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Exhibit 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO SECURITY AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of October __, 2006, is by and among CAYE HOME FURNISHINGS, LLC, a Delaware limited liability company ("Caye Home"), CAYE UPHOLSTERY, LLC, a Mississippi limited liability company ("Caye Upholstery"), and CAYE INTERNATIONAL FURNISHINGS, LLC, a Mississippi limited liability company (“Caye International" and together with the Caye Home and Caye Upholstery, each individually as a "Vendor" and collectively as the "Vendors"), Caye Home, as administrative agent for the Vendors (in such capacity, the "Agent"), and the Customers, whose names are set forth on the signature pages hereto. Capitalized terms used herein and not otherwise defined shall have the meaning assigned such term in the Credit Agreement (as defined below).
RECITALS:
A. The Customers, the Vendors and the Agent are parties to that certain Credit Agreement, dated as of July 11, 2005 (as amended to the date hereof, the “ Credit Agreement ”) and the related Security Agreement, dated as of July 11, 2005 (as amended to the date hereof, the “Security Agreement”).
B. The parties hereto have agreed to amend the Credit Agreement as set forth below.
NOW, THEREFORE , in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
SECTION 1. Amendments to Credit Agreement .
(a) New Definitions. The following definitions for “Ashley”, “Ashley Assets,” “Glencove Liens”, and “Glencove Store” are hereby added to Annex A to the Agreement:
“ Ashley ” means Ashley Furniture Industries, Inc.
“ Ashley Assets ” means and includes (i) the agreements among Ashley and its Affiliates and Hartsdale Convertibles, Inc, JCI and its Affiliates, (ii) the leases, fixtures, Inventory or other assets located on the premises of the Glencove Location; (iii) Inventory held for sale from the Glencove Location, whether or not on the premises of the Glencove Location, provided that it is segregated from Inventory held by the Customers for use in locations other than the Glencove location, (iv) any websites or URLs established specifically with respect to the Glencove location and (v)operating manuals, software, advertising materials and other material relating to the operations of the Glencove Location.
“ Glencove Liens ” means liens held by Ashley or its Affiliates in inventory sold to the Glencove Store by Ashley for resale at such location.
“ Glencove Store ” means the Ashley store to be owned by Hartsdale Convertibles, Inc., located at 168 Glencove Road, Carl Place, New York.
(b) Amendment to definition of “Permitted Liens” . Subsection (i) of the definition of “Permitted Liens” (as set forth in Annex A to the Agreement) is hereby amended and restated in its entirety as follows:
(i) Liens securing purchase money Debt and Capital Leases permitted under Section 7.13 and the Glencove Liens.
(c) Amendment to Section 7.16 . Section 7.16 of the Agreement is hereby amended and restated in its entirety as follows:
7.16 Business Conducted . No Customer shall engage directly or indirectly, in any line of business other than the businesses in which such Customer is engaged on the Closing Date, provided, however that the foregoing shall not restrict or prohibit Customer from opening new stores or from operating the Glencove Location as an Ashley Home Furniture Store under license from Ashley.
(d) New Section 7.26 . A new Section 7.26 is added to the Agreement as follows:
Section 7.26. Glencove Location. No Inventory shall be transferred from the Glencove Location to any other location of any Customer (except for warehouse facilities in which the Inventory for the Glencove Location is segregated from Inventory of Customers that may be used for other locations), unless the Glencove Liens have been released from such Inventory prior to the transfer.
(e) Amended Section 7.15 . Section 7.15 is hereby amended to add the following proviso at the end of the first sentence of such section:
, provided that Jennifer Convertibles, Inc. may guarantee the obligations of Hartsdale Convertibles, Inc. to Ashley and may make up to $2 million of investment in such Affiliate.
(f) Amended Section 7.21 . Section 7.21 is hereby amended to add the following proviso at the end of such section:
, provided that Customers may make up to $2 million of Capital Expenditures in connection with the opening of the Glencove Location and such Capital Expenditures shall not be counted against the $1 million per Fiscal Year referred to above.
(g) Schedule 6.13. Schedule 6.13 is hereby amended to add “Ashley Home Furniture Store” as a trade name used for the Glencove Location.
(h) Exhibit A . Exhibit A of the Security Agreement is hereby amended to add the Ashley Assets.
SECTION 2. Representations and Warranties . Each Customer hereby represents and warrants to each Vendor and the Agent, on the Amendment Effective Date (as hereinafter defined), as follows:
(a) After giving effect to this amendment, the representations and warranties set forth in Article 6 of the Credit Agreement, and in each other Credit Document, are true and correct in all material respects on and as of the date hereof and on and as of the Amendment Effective Date (as defined in Section 3 ) with the same effect as if made on and as of the date
hereof or the Amendment Effective Date, as the case may be, except to the extent such representations and warranties expressly relate solely to an earlier date.
