License Agreement [Amendment] - Hearst Holdings Inc. and AFC Enterprises Inc.
AMENDMENT
AGREEMENT made as of January 1, 2002 by and between Hearst Holdings,
Inc., King Features Syndicate Division, a Delaware corporation with offices at
888 Seventh Avenue, New York, New York 10019 ("HHI") and AFC Enterprises, Inc.,
a Minnesota corporation with offices at Six Concourse Parkway, Suite 1700,
Atlanta, Georgia 30328 ("AFCE") (hereinafter referred to as the "January 1, 2002
Amendment").
WHEREAS, The Hearst Corporation, King Features Syndicate Division
("Hearst") and A. Copeland Enterprises, Inc. entered into an agreement dated
March 11, 1976 relating inter alia to the use of the POPEYE cartoon in
connection with POPEYES restaurants inside of the United States (the "Domestic
Agreement"); and
WHEREAS, Hearst, A. Copeland Enterprises, Inc. and Popeyes Famous Fried
Chicken, Inc. ("PPFC") entered into an agreement dated January 1, 1981 (the
"Assignment and Amendment") which inter alia amended the Domestic Agreement and
assigned the rights and obligations of A. Copeland Enterprises, Inc. under the
Domestic Agreement to PPFC; and
WHEREAS, Hearst and PPFC entered into an agreement dated January 1,
1981 relating inter alia to the use of the POPEYE cartoon in connection with
POPEYES restaurants outside of the United States (the "International
Agreement"); and
WHEREAS, Hearst and PPFC entered into a letter agreement dated
September 17, 1981 (the "Letter Agreement of September 17, 1981") which amended
the Domestic Agreement and the International Agreement; and
WHEREAS, King Features Syndicate, Inc., Hearst, POPEYES, Inc., and A.
Copeland Enterprises, Inc. entered into an agreement dated December 19, 1985
(the "License Agreement") which refers to and is controlled by the Domestic
Agreement; and
WHEREAS, Hearst and POPEYES, Inc. entered into a letter agreement dated
July 20, 1987 (the "Letter Agreement of July 20, 1987") which amended the
Domestic Agreement; and
WHEREAS, Biscuits Investments, Inc., Canadian Imperial Bank of
Commerce, and Hearst entered into an agreement which was signed by the last
party on September 22, 1989 (the "Consent Relative to Security Agreement") which
amended the Domestic Agreement and the International Agreement and which was
based on agreements, confirmations and representations of POPEYES, Inc., in a
letter dated March 17, 1989; and
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WHEREAS, Hearst and America's Favorite Chicken Company ("AFC") entered
into an agreement dated July 12, 1995 (the "Japanese Agreement") which amended
the International Agreement; and
WHEREAS, Hearst and AFC entered into an agreement dated December 31,
1995 (the "December 31, 1995 Amendment") which amended, among other provisions,
the royalty provisions of the Domestic Agreement and the International
Agreement; and
WHEREAS, AFCE by a succession of inter mesne assignments, name changes
and mergers has succeeded to and accepted the rights and obligations of PFFC,
POPEYES, Inc. and AFC under the Domestic Agreement as amended and the
International Agreement as amended; and
WHEREAS, Hearst has assigned to HHI its rights and obligations under
the Domestic Agreement as amended and the International Agreement as amended and
HHI accepted such rights and obligations of Hearst; and
WHEREAS, AFCE wishes to adjust the royalties provisions of the Domestic
Agreement and the International Agreement; and
WHEREAS, as compensation for the adjustment of royalty provisions, AFCE
is willing to have removed from the grant of rights licensed to it under the
Domestic Agreement as amended, and the License Agreement, all rights relating to
the companion characters of the POPEYE cartoon strip and to limit the
exclusivity of its licensed use of the POPEYE character; and
WHEREAS, HHI and AFCE wish to further amend the term provisions, among
other provisions, of the Domestic Agreement and the International Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
respective promises, covenants, representations and warranties contained herein,
HHI and AFCE hereby agree as follows:
1. Paragraphs 3, 4, 5, 6, 7, 8, and 11 of the December 31, 1995
Amendment are cancelled and shall not be in force or effect as of January 1,
2002.
2. Effective as of January 1, 2002, all rights relating to the
companion characters of the POPEYE cartoon strip (e.g., OLIVE OYL, SWEE' PEA and
WIMPY), their names, pictures, portraits, photographs, likenesses, images,
symbols, caricatures, cartoons and signatures, licensed to AFCE's predecessors
in interest under the Domestic Agreement as amended, and the License Agreement,
shall be deemed to have terminated for all intents and purposes as set forth in
the Domestic Agreement as amended, and the License Agreement.
