Letter Agreement - Popeyes Inc. and Hearst Corp.
[LETTERHEAD OF POPEYES FAMOUS FRIED CHICKEN]
July 20, 1987
Mr. Jeffrey A. Brown
Vice President
The Hearst Corporation
King Features Syndicate Division
235 East 45th Street
New York, NY 10017
Dear Jeff:
This letter will supercede my earlier letter of December 5, 1986 which
we both signed, the said letter of December 5, 1986 shall be considered null and
void.
Popeyes, Inc. ("Popeyes") has succeeded to the rights and obligations of
A. Copeland Enterprises, Inc. ("Copeland") under the March 11, 1976 agreement
between Copeland and King Features Syndicate Division of The Hearst Corporation
("King Features") regarding the use of the characters contained in the cartoon
strip entitled POPEYE, their names, pictures, likenesses, images, symbols,
caricatures, cartoons and signatures in connection with our operation and supply
and franchising the operation of restaurants specializing in the sale of food
items such as fried chicken, french fries and other prepared or packaged foods
or ingredients.
It is the wish of Popeyes and King Features to modify the exclusivity
and royalty provisions of the March 11, 1976 agreement. Accordingly, the
following when executed by the parties shall set forth their agreement with
respect to such revisions.
Paragraphs 1, 3, 4, 5, 6 and 12 of the March 11, 1976 agreement are
cancelled and rewritten and a new paragraph 25 added as follows:
1. (A) King Features Syndicate Division of The Hearst
Corporation ("King Features") hereby grants Popeyes, Inc.
("Popeyes") the sole and exclusive right in the United States
only, for the term of this agreement and any renewal or extension
thereof, to reproduce and use, subject to the terms and conditions
of the agreement, the names, pictures, portraits, photographs,
likenesses, images, symbols, caricatures, cartoons and signature
of any of them, alone or with others of the POPEYE cartoon strip
(hereinafter collectively referred to as "Cartoon"), its principal
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Jeffrey A. Brown
July 20, 1987
Page 2
character and its companion characters for the purposes of your business and
trade only and the advertising thereof as hereinafter defined and set forth.
1. (B) Notwithstanding anything to the contrary in sub-paragraph I(A),
King Features shall have the right to license others in the food service field
to use the Cartoon or any element or elements thereof in connection with
promotions including but not limited to advertising, contest, and premium
promotions without Popeyes' prior consent provided that:
(i) The promotions are not involved with chicken or shrimp products,
biscuits, french fried potatoes or onion rings or any product promoted
as or relating to "cajun" or "New Orleans" style cooking or any major
new featured menu item which is related to "cajun" or "New Orleans"
style cooking which Popeyes is promoting throughout the POPEYES system
as hereinafter defined and of which Popeyes hereafter advises King
Features in writing at least One Hundred Twenty (120) days before such
product is introduced. It is understood that any promotion, which prior
to the receipt of such notice King Features has either licensed or is
engaged in active negotiations for and which negotiations conclude in a
license agreement no later than ten (10) business days after receipt of
such notice, shall not be prohibited by this sub-paragraph 1(B)(i).
(ii) The promotions are limited in duration not to exceed two (2)
months in their active phase, and the same entity, chain, or anyone
within the chain has not conducted two (2) Cartoon promotions during the
preceding eighteen (18) months measured from the commencement of the
promotion with the earlier active phase. The limitations of the
paragraph shall neither include test marketing, which is defined as not
exceeding four media markets and which does not include national,
regional or system-wide promotions of the licensee nor any period of
exclusivity either before or after the active phase of the promotion.
l.(C) King Features shall have the right to license the Cartoon and
any element or elements thereof other than Popeye, Olive Oyl, and Swee' Pea as
marks for foods sold by restaurants for consumption on or off the premises
provided that:
(i) The foods are not chicken or shrimp products, biscuits, french
fried potatoes or onion rings, or any food promoted as or relating to
"cajun" or "New Orleans" style cooking or any major new featured menu
item which is related to "cajun" or "New Orleans" style
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Jeffrey A. Brown
July 20, 1987
Page 3
cooking which Popeyes is promoting throughout the POPEYES system and
which Popeyes hereafter advises King Features in writing:
(ii) King Features obtains Popeyes prior written consent, which shall
not be unreasonably withheld. It being understood that if King Features
obtains Popeyes consent for such a license, prior to the introduction by
Popeyes of such a major new featured menu item which license would
otherwise be precluded under sub-paragraph l(C) (i), then the addition
of such new major featured menu item shall not have any effect on any
license which King Features may enter into based upon Popeyes prior
consent.
l.(D) King Features shall also have the right to license the Cartoon
and any element or elements thereof other than Popeye, Olive Oyl and Swee' Pea
as servicemarks for restaurant services provided that:
(i) The restaurant services do not and will not specialize in or
promote foods or cooking in the "Cajun" or "New Orleans" style, or
chicken or shrimp products, biscuits, french fried potatoes or onion
rings or any major new featured menu item which is related to "cajun" or
"New Orleans" style cooking which Popeyes is promoting throughout the
POPEYES system and which Popeyes hereafter advises King Features in
writing;
(ii) King Features obtains Popeyes' prior written consent, which
shall not be unreasonably withheld. It being understood that if King
Features obtains Popeyes consent for such a license, prior to the
introduction by Popeyes of a major new featured menu which would
otherwise be precluded under sub-paragraph l(D)(i), then the addition
of such new major featured menu item shall not have any effect on any
license which King Features may enter into based upon Popeyes prior
consent.
3. Commencing January 1, 1986, Popeyes shall pay to King Features
an annual royalty of Three Hundred Thousand Dollars ($300,000.00) in equal
semi-annual installments for the preceding six (6) months within thirty (30)
days from July 1 and January 1, respectively.