(b) Each Customer is in compliance with all terms and conditions of the Credit Agreement and the other Credit Documents on its part to be observed and performed and no Default or Event of Default has occurred and is continuing.
(c) The execution, delivery and performance by each Customer of this Amendment have been duly authorized by each Customer, as applicable.
(d) This Amendment constitutes the legal, valid and binding obligation of each Customer, enforceable against each Customer in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement of creditors' rights or by the effect of general equitable principles.
(e) The execution, delivery and performance by each Customer of this Amendment do not and will not conflict with, or constitute a violation or breach of, or result in the imposition of any Lien upon the property of any Customer or any of its Subsidiaries, by reason of the terms of (i) any contract, mortgage, lease, agreement, indenture, or instrument to which any Customer is a party or which is binding upon it, (ii) any Requirement of Law applicable to any Customer, or (iii) the certificate or articles of incorporation or by-laws or the limited liability company or limited partnership agreement of any Customer.
SECTION 3. Effectiveness . This Amendment shall become effective only upon satisfaction of the following conditions precedent (the first date upon which each such condition has been satisfied being herein called the “ Amendment Effective Date ”):
(a) The Agent shall have received duly executed counterparts of this Amendment which, when taken together, bear the authorized signatures of the Customers, the Agent and the Vendors.
(b) The Agent shall have received certified copies of resolutions or other action, incumbency certificates and/or other certificates of duly authorized officers of each Customer as the Administrative Agent may require evidencing the identity, authority and capacity of each duly authorized officer authorized to act on behalf of such Customer in connection with this Amendment;
(c) The Agent and the Vendors shall be satisfied that the representations and warranties set forth in Section 3 of this Amendment are true and correct on and as of the Amendment Effective Date and that no Default or Event of Default has occurred and is continuing on and as of the Amendment Effective Date.
(d) The Agent shall have received all fees and expenses to be paid by the Customers pursuant to Section 4 of this Amendment.
(e) There shall not be any action pending or any judgment, order or decree in effect which, in the judgment of the Agent or the Vendors, is likely to restrain, prevent or impose materially adverse conditions upon the performance by any Customer of its obligations under the Credit Agreement or the other Credit Documents.
(f) The Agent shall have received such other documents, legal opinions, instruments and certificates relating to this Amendment as it shall reasonably request and such other documents, legal opinions, instruments and certificates that shall be reasonably satisfactory in form and substance to the Agent and the Vendors. All corporate or limited liability proceedings taken or to be taken in connection with this Amendment and documents incidental thereto whether or not referred to herein shall be reasonably satisfactory in form and substance to the Agent and the Vendors.
SECTION 4 Expenses . The Customers shall pay all reasonable out-of-pocket expenses incurred by Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including, but not limited to, the reasonable fees and disbursements of counsel to the Agent.
SECTION 5 Cross-References . References in this Amendment to any Section are, unless otherwise specified, to such Section of this Amendment.
SECTION 6 Instrument Pursuant to Credit Agreement . This Amendment is a Credit Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions of the Credit Agreement.
SECTION 7 Further Acts . Each of the parties to this Amendment agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Amendment.
SECTION 8 Counterparts . This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.
SECTION 9 Severability . In case any provision in or obligation under this Amendment or the other Credit Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 10 Benefit of Agreement . This Amendment shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that no Customer may assign or transfer any of its interest hereunder without the prior written consent of the Vendors.
SECTION 11 Integration . This Amendment represents the agreement of the Customers, each other Credit Party, the Agent and each of the Vendors signatory hereto with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties relative to the subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents.
SECTION 12 Confirmation . Except as expressly amended by the terms hereof, all of the terms of the Credit Agreement and the other Credit Documents shall continue in full force and effect and are hereby ratified and confirmed in all respects.
SECTION 13 Credit Documents . Except as expressly set forth herein, the amendments provided herein shall not by implication or otherwise limit, constitute a waiver of, or otherwise affect the rights and remedies of the Vendors or the Agent under any Credit Document, nor shall they constitute a waiver of any Event of Default, nor shall they alter, modify, amend
or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the any Credit Document. Each of the amendments provided herein shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to by such amendments. Except as expressly amended herein, the Credit Agreement and the other Credit Documents shall continue in full force and effect in accordance with the provisions thereof. As used in the Credit Agreement, the terms “Agreement”, “herein”, “hereinafter”, “hereunder”, “hereto” and words of similar import shall mean, from and after the date hereof, the Credit Agreement as amended hereby.
