Exhibit 10.1
LICENSE AGREEMENT
THIS AGREEMENT, made this 24th day of July, 2002 to be effective at the close of
business on July 31, 2002 (hereinafter the "Effective Date"), by and between
Land O'Lakes, Inc., a Minnesota cooperative corporation with its principal place
of business in Arden Hills, Minnesota (hereinafter together with its successors
and assigns "LOL") and Xxxx Foods Company, a Delaware corporation with its
principal place of business in Dallas, Texas (hereinafter together with its
successors and assigns "DFC",) Morningstar Foods, Inc., a wholly owned affiliate
of DFC (hereinafter together with its successors and assigns "Morningstar"), and
Dairy Marketing Alliance, LLC, a Delaware limited liability company with its
principal place of business in Arden Hills, Minnesota (hereinafter "DMA").
WHEREAS, LOL entered into a License Agreement dated July 10, 2000 with Landean,
LLC, which company later changed its name to Dairy Marketing Alliance, LLC; and
WHEREAS, Xxxx Holding Company, formerly Xxxx Foods Company ("Xxxx Holding"), a
wholly owned subsidiary of DFC, and LOL are joint owners and members of DMA; and
WHEREAS, Xxxx Holding and LOL have agreed that as of the Effective Date DMA
shall be dissolved; and
WHEREAS, as part of the dissolution of DMA, LOL and DFC agreed to enter into
this License Agreement and assign the Hood Licenses to DFC; and
WHEREAS, also as a part of the dissolution of DMA, LOL and DFC, or one or its
affiliates, have agreed to enter into a license agreement for the sale by DFC of
certain sour cream products to the foodservice channel of trade (the
"Foodservice License Agreement") and two copack agreements for the processing by
DFC of certain xxxxxxx (the "Xxxxxxx Co-Pack Agreement") and sour cream products
(the "Sour Cream Co-Pack Agreement") for LOL.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. Definitions.
The following definitions shall apply for the purposes of this
Agreement:
1.1 Basic Dairy Products - The term "Basic Dairy Products" shall
mean only those products set forth in Exhibit A to this
Agreement, attached hereto and hereby incorporated by
reference.
1.2 Combination Products -- The term "Combination Products"
shall mean only such refrigerated or shelf-stable products
wherein such product contains as a total of its finished
product formula at least seventy-five (75) percent or more
of one or more of the following products: any Basic Dairy
Product, light cream (131.155), heavy cream (131.150), light
whipping cream (131.155), half & half (131.180), sour cream
(131.160), or acidified sour cream (131.162); provided,
however, Combination
Products shall not include any product which is excluded
from the definition of Licensed Products as set forth in
Exhibit B or which contains a total of its finished product
formula less than seventy-five (75) percent of one or more
of the Licensed Products and all rights to such "less than
seventy-five (75) percent products" shall be retained by
LOL.
1.3 Content Claim - The term "Content Claim" shall mean any
nutrient content claim as described in 21 CFR or any other
claim made with respect to a product that expressly
characterizes the addition or deletion of an ingredient as
adding value to the product.
1.4. Cream Products - The term "Cream Products" shall mean only
refrigerated or shelf-stable half & half as defined by 21
CFR Section 131.180; light cream as defined by 21 CFR
Section 131.155; light whipping cream as defined by 21 CFR
Section 131.157; heavy whipping cream as defined by 21 CFR
Section 131.150; and whipping cream in aerosol form,
flavored and unflavored, to the extent such products either
(i) meet the standard of identity for such products (if
applicable) as set forth in April 1998 edition of the CFR or
as may be amended in the future or (ii) make any Content
Claim; provided, however, Creamers, as defined herein, are
expressly excluded from the definition of Cream Products.
1.5 Creamers -- The term "Creamers" shall mean only refrigerated
or shelf-stable dairy or non-dairy, flavored or unflavored
coffee creamers, with or without a fat reduction claim,
packaged in single serving packages of four (4) ounces or
less.
1.6 Grip `N Go Intellectual Property -- The term "Grip `n Go
Intellectual Property" shall mean the patented bottle utilized
to package Grip `n Go(TM) beverage products (US Patent Number
D428,813).
1.7 Gross Sales -- The term "Gross Sales" shall mean all revenue
from sales of Licensed Products less the actual cost of
reasonable returns. Gross Sales shall include all revenue from
sales of Hood Cream Products and Hood Sour Cream Products sold
by Hood pursuant to the Hood License Agreements. Gross Sales
shall not include revenue from sales of products co-packed by
DFC or any of its affiliates for LOL.
