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Royalty And Supply Agreement

Royalty Agreement

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AFC ENTERPRISES, INC | DIVERSIFIED FOODS AND SEASONINGS, INC

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Title: ROYALTY AND SUPPLY AGREEMENT
Governing Law: Louisiana     Date: 8/18/2010
Industry: Restaurants     Sector: Services

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Exhibit 10.1

PORTIONS OF THIS AGREEMENT MARKED BY “***” HAVE BEEN
OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION

ROYALTY AND SUPPLY AGREEMENT

This Royalty and Supply Agreement (“Agreement”) dated as of the 15 th day of July, 2010 (the “Effective Date”), is by and between AFC ENTERPRISES, INC. (“AFC”) and DIVERSIFIED FOODS AND SEASONINGS, INC. (“Diversified”).

WHEREAS , Diversified has substantial experience in the production and/or supply of certain commercial seasonings, spices, custom-formulated cooked products, and other products and supplies; and

WHEREAS , AFC is the franchisor of the Popeyes ® , Popeyes ® Chicken & Biscuits and Popeyes ® Louisiana Kitchen quick service restaurant system and as of the Effective Date operates, and licenses others to operate, Popeyes restaurants around the world; and

WHEREAS , Diversified has acted as a supplier for certain products used in Popeyes restaurants; and

WHEREAS , AFC and Diversified, and their respective predecessors, have been parties to various agreements and amendments thereto dealing with Diversified’s supply of products; and

WHEREAS , AFC and Diversified desire to enter into a comprehensive royalty and supply agreement under the terms set forth herein;

NOW , THEREFORE , in consideration of the premises and representations, warranties, covenants, and agreements contained herein, the parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

     1.1 “AFC” means AFC Enterprises, Inc., a Minnesota corporation with a principal place of business, as of the Effective Date, located at 5555 Glenridge Connector, NE, Suite 300, Atlanta, Georgia 30342, and its successors.

     1.2 “AFC Confidential Information” means secret, confidential or proprietary information of AFC, including without limitation, (i) AFC’s Formulas; (ii) other trade secrets of AFC; (iii) food preparation processes, procedures, methods and techniques developed by AFC; (iv) marketing plans; (v) test products; (vi) strategic plans; (vii) pricing plans and structures; and (viii) lists of Franchisees and lists of products and supplies approved by AFC. The term “AFC Confidential Information” does not include information that has become generally, readily, and freely available to the public by the act of a person or entity (other than Diversified or any affiliate or representative of Diversified or any person or entity acting in concert with or with the assistance or encouragement of Diversified) that has the right to disclose such information without violating any right of AFC (such as, for example, the filing of information by AFC with the Securities and Exchange Commission on EDGAR). The term

 


 

“AFC Confidential Information” does not include information which was known to Diversified prior to its disclosure by AFC, or that is independently developed by Diversified, in each case without using the AFC Confidential Information and without any use of Prohibited Analysis on any of AFC’s products.

     1.3 “AFC Markings” means trademarks, trade names, logos or other identifying markings owned by AFC.

     1.4 “Calendar year” or “calendar year” means the one-year period from and including any January 1 to and including the following December 31.

     1.5 “Core Product” or “Core Products” means the products identified in Schedule A attached hereto, including any modifications thereto, as may be amended in accordance with the terms of this Agreement.

     1.6 “Distributor” means a person or entity that has a contract with AFC, or with a purchasing cooperative affiliated with AFC (such as Supply Management Services, Inc.), to distribute products to AFC or the Franchisees.

     1.7 “Diversified” means Diversified Foods and Seasonings, Inc., a Louisiana corporation with a principal place of business, as of the Effective Date, located at 1115 North Causeway Boulevard, Suite 200, Mandeville, Louisiana 70471, and its successors.

