EXHIBIT 10.5
SUBLICENSE AGREEMENT
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This Sublicense Agreement is made as of the day of December, 1996 by and
between FRANCHISE ASSOCIATES, INC., a Delaware corporation (hereinafter "FAI")
and DOWNEAST FROZEN DESSERTS, L.L.C. a Delaware Limited Liability Company,
(hereinafter "Licensee").
WHEREAS, FAI has received a license from Xxxxxx Xxxxxxx Company, Inc.
(hereinafter "HJ"), a Delaware corporation and a wholly-owned subsidiary of
Prime Motor Inns, Inc., to use certain service marks, trade names, trademarks,
letters patent, licensed works and the copyrights therein, and trade secrets,
all in accordance with that certain Service Xxxx and Trademark License Agreement
and that certain Patent, Copyright and Trade Secret License Agreement between HJ
and FAI, and that certain Definitive Agreement between Marriott Family
Restaurants, Inc., HJ, FAI, and others, all of which agreements are dated May
22, 1986 and are incorporated herein by reference (hereinafter, collectively,
the "License Agreements"), and copies of which are herewith provided and
initialed by the parties hereto;
WHEREAS, FAI desires to sublicense to Licensee certain rights received by FAI
under the License Agreements, and Licensee desires to obtain such rights; and
WHEREAS, HFS Incorporated, previously known as Hospitality Franchise Systems,
Inc. ("Hospitality") is the successor in interest of HJ with respect to certain
of HJ's rights and obligations under the License Agreements;
NOW, THEREFORE, FAI and Licensee, in consideration of the mutual agreements and
promises contained and expressed herein and for other good and valuable
consideration acknowledged by each of them to be satisfactory and adequate, do
hereby agree as follows:
1. DEFINITIONS
(a) "Licensed Trademarks" shall mean those marks set forth in Exhibit A.
(b) "Licensed Trade Secrets" shall mean all recipes and formulae contained
in Exhibit B attached hereto together with recipes and formulae
specified by FAI from time to time for products made using ice cream,
yogurt, sherbet, lites/ice milk and frozen ice.
(c) "Licensed Products" shall mean those products which are made using the
Licensed Trade Secrets.
(d) "Licensed Territory,, shall mean the United States, excluding
Florida and Puerto Rico.
(e) "Licensed Works" shall mean those literary and pictorial works,
graphic works of applied art, sound recordings and the copyrights
therein and the copyright registrations therefor which are related
solely to XXXXXX XXXXXXX food products.
(f) "Licensed Labels and Advertising" shall mean all packaging, labels,
advertising and promotional material and other media forms of
advertising which contain or make reference to one or more of the
Licensed Trademarks.
(g) "Day(s)" shall mean calendar day or days.
(h) "Related Parties" or "Affiliates" shall mean with respect to any
party, any person or entity controlled by, in control of, or under
common control with such party, whether directly or indirectly.
(i) "Agreement" shall mean this Agreement.
"Prime Purchase and Ancillary Agreement" shall mean the Prime Asset
Purchase Agreement between Marriott Corporation and HJ Acquisition
Corp., dated September 23, 1985, including the Ancillary Agreement
attached thereto.
2. GRANT OF SUBLICENSES
(a) To the extent that FAI now has or may later acquire the right to do
so, FAI hereby grants to Licensee exclusive license to manufacture,
market and deliver all Licensed Products in the Licensed Territory and
the exclusive license to use the Licensed Trademarks to identify
Licensed Products in the Licensed Territory, subject to the rights of
FAI, Hospitality, and Marriott Corporation and their Related Parties
and grantees under the terms of the Prime Purchase and Ancillary
Agreement and the License Agreements.
Licensee may also use the Licensed Trademarks to identify new products
in the Licensed Territory in accordance with the following provisions:
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In the event that Licensee wishes to use the Licensed Trademarks to
identify a new product, Licensee shall submit to FAI a written request
identifying the proposed new product (hereinafter a "New Product"),
together with the recipe or formula that Licensee proposes to use and
a sample of the proposed New Product, together with the proposed
Licensed Labels to be used in connection with such New Product. FAI
shall give Licensee written notice of its approval or disapproval,
together with the reasons therefor, within fifteen (15) days after
receipt of the request from Licensee. FAI's approval shall not be
unreasonably withheld. Licensee, when practical, shall also submit,
prior to use by Licensee, all proposed advertising of any New Product
for review by FAI.
If FAI approves the New Product, FAI shall, within five (5) working
days of its approval, notify Hospitality of its approval and provide
Hospitality with all documentation provided by Licensee relating to
the New Product. Hospitality shall give FAI and Licensee written
notice of approval or disapproval, together with the reasons therefor,
within twenty (20) days after receipt of the notification from FAI.
Hospitality will approve unless Hospitality believes its approval will
adversely affect the image, reputation or business of Hospitality and
presents reasons which satisfy that standard.