1.8 Hood Cream Products -- The term "Hood Cream Products" shall
mean only half & half as defined by 21 CFR Section 131.180;
fat-free half & half; heavy whipping cream as defined by 21
CFR Section 131.150; and whipping cream in aerosol form in
regular and chocolate flavors, and in each case bearing a
Trademark on the package. Hood Cream Products is defined to
include all package sizes eight (8) ounces or greater;
provided, however, DMA must approve in writing, which
approval may be granted or withheld by DMA in its sole
discretion, any package size before such size of Hood Cream
Product is marketed or sold.
1.9 Hood Cream Territory - The term "Hood Cream Territory" shall
mean only the distribution channels specified below and
located within those states (and portions
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thereof) set forth in Exhibit C attached hereto and hereby
incorporated by reference. The distribution channels are:
retail grocery stores, food and dairy wholesalers,
convenience stores, military commissaries, and dairy
distributors, but expressly excluding foodservice accounts
and distributors, club stores (including but not limited to
Costco and Sam's), and mass merchandisers (including but not
limited to Wal-Mart, Target, and K-Mart); but expressly
including BJ's and to those accounts to which Hood sold
product under the June 25, 1996 License Agreement between
LOL and Hood.
1.10 Hood Sour Cream Products -- The term "Hood Sour Cream
Products" shall mean only sour cream as defined by 21 CFR
Section 131.160, light sour cream, and no-fat sour cream, and
in each case bearing a Trademark on the package. Hood Sour
Cream Products is defined to include all package sizes;
provided, however, DMA must approve in writing, which approval
may be granted or withheld by DMA in its sole discretion, any
package size before such size of Hood Sour Cream Products is
marketed or sold.
1.11 Hood Sour Cream Territory - The term "Hood Sour Cream
Territory" shall mean only the distribution channels specified
below and located within those states (and portions thereof)
set forth in Exhibit D attached hereto and hereby incorporated
by reference. The distribution channels are: retail grocery
stores, food and dairy wholesalers, convenience stores,
military commissaries, and dairy distributors, but expressly
excluding foodservice accounts and distributors, club stores
(including but not limited to Costco and Sam's), and mass
merchandisers (including but not limited to Wal-Mart, Target,
and K-Mart); but expressly including BJ's and to those
accounts to which Hood sold product under the May 12, 1998
License Agreement between LOL and Hood.
1.12 Infant Formula Products -- The term "Infant Formula Products"
shall mean only shelf-stable or refrigerated, liquid, cow's
milk-based or soy-based replacement for human breast milk and
which products comply with the requirements of 21 CFR Sections
106 and 107 and such other requirements as may be imposed from
time to time by the US Food and Drug Administration.
1.13 Licensed Products -- The term "Licensed Products" shall mean
only those products set forth in Exhibit B attached hereto and
hereby incorporated by reference.
1.14 Small Bottle Milk - The term "Small Bottle Milk" shall mean
only milk (as defined in 21 Code of Federal Regulations
Section 131.110, 1998 edition or as may be amended in the
future), refrigerated, or shelf-stable, with or without a fat
and/or lactose reduction claim, packaged in plastic packaging
containing less than 40 fluid ounces.
1.15 Small Bottle Nutritional Milk -- The term "Small Bottle
Nutritional Milk" shall mean only milk (as defined in 21
Code of Federal Regulations Section 131.110, 1998 edition or
as may be amended in the future) refrigerated or
shelf-stable packaged in
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plastic packaging containing less than 40 fluid ounces and
containing any Content Claim in addition to or other than
just fat and/or lactose reduction claims.
1.16 Sour Cream Products - The term "Sour Cream Products" shall
mean only refrigerated or shelf-stable sour cream as defined
by 21 CFR Section 131.160 and acidified sour cream as defined
by 21 CFR Section 131.162 to the extent such products either
(i) meet the standard of identity for such products as set
forth in April 1998 edition of the CFR or as may be amended in
the future or (ii) make any Content Claim .
1.17 Soy Beverage Products -- The term "Soy Beverage Products"
shall mean only refrigerated or shelf-stable soy milk and
other soy-based beverage products whether or not such soy milk
or other soy-based beverage products make any Content Claims .
1.18 Territory - The term "Territory" shall mean only the fifty
states of the United States, Puerto Rico, and the country of
Canada.