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.
VENDORS:
CAYE HOME FURNISHINGS, LLC, as a Vendor
By: Name: Karl W. Leo Title: Chairperson of Board of Managers
CAYE UPHOLSTERY, LLC, as a Vendor
By: Name: Karl W. Leo Title: Chairperson of Board of Managers
CAYE INTERNATIONAL FURNISHINGS, LLC, as a Vendor
By: Name: Karl W. Leo Title: Chairperson of Board of Managers
ADMINISTRATIVE AGENT :
CAYE HOME FURNISHINGS, LLC, as Agent
By: Name: Karl W. Leo Title: Chairperson of Board of Managers
CUSTOMERS :
JENNIFER CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER CONVERTIBLES BOYLSTON MA, INC.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER CHICAGO LTD
By: Name: _______________________________________ Title: _______________________________________
CIPRIANO SQUARE CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
CONTOUR RD CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
ELEGANT LIVING MANAGEMENT, LTD.
By: Name: _______________________________________ Title: _______________________________________
HARTSDALE CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER ACQUISITION CORP.
By: Name: _______________________________________ Title: _______________________________________
JAMAICA AVENUE CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER MANAGEMENT III CORP.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER MEDIA CORP.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER OUTLET CENTER, INC.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER PURCHASING CORP.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER CONVERTIBLES LICENSING CORP
By: Name: _______________________________________ Title: _______________________________________
JENNIFER MANAGEMENT II CORP
By: Name: _______________________________________ Title: _______________________________________
JENNIFER MANAGEMENT IV CORP.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER MANAGEMENT V LTD.
By: Name: _______________________________________ Title: _______________________________________
JENNIFER CONVERTIBLES NATICK, INC.
By: Name: _______________________________________ Title: _______________________________________
NICOLE CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
NICHOLSON LANE CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
ROUTE 35 CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
STEWART STREET CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
VALLEY STREAM CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
WASHINGTON HEIGHTS CONVERTIBLES, INC.
By: Name: _______________________________________ Title: _______________________________________
Exhibit 10.2
ASHLEY HOMESTORES, LTD TRADEMARK USAGE AGREEMENT
This Trademark Usage Agreement (the “Agreement”) dated as of this 1st day of November, 2006 (the “Effective Date”), by and between ASHLEY HOMESTORES, LTD. , a Wisconsin corporation, with its principal place of business at One Ashley Way, Arcadia, Wisconsin, 54612 (“Licensor”) and Hartsdale Convertibles, Inc., a New York (“Licensee”), with its principal place of business at 419 Crossways Park Drive, Woodbury, New York, 11797.
RECITALS
Licensor has developed the HomeStore Concept, as defined herein, for the operation of retail furniture stores. An integral part of the HomeStore Concept is the use of the Marks, as defined herein. Licensor has the right, pursuant to a Trademark License Agreement between Licensor and Ashley Furniture Industries, Inc. (“Owner”), a Wisconsin corporation, to use and authorize others to use the Marks, including the name Ashley Furniture HomeStore.
Licensee will operate a retail furniture store, having a minimum of 32,480square feet of retail floor space, at the Authorized Location, as defined herein, using the name Ashley Furniture HomeStore, the HomeStore Concept and the other Marks after the Effective Date in accordance with the terms and conditions of this Agreement. Licensee, in operating the Licensed Business (as defined herein), will not display or offer for sale any product or service other than the Trademark Product Line Inventory (as defined herein). All Ashley Products (as defined herein) will be purchased by Licensee from Owner at Owner’s wholesale prices. All Accessories (as defined herein) that are not sold by Owner will be purchased by Licensee from manufacturers, suppliers, or distributors listed on the Accessory List (as defined herein).
Licensee has reviewed this Agreement in its entirety with its attorney and other advisors and has evaluated the HomeStore Concept, the financial investment required, and all business risks associated with owning and operating a retail furniture store in accordance with the terms and conditions of this Agreement.
NOW THEREFORE, for and in consideration of the agreements of the parties set forth below, the parties hereby agree as follows:
1. DEFINITIONS . As used in this Agreement:
A. “ Accessories ” means (i) non-furniture items such as plants, pictures, rugs, clocks, mirrors, statues, china, bedspreads, pillows, and interior decorations either sold by Licensed Business or used to improve the appearance of the Authorized Location, (ii) mattresses and box springs not manufactured or distributed by Owner, (iii) demonstration models and all promotional materials used by the Licensed Business to promote Ashley Products, (iv) computer software and hardware, and (v) all goods and products which are not Ashley Products (as defined herein) but which bear one or more of the Marks.