In connection with such New Products, Licensee shall provide to FAI
and Hospitality any additional information reasonably requested by
either, provided that if any request for additional information occurs
within the approval periods described above for each party, each
approval period will extend for a one time twenty (20) day extension
after the receipt of such information by either FAI or Hospitality.
All New Products developed by Licensee approved in accordance with
this Paragraph 2(a) shall be owned by Licensee and shall be deemed to
be Licensed Products subject to the provisions of this Agreement.
Notwithstanding the foregoing, FAI shall continue, after the
expiration or termination of this Agreement, to have a non-exclusive
right to manufacture and deliver such New Products, using Licensee's
formulae or recipes therefor, and to identify such New Products with
the Licensed Trademarks.
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(b) To the extent that FAI now has or may later acquire the right to do
so, FAI hereby grants to Licensee the exclusive license to use the
Licensed Trade Secrets in the Licensed Territory for the sole purpose
of manufacturing the Licensed Products. No other use may be made of
the Licensed Trade Secrets.
(c) To the extent that FAI now has or may later acquire the right to do
so, FAI hereby grants to Licensee a non exclusive license to use and
make use of the Licensed Works in the Licensed Territory for the
Licensed Products, including but not limited to the right to
reproduce, to distribute, to perform and/or display publicly, and to
prepare derivative works from the Licensed Works.
(d) Licensee shall not have the right to use any Licensed Trademark as all
or part of the name of any company, partnership, or any other entity.
(e) Licensee shall have the right to use the Licensed Trademarks, Licensed
Works and Licensed Trade Secrets only in the manner and to the extent
specifically permitted by this Agreement. No right, title or interest
in and to the Licensed Trademarks, Licensed Works or Licensed Trade
Secrets, except for the right to use the same as and only to the
extent specifically permitted under this Agreement, is or will be
transferred to Licensee by this Agreement. Without limiting the
foregoing: (i) Licensee shall not have the right to use any variation
of the Licensed Trademarks without the prior written approval of FAI
and Hospitality, which approval may be withheld by FAI or Hospitality
in its sole discretion. In the event that approval is granted for the
use of any variation of a Licensed Trademark, such xxxx shall become a
Licensed Trademark owned by Hospitality and governed by the terms of
this Agreement; (ii) Licensee shall not have the right to use, in
association with the Licensed Trademarks, any xxxx other than a
Licensed Trademark without the prior written approval of FAI and
Hospitality, which approval may be withheld by FAI or Hospitality in
its sole discretion; (iii) Licensee shall not, without the prior
written approval of FAI and Hospitality, which approval may be
withheld by FAI or Hospitality in its sole discretion, have the right
to use any form of Licensed Labels or Advertising containing any
Licensed Trademarks except as shown on
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Exhibit C attached hereto or which has been expressly authorized in
writing by Hospitality. Licensee may make such changes in Licensed
Labels and Advertising as may be required by governmental rules or
regulations and to accommodate for changes in product content approved
by Hospitality and FAI.
(f) Licensee recognizes that Hospitality may request changes in existing
Licensed Labels and Advertising of the Licensed Trademarks. If such
changes are requested in writing, Licensee shall adopt such changes
(or, in the alternative, discontinue further production of the
Licensed Products) as soon as practical, not to exceed one (1) year
from the date of such request by Hospitality. Upon any such request,
FAI shall request of Hospitality, in writing, that Hospitality
reimburse Downeast for all costs Downeast incurs in connection with
complying with any and all changes to the Licensed Labels and
Advertising of the Licensed Trademarks requested by Hospitality, it
being understood that Hospitality has no obligation to pay such costs.
3. OWNERSHIP
(a) Except as hereinafter provided, the licenses herein granted by FAI:
are without warranty or representation whatsoever; include only
whatever right, title and interest FAI has acquired from HJ under the
License Agreements or later acquires; and are subject to whatever
claims, if any, third parties may have now or in the future. Licensee
shall bear the risks, if any, that accompany the right to use the
Licensed Trademarks, Licensed Works and Licensed Trade Secrets. FAI
does represent and warrant to Licensee that:
(i) FAI is the "Licensee" under the aforementioned Service Xxxx and
Trademark License Agreement and the Patent, Copyright and Trade Secret
License Agreement and accordingly has the right and authority to enter
into this Sublicense Agreement and perform its terms;
(ii) to the knowledge of FAI, none of the Licensed Trademarks or
Trade Secrets has been adjudged invalid or unenforceable;
(iii) FAI's right to use the Licensed Trademarks to identify the
Licensed Products in the Licensed Territory is not encumbered by any
lien, charge or encumbrance
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except the security interest granted to Hospitality as security for
the performance of its obligations as "Licensee" under the Agreements
referred to in Paragraph 3(a)(i) hereof;
(iv) To the knowledge of FAI, Hospitality has succeeded to all rights
in or to the Licensed Trademarks and Licensed Works; and
(v) To the knowledge of FAI, FAI is not in default under any
contract or other obligation with or to Hospitality which would
threaten the continued existence of its License(s) granted in the
License Agreements. FAI agrees to promptly provide Licensee with any
notice of termination or notice threatening termination of any such
License(s).