     1.8 “Diversified Confidential Information” means secret, confidential or proprietary information of Diversified, including without limitation, (i) the Popeyes Formulas, (ii) other trade secrets of Diversified; (iii) food preparation processes, procedures, methods, and techniques developed by Diversified, and (iv) all information regarding Diversified’s costs, prices, revenues, margins, profits, and other financial information. The term “Diversified Confidential Information” does not include information that has become generally, readily, and freely available to the public by the act of a person or entity (other than AFC or any affiliate or representative of AFC or any person or entity acting in concert with or with the assistance or encouragement of AFC) that has the right to disclose such information without violating any right of Diversified. The term “Diversified Confidential Information” does not include information which was known to AFC prior to its disclosure by Diversified, or that is independently developed by AFC, in each case without using the Diversified Confidential Information and without any use of Prohibited Analysis on any of Diversified’s products.

     1.9 “Diversified Markings” means trademarks, trade names, logos or other identifying markings owned by Diversified.

     1.10 “Domestic Market” or “Domestic Markets” means the forty eight continental states in the United States of America (excluding Alaska and Hawaii) and the District of Columbia.

     1.11 “Effective Date” means the date first set forth above in this Agreement.

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     1.12 “First Amendment to Formula Agreement” means the untitled agreement entered into on or about March 21, 1989, between Alvin C. Copeland, Sr., New Orleans Spice Company, Inc., and Biscuit Investments, Inc.

     1.13 “Flour-Based Core Product” means the products indicated as such on Schedule A and any other Core Product added to Schedule A after the Effective Date that is flour-based.

     1.14 “Flour Index” means the Flour Seller’s quoted price for [***] hard wheat flour (or, if Flour Seller has discontinued selling such brand, its most nearly comparable brand) to be delivered in the first full calendar month following the date of the quote, FOB the Flour Seller’s [***] mill, in bulk. (For example, if the price is quoted on June 12, 2011, it would be the price for delivery in July 2011.)

     1.14A. “Flour Seller” means [***], or the successor to its flour sales business.

     1.15 “Formula Agreement” means the agreement entered into on or about July 2, 1979, between Alvin C. Copeland, Sr., Gilbert E. Copeland, Mary L. Copeland, Catherine Copeland, Russell J. Jones, A. Copeland Enterprises, Inc., and Popeyes Famous Fried Chicken, Inc.

     1.16 “Franchisee” or “Franchisees” means persons or entities who have a franchise or other agreement with AFC for the purpose of operating a Popeyes Restaurant.

     1.17 “Including” or “including” means including but not limited to.

     1.18 “International Market” or “International Markets” means any and all countries or markets (including Alaska and Hawaii) in which AFC or any Franchisee operates a Popeyes Restaurant other than in Domestic Markets.

     1.19 “Markings” means trademarks, trade names, logos or other identifying markings.

     1.20 “Other Product” or “Other Products” means any product sold or to be sold in Popeyes Restaurants that is not identified in Schedule A attached hereto.

     1.21 “Popeyes” means Popeyes ® , Popeyes ® Chicken & Biscuits, Popeyes ® Louisiana Kitchen, a circle containing a capital letter “P”, other marks utilized by the Popeyes System, and any other variation or derivative of any of the foregoing, as the same may evolve over time.

     1.22 “Popeyes Formula” or “Popeyes Formulas” means the recipes or formulas used by Diversified for the preparation of the Core Products.

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     1.23 “Popeyes Restaurant” or “Popeyes Restaurants” means a restaurant operated in connection with the Popeyes System.

     1.24 “Popeyes System” means the entire Popeyes restaurant system that AFC operates and/or licenses or contracts with others to operate now or in the future, as the same may evolve over time.

     1.25 “Recipe Royalty Agreement” means the agreement entered into on or about March 21, 1989, between Alvin C. Copeland, Sr., New Orleans Spice Company, Inc. and Biscuit Investments, Inc.

     1.26 “Second Amendment to Formula Agreement” means the agreement so entitled and entered into on or about March 21, 1989, between Alvin C. Copeland, Sr., Biscuit Investments, Inc., and New Orleans Spice Company, Inc.