B. “ Accessory List ” means a list, as amended from time to time by Licensor, of (i) the Accessories that Licensee is required to display and offer for sale at the Licensed Business, (ii) the mattresses and box springs not manufactured or distributed by Owner that Licensee is permitted to display and offer for sale at the Licensed Business, (iii) the demonstration models and all promotional materials Licensee is required to use in the Licensed Business, (iv) the computer software and hardware Licensee is required to use in the Licensed Business, (v) the materials, products, goods, and other property one or more of the Marks may be affixed to, and (vi) the names, addresses, and telephone numbers of the manufacturers, suppliers, and distributors of Accessories who have been approved by Licensor for each accessory.
C. “ Affiliate ” means a legal entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Licensor.
D . “Ashley Products” means furniture, mattresses, lamps, box springs, and Accessories manufactured or distributed by Owner and approved by Licensor for sale under the HomeStore Concept.
E. “ Authorized Location ” means the street address of 168 Glen Cove Road, Carle Place, New Yorkat which, by this Agreement, Licensor has authorized Licensee to operate the Licensed Business.
F. “ Confidential Information ” means the HomeStore Manual together with (i) the Accessory List, (ii) all Planned Web Site(s) (as defined herein), PISAD Systems (as defined herein) and all Internet-related materials and information including, but not limited to, access codes, identification codes, passwords, log-in identification numbers, and electronic signatures provided by Licensor or Owner to Licensee for use in the Licensed Business, and (iii) all information provided by Licensor to Licensee and marked “Confidential.”
G. “ HomeStore Concept ” means the image, technique, design, concept, and business methods developed by Licensor for the retail sale of Ashley Products and Accessories in retail furniture stores authorized to use the name Ashley Furniture HomeStore. The HomeStore Concept includes, but is not limited to, interior décor, color scheme, design, layout, signage, decorations, furnishings, purchasing methods and procedures, demographic information, computer systems and software, and other information systems, procedures, methods, and techniques that relate to the operation of the Retail Store, as defined herein, and Warehouse, as defined herein. The HomeStore Concept may, in Licensor’s sole and absolute judgment, be changed, modified, improved, and further developed by Licensor during the Term.
H. “ HomeStore Manual ” means all manuals containing rules, guidelines, policies, procedures, trademark usage standards, and other requirements developed by Licensor, as well as all additions and amendments thereto, that Licensee must adhere to in operating the Licensed Business.
I, “ Licensed Business ” means the Retail Store and attached warehouse operated by Licensee, at the Authorized Location, utilizing the HomeStore Concept and the Marks, all in accordance with the terms and conditions of this Agreement.
J. “ Licensed Territory” means the geographic area described on Exhibit A.
K. “ Marks ” means the trademarks, including the name ASHLEY FURNITURE HOMESTORE, set forth in Exhibit B attached hereto, as may be modified from time to time by Licensor in Licensor’s sole discretion.
L. “ Personal Guarantor ” means an individual or entity that is responsible and liable for any obligations of Licensee under this Agreement.
M . “Principal Owner” means Jennifer Convertibles, Inc., a Delaware corporation, which is the sole owner of 100% of all shares in Licensee.
N. “ Retail Store ” means the interior and exterior of a furniture store having (i) a minimum of 32,480 square feet of retail floor space that is used by Licensee for the sole purpose of displaying Ashley Products and Accessories for resale to retail customers and (ii) attached warehouse space of at least 500 square feet that will be used exclusively for the sole purpose of receiving, storing, and delivering the Trademark Product Line Inventory. The “retail floor space” shall not include the floor space devoted to offices, hallways, utility rooms, storage spaces, restrooms, warehouse, and preparation, receiving, and repair areas.
O. “ Term ” means the period of time during which this Agreement will be in effect and begins on the Effective Date and continues for a period of sixty (60) months thereafter.
P. “ Trademark Product Line Inventory ” means the Ashley Products and Accessories approved by Licensor for sale by Licensee, using the HomeStore Concept, at the Authorized Location.
Q, “ Warehouse ” means a separate warehouse at a location approved by Licensor that is used for the purpose of receiving, preparing, repairing, scheduling, storing and delivering the Trademark Product Line Inventory and that meets all of the requirements set forth in Exhibit C.
2. LICENSE . Licensor hereby grants to Licensee, subject to the terms and conditions of this Agreement, a nonexclusive, limited sublicense to use the HomeStore Concept and the Marks, including the name ASHLEY FURNITURE HOMESTORE, during the Term in connection with the operation of the Licensed Business at the Authorized Location. Licensee will not relocate or move the Licensed Business from the Authorized Location without Licensor’s prior written approval.