Where used in this Agreement, "To the knowledge of FAI" shall be
limited to the knowledge of Xxxxxx Xxxxxxx and Xxxxxxx Xxxxxxxx.
(b) Licensee shall not disclose to any third party -- i.e., one who is not
an employee or agent of Licensee -- at any time either during or
subsequent to the Term of this Sublicense Agreement, any of the
Licensed Trade Secrets without the prior written consent of FAI.
Licensee shall require all of its employees, agents, sublicensees and
any other party to whom the Licensed Trade Secrets are to be disclosed
to agree to maintain the confidentiality of the Licensed Trade
Secrets. If any of the Licensed Trade Secrets is ever finally
determined by a court of competent jurisdiction not to rise to the
level of a trade secret, such information, formula, recipe, or process
will be considered to be confidential information (hereinafter
"Licensed Confidential Information") and the confidentiality
requirement discussed above will be deemed to be modified to the
extent that Licensee shall be under an obligation, and will impose
such obligation on their respective employees, agents, and any other
person to whom disclosure of any of the Licensed Confidential
Information has been permitted and made, not to disclose any Licensed
Confidential Information to the full extent allowed by applicable law.
(c) Licensee acknowledges that it has read and understands the provisions
contained in Paragraphs 4(b), (c), (d), (e) and (f) of said Service
Xxxx and Trademark License
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Agreement between HJ and FAI, and to the extent applicable, agrees to
perform and be bound by the obligations of "Licensee" in said
paragraphs. All references in said paragraphs to "Licensed Marks"
shall mean "Licensed Trademarks".
(d) Licensee shall use all reasonable commercial efforts to (i) ensure
that the prices of the Licensed Products shall at all times be
competitive and (ii) to market, distribute and maximize the sale
thereof. For the first year of the Term, Licensee agrees to maintain
prices of bulk ice cream at levels in effect on November 15, 1996
except that such prices may be increased during said first year to the
extent that the cost of material or packaging increases by more than
ten percent (10%) over the cost in effect on November 15, 1996.
(e) To the extent that FAI may legally do so and Licensee is in compliance
with its obligations under this Agreement, FAI shall use all
reasonable commercial efforts to cause each Xxxxxx Xxxxxxx'x
Restaurant in the Licensed Territory to purchase Licensed Products
from Licensee but only for so long as Licensee provides for the timely
delivery of Licensed Products to any such Restaurant and the quality
and prices of such Licensed Products are competitive.
(f) Throughout the Term of this Agreement, Licensee shall sell at least
the following quantities of non-bulk ice cream, yogurt, sherbet and
other frozen desserts or novelty items which are Licensed Products:
(i) for the first year of the Term, 61,000 gallons;
(ii) for the second year of the Term, 77,000 gallons;
(iii) for the third year of the Term, 89,000 gallons; and
(iv) for the fourth year of the Term, 100,000 gallons.
(g) Notwithstanding the exclusion of Florida from the Licensed Territory,
Licensee shall supply non-bulk Licensed Products to Florida according
to demand therefor from the date of commencement of the Term until the
date occurring sixty (60) days after written notice from FAI to cease
such supply. Such supply shall be subject to all terms, conditions and
obligations of this Agreement, except that the freight charges for all
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orders of Licensed Product to be shipped to Florida may be adjusted by
Downeast for the size and frequency of shipment.
4. ROYALTIES
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(a) In consideration of the sublicenses granted hereby, Licensee shall pay
to FAI the greater of: (i) the sum of $15,000.00 per year; or (ii) the
Licensed Product royalties paid under Paragraph 4(b) during each year
of the Term. If said Licensed Product royalties are less than $15,000
during any such year, Licensee shall pay FAI the difference within
thirty (30) days after the end of such year.
(b) Licensee agrees to pay to FAI a royalty ("Royalty") of Four Percent
(4%) of all "Sales" (as herein defined) of all Licensed Products of
all bulk ice cream products (eg. Three (3) gallon containers) and Two
Percent (2%) of all non-bulk ice cream products. Licensee further
agrees to pay to FAI a Royalty of Two Percent (2%) of all "Sales" (as
hereinafter defined) of products other than Licensed Products ("Non-
Licensed Products") made by Licensee, its Affiliates or Subcontractors
to (i) FAI and its Affiliates and (ii) to franchisees of FAI. "Sales"
as used herein shall mean the gross invoice prices less "xxxx backs"
(as known in the ice cream industry) and returns. A sale shall be
deemed to be made when the amount of the Sale is collected by
Licensee.
(c) Sales royalties shall be due and payable within thirty (30) days after
the end of each calendar month with respect to Sales made during the
month. A written royalty statement for each calendar month setting
forth the Sales shall accompany each payment. An opening inventory and
closing inventory of the Licensee certified by a corporate officer of
Licensee to be true and complete with, if available, a computer
summary of all applicable invoices for Sales, of returns and xxxx
backs and of inventories of Licensed Products during that period shall
also be delivered by the Licensee to FAI within thirty (30) days after
the end of each calendar quarter. Acceptance of payments or statements
shall not be deemed to be a waiver of any of FAI's rights.