     1.27 “SMS” means Supply Management Services, Inc. (which is the purchasing co-operative of the Popeyes System as of the Effective Date) and any subsequent purchasing co-operative for the Popeyes System.

     1.28 “Supply Contract” means the agreement so entitled and entered into on or about March 21, 1989, between New Orleans Spice Company, Inc. and Biscuit Investments, Inc.

     1.29 “Supplemental Disclosure” means the Supplemental Disclosure Relating to Plan of Reorganization Proposed by Canadian Imperial Bank of Commerce, as agent, including all exhibits thereto, filed on or about August 12, 1992, in the United States Bankruptcy Court for the Western District of Texas, Austin Division, in the case of Al Copeland Enterprises, Inc., debtor, Case No. 91 12575 FM 11.1.22.

     1.30 “1994 Letter Agreement” means the letter agreement entered into on or about June 13, 1994, between Alvin C. Copeland, Sr., America’s Favorite Chicken Company, and Diversified Foods and Seasonings, Inc., executed by Kam M. Nasser and Alvin C. Copeland, Sr.

     1.31 “1997 Settlement Agreement” means the agreement entered into on or about May 29, 1997, between Alvin C. Copeland, Sr., AFC Enterprises, Inc., Diversified Foods and Seasonings, Inc., and Flavorite Laboratories, Inc.

2. TERMINATION OF PRIOR AGREEMENTS . AFC and Diversified acknowledge and agree that, to the extent contractual rights or obligations have been created by any agreements between the parties or their predecessors in interest, they are, respectively, the successors in interest to those agreements, including without limitation, the Formula Agreement, the First Amendment to Formula Agreement, the Second Amendment to Formula Agreement, the Recipe Royalty Agreement, the Supply Contract, the Supplemental Disclosure, the 1994 Letter Agreement, and the 1997 Settlement Agreement (collectively the “Prior Agreements”). AFC and Diversified agree that as of the Effective Date of this Agreement, the Prior Agreements shall be terminated in their entirety, shall have no force or

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effect whatsoever, and this Agreement shall instead be applicable in lieu thereof, excepting only, however, that within 10 days after the Effective Date, AFC shall pay the portion of the royalty payment that accrued but was unpaid under the Recipe Royalty Agreement as of the Effective Date.

3. TERM AND TERMINATION

A. Term. The initial term of this Agreement (the “Initial Term”) shall commence on the Effective Date and shall continue through March 20, 2029, unless earlier terminated in accordance with the terms of this Agreement. At the end of the Initial Term, this Agreement shall be renewed in two (2) year increments (each, a “Renewal Term”), provided that AFC and Diversified mutually agree in writing on such renewal terms. The “Term” means the Initial Term and any Renewal Term(s). This is an exclusive requirements contract. So long as this Agreement remains in effect, AFC agrees (i) that it will utilize Diversified as the exclusive supplier of all of AFC’s requirements of the Core Products, and (ii) that AFC will require the Franchisees to utilize Diversified as their exclusive supplier of all of their requirements of the Core Products. It is acknowledged and agreed that the supply of products by Diversified to AFC and the Franchisees is now and may be made either directly or indirectly through Distributors or agents.

B. Breach. In the event that (i) either party materially breaches this Agreement, and (ii) such material breach shall remain substantially un-remedied for a period of thirty (30) calendar days after written notice of such breach from the non-breaching party, specifying in reasonable detail the nature and scope of the material breach, then the non-breaching party may terminate this Agreement by giving 30 days advance written notice to the breaching party; provided, however, that if such matter is not reasonably susceptible of cure within such thirty (30) day period, then the thirty (30) day period shall be extended for a commercially reasonable period (not to exceed one hundred and eighty (180) days in the aggregate) so long as the party in breach (1) promptly notices the other party in writing of the expected period of time required to cure the default together with reasonable detail to support the position that it cannot cure the default within the thirty (30) day period; (2) commences curative action within the thirty (30) day period or as soon as commercially reasonable if it cannot reasonably be commenced within the thirty (30) day period; and (3) diligently proceeds therewith to completion within a commercially reasonable time.