3. BUSINESS IDENTIFICATION . Licensee will operate the Licensed Business under the name ASHLEY FURNITURE HOMESTORE and no other name. In addition, Licensee will use only those Marks, names, logos, and signs, both exterior and interior, that are approved by Licensor for use in the Licensed Business.
4. RETAIL STORE OPERATION . Immediately after the Effective Date, Licensor will provide Licensee, through electronic or other means, with a copy of its HomeStore Manual. Licensor may, at any time, make additions and amendments to the HomeStore Manual. These HomeStore Manual additions and amendments will be distributed, through electronic or other means, to Licensee at or about the same time they are distributed to other ASHLEY FURNITURE HOMESTORE licensees.
Licensee will keep its copy of the HomeStore Manual current and up to date with contents as made available by Licensor. If there are any differences between Licensor’s and Licensee’s copies, the terms of the master copy of the HomeStore manual maintained by Licensor will control in all respects.
Licensee will operate the Licensed Business and Warehouse in accordance with the terms and conditions of this Agreement and all rules, guidelines, policies, procedures, trademark usage standards, and other requirements contained in the HomeStore Manual, including all customer service requirements prescribed by Licensor in the HomeStore Manual.
Licensee, in operating the Licensed Business and Warehouse, will pay, on or before the date they become due, all sums due Licensor, Owner, Ashley Distribution Services, Ltd., and all other parties with which Licensee does business. Licensee acknowledges that Licensee is not obligated under this Agreement or by commercial necessity to purchase any products or services from Licensor or any of its Affiliates, except for the Trademark Product Line Inventory items. Licensee, in operating the Licensed Business and Warehouse, will make the financial expenditures and time commitments that are necessary to properly install, learn to operate, upgrade, and maintain, at its sole expense, computer hardware and software in accordance with the requirements set forth in the HomeStore Manual.
5. BEST EFFORTS . Licensee will use its best efforts to solicit sales of the Ashley Products from the Authorized Location and, in consultation with Licensor, to develop annual sales goals and marketing objectives reasonably designed to assure maximum sales and market penetration of the Ashley Products in the Licensed Territory.
6. TRADEMARK PRODUCT LINE INVENTORY . Licensee will at all times purchase, carry, and maintain, in reasonable quantities, the Trademark Product Line Inventory (including alternative fabric selections and swatches) for sale and display. Licensee will display the Trademark Product Line Inventory in a manner that simulates, as nearly as possible, the consumer’s home environment. Licensee will purchase from Owner all Ashley Products displayed or held for resale at the Authorized Locations. Licensee will pay Owner in full for all Ashley Products contained in each shipment on or before the payment date as indicated on each invoice. Licensee will not, without the written authorization of Licensor, sell, offer for sale, accept offers, or solicit offers for the sale of the Trademark Product Line Inventory from any location other than the Authorized Location. Licensee will not sell, assign, transfer, or otherwise distribute the Trademark Product Line Inventory to any person or entity in a wholesale manner or in any other manner that would facilitate or permit the further distribution or resale of the Trademark Product Line Inventory in connection with the business of any third party. Licensee will sell the Trademark Product Line Inventory only at its Authorized Location to retail customers. Moreover, Licensee, in operating the Licensed Business, will not display or offer for sale any product or service other than the Trademark Product Line Inventory. Licensee agrees to build or acquire additional warehouse space to house the Trademark Product Line Inventory that Licensor reasonably requires Licensee to carry.
7. ACCESSORIES . Licensor will periodically provide Licensee with an Accessory List. Licensee will maintain an inventory of, display, and offer for sale, Accessories in reasonable quantities. Licensee will only use, display, or offer for sale Accessories that are contained on the Accessory List. Licensee will purchase Accessories only from Owner or from manufacturers, suppliers, or distributors contained on the Accessory List. Licensee will not use, purchase, display, or offer for sale Accessories from a manufacturer, supplier, or distributor that is not contained on the Accessory List.
8. RELATIONSHIP WITH ACCESSORIES MANUFACTURERS . Licensee acknowledges that the terms and conditions of its orders and purchases of Accessories will be agreed to by Licensee and the manufacturer, supplier, or distributor of the products being purchased by Licensee. Licensor has no obligation or duty of any kind or character whatsoever to procure or assist Licensee in procuring Accessories. Licensor makes no warranty of any kind or character whatsoever with respect to Accessories and such products will carry only the warranties as the manufacturer thereof extends to Licensee. Licensee acknowledges and agrees that Licensor may, at its option, (i) revoke its approval of any products previously designated on the Accessory List, and may terminate the designation of any manufacturer, supplier, or distributor as an authorized supplier of Accessories or (ii) modify the Accessory List to include new products and manufacturers, suppliers, or distributors as an authorized supplier of Accessories.