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(d) Licensee agrees to keep at its principal office, all invoices relating
to Licensed Products and Non-Licensed Products subject to royalty
payment hereunder and a separate record of its Sales and inventories
of the Licensed Products and Non-Licensed Products subject to royalty
payment hereunder in a suitable record form, in sufficient detail to
enable FAI to determine or verify the Sales, royalties due and
inventories of the Licensed Products and further agrees that it will
permit such invoices and records to be examined and copied by FAI and
its auditors at reasonable times during ordinary business hours to the
extent necessary to verify the Sales, royalties due and inventories of
the Licensed Products. Notwithstanding the foregoing, FAI may not
disclose to others any information deemed confidential by Licensee.
Such records shall not be destroyed before expiration of two (2) years
after the submission of any royalty statement relating thereto, or in
the event that FAI questions the payment during such two year period,
until such dispute is resolved.
5. MARKETING
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(a) Licensee shall pay FAI a Marketing Fee of $2,500.00 per year
("Marketing Fee"), such payment to be made in monthly installments of
$208.33 at the same time as royalties are paid to FAI. FAI shall
contribute to the Marketing Fee the sum of $2,500.00 per year. FAI
shall use the Marketing Fee exclusively to promote the sale of
Licensed Products to Xxxxxx Xxxxxxx'x Restaurants.
(b) Commencing April 1, 1997 and annually on April lst each year
thereafter during the Term of this Agreement, Licensee shall submit to
FAI a marketing plan ("Marketing Plan") to promote the sale of non-
bulk Licensed Products, and Licensee and FAI shall jointly review each
such Marketing Plan.
6. QUALITY CONTROL AND STANDARDS OF QUALITY
----------------------------------------
(a) All Licensed Products will meet uniform standards of high quality and
appearance and will be produced in strict accordance with the Licensed
Trade Secrets. No change in the formula or recipe of any Licensed
Trade Secret shall be made without FAI's prior written consent. In the
event of any such change Licensee shall immediately provide FAI with
such changed formula or recipe. Licensee shall annually manufacture,
market and
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deliver a minimum of four (4) special and/or holiday flavors of ice
cream products, each of which shall be subject to the approval of FAI
and Hospitality as provided in Section 2(a) of this Agreement.
(b) In the event Licensee is allowed to use the Licensed Trademarks to
identify new varieties of existing Licensed Products or New Products
in accordance with Paragraph 2(a) above, such new varieties and New
Products shall be produced in compliance with all quality control
standards contained herein and pursuant to recipes submitted to FAI.
All Licensed products shall be manufactured and produced in accordance
with all applicable local, state, and federal health standards, laws,
and regulations and in accordance with high standards of cleanliness
and health safety in the food manufacturing industry.
(c) To control and monitor effectively the quality of the Licensed
Products, FAI or Hospitality may: purchase at its expense a
representative number of any such Licensed Products found in the
marketplace that in FAI's or Hospitality's judgment are inconsistent
with quality standards as contained herein; require Licensee to
furnish to FAI or Hospitality for testing at any time and at
Licensee's expense a reasonable number of such Licensed Products; and
inspect, during regular business hours, the premises of all facilities
operated by Licensee for the manufacture and distribution of the
Licensed Products.
(d) If Hospitality determines, in its sole discretion, or FAI determines,
in its reasonable opinion, that any of the Licensed Products (i) do
not meet the quality standards for such Licensed Products, (ii)
present a health or safety risk to the public or (iii) will damage the
image and/or goodwill of the Licensed Trademarks, FAI or Hospitality
may demand that Licensee take all reasonable steps to recall all such
Licensed Products. In such event, Licensee shall comply with said
quality standards and eliminate any such health or safety risk for
such recalled Licensed Products before permitting further distribution
thereof.
(i) If Licensee fails to take all reasonable steps to comply with
such demand, FAI or Hospitality, in the sole discretion of
either, shall have the right to terminate Licensee's
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rights to use the licensed Trademarks, Licensed Works and
Licensed Trade Secrets under this Agreement with respect to the
non-complying products.
(ii) If Licensee cannot reasonably comply with FAI's or
Hospitality's demand as specified in this sub-paragraph (d),
Licensee shall be granted only such additional time as is
necessary to so comply, provided that Licensee has undertaken
all reasonable steps to begin compliance and diligently
continue to do so as specified in this subparagraph (d).
(e) Licensee shall at all times remain in compliance with all applicable
local, state and federal statues and regulations.
(f) Beginning one year following the date of this Agreement and continuing
every year thereafter on the anniversary hereof, Licensee shall
provide to FAI and Hospitality a list of all Licensed Products
manufactured or sold during the preceding 12 month period, such list
to be accompanied with the formula or recipe of each such Licensed
Product.