1.19 Trademarks - The term "Trademarks" shall mean only those
trademarks set forth in Exhibit E attached hereto and hereby
incorporated by reference.
1.20 Value Added Dairy Products -- The term "Value Added Dairy
Products" shall mean any refrigerated or shelf-stable product
that fails to meet the definition of Basic Dairy Product only
because it makes a Content Claim other than a Royalty Free
Content Claim as described in Exhibit A to this Agreement,
attached hereto and hereby incorporated by reference.
2. Grant of License.
Subject to the terms and conditions set forth herein:
2.1 Except as otherwise noted herein and subject to the rights
granted to H. P. Hood, Inc. ("Hood") pursuant to two (2)
License Agreements between DMA and Hood dated January 1,
2002 (the "Hood Licenses"), LOL grants to DFC/Morningstar an
exclusive, royalty bearing or royalty-free (depending on the
specific product) license to utilize Trademarks in Territory
on all sizes and types of packaging and in all channels of
trade in connection with the manufacture, marketing,
promotion, distribution, and sale of Licensed Products.
2.2 The right to utilize Trademarks in connection with the
manufacture, marketing, promotion, distribution, and sale of
Sour Cream Products in Territory directly or indirectly to
institutional accounts is expressly excluded from this license
and is expressly reserved by LOL.
2.3 The right to utilize Trademarks in connection with the
manufacture, marketing, promotion, distribution, and sale of
Creamers shall be exclusive to DFC/Morningstar except that LOL
shall also have the right to manufacture, market,
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promote, distribute, and sell Creamers utilizing Trademarks
to club stores, national accounts, and full line
distributors only. LOL shall not grant such rights to
others; provided however, LOL shall have the right to grant
a license to third parties for the purpose of manufacturing
and/or distributing Creamers on behalf of LOL for sale to
club stores, national accounts, and full line distributors.
2.4 In the event DFC sells one or more Value Added Dairy Products
under a preponderance of DFC's regionally branded volume of
comparable products or such Value Added Dairy Products are
sold as a preponderance of volume of comparable products sold
in Territory by third parties, the parties agree that on the
date LOL receives written notice and documentation reasonably
satisfactory to LOL that DFC has met the preponderance tests
set forth above, the sales of such Value Added Dairy
Product(s) shall be on a royalty-free basis.
2.5 The parties agree that products may be added to the definition
of Licensed Products from time to time by the mutual written
agreement of the parties; provided, however, nothing herein
shall prohibit or restrict in any way LOL from manufacturing
and selling, directly or indirectly, any product not expressly
licensed to DFC/Morningstar hereunder. Any products added to
the definition of Licensed Products shall be on a
royalty-bearing basis which royalty is mutually agreed upon by
DFC/Morningstar and LOL and is consistent with the royalty
rates set forth in this Agreement, taking into consideration
the expected research and development, advertising, marketing,
promotion, and other costs and the expected distribution and
positioning of such product.
2.6 DFC/Morningstar shall not allow any product for which a
license is hereunder granted to be manufactured for it by any
third party without LOL's prior written consent.
2.7 Except as set forth in Section 28 hereof, DFC/Morningstar
shall not assign the license granted hereunder nor grant any
license or sublicense to utilize Trademarks for any reason;
provided, however, the parties agree that DFC/Morningstar may
sublicense the rights granted herein to any wholly owned
subsidiary of DFC or assign such license to any subsidiary or
affiliate which is controlled and majority owned by DFC. In
the event of any such assignment or sublicense, the parties
expressly agree that DFC shall remain responsible for all of
the obligations set forth in this Agreement.
2.8 Except as provided above, LOL agrees that it shall not use
Trademarks in connection with the sale of Licensed Products in
Territory, but nothing herein shall prohibit LOL from using or
permitting third parties to use Trademarks in Territory on any
products other than Licensed Products, or outside of Territory
on any product and LOL expressly reserves the right to do so.
All rights not expressly licensed hereunder to DFC/Morningstar
are retained by LOL.
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2.9 Subject to the Hood Licenses and the rights reserved by LOL in
Section 2.3, LOL grants to DFC an exclusive, royalty-free
license to the formula owned by LOL for fat-free half and half
(the "Formula").
2.10 LOL grants to DFC an exclusive, royalty bearing license to use
the Grip `N Go Intellectual Property in connection with any of
the Licensed Products.
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3. Trademark Rights.
3.1 DFC/Morningstar hereby acknowledges the validity of Trademarks
and LOL's ownership of Trademarks. DFC/Morningstar further
acknowledges the reasonableness and validity of this
Agreement.