Licensee shall purchase Accessories from approved suppliers unaffiliated with Licensor or Owner, with the exception of Accessories items purchased from Licensor or Owner at wholesale price for resale by Licensee at the Authorized Location.
9. MARKS OWNERSHIP AND USE . Licensee acknowledges and understands that Owner is the owner of the Marks and that Licensor has obtained from Owner the right to use the Marks and to sublicense the use of the Marks. Licensee’s right to use the Marks, including the name ASHLEY FURNITURE HOMESTORE, is derived solely from this Agreement and is limited to conducting the Licensed Business by Licensee pursuant to and in compliance with this Agreement and all applicable standards, specifications, operating procedures, and other requirements prescribed by Licensor from time to time. Every use or display of the Marks by Licensee will include the federal registration symbol (the letter “R” enclosed within a circle (“®”)) if the mark is registered with the United States Patent and Trademark Office, or will otherwise include the superscript “TM,” and will be in accordance with Licensor’s logo style guidelines as amended from time to time, the current version of which is set forth in the HomeStore Manual. Licensee will not (i) use the Marks, including the name ASHLEY FURNITURE HOMESTORE, or any similar trademarks or trade names, in a way that is likely to lead a third person to believe that Licensee is in any way authorized to contract for, bind, or commit Licensor or Owner in any manner whatsoever; (ii) use the Marks or any portion thereof as part of its firm, corporate or other legal entity name; (iii) use the Marks, except as provided in Section 16, on the Internet or in another on-line communication system or network or in any electronic data exchange system; (iv) use any trademark or trade name of which Licensor disapproves; or (v) register or attempt to register any of Licensor’s or Owner’s trademarks in Licensee’s name or in any other person’s name. Any unauthorized use of the Marks by Licensee is a breach of this Agreement and constitutes trademark infringement and entitles Licensor to injunctive relief as specified in Section 29. Licensee’s use of the Marks and any goodwill established by Licensee’s use will inure to the exclusive benefit of Owner and Licensee hereby assigns such goodwill to Owner and will execute any additional documents necessary to effectuate such assignment. Licensee will not contest the validity or ownership of any of the Marks or assist any other person in contesting the validity or ownership of the Marks. Notwithstanding anything contained herein to the contrary, Licensor and Owner make no representations, warranties, or guarantees to Licensee concerning the enforceability or use of the Marks in any particular trade area. Licensor and Owner further make no representations, warranties, or guarantees of any kind that the Marks, or any registrations or use thereof, do not infringe on the rights of any third person and Licensee hereby waives any actions or claims for, and releases Licensor and Owner from any liability for, any losses, expenses, costs, or damages arising from or in any way relating to Licensee’s use of the Marks.
10. NOTICE OF INFRINGEMENT . Licensee will immediately notify Licensor and Owner upon Licensee’s becoming aware of (i) any improper use of the Marks; (ii) any person or entity using, without Licensor’s or Owner’s authorization, any of the Marks, or a confusingly similar trademark; or (iii) any person or entity alleging that Licensee’s, Licensor’s, or Owner’s use of the Marks is unlawful, improper, or infringes on any trademark, right, or claimed privilege of a third party. Licensee will, at its expense, cooperate with Licensor and Owner in investigating and responding to any claim made by a third party that arises, either directly or indirectly, from Licensee’s use of any of the Marks. Provided Licensee is only using the Marks in the manner prescribed in the HomeStore Manual and gives Licensor and Owner the notice referred to above, Licensor will indemnify Licensee and its officers, directors, shareholders, partners, members, agents, employees and assigns and will defend and hold harmless Licensee from all actions, claims, liabilities, damages, and expenses, including reasonable attorneys’ fees, for trademark infringement resulting from Licensee’s use of the Marks.
11. LITIGATION . In the event any person or entity improperly uses or infringes the Marks, Licensor or Owner will control all litigation and will determine whether suit shall be instituted, prosecuted, or settled, the terms of settlement, and whether any other action will be taken. Licensee will, at its expense, cooperate with Licensor and Owner in any claim, action, or proceeding that affects any of the Marks.