(g) Licensee agrees that compliance with the quality standards contained
herein is a material and essential condition of this Agreement and
that the failure by Licensee to take actions required under this
Agreement in a timely manner shall constitute a material breach of
this Agreement.
(h) FAI and Hospitality reserve the right to prohibit Licensee from using
the Licensed Trademarks in any manner or in connection with any
products that it believes are inconsistent with or detrimental to the
XXXXXX XXXXXXX'X name or image.
7. ASSIGNMENT AND SUBLICENSE
-------------------------
(a) Except as otherwise specifically authorized by this Agreement,
Licensee shall not, without the express written consent of FAI and
Hospitality, which may be granted or withheld, in the sole discretion
of either, (i) assign, transfer or otherwise alienate, directly or
indirectly (by operation or law or otherwise) this
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Agreement or any of its rights or obligations hereunder or (ii)
sublicense or subcontract any of the rights or obligations granted
hereunder. Notwithstanding the foregoing, Licensee may assign this
Agreement to any company which may acquire Licensee or substantially
all of Licensee's assets or with which Licensee may merge provided
Licensee shall have received the prior written approval of FAI and
Hospitality, such approval not to be unreasonably withheld and based
solely on the financial condition, experience in the food
manufacturing business and professional reputation of such company.
(b) Licensee shall not at any time engage one or more subcontractors to
manufacture any Licensed Product without the prior written approval of
FAI, such approval not to be unreasonably withheld and based solely on
the financial condition, experience in the manufacture of ice cream
products and professional reputation of such subcontractors).
Notwithstanding the foregoing, Licensee may engage one or more
subcontractors to manufacture one or more "Novelty Items" according to
specifications or brand name approved in writing by FAI.
Subcontractors manufacturing any Licensed Product bearing a Licensed
Trademark must assume in writing, prior to such manufacture, all
obligations of Licensee under this Agreement including, without
limitation, all obligations of insurance and indemnity. "Novelty
Items" consist of such items as Sundae Cups, Bars, Sticks, Cones and
Sandwiches and such other similar items as from time to time specified
by FAI which are made using ice cream, yogurt, sherbet, lites, ice
milk or frozen ice.
(c) Subject to the terms and conditions of the License Agreements and this
Paragraph 7(c), FAI may assign its rights and/or its obligations under
this Agreement provided, however, that FAI shall give Licensee written
notice of any such assignment together with a right of first refusal
to obtain such assignment at the price and on the terms offered by the
prospective assignee, which right of first refusal, to be effective,
must be accepted by delivery of written notice of acceptance to FAI
within ten (10) days after Licensee's receipt of notice of assignment
from FAI.
(d) Notwithstanding any sublicense or subcontracting by Licensee of any of
its rights, duties or obligations hereunder, Licensee shall remain
primarily liable for
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the performance of all obligations of every subcontractor and
sublicensee.
8. DURATION AND TERMINATION
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(a) This Agreement and the license herein granted shall continue for a
Term of four (4) years from the date when all conditions specified in
Paragraph 22 have been satisfied ("Term"), except that FAI or
Hospitality may terminate this Agreement as follows:
(i) If Licensee assigns, sublicenses, or subcontracts any of its
rights or delegates any of its duties or responsibilities under
this Agreement without obtaining all consents called for
herein, FAI may terminate this Agreement effective immediately
upon giving notice to Licensee;
(ii) If any of the License Agreements (upon which this Agreement is
based) is validly terminated for any reason, this Agreement
shall be terminated at the same time and to the same extent as
the termination of any of said License Agreements;
(iii) If FAI reasonably believes that Licensee is or will become
unable to meet its relevant financial obligations when due, FAI
may demand written assurance that Licensee will be able to meet
any future relevant financial obligations when such obligations
become due. If Licensee fails to give said assurance within
five (5) business days after actual receipt of written demand,
and if FAI in the exercise of its reasonable judgment believes
that Licensee cannot meet its relevant obligations as they
become due, FAI may terminate this Agreement effective
immediately upon giving notice to Licensee;
(iv) If and when Licensee ceases to manufacture the Licensed
Products as a result of the closure of its plant(s) for the
manufacture of same and does not provide for the continued
supply of all Licensed Products, within thirty (30) days after
such closure, by one or more subcontractors) approved in
writing by FAI in
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accordance with the provisions of Paragraph 7(b) hereof.
Licensee shall be required to provide FAI with not less than
one hundred twenty (120) days prior written notice of intention
to close said plant(s) when closure is voluntary, at which time
all licenses granted hereby shall be deemed non-exclusive and
FAI shall be free to grant other licenses for the Licensed
Products and to use the Licensed Trademarks with respect to
same.