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Such termination of rights shall be binding upon any franchisees or sublicensees
of AFCE or its predecessors in interest, provided, however, that AFCE's
franchisees and sublicensees will have six (6) months from the last signature
date hereof to remove from their premises all materials displaying such
companion characters. Accordingly and also effective as of January 1, 2002, HHI
shall be free to itself use or license any third party the right to use in the
United States the said POPEYE companion characters and all of their aforesaid
elements on or in connection with any goods or services.
3. Paragraph 1 of the Domestic Agreement, as rewritten in the
Letter Agreement of July 20, 1987, is hereby deleted and replaced with the
following:
1. (a) King Features Syndicate Division of Hearst Holdings,
Inc. ("HHI") hereby grants AFC Enterprises, Inc. ("AFCE") the
sole and exclusive rights 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
signatures of only the POPEYE character (and not any of the
companion characters such as OLIVE OYL, SWEE' PEA and WIMPY)
from and as it appears in the POPEYE cartoon strip (the
"POPEYE Character") for the purposes of AFCE's business and
trade only and the advertising thereof as hereinafter defined
and set forth. During the term of this agreement and any
renewal or extension thereof, and subject to the provisions of
Subparagraph 1(c) below, HHI shall not itself exercise or
license another to exercise any right granted in this
Subparagraph 1(a), regardless of whether AFCE has yet
exercised any right so granted.
(b) In addition to the rights set forth in Subparagraph
1(a) above and notwithstanding anything to the contrary in the
agreement, HHI hereby grants AFCE the non-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 this agreement, the POPEYE
Character on and in connection with Cajun entree products to
be sold outside of the restaurants of the POPEYES system as
defined herein (e.g., through retail outlets such as Costco
and by way of web sites such as Popeyes.com). The Cajun entree
products shall consist of specialty Cajun seafood entrees
comprised of: ready-to-bake and ready-to-fry blackened grilled
fish, stuffed shrimp and stuffed whitefish; gourmet Cajun
pizza comprised of rustic New Orleans style ready-to-bake
pizza with the following Louisiana specialty toppings:
crawfish, andoullie sausage, Italian sausage, tasso ham,
shrimp, Portobello mushrooms and Creole tomatoes; Cajun heat
and serve BBQ and
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smoked ribs, roasted pork tenderloin, stuffed pork tenderloin,
turkey medallions, turkey filets, andoullie sausage and
crawfish; heat and serve pasta bowl and rice bowls with
seafood and poultry in Cajun sauces; heat and serve Cajun hams
and turkeys; heat and serve oyster-cornbread dressing, corn
casserole, sweet potato biscuits, and bananas foster bread
pudding sold as sets; and such other Cajun entree products
that the parties may from time to time agree to add to this
Agreement (collectively, the "Products"). Furthermore, AFCE
shall have the right to sublicense to third parties the right
to reproduce and use the POPEYE Character on the Products,
provided that such sublicensees are also bound by the same
obligations imposed on AFCE hereunder (except that AFCE shall
be solely responsible for remitting to HHI all royalty
payments due to HHI from sales by such sublicensees) and that
nothing in this subparagraph shall relieve AFCE of its
obligations hereunder.
(c) Notwithstanding anything to the contrary herein,
including but not limited to the provisions of Subparagraph
1(a), HHI shall be free to itself use, or license any third
party the right to use, the POPEYE Character in the United
States on or in connection with any goods or services,
provided that, HHI agrees that during the term of this
agreement it shall not license the use of the POPEYE Character
in the United States to any restaurant chain that derives more
than fifty (50%) percent of its gross sales from prepared
chicken (and not egg) products (e.g., chicken fingers, fried
chicken, roasted chicken and chicken sandwiches).
4. (a) In consideration for the rights granted to AFCE under
the International Agreement and in Subparagraph 1(a) of the Domestic Agreement,
AFCE agrees to pay to HHI for each year of the term the sum of Nine Hundred
Thousand Dollars ($900,000) in United States currency (the "Annual Fee"),
regardless of whether such rights are exercised in whole or in part. HHI
acknowledges that, even though AFCE has the right under and subject to said
Agreements to reproduce and use the POPEYE Character image, it may nonetheless
decide not to use the POPEYE Character image on all or any of its products or in
connection with all or any of its services. Subject to the stipulations and
conditions set forth in Paragraph 9 hereof, AFCE agrees that the aforementioned
payments shall be due even if it stops all use of the POPEYE Character image.