C. Effect of Termination .

(i) Discontinue Use. Upon the expiration or the termination of this Agreement in accordance with its terms for any reason, and subject to the provisions of Section 3(C)(iii): (a) Diversified shall immediately and for fifty years and permanently thereafter discontinue and refrain from the use of all AFC Markings and all trade secrets of AFC and all AFC Confidential Information, and (b) AFC shall immediately and for fifty years and permanently thereafter discontinue and refrain from the use of all Diversified

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Markings and all trade secrets of Diversified and all Diversified Confidential Information.

(ii) Deliver Materials. Upon the expiration or the termination of this Agreement in accordance with its terms for any reason, and subject to the provisions of Section 3(C)(iii): (a) Diversified shall promptly deliver to AFC, or at AFC’s option, destroy, all AFC Markings and any other printed material containing either the AFC Markings, AFC trade secrets and/or AFC Confidential Information, and (b) AFC shall promptly deliver to Diversified, or at Diversified’s option, destroy, all Diversified Markings and any other printed material containing any Diversified Markings, Diversified trade secrets and/or Diversified Confidential Information.

(iii) Pending Orders. Upon the expiration or the termination of this Agreement in accordance with its terms for any reason, Diversified shall fulfill all product orders that were made under this Agreement prior to the expiration of this Agreement or the effective date of any termination of this Agreement. Upon AFC’s written request, Diversified shall further continue to supply the Core Products to the Popeyes System in accordance with and subject to the terms of this Agreement, at prices equal to those immediately in effect prior to termination or expiration plus 7.5%, for a period of time designated by AFC, up to but not exceeding six (6) months. The parties shall cooperate with each other and with any supplier designated by AFC in the transfer of the expired or terminated services in order to facilitate the seamless transfer of the terminated supply.

(iv) Rights to Popeyes Formulas. Upon the expiration or the termination of this Agreement in accordance with its terms for any reason, AFC acknowledges and agrees that Diversified shall have the full and exclusive right to use, sell, license, and otherwise exploit commercially in any lawful manner the Popeyes Formulas; however, in doing so Diversified shall not disclose to any party that the Popeyes Formulas have been utilized by Popeyes at any time.

4. LICENSE AGREEMENT. Diversified hereby grants to AFC, subject to the terms and conditions of this Agreement, an exclusive non-transferable license (the “License”), for the full Term of this Agreement, to use the Popeyes Formulas in connection with the operation of Popeyes Restaurants by AFC and/or the Franchisees by virtue of having the right to use in such connection products made in whole or in part with a Popeyes Formula by Diversified. Diversified hereby agrees not to grant any third party the right to use any Popeyes Formula without the express written consent of AFC, such consent to be in AFC’s sole discretion, except that Diversified may grant such rights without AFC’s consent for the purpose of enabling a third party to manufacture or process Core Products (such as rights granted to a co-packer or a further processor) for use in the Popeyes System. Diversified warrants that Diversified knows and will maintain its knowledge of the Popeyes Formulas for the Term of this Agreement. AFC acknowledges and agrees that (i) Diversified retains all

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rights not expressly granted with respect to the Popeyes Formulas, including the right to use the Popeyes Formulas in the production of food, in accordance with the terms of this Agreement and (ii) AFC has no right to see or know the contents of any Popeyes Formulas. This shall not relieve Diversified from its obligation to provide ingredient information to AFC on a continuing basis as necessary for compliance with laws, regulations, and judicial orders.