(v) If Licensee fails to meet the quality standards for Licensed
Products, FAI may terminate this Agreement after complying with
the requirements of paragraph 6, effective thirty (30) days
after giving notice of termination;
(vi) If Licensee breaches any condition, covenant or obligation
contained anywhere in this Agreement, FAI may terminate this
Agreement effective thirty (30) days after giving notice of
termination if Licensee fails to remedy or take such steps as
are herein provided to correct any such breach within thirty
(30) days after FAI's notice of such breach;
(vii) If any of the Licensed Products are not sold for eighteen (18)
consecutive months in the ordinary course of business, FAI may
terminate Licensee's right to use the Licensed Trademarks to
identify said Licensed Product(s) not sold during such period
and terminate Licensee's license to use the Licensed Trade
Secrets for said Licensed Product(s), such termination to be
effective thirty (30) days after giving notice of such
termination; provided that such period shall not include any
period of non-sale that is caused by circumstances beyond the
control of Licensee; or
(viii) If Licensee fails to use the Licensed Trademark "Xxxxxx
Xxxxxxx'x" for a period of twelve (12) consecutive months, in
the ordinary course of business, FAI may terminate Licensee's
right and license to use such
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Licensed Trademark effective thirty (30) days after giving
notice of such termination.
(b) This Agreement shall automatically renew for successive three (3) year
Terms ("Renewal Term(s)") on the same terms and conditions as herein
contained provided that the amounts and percentages specified in
Paragraphs 3(f) and 4 and the amount of the Marketing Fee specified in
Paragraph 5 must be mutually agreed upon for each Renewal Term, but
shall never be less than the amounts and percentages during the Term.
If such amounts and percentages cannot be mutually agreed upon for any
Renewal Term in writing signed by FAI and Licensee, this Agreement
shall not be renewed for such Renewal Term. Additionally, either party
may terminate this Agreement without cause at the end of the Term or
any Renewal Term by giving the other party written notice of
termination at least one hundred twenty (120) days before the end of
the Term or any Renewal Term.
(c) Licensee shall continue to supply or cause to be supplied all Licensed
Products in the Licensed Territory according to demand therefor up to
and including the date of termination of this Agreement whether such
termination results from plant closure or other condition specified in
Paragraph 8(a) or from non-renewal under Paragraph 8(b).
9. RIGHTS AND DUTIES UPON TERMINATION
----------------------------------
(a) Upon termination of this Agreement for any cause (including, without
limitation expiration of the Term of this Agreement), Licensee shall:
(i) not exercise or attempt to exercise any rights or privileges
hereunder; (ii) immediately discontinue the use of all Licensed
Trademarks, Licensed Works and Licensed Trade Secrets and immediately
cease the manufacture of all Licensed Products; (iii) immediately
forward to FAI all copies of relevant documents pertaining to the
Licensed Products Licensed Works, and Licensed Trade Secrets; and (iv)
continue to maintain the obligations of confidentiality of the
Licensed Trade Secrets or, if applicable, the Licensed Confidential
Information, by not disclosing and by taking all legal action
reasonably necessary to enforce the obligations imposed on its
employees, agents, and other affiliates not to disclose any
information pertaining to the Licensed Trade Secrets or, if
applicable, the Licensed Confidential Information.
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(b) Licensee acknowledges that its failure to cease use of the Licensed
Trademarks, Licensed Works and Licensed Trade Secrets and to cease the
manufacture of the Licensed Products at the termination of this
Agreement as provided above will result in immediate and irreparable
damage to FAI, that money damages may not be an adequate remedy for
the breach of such obligations and that FAI shall be entitled to
injunctive relief if necessary to enforce this Agreement or any
provision hereof.
(c) Upon termination of this Agreement Licensee shall have the right to
distribute and/or sell inventories of Licensed Products or components
thereof and packaging materials in existence on the date of
termination, but empty packaging materials bearing a Licensed
Trademark may only be distributed and/or sold to a party approved by
FAI, such approval not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, no Licensed Product or component hereof
may be distributed and/or sold if same does not meet the quality
standards specified herein.
10. INSURANCE AND INDEMNITY
-----------------------
(a) Licensee agrees to place with a domestic United States insurance
company rated A or better by A.M. Best Co., and keep in effect during
the Term of this Agreement comprehensive general liability insurance
(including but not limited to product liability, contractual liability
and personal liability and any other type of insurance generally
applicable to food manufacturing operations) all on an occurrence
basis naming "HFS Incorporated,, and all Related Entities", and
"Franchise Associates, Inc. , and all Related Entities" as additional
insureds, with combined coverage of at least ten million dollars
($10,000,000). In the event that Licensee fails to comply with its
obligations of insurance as set forth in this subparagraph 10(a), FAI
or Hospitality, in the sole discretion of either, shall have the right
to terminate this Agreement. The types and amount of insurance
required under this subparagraph may be established, modified or
increased by FAI or Hospitality as reasonably necessary and as
reasonably available in the normal course of the food manufacturing
business from time to time, but no more frequently than once in any
calendar year.
16
(b) All insurance required hereunder shall be issued for period of not
less than one year. Licensee shall deliver to FAI a certificate of the
insurance company issuing each such policy of insurance required
herein at or prior to the commencement of the term of this Agreement,
and thereafter, a renewal certificate at least ten (10) days prior to
the expiration of each such policy of insurance. All certificates of
insurance will grant thirty (30) days notice of cancellation to FAI
and to Hospitality and will name "HFS Incorporated and All Related
Entities", and "Franchise Associates, Inc. and All Related Entities"
as additional insureds.