3.2 DFC/Morningstar agrees that nothing herein shall give
DFC/Morningstar any right, title or interest in Trademarks,
except the right to use Trademarks in accordance with the
terms of this Agreement. DFC/Morningstar further agrees that
Trademarks are the sole property of LOL and any goodwill
generated from any and all uses of Trademarks shall inure to
the benefit of LOL. DFC/Morningstar agrees that nothing herein
shall give DFC/Morningstar any right, title or interest in any
of LOL's Trademarks, except the right to use Trademarks in
accordance with the terms and conditions of this Agreement.
3.3 DFC/Morningstar agrees to assign to LOL, in the event of
termination of this Agreement, and without additional
consideration, any rights and equities related to Trademarks
and any goodwill incidental to such rights that may be vested
or believed to be vested in DFC/Morningstar as the result of
the activities of DFC/Morningstar pursuant to this Agreement.
3.4 DFC/Morningstar acknowledges and desires to maintain the
validity of Trademarks and the valuable goodwill associated
with Trademarks for the benefit of LOL. DFC/Morningstar
agrees, therefore, to use Trademarks rights in accordance with
the Brand and Trademark Usage Manual provided to DFC by LOL
together with such reasonable changes to such Manual as may be
made from time to time by LOL and proper trademark usage and
consistent with the character and image of Trademarks.
DFC/Morningstar shall not, directly or indirectly, attack or
assist a third party in attacking the validity of Trademarks.
3.5 DFC/Morningstar shall not claim any ownership rights in or to
Trademarks or the goodwill associated therewith or use any
trademark or tradename confusingly similar to the trademarks
which are included in Trademarks.
3.6 DFC/Morningstar agrees, upon the request and at the sole cost
and expense of LOL, to aid and assist LOL in the registration
and maintenance of Trademarks and in any litigation or
resolution of claims with respect to Trademarks, as LOL may
request.
4. Term.
The initial term of this Agreement shall commence on the day and year
first above written and shall continue in perpetuity unless terminated
by either party as provided for in Section 11.
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5. Quality Control.
5.1 DFC/Morningstar desires to maintain the validity of Trademarks
and goodwill associated therewith and DFC/Morningstar agrees,
therefore, to maintain high standards in manufacturing and
packaging of Licensed Products.
5.2 DFC/Morningstar agree that Licensed Products shall be
manufactured, packaged, stored, distributed and sold in
accordance with all applicable federal, state or local laws,
regulations, rules and guidelines, including but not limited
to good manufacturing practices prevailing in the industry,
now in effect or which may hereinafter come into effect.
5.3 DFC/Morningstar agree that Licensed Products shall be
manufactured and packaged in accordance with the formulas,
specifications, and samples mutually approved by
DFC/Morningstar and LOL prior to the initial manufacture of
each and every Licensed Products by DFC/Morningstar or a third
party manufacturer. The parties agree that all formulas and
specifications utilized by LOL, DMA or DFC as of the Effective
Date of this Agreement shall be deemed approved by LOL. In the
event DFC/Morningstar desires to make any modifications to the
formulas or specifications for Licensed Products, it shall
provide LOL with written notice of DFC/Morningstar's desire to
make such modifications. LOL shall respond to
DFC/Morningstar's request for such modifications as soon as
reasonably possible, but in no event more than thirty (30)
days after LOL's receipt of DFC/Morningstar's notice of the
proposed modifications or LOL's approval of the proposed
modifications shall be presumed. The parties agree that no
modifications shall be made to the formulas or specifications
for Licensed Products without LOL's prior approval, which
consent shall not be unreasonably withheld.
5.4 DFC/Morningstar agrees to provide LOL, at DFC/Morningstar's
expense, with reasonable samples of Licensed Products, on a
quarterly basis, upon receipt of requests from LOL. Any
samples requested by LOL more frequently than on a quarterly
basis shall be at LOL's expense.
5.5 DFC/Morningstar shall allow LOL, or its designated
representative, to inspect, on a confidential basis, a copy of
all DFC's quality control manuals that relate to the safety
and quality of the manufacture, packaging and storage of
Licensed Products. DFC/Morningstar agrees to manufacture,
package and store Licensed Products in strict accordance with
such manuals.
5.6 DFC shall keep and maintain, for a period of at least two (2)
years following each production run, complete and accurate
production, quality control and distribution records relating
to Licensed Products. LOL shall have the right to inspect all
such records on a confidential basis during normal business
hours and subsequent to providing DFC with at least
forty-eight (48) hours prior notice.