5. ROYALTY AGREEMENT. AFC agrees to pay a royalty payment for the exclusive use of the Popeyes Formulas as set forth in Section 4 of $254,166.67 per month, prorated for any period less than a month, during the Term of this Agreement and during any period of time designated by AFC under Section 3(C)(iii), with 16% of each payment being made to Diversified and the remaining 84% of each payment being made to the Estate of Alvin C. Copeland, Sr., or its successor (the “Estate”). Each payment shall be made on the first business day of each month (or prorated period) by wire transferable funds, by cashiers or certified check, or by any other means acceptable to Diversified and the Estate. The Estate shall be a third-party beneficiary of this Agreement for purposes of this Section.

6. SUPPLY IN INTERNATIONAL MARKETS. AFC and Diversified agree that, subject to the conditions in Section 8 of this Agreement, after the Effective Date of this Agreement, no obligation is imposed on AFC by this Agreement to purchase, or to cause any of its Franchisees or Distributors to purchase, from Diversified, any Core Products or Other Products in or for use in any International Markets, and no obligation is imposed on Diversified by this Agreement to sell any Core Products or Other Products to AFC or any Franchisees or Distributors in or for use in any International Markets. AFC and Diversified may or may not enter into one or more other agreements from time to time that govern such purchases and sales, but such purchases and sales are not governed by this Agreement. For example, with respect to certain International Markets, AFC and Diversified may agree that Diversified will supply Core Products or Other Products to such markets, but any such separate agreements will not be governed by this Agreement.

A. Exception for Certain International Markets. Notwithstanding the foregoing, AFC and Diversified agree that, for a period of time commencing on the Effective Date and continuing thereafter until December 31, 2015 for five (5) years, certain International Markets constituting United States military bases, Canada, and the islands of the Caribbean shall be treated as Domestic Markets and shall be subject to all requirements of this Agreement. After this period, AFC and Diversified may or may not enter into one or more other agreements from time to time that govern purchases and sales for United States military bases, Canada, and the islands of the Caribbean, but such purchases and sales will not be governed by this Agreement.

7. EXCLUSIVE SUPPLIER OF THE CORE PRODUCTS IN DOMESTIC MARKETS. AFC hereby appoints Diversified, and Diversified hereby accepts such appointment, as AFC’s and the Franchisees’ exclusive supplier in Domestic Markets of the Core Products. AFC agrees that during the Term of this Agreement, it shall purchase, and shall require all Franchisees in Domestic Markets to purchase, all of AFC’s and the Franchisees’ respective requirements of the Core Products for use in Domestic Markets, exclusively from Diversified, and Diversified agrees to sell such requirements to AFC and the

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Franchisees. During the Term of this Agreement, Diversified will be identified by AFC to Franchisees as the sole and exclusive supplier of the Core Products for use in Domestic Markets. Such purchases and sales may be made directly or indirectly through Distributors or agents.

A. Use of the Core Products and the Popeyes Formula. The parties intend, and AFC agrees, that AFC and the Franchisees will purchase all of their requirements of the Core Products for use in Domestic Markets exclusively from Diversified (directly or indirectly) during the Term of this Agreement. During the Term of this Agreement, AFC shall not import, or permit any Franchisee or Distributor to import, directly or indirectly, any Core Product or any substitute for any core product from any International Market into any Domestic Market.

8. CONTINUITY OF SUPPLY.

A. Supply of All Products Currently Supplied to the Popeyes System. AFC and Diversified agree that for the period of time commencing on the Effective Date of this Agreement and continuing through December 31, 2010, AFC shall purchase, and shall require its Franchisees and Distributors to purchase, and Diversified shall continue to fill all orders made by AFC, the Franchisees, and/or the Distributor(s), for any products currently supplied by Diversified to the Popeyes System in both Domestic Markets and International Markets. Pricing for any such product orders shall be at Diversified’s existing pricing on the Effective Date of this Agreement, except as set forth in this Agreement. After January 1, 2011, Diversified shall have no obligation to fill any orders for any products for the Popeyes System, and AFC, the Franchisees, and the Distributor(s) shall have no obligation to order any products from Diversified, except as set forth in this Agreement (such as in Section 6A and Section 7); provided that, upon AFC’s request, Diversified shall continue through December 31, 2011 to fill all orders made by AFC, the Franchisees, and/or the Distributor(s), for any products currently supplied by Diversified to the Popeyes System in International Markets at Diversified’s existing prices on the Effective Date of this Agreement. AFC shall give Diversified at least 90 days advance notice of the intent to stop buying products with respect to each particular jurisdiction in International Markets.

