, we agree
that you shall not be obligated to sign the Franchise Agreement for the first
uWink(TM) Entertainment Restaurant ("Restaurant") in the Development Quota until
such time as you and we mutually agree upon the site for the first Restaurant.
Once we mutually agree upon the site, we shall deliver a copy of the Franchise
Agreement for the first Restaurant in the form attached to the Area Development
Agreement as SCHEDULE C. You shall have 15 days in which to execute the
Franchise Agreement. You agree to pay us all fees due and payable upon execution
of the Franchise Agreement as set forth in the Franchise Agreement.
2. If for any reason we are unable to reach a mutual agreement on the
site for the first Restaurant within one year from the Effective Date of the
Area Development Agreement, either one of us may terminate the Area Development
Agreement by giving written notice of termination to the other within 30 days
following the end of the one year period. For example, if we sign the Area
Development Agreement on July 7, 2007 and we do not mutually agree upon the site
for the first Restaurant by July 7, 2008, either one of us may terminate the
Area Development Agreement by giving written notice of termination to the other
on or before August 7, 2008. Should either one of us terminate the Area
Development Agreement within the 30 days allowed, we agree to refund 50% of the
Development Fee, or $20,000, to you without interest upon your delivery to us of
a properly executed general release in the form that we require releasing all
claims that you may have against us, our Affiliates and our respective officers,
C-68
directors, shareholders, employees and agents. Upon termination of the Area
Development Agreement, neither one of us shall have any further obligations to
the other, except as stated in this letter agreement.
3. Upon execution of the Area Development Agreement, you will pay 50%
of the Development Fee, or $20,000, to us and pay the other 50% of the
Development Fee, or $20,000, to our attorneys, Sonnenschein, Nath and Xxxxxxxxx,
which will hold the sum in trust subject to the terms of the Escrow Deposit
Agreement attached to this letter. You agree to execute the Escrow Deposit
Agreement concurrently upon execution of the Area Development Agreement.
Sonnenschein, Nath and Xxxxxxxxx shall release the $20,000 to us when we notify
them in writing that you and we have reached mutual agreement on the site for
the first Restaurant.
4. The Development Fee shall be fully earned and non-refundable when
paid by you upon execution of the Area Development Agreement, subject to the
specific refund conditions stated in this letter applicable to 50% of the
Development Fee or $20,000.
5. As we state in the separate letter agreement for consulting
services, we agree to assist you with site selection for your first Restaurant
by making recommendations and providing advice to help you identify and evaluate
potential sites for the Franchise Location. You agree to use your best efforts
to identify one or more suitable sites within the Development Territory, subject
to your assessment of our financial condition.
6. While we will not sign the Franchise Agreement for the first
Restaurant until mutual site approval, you and we agree to be bound by the site
selection procedures and related provisions set forth in the Franchise Agreement
attached to the Area Development Agreement as SCHEDULE C.
7. We amend the Development Deadline for the first Restaurant to
require that you open it within 9 months after the date that we sign the
Franchise Agreement for the first Restaurant. The Development Deadlines for the
second and third Restaurants shall remain the same.
8. We agree to extend to you limited "most favored nation" treatment
subject to the following terms and conditions. If, during the Development Term,
we enter into an Area Development Agreement with another developer for the
opening of 3 or fewer Restaurants in the United States and agree to economic
terms in the other developer's Franchise Agreement requiring payment of fees at
rates lower than the fees set forth in your Franchise Agreement, we will amend
each Franchise Agreement which, at the time, has been, or thereafter will be,
entered into by you and us pursuant to our Area Development Agreement in order
to offer you the same lower fees prospectively. You understand and agree that
this "most favored nations" agreement (w) applies only to the fees payable by
you to us under your Franchise Agreement; (x) depends on the other developer's
development commitment not being greater than your development commitment; (y)
is available only during your Development Term; and (z) applies prospectively
only from and after the date that we enter into an Area Development Agreement
with
[continued on next page]
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another developer and will not result in any retroactive adjustment or refund of
fees paid or due before the date that we enter into the Area Development
Agreement with the other developer.
Please indicate your agreement to the foregoing terms and conditions by
signing below where indicated.
uWink Franchise Corporation
By: _____________________________________
Name: __________________________________
Title: _________________________________
AGREED AND ACCEPTED
Franchisee
OCC Partners LLC
A Florida limited liability company
By: _____________________________________
Name: __________________________________
Title: _________________________________
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