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6. Quality Assurance.
6.1 DFC/Morningstar agrees to provide for and allow duly
authorized representatives of LOL, on a confidential basis, to
inspect and test all DFC/Morningstar and any third party
facilities at which Licensed Products are going to be
manufactured prior to the initial manufacture and on a
semi-annual basis thereafter. The parties agree that all
facilities that have been approved by LOL prior to the
Effective Date do not need to be re-approved by LOL prior to
the initial manufacturing of Licensed Products pursuant to
this License Agreement. LOL agrees any such inspections shall
be on confidential basis during normal business hours and
further agrees to provide DFC/Morningstar with at least
forty-eight (48) hours prior notice of any such inspection.
The parties agree that except in the event DFC/Morningstar's
facilities are unsanitary, are not in compliance with
applicable laws, regulations, or rules, or conditions exist
which do or may cause a health risk relating to Licensed
Products, the QA representatives of LOL shall not disclose
specific information relating to DFC/Morningstar's facilities.
6.2 If any such facilities are in unsanitary condition or do not
otherwise comply with applicable law or government
regulations, or with the terms of this Agreement, or if in
LOL's determination they pose a risk of producing products not
in accordance with the product and packaging specifications,
DFC/Morningstar agrees that it or its representative shall
initiate such actions as may be necessary to correct the
deficiencies and to bring the facilities into compliance.
DFC/Morningstar's failure to complete such action within seven
(7) days or failure to take all commercially reasonable
actions necessary to complete the correction of such
deficiencies as soon as possible shall constitute a material
breach under this Agreement.
6.3 Except for routine scheduled inspections by a governmental
agency (except for an inspection which indicates an unsanitary
practice or public health concern; which DFC/Morningstar shall
report to LOL), DFC/Morningstar shall promptly notify LOL of
all inspections by a governmental agency of the facilities
utilized to produce Licensed Products and DFC/Morningstar
shall make available for review or provide to LOL upon request
a copy of any inspection report or audit relating to the
facility, equipment or ingredients utilized to manufacture
Licensed Products. DFC/Morningstar shall notify LOL
immediately by telephone of any information which indicate the
presence of salmonella, listeria or any other bacteriological
agent or substance which is considered by health authorities
as being indicative of either unsanitary practices or of
public health concern or any other material product safety or
quality issues with regard to any Licensed Product or issues
which result or cause DFC/Morningstar to consider the
possibility of a product withdrawal, retrieval or recall of
Licensed Products.
6.4 LOL shall have the right to participate in discussions
relating to the quality of Licensed Products. In the event
that physical conditions exist at the manufacturing
facility that potentially will adversely affect the quality of
Licensed Products or in the event Licensed Products do not
comply with the finished product specifications,
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the parties agree that LOL shall have the right to direct
DFC/Morningstar managerial or supervisory personnel to take
such action (but not specific steps) as is necessary to
immediately remedy such conditions or non-compliance and/or
LOL shall have the right to direct such personnel to
discontinue the production of Licensed Products until such
time as such conditions are or non-compliance is remedied.
7. Packaging, Labels, Advertising and Promotional Information.
7.1 DFC/Morningstar agrees to submit to LOL, and LOL shall review
for approval prior to use, samples of all packaging, labels,
advertising and other materials which utilize, incorporate or
make reference to Trademarks. The parties agree that all
packaging, labels, advertising, and other materials utilized
by LOL, DFC or DMA as of the Effective Date shall be deemed
approved by LOL. DFC/Morningstar agrees that it shall not
create any new packaging or make any changes to LOL's existing
packaging without obtaining LOL's prior written approval in
accordance with the procedure set forth in this Section. LOL
shall communicate to DFC/Morningstar in writing LOL's approval
or any objection to such samples within ten (10) working days
after LOL's receipt of such samples or LOL's approval shall be
presumed. LOL's approval of such samples shall not be
unreasonably withheld. DFC/Morningstar agrees to make any
changes which LOL requests to ensure that Trademarks are used
in accordance with proper trademark usage and are consistent
with the character and image of Trademarks. DFC/Morningstar
agrees that on or before June 30, 2003 with respect to Basic
Dairy Products and December 31, 2002 for all other Licensed
Products, it shall redesign all packages of Licensed Products,
as necessary, so that such packages utilize the new "unified"
brandmark being utilized by LOL. DFC/Morningstar further
agrees that in the event LOL makes future modifications of its
brandmark, DFC/Morningstar shall make modifications, on a
commercially reasonable timetable, to packaging for all
Licensed Products so that the packaging graphics and brandmark
usage for Licensed Products is consistent with LOL's graphics
and brandmark usage. DFC/Morningstar agrees that the
advertising and promotional themes utilized in all customer
and consumer communications in connection with Licensed
Products shall be consistent with the positioning, values and
brand personality (as described in the then current Land
O'Lakes Brand and Trademark Usage Manual) utilized by LOL. The
parties agree to meet at least every six (6) months during the
term of this Agreement to discuss advertising and promotional
themes.