(c) Licensee hereby agrees to indemnify and hold harmless FAI and
Hospitality and their respective affiliates against and from any and
all liability, damage, loss and expense resulting from claims by any
person or entity arising after the date of this Agreement and arising
out of Licensee's food manufacturing operations and the related sale
operations licensed under this Agreement except for claims arising
solely from the negligence or willful misconduct of Hospitality or its
respective affiliates which occurs after the date of this Agreement,
and except to the extent of claims arising from the negligence or
willful misconduct of FAI which occurs after the date of this
Agreement. These indemnities shall include, but shall not be limited
to, personal injury claims.
(d) FAI hereby agrees to indemnify and hold harmless Licensee and its
affiliates from any and all liability, damage, loss and expense
resulting from the claims of any person or entity which arise from the
negligence or willful misconduct of FAI.
11. LICENSEE'S OBLIGATION TO MANUFACTURE AND DELIVER
LICENSED PRODUCTS
-------------------------------------------------------------
(a) Licensee agrees that it will manufacture and deliver or cause to be
delivered by distributors a sufficient quantity of each of the
Licensed Products to meet the needs of all XXXXXX XXXXXXX'X
Restaurants, Ice Cream Shops and all other restaurants, shops or
outlets operated by FAI, its Affiliates and their franchisees in the
Licensed Territory, in packaging determined by FAI from time to time,
as being sized and designed for sales to such restaurants, shops or
outlets, provided however,
17
that no delivery for less than $350.00 need be made by Licensee.
Deliveries will be made within the time periods specified in Exhibit
D, as adjusted from time to time with FAI's approval. If Licensee is
unable or unwilling to comply with the requirements of this
subparagraph (a), FAI may take the action spelled out in subparagraph
(b) below, but only that action.
(b) In the event that Licensee fails or is unwilling after thirty (30)
days written notice from FAI, to manufacture or deliver or cause to be
delivered any one or more of the Licensed Products, in the manner and
quantity set forth in subparagraph (a) above, Licensee shall no longer
have the right to manufacture and sell such Licensed Product(s)
without FAI's written consent. Furthermore, FAI shall have the right
to grant appropriate licenses to any other entity to manufacture such
Licensed Product(s) which Licensee has failed to manufacture in
accordance with subparagraph (a) above, together with the right to
license said other entities to manufacture and sell such Licensed
products under the Licensed Trademarks, all on such terms as FAI, in
its sole discretion, shall determine.
12. GOVERNING LAW
-------------
This License Agreement shall be construed in accordance with the laws
of the State of Massachusetts.
13. ENTIRE AGREEMENT
----------------
This Agreement between the parties hereto sets forth the entire
agreement between the parties, and fully supersedes any and all prior agreements
or understandings between the parties, oral or written, pertaining to the
subject matter hereof. This Agreement may not be amended or modified, in whole
or in part, except by an instrument in writing duly executed by the parties.
14. PARTIAL INVALIDITY
------------------
Should any part of this Agreement, for any reason, be declared invalid,
such decision shall not affect the validity of any remaining portion, which
remaining portion shall remain in force and effect as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that they would have executed the remaining portion of this
Agreement without including therein any such portion which may, for any reason,
be hereafter declared invalid; provided,
18
however, that if such declaration of invalidity shall impair either FAI's
ability to exert quality control over the Licensed Products or to receive
royalties due hereunder, FAI and Licensee will in good faith attempt to
negotiate an alternative provision for the portion declared invalid. If such
negotiations are not successful within thirty (30) days from the date the
provision is declared invalid, FAI may thereafter terminate this Agreement
effective immediately upon giving written notice to Licensee. In addition, if
the insurance and/or indemnification provisions contained in paragraph 10 are
declared invalid for any reason, FAI or Hospitality may at any time thereafter
terminate, at their option, this Agreement by written notice to Licensee.
15. PARAGRAPH HEADINGS
------------------
The paragraph headings throughout this Agreement are for convenience and
reference only, and the words contained in the headings shall in no way be held
to explain, modify, amplify, or aid in the interpretation, construction or
meaning of the provisions of this Agreement.
16. WAIVER OF DEFAULT
-----------------
Waiver by any party hereto or by Hospitality of any particular default by
any other party shall not affect or impair the party's or Hospitality's rights
with respect to any subsequent default of the same or a different kind; nor
shall any delay or omission of any part or Hospitality to exercise any right
arising from any default affect or impair the parties or Hospitality's rights as
to the same or any future default.
17. TERMINOLOGY
-----------
All terms and words in this Agreement, regardless of the number in which
they are used, shall be deemed and construed to include any other number,
singular or plural, as the context or sense of this Agreement or any paragraph
or clause herein may require, the same as if such words had been fully and
properly written.
18. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be deemed an original, but such
counterparts together shall constitute but one and the same instrument.