12. SUBSTITUTIONS . If there is a claim by any party that its rights to use any of the Marks are superior to the rights of Owner and if Licensor or Owner determines the claim is legally meritorious, then upon receiving written notice from Licensor, Licensee will, at its expense, immediately make such changes and use such modifications or substitutions to the Marks as may be required by Licensor. Licensee will not make any other changes or substitutions whatsoever in or to the use of the Marks unless directed by Licensor in writing. Licensee acknowledges and agrees that Licensor has the right to modify, replace, or discontinue use of any of the Marks at any time, according to Licensor’s sole discretion, and Licensee agrees to comply, in a timely manner, with such changes and substitutions at Licensee’s expense.
13. COMPLIANCE WITH THE LAW . Licensee will secure and maintain in force all required licenses, permits, and certificates relating to the operation of the Licensed Business and will operate the Licensed Business in full compliance with all applicable laws, ordinances, regulations and guidelines, including without limitation, the Federal Trade Commission Guidelines for the Household Furniture Industry and all government regulations relating to occupational hazards and health, the Americans with Disabilities Act (ADA), consumer protection, trade regulations, workers’ compensation, and unemployment insurance. Licensee will be solely responsible for withholding and paying federal and state income taxes, social security taxes, sales and use taxes, and property taxes associated with operating the Licensed Business and employing people in the Licensed Business.
14. SCOPE; LICENSED TERRITORY . Licensor will not, during the Term, grant another license for, or operate for its own account or through an Affiliate, another retail furniture store using both the HomeStore Concept and the name “Ashley Furniture HomeStore” within the Licensed Territory, although the Licensed Territory may be modified as set forth in Section 15. The Licensed Territory granted under this Agreement is the only territorial protection granted to Licensee and does not in any way expressly or implicitly grant any other area, market, territorial, or development rights to Licensee or restrict Licensor or Owner in any way in the manner in which Licensor or Owner may conduct or operate their respective businesses outside of the Licensed Territory. Furthermore, subject to the protection set forth in the first sentence of this Section 14, Owner and Licensor retain the right to engage in or conduct their businesses both within and outside the Licensed Territory during and after the Term, directly or through their Affiliates or third parties, including without limitation (i) the operation of the same or similar businesses selling the same or similar products (including the Trademark Product Line Inventory) as the Licensed Business, and (ii) the sale and distribution of products (including the Trademark Product Line Inventory) (a) to or through other furniture distributors and retailers or other distributors and retailers who feature furniture as a component of their business, and (b) through any other channel or method of distribution, including without limitation the Internet, the PISAD System (as defined herein), other on-line communications systems or networks, or through any electronic data exchange system. Licensee acknowledges and agrees that these businesses, distributors, retailers, and other channels of distribution will be competing with Licensee for customers and may be selling the Trademark Product Line Inventory using the Marks or other trademarks owned or licensed by Owner or Licensor.
15. CHANGES IN LICENSED TERRITORY . The parties acknowledge that, during the Term, business, economic, or demographic changes in the Licensed Territory are likely to occur. These changes may make it advantageous, for various reasons, including increasing the sales and market penetration of the Trademark Product Line Inventory, to open another retail furniture store using the HomeStore Concept within the Licensed Territory. If Licensor decides, in its sole judgment, to grant a license for, or to operate for its own account or through an Affiliate, another Ashley Furniture HomeStore (the “Additional Ashley Furniture HomeStore”) within the Licensed Territory, Licensor will notify Licensee. Licensee will have ninety (90) days from the date of the notice to notify Licensor in writing if Licensee desires to open an Additional Ashley Furniture HomeStore within the Licensed Territory. Licensor will consent to Licensee’s opening an Additional Ashley Furniture HomeStore, provided that all of the following conditions have been fully satisfied:
A. Licensee is in compliance with all of the terms and conditions of this Agreement;
B. Licensee demonstrates to Licensor’s satisfaction that Licensee has the financial ability to operate the Additional Ashley Furniture HomeStore;
C. Licensee agrees to enter into and abide by all agreements required by Licensor including, but not limited to Licensor’s then-current form of license or other agreement authorizing the use of the Marks and the HomeStore Concept;
D. Principal Owner agrees to execute the then-current form of personal guaranty used by Licensor, Owner and the Affiliates of Licensor and Owner;
E. Licensee has, in a timely manner, fully paid and satisfied all of Licensee’s obligations to Licensor, Owner, Ashley Distribution Services, Ltd., and any other third parties who have sold products to or otherwise conducted business with Licensee; and
F. Licensee agrees in a written document, the form and content of which will be determined by Licensor, to have the Additional Ashley Furniture HomeStore fully completed and open for business within twelve (12) months of the date Licensee is notified that (i) it meets all of the criteria set forth above, and (ii) it is authorized to open the Additional Ashley Furniture HomeStore.