B. Supply of Certain Sauces. AFC and Diversified acknowledge that Diversified currently supplies barbeque sauce (Item No. 8R3306), cajun sparkle sauce (Item No. N656-C), cocktail sauce (Item No. 8R3307), confetti sweet and sour sauce (Item No. SD3310), and mardi gras mustard (Item No. 8R3303) (collectively the “Sauces”) to the Popeyes System. For a period of time commencing on the Effective Date and continuing through December 31, 2014, AFC agrees it shall purchase, and shall require all Franchisees in Domestic Markets (including certain International Markets while treated as Domestic Markets under Section 6(A)) to purchase, all of AFC’s and the Franchisees’ respective requirements of the Sauces for use in such Domestic Markets, exclusively from Diversified, and Diversified agrees to sell such requirements to AFC and the Franchisees. After January 1, 2015, neither AFC, the Franchisees, nor the Distributor(s) will have the obligation to purchase the Sauces

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from Diversified, unless Diversified’s bid for any such products is accepted by AFC in accordance with Section 10 of this Agreement. The prices for the Sauces until December 31, 2014 shall be the same as the existing prices for the Sauces on the Effective Date.

9. NONDISCLOSURE, REPLICATION, PROHIBITED ANALYSIS, AND NEW PRODUCTS.

A. Nondisclosure. AFC agrees that it will not, during or after the Term of this Agreement, use or permit the duplication or disclosure of any trade secrets associated with the Popeyes Formulas or the Core Products or any other Diversified Confidential Information unless such use, duplication, or disclosure is specifically authorized in advance and in writing by Diversified through its President.

B. Replication. AFC agrees that during the Term of this Agreement, it will not seek or assist or encourage others to replicate the Core Products or any Popeyes Formula for commercial use in any Domestic Markets. AFC shall, however, have the right to independently develop, without using Prohibited Analysis, substitute recipes for the Core Products, which substitute recipes may be commercially utilized by AFC and/or the Franchisees in a Domestic Market only under the conditions set forth in Section 20 of this Agreement. AFC shall further have the right to independently develop, without using Prohibited Analysis, substitute recipes for the Core Products or any other Diversified products, which substitute recipes may be commercially utilized by AFC and/or the Franchisees only in and for International Markets.

C. Prohibited Analysis. AFC agrees that it will not, during or after the Term of this Agreement, attempt (or cause, induce, solicit, encourage, or assist any other person or entity to attempt) to use or take advantage of or benefit from any Prohibited Analysis on any Core Product or other Diversified product or any Popeyes Formulas or any recipes or formulas associated with any Core Product or other Diversified product. For purposes of this Agreement, “Prohibited Analysis” shall mean any effort to perform a chemical or other analysis (other than simple use of the five human senses) on any product in order to determine all or part of the composition of the product for purposes of duplication.

D. New Products. The parties acknowledge that AFC continuously develops new products. Nothing in this Agreement shall, in any way, preclude or limits AFC’s rights to continue its efforts to develop new products. Notwithstanding the foregoing, for the full term of this Agreement, AFC shall exercise good faith in its development of any new products and agrees not to develop or sell or permit the Franchisees to sell any new products for the purpose of intentionally depleting the volume of Core Products sold by Diversified to the Popeyes System pursuant to this Agreement.