Each Annual Fee shall be payable in equal semi-annual installments of Four
Hundred and Fifty Thousand Dollars ($450,000) within thirty (30) days from
January 1 and July 1 of each year, respectively, commencing on January 1, 2002.
Notwithstanding the foregoing, the first such installment shall be paid upon
execution of this January 1, 2002 Amendment by AFCE and HHI and the Annual Fee
for the last six (6) month period of the term shall be pro-rated (i.e., one (1)
installment of $450,000 due within thirty (30) days from January 1, 2010).
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(b) The Annual Fee shall be adjusted by the percentage
increase or decrease in the nationwide Average Consumer Price Index for All
Urban Consumers ("CPI-U") between the CPI-U for calendar year 2002 and the CPI-U
for the year in which the Annual Fee is due, commencing with the Annual Fee due
for 2003. Any such adjustment in the Annual Fee shall be made in the July 1
installment. With regards to the last pro-rated Annual Fee, the adjustment, if
any, shall be made within thirty (30) days of July 1, 2010.
(c) In consideration for the rights granted to AFCE under
Subparagraph 1(b) of the Domestic Agreement, AFCE agrees to pay HHI twenty (20%)
percent of AFCE's Gross Revenues from the sales of the Products, regardless of
whether such rights are exercised in whole or in part. HHI acknowledges that,
even though AFCE has the right under and subject to said Subparagraph 1(b) to
reproduce and use the POPEYE Character image, it may nonetheless decide not to
use the POPEYE Character image on or in connection with all or any of the
Products. Subject to the stipulations and conditions set forth in Paragraph 9
hereof, AFCE agrees that the aforementioned payments shall be due even if there
is no use of the POPEYE Character image on or in connection with all or any of
the Products. As used herein, "Gross Revenues" shall mean all advances, fees,
royalties, revenues, or other consideration received by AFCE from its and its
sublicensees' sales of the Products without any setoffs or deductions
whatsoever.
(d) AFCE agrees to remit to HHI within sixty (60) days
following the completion of each consecutive six (6) month period of the term
commencing January 1, 2002, HHI's share of Gross Revenues received by AFCE
during the preceding six (6) month period. All such payments shall be made in
U.S. currency and shall be accompanied by a statement certified to be accurate
by an officer of AFCE, setting forth the information necessary or as reasonably
requested by HHI to determine the sums due to HHI under Subparagraph 4(c). The
statements will show the number and description of Products sold by AFCE and its
sublicensees and shall be furnished to HHI whether or not any Products have been
sold during the six (6) month period to which any such statement refers.
(e) AFCE agrees to keep accurate and complete books and
records with respect to the sales of the Products by AFCE and its sublicensees
and to open up all such books and records with respect to such sales and the
Gross Revenues therefrom for the inspection of HHI, its agents or designees, any
time and from time to time during regular business hours, whenever such
inspection is requested by HHI. HHI shall have the right to make copies of such
books and records which copies shall be maintained by HHI in strict confidence.
(f) AFCE agrees to require its sublicensees to keep
accurate and complete books and records with respect to their sales of the
Products and
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to require its sublicensees to open up all such books and records
with respect to such sales and the gross revenues therefrom for the inspection
of HHI, its agents or designees, any time and from time to time during regular
business hours, whenever such inspection is requested by HHI.
5. Any payments which are required to be made under Paragraph 4
hereof and which are not made by AFCE on or before the last day permitted for
such payment to be made, shall bear interest per annum from such last day at the
lower of the following rates: (i) the prevailing prime rate of interest charged
by JP Morgan Chase Bank (or its parent company or any successor financial
institution) in New York on said last day or (ii) the highest rate of interest
which may be charged under the laws of New York. This provision for payment of
interest on late payments shall not act as a waiver of the right to terminate
the Domestic Agreement and the International Agreement under Paragraph 6 hereof.