4. The royalties due for 1989 and each year thereafter shall be
adjusted by this percentage increase or decrease in the nationwide Average
Consumer Price Index for All Urban Consumers ("CPI-U") between the CPI-U for
1986 and for the year preceding the date in which the royalty is due. The
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Jeffrey A. Brown
July 20, 1987
Page 4
adjustment shall be reflected in each July semi-annual payment. (NOTE: The use
of the CPI-U or a GNP Implicit Price Deflator Index is subject to the choice of
King Features).
5. It is further agreed that if Popeyes fails to make any payments
pursuant to paragraph 3 and 4 above, or if it otherwise violates any of the
material terms of this agreement, King Features shall have the right to treat
each such failure or violation as a material breach of this agreement, entitling
King Features to all rights and remedies allowed by law for such breach,
including, without limitation, the right to terminate this agreement at any time
after such breach, and to retain whatever monies have theretofore been paid
hereunder by Popeyes to King Features, provided that King Features must give
ninety (90) days notice of such breach, which notice will be null and void if
the alleged breach is cured by Popeyes within sixty (60)
days of Popeyes' receipt of such notice.
6. The term of this Agreement shall extend through December 31,
1989 and shall be automatically removed from year to year thereafter, provided
that all of the terms and conditions to the performed by Popeyes hereunder have
been performed, and that Popeyes is not in breach or default of this agreement.
Further, the obligation of Popeyes to pay any royalties pursuant to paragraph 3
and 4 hereof shall cease at such time that the copyrights for the POPEYE cartoon
as it appeared in newspapers during March 1976 expire. Further, the amount of
the royalty shall be fixed as of the date that the original copyright in the
POPEYE cartoon character expires, and it shall not thereafter be adjusted under
any other paragraph of this agreement. Notwithstanding anything to the contrary
herein, this agreement may be terminated at any time after December 31, 1989 by
Popeyes giving King Features ninety (90) days' written notice together with a
pro-rata payment of the annual royalty.
12. The rights herein granted are personal to Popeyes and its
subsidiary corporations and may not, in whole or in part, be transferred or
assigned by operation of law or otherwise without King Features' prior written
consent which consent will not be unreasonably withheld. King Features agrees,
however, that Popeyes has the right to sub-license its rights hereunder to its
individual POPEYES franchisees provided that said franchisees are also bound by
the same quality obligations imposed on Popeyes hereunder. Notwithstanding the
foregoing, nothing in this paragraph shall relieve Popeyes of its obligations
under this agreement.
25.(A) The rights granted herein by King Features shall be limited to
the use of the Cartoon within the POPEYES system as hereinafter defined.
Nothing herein shall be construed to
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Jeffrey A. Brown
July 20, 1987
Page 5
permit Popeyes or any successors to use the Cartoon or any element or elements
thereof outside of the POPEYES system without the express written approval of
King Features. The POPEYES system shall be defined as the operation and supply
of restaurants bearing POPEYES as their primary name and specializing in the
sale of chicken, shrimp products, biscuits, french fried potatoes and onion
rings or food items prepared in "cajun" or "New Orleans" style cooking.
25.(B) Popeyes shall pay an additional annual royalty to King Features
if (1) Popeyes acquires or is acquired by, or affiliates with any entity having
or licensing or franchising twenty (20) or more restaurants in operation under a
mark other than POPEYES on the date of such acquisition or affiliation ("defined
entity"), (2) and one (1) or more of the restaurants of, or licensed by, or
franchised by, the defined entity are converted to POPEYES restaurants, and (3)
the total number of converted restaurants of all the defined entities exceeds
three hundred fifty (350) units in any five year period (the "Acquisition
Period"). The additional royalty shall be calculated by dividing the then
current royalty under paragraphs 3 and 4 by the total number of POPEYES
restaurants in operations on the effective date of the first acquisition by, or
affiliation of, any defined entity within the Acquisition Period. The quotient
shall be the additional royalty for each converted operating restaurant that was
acquired or affiliated within the said five (5) year period. The additional
royalty shall be pro-rated as applicable when the converted POPEYES restaurant
is in operation under this agreement for less than a full year but shall
thereafter continue at the full rate applicable to that POPEYES restaurant while
that restaurant is in operation under this Agreement. If the restaurants of a
defined entity operating under a different mark at the time of the acquisition
or affiliation are not converted to POPEYES restaurants within ten (10) years of
the effective date of such acquisition or affiliation (the "Conversion Period"),
they will no longer be considered as restaurants of a defined entity for the
purpose of this paragraph. The calculation of any additional royalty due from
the conversion to POPEYES restaurants of any additional restaurants which have
been acquired or affiliated during any subsequent Acquisition Period shall be
calculated in the same manner as provided for restaurants which have been
converted to POPEYES restaurants in the initial Acquisition Period. The payment
for the additional royalty for converted
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Jeffrey A. Brown
July 20, 1987
Page 6
POPEYES restaurants under this Paragraph shall be due at the same time
as the royalty due King Features under Paragraph 3 is due.
Very truly yours,
POPEYES, INC.
BY: /s/
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TITLE: President
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In consideration of $300,000.00 for the 1986 royalty as set forth above,
the receipt of which I hereby acknowledge, the foregoing is accepted.
THE HEARST CORPORATION,
KING FEATURES SYNDICATE DIVISION
BY: /s/
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TITLE: Vice President DATE:
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To induce The Hearst Corporation to enter into the foregoing agreement
A. Copeland Enterprises, Inc., guarantees the performance by its
subsidiary Popeyes, Inc., of all the terms and conditions which are to
be performed by Popeyes, Inc., under the said agreement.
A. COPELAND ENTERPRISES, INC.
BY: /s/ Alvin C. Copeland
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Alvin C. Copeland
President