19
19. RELATIONSHIP 0F PARTIES
-----------------------
Licensee is an independent contractor. Nothing herein contained shall be
construed to place the parties in the relationship of joint venturers, partners,
associates, or principal and agent, and both parties are acting as principals.
Licensee is granted no right or authority to assume or create any obligation or
responsibility for or on behalf of FAI or Hospitality or otherwise to bind FAI
or Hospitality other than as may be expressly authorized by FAI or Hospitality
in writing. Neither FAI nor Hospitality is granted any right or authority to
assume or create any obligation or responsibility for or on behalf of Licensee
or otherwise to bind Licensee other than as may be expressly authorized by
Licensee in writing.
20. SUCCESSORS AND ASSIGNS
-----------------------
This Agreement shall benefit and be binding upon FAI, Hospitality, Licensee
and their respective legal representatives and permitted successors and assigns.
21. SURVIVAL
--------
All obligations of FAI and Licensee which expressly or by their nature
survive termination or expiration or transfer of this Agreement shall continue
in full force and effect subsequent to and notwithstanding such termination or
expiration and until they are satisfied or by their nature expire.
22. CONDITIONS PRECEDENT
---------------------
This Term of this Agreement and the rights and obligations of the parties
specified in this Agreement shall commence on such date as FAI and Licensee
shall have obtained to their satisfaction:
(i) An uncontested termination of the exclusive rights of Basic
American Acquisition Corporation with respect to the Licensed Products; and
(ii) The written consent of Hospitality Franchise Systems, Inc. to
this Sublicense Agreement, such consent to be in the form contained on Page 18
hereof.
FAI agrees to use reasonable efforts to obtain as soon as reasonably possible
the above mentioned termination and consent. If said termination and consent are
not obtained by January 1.
20
1997, either party shall have the right, effective upon written notice to the
other, to terminate this Agreement.
23. NOTICES
-------
All notices and statements ("notices") to be given hereunder shall be given
or made at the respective addresses of the parties as set forth below unless
notification of a change of address is given in writing as required herein,
whereupon such notice of change of address shall become effective upon actual
receipt by the addressee. All notices shall be in writing and shall be given
only by (i) telex with a confirmed answer back or other means of same day
delivery message service with receipt confirmation; (ii) express courier service
on a next day delivery basis; or (iii) registered or certified U.S. mail,
postage prepaid.
FOR HOSPITALITY:
----------------
HFS INCORPORATED Attention: General Counsel
----------------
0 Xxxxxx Xxx
P. 0. Xxx 000
Xxxxxxxxxx, XX 00000
FOR FAI:
--------
FRANCHISE ASSOCIATES, INC.
Attention: Xxxxxx X. Xxxxxxx, President
541 Main Street
So. Xxxxxxxx, XX 00000
COPY TO:
--------
Xxxx X. Xxxxxxxxx, Xx.
Xxxxxxxxx & Associates
00 Xxxx Xxxx
Xxxxxxxx, XX 00000
FOR LICENSEE:
-------------
DownEast Frozen Desserts, L.L.C.
Attention: Xxxxxx Xxxxxx, President
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
21
COPY TO:
--------
Xxxxxxx & XxXxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
All notices shall be deemed to have been given upon the earlier of (a) actual
receipt or (b) the time of dispatch if delivered by same-day delivery or sent by
telex with confirmed answer back; on the day following dispatch if sent by an
express courier service on a next-day delivery basis; and ten days after the
date of mailing if sent by registered or certified U.S. mail, postage prepaid
unless actually received earlier.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first above written.
ATTEST: FRANCHISE ASSOCIATES, INC.
-------
By:
----------------------- ----------------------------
, Asst. Secretary X.X. Xxxxxxx, President
CORPORATE SEAL
DOWNEAST FROZEN DESSERTS, L.L.C.
By:
----------------------------
Xxxxxx Xxxxxx, President
-----------------------
, Secretary
CORPORATE SEAL
22
CONSENT
-------
HFS incorporated ("Hospitality") hereby consents to the terms of the
foregoing Sublicense Agreement between Franchise Associates, Inc. ("FAI") and
DownEast Frozen Desserts, L.L.C. ("Licensee"), is agreeable to all of the terms
and conditions hereof and consents to FAI's entering into the same.
HFS INCORPORATED
By:
------------------------ ------------------------
,Asst. Secretary
CORPORATE SEAL
23
EXHIBIT A
XXXXXX XXXXXXX TRADEMARKS
-------------------------
TO BE SUBLICENSED
-----------------
Xxxx Reg./Xxx.Xx. Xxx.Xxxx
------------------ ------------ -----------------
XXXXXX XXXXXXX'X 807,579 APRIL 26, 1966
SIMPLE SIMON PIE 537,778 FEBRUARY 13, 1951
MAN DESIGN
THE FOLLOWING MARKS FOR "LICENSED PRODUCTS" WHETHER OR NOT
REGISTERED:
a. XXXXXX XXXXXXX'X
b. SIMPLE SIMON PIE MAN DESIGN
24