6. It is agreed that if AFCE fails to make any payments pursuant
to Paragraph 4 hereof, or if it or any of its franchisees or sublicensees
otherwise violate any of the material terms of the Domestic Agreement as amended
or the International Agreement as amended, HHI shall have the right to treat
each such failure or violation as a material breach, entitling HHI to all rights
and remedies allowed by law for such breach, including without limitation, the
right to terminate the Domestic Agreement and/or the International Agreement at
any time after such breach, and to retain whatever monies have theretofore been
paid hereunder by AFCE to HHI, provided HHI must give ninety (90) days written
notice of such breach, which notice will be null and void if the alleged breach
is cured within sixty (60) days of AFCE's receipt of such written notice.
7. The term of the Domestic Agreement and the International
Agreement shall extend through June 30, 2010. HHI and AFCE agree to commence
good faith negotiations regarding a further extension of the term of the
Domestic and International Agreements on or before December 1, 2009. In the
event that HHI and AFCE do not agree to extend the terms of the Domestic
Agreement or the International Agreement by June 30, 2010, then the non-extended
agreement will be deemed terminated for all intents and purposes as set forth in
the Domestic Agreement as amended, and the International Agreement as amended.
The non-extension of one agreement shall not affect the continuing validity of
the other agreement, assuming it is properly extended per its terms or other
agreement between the parties. Further, the obligation of AFCE to pay any
royalties pursuant to Paragraph 4 hereof shall cease at such time that the
copyrights for the POPEYE cartoon as it appeared in newspapers during March 1976
expire, provided that in no event shall such obligation of AFCE cease prior to
June 30, 2010.
8. Notwithstanding anything contained in the International
Agreement as amended or the Domestic Agreement as amended, AFCE shall, at its
option, provide HHI with written notice of any third party's use or
registration, in
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connection with restaurant services, chicken or poultry products:(i) in any
country covered by the International Agreement as amended, of any of the POPEYE
cartoon characters or the names thereof (excluding, however, the name POPEYES
and the name WIMPY and except as otherwise permitted in the International
Agreement as amended) and (ii) in any country covered by the Domestic Agreement
as amended, the POPEYE cartoon character or name thereof (excluding, however,
the name POPEYES and except as otherwise permitted in the Domestic Agreement as
amended). In the event HHI fails, within thirty (30) days of such notice from
AFCE, to notify AFCE in writing that it agrees to timely take all actions
reasonably necessary to prevent the continued use, registration or attempted
registration of such names or characters in connection with restaurant services
and/or the products described above, AFCE is hereby authorized by HHI to take
all such actions in AFCE's name or in the name of HHI and/or King Features
Syndicate, Inc. (as the exclusive Licensee of the owner of the copyright in the
POPEYE cartoon characters).
9. The parties acknowledge that they disagree about the nature of
their relationship as evidenced in correspondence exchanged between the parties
during the year 2001. Neither party intends by entering into this January 1,
2002 Amendment to agree, either expressly or implicitly, with the other party's
position and both parties acknowledge the right of the other to have and hold
the positions previously asserted. To facilitate the compromises each party has
made in reaching agreement on this January 1, 2002 Amendment, the parties agree
to suspend their differences as they may apply in any country covered by the
Domestic Agreement as amended, during its term and in any country covered by the
International Agreement as amended, during its term for the purpose of
concluding this January 1, 2002 Amendment. Both parties agree that no provision
of this January 1, 2002 Amendment may be asserted by either party as an
admission against interest of the other party in any future litigation between
the parties to determine whether this Amendment, the Domestic Agreement as
amended, the International Agreement as amended and/or the License Agreement
constitute a copyright and/or trademark license or to determine whether there is
a likelihood of confusion between POPEYE and POPEYES. However, the limitations
of this Paragraph 9 do not bar admission of this January 1, 2002 Amendment for
the purposes of proving that an agreement existed between the parties or to
prove any breach of the provisions of this January 1, 2002 Amendment. HHI agrees
that AFCE's payments in the absence of any use of the POPEYE Character image
shall not be admissible in any proceeding to prove the nature of any agreements
between the parties as a copyright and/or trademark license.
Except as expressly set forth above, all of the terms and conditions of
the Domestic Agreement as previously amended, the International Agreement as
previously amended, and the License Agreement shall remain in full force and
effect.
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IN WITNESS WHEREOF, the parties hereto have duly executed this January
1, 2002 Amendment on the date first written above.
HEARST HOLDINGS, INC. AFC ENTERPRISES, INC.
KING FEATURES SYNDICATE DIVISION
By: /s/ T. R. Shepard By: /s/ Jon L. Luther
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Name: T. R. Shepard Name: Jon L. Luther
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Title: President Title: President - Popeyes
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