10. BIDDER ON OTHER PRODUCTS IN DOMESTIC MARKETS. AFC and Diversified acknowledge and agree that Popeyes Restaurants offer as of the Effective Date and may continue to offer Other Products for sale to the public in Domestic Markets. AFC

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hereby agrees that, with respect to all Other Product offerings in Domestic Markets of the type that Diversified is capable of producing, AFC shall, at the time of such bidding, provide Diversified the opportunity to submit a competitive bid on any such Other Products.

A. Bidding Process. AFC agrees that with respect to any Other Product offerings of the type that Diversified is capable of producing, AFC shall offer Diversified a fair and reasonable opportunity to develop and bid on any such Other Products, on terms and conditions (including lead time) no less favorable than those offered any other bidder. AFC shall provide Diversified with commercially-reasonable information (including whatever is or was provided to any other prospective bidder) to develop and bid on any such Other Products. Diversified has no obligation to submit a bid.

B. Award by AFC. AFC agrees that it will consider any bid presented by Diversified on Other Products in a commercially reasonable manner and will timely notify Diversified, in writing, whether Diversified’s bid is selected for further negotiation of price and terms. AFC’s decision to select, or not select, any Diversified bid for negotiation shall be subject to AFC’s sole discretion. In the event AFC selects Diversified’s bid on any such Other Products, AFC and Diversified may negotiate the price and other terms of one or more separate agreements for any such Other Products. Neither AFC nor Diversified shall have any obligation to enter into any agreement as a result of Diversified’s bid being selected.

11. MODIFICATION OF CORE PRODUCTS

A. Initial Approval. AFC acknowledges and agrees that the Core Products meet or exceed all of AFC’s quality standards. Diversified agrees that the Core Products will continue to meet AFC’s quality standards as in effect between the parties as of the Effective Date for the Term of this Agreement. If AFC requests a higher standard of quality for any product, Diversified will use good faith efforts to attempt to satisfy the request, and AFC acknowledges that any higher costs entailed in meeting the higher quality standard may affect the reasonable price of the product.

B. Product Modifications Initiated by Diversified. If Diversified makes any material improvements, modifications, or changes to the formula of any of the Core Products, Diversified shall notify AFC in writing specifying the improvement, modification or change and any cost implications related to the change. Unless and until AFC, in its sole discretion, approves the modified Core Product, (a) Diversified shall not sell such modified product under this Agreement to AFC, any Distributor(s), or the Franchisees, and (b) AFC, any Distributor(s), and the Franchisees shall continue to buy the pre-modified Core Product from Diversified in accordance with Section 7 and the other terms and conditions of this Agreement.

C. Product Modification Requests by AFC. The parties agree that although Diversified owns the Popeyes Formulas, AFC retains the right to make all decisions regarding the Popeyes brand, including the right specifically to request in good faith modifications, improvements, or changes to the Core Products, including the Popeyes

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Formulas, for any reason, including without limitation, actual or reasonably anticipated changes required by international laws (but only for such International Markets while treated as Domestic Markets under Section 6(A)), federal laws, state laws, or local laws or regulations, and changes in consumer preferences or industry standards. In the event of any such request by AFC for a modification, improvement or change to a Core Product or the Popeyes Formulas, (a) AFC will notify Diversified of the requested modification, improvement or change, and (b) provided AFC is not contractually prohibited from doing so by a confidentiality agreement or other contractual limitation, AFC will provide Diversified with the material information, if any, known to AFC regarding how the requested modification, improvement or change might be accomplished (including any work, formulas, recipes or manufacturing techniques related to the requested modification, improvement or change, whether developed by AFC or any third party), and (c) Diversified shall use commercially reasonable efforts to cooperate with AFC in executing the change. The price for any such modified Core Product shall be set in accordance with Section 13(G) of this Agreement. In the event (i) AFC in good faith requests improvements, modifications or changes that are commercially reasonable and that are stated in terms that are objectively measurable, and (ii) AFC has provided the information specified above, if any, without any exception due to a confidentiality agreement or contractual limitation, and (iii) the request for modifications is not for the purpose of intentionally depleting the volume of Core Products sold by Diversified to t


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