If Licensee is unable, in Licensor’s sole judgment, to satisfy fully any of the conditions enumerated above, Licensee’s request to open an Additional Ashley Furniture HomeStore will be denied automatically and Licensor will be free (without compensation to or protest by Licensee) to (i) grant an additional license for, or to operate for its own account or through an Affiliate, the Additional Ashley Furniture HomeStore in the Licensed Territory, and (ii) reduce the Licensed Territory under this Agreement as Licensor determines necessary to reflect the business, economic, or demographic changes in the Licensed Territory as affected by the opening of the Additional Ashley Furniture HomeStore. Licensor will notify Licensee in writing of the revised Licensed Territory and of the date on which the revision will take effect.
16. INTERNET SALES AND WEB SITE PARTICIPATION .
A. Web Sites. Licensee is prohibited, except as provided in this Section of the Agreement, from selling or advertising Ashley Products using the Internet, other on-line communication systems or networks, or any electronic data exchange system. Licensee is further prohibited, except as provided in this Section of the Agreement, from using the Marks on the Internet or other on-line communication system or network or in any electronic data exchange system. Owner has developed and Licensor is in the process of developing one or more Internet sites on the World Wide Web (collectively the “Web Site(s)”). Additional Web sites may be developed and implemented by Owner or Licensor (collectively the “Planned Web Sites”). The purposes of the Web Site(s) and the Planned Web Sites (the “Web Site Purposes”) include (i) providing potential retail consumers of Ashley Products the opportunity to review all products contained within the term “Ashley Products” as it is defined in this Agreement; (ii) providing potential consumers of Ashley Products with information concerning retail stores near their home, where they can view and purchase the Ashley Products in which they are interested; (iii) providing answers to questions asked by retail consumers concerning current availability of Ashley Products, the availability and coverage of warranties, and other relevant questions relating to consumer satisfaction, and the sale and distribution of Ashley Products; and (iv) providing a method of business-to-business communication between Owner and Licensee and between Licensor and Licensee. To achieve the Web Site Purposes, Licensee will be given the opportunity to participate on the Web Site(s) or Planned Web Sites or both during the Term, at its own expense and according to policies, procedures, guidelines, and rules as established by Owner or Licensor from time to time, pertaining to the content and operation of the Web Site(s) or Planned Web Sites or both. Licensor retains all rights relating to the Web Site(s) and the Planned Web Sites, including the right to alter or terminate the use of such media.
B. Product Information, Sales and Delivery System. It is understood and agreed that Licensor or Owner, acting individually or collectively, may establish, from time to time and in the sole and exclusive judgment of Licensor and Owner, policies, procedures, guidelines, and rules for the sale and distribution of Ashley Products using the Internet, other on-line communication systems or networks, or any electronic data exchange system, and at retail prices determined by Owner (the “Product Information, Sales and Delivery System,” hereinafter the “PISAD System”). While the PISAD System may utilize the Web Site(s) and the Planned Web Sites, the PISAD System is separate and distinct from the Web Site(s) and Planned Web Sites. Licensor retains all rights relating to the PISAD System, including the right to alter or terminate its use. Owner will use the PISAD System to sell Ashley Products, at retail prices determined by Owner, in the Licensed Territory and may or may not request Licensee to provide delivery and other services to customers in or within a reasonable distance of the Licensed Territory; provided that, prior to Owner requesting Licensee to provide delivery or other services, Owner and Licensee agree on the amount Owner will pay Licensee to reimburse Licensee for those reasonable costs that are directly related to the delivery and other services Licensee is being requested to provide. Notwithstanding the foregoing, Owner may provide delivery and other services to customers in the Licensed Territory who purchase or have purchased Ashley Products.
17. NO ASSURANCES . Licensee acknowledges and agrees that Licensor’s acceptance of the Authorized Location shall not be deemed as constituting a guarantee, recommendation, warranty, representation, or assurance by Licensor that the Authorized Location is capable of supporting a successful retail furniture store.
18. APPEARANCE OF LICENSED BUSINESS . The interior and exterior décor and visual image of the Retail Store, including signage, must be created and maintained in accordance with the HomeStore Concept and all requirements set forth in the HomeStore Manual. Additionally, the equipment, fixtures, furnishings, and signage at the Authorized Location as well as the design, appearance, size, and layout of the Retail Store must be created and maintained in accordance with the HomeStore Concept and all requirements set forth in the HomeStore Manual. Licensor’s determination of whether Licensee is, at any time, in compliance with the requirements contained in this paragraph will be conclusive and binding on the parties to this Agreement.
In performing construction work, renovation, remodeling, or repair to the Retail Store, Warehouse, or any part of the premises occupied by the Licensed Business, Licensee will comply with all federal, state and |
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