7.2 DFC/Morningstar agrees that all packages, labels, advertising
and other materials which utilize a trademark shall include
the following statement or similar statement agreed to in
writing by LOL: "The LAND O LAKES Brand name is used under
license from Land O'Lakes, Inc."
8. Positioning of Licensed Products.
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LOL and DFC/Morningstar acknowledge and agree that Trademarks are
utilized on products which are generally premium priced. For the
purposes of this Agreement, premium priced shall mean that Licensed
Products shall be priced above competitive private label and second
label products.
9. Royalties.
9.1 During the term of this Agreement, DFC agrees to pay to LOL
the following royalties for use of trademark:
(a) Basic Dairy Products in refrigerated form -- royalty
free;
(b) Basic Dairy Products in shelf-stable form - royalty
free;
(c) Value Added Dairy Products in refrigerated form -
1.5% of Gross Sales; provided , however, the parties
agree that milk which has been fortified with the
addition of vitamins, minerals, calcium and/or
protein, flavored or unflavored and packaged so as to
contain greater than 40 fluid ounces and with or
without any fat reduction claim shall be
royalty-free;
(d) Value Added Dairy Products in shelf stable form - 3%
of Gross Sales; provided, however, the parties agree
that milk which has been fortified with the addition
of vitamins, minerals, calcium and/or protein,
flavored or unflavored and packaged so as to contain
greater than 40 fluid ounces and with or without any
fat reduction claim shall be royalty-free;
(e) Cream Products in refrigerated form - 1.5% of Gross
Sales;
(f) Cream Products in shelf-stable form - 3% of Gross
Sales;
(g) Sour Cream Products in refrigerated form - 1.5% of
Gross Sales;
(h) Sour Cream Products in shelf-stable form - 3% of
Gross Sales;
(i) Creamers (refrigerated or shelf-stable) - 3% of Gross
Sales; provided, however, the parties agree that to
the extent DFC/Morningstar converts sales of its
International Delight Creamers to sales of Creamers
utilizing Trademarks, the first twenty-five million
dollars ($25,000,000.00) of such conversion sales
each calendar year shall by royalty-free. The parties
acknowledge and agree that DFC and its affiliates
have sold Creamers utilizing Trademarks prior to the
Effective Date and that the continued sale of such
Creamers following the Effective Date shall not
constitute conversion sales and shall bear a royalty;
(j) Combination Products in refrigerated form - 1.5% of
Gross Sales;
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(k) Combination Products in shelf-stable form - 3% of
Gross Sales;
(l) Small Bottle Milk in refrigerated form -
royalty-free;
(m) Small Bottle Milk in shelf-stable form -
royalty-free;
(n) Small Bottle Nutritional Milk in refrigerated form -
1.5% of Gross Sales;
(o) Small Bottle Nutritional Milk in shelf-stable form -
3% of Gross Sales;
(p) Infant Formula Products (refrigerated or
shelf-stable) - 3% of Gross Sales;
(q) Soy Beverage Products in refrigerated form - 1.5% of
Gross Sales;
(r) Soy Beverage Products in shelf-stable form - 3% of
Gross Sales;
(s) All Licensed Products regardless of type or form (and
regardless of royalty rates set forth above) sold in
Canada or Puerto Rico - 3% of Gross Sales; and
(t) All Licensed Products sold in packages utilizing Grip
`n Go Intellectual Property -- 1.5% of Gross Sales
with respect to sales of royalty-free Licensed
Products and the applicable royalty rate with respect
to sales of royalty bearing Licensed Products.
9.2 The parties agree that fifteen (15) days following the end of
each calendar quarter during the term of this Agreement,
commencing with October 15, 2002 (the first period shall cover
the period from the Effective Date to the end of the calendar
quarter), DFC agrees to provide LOL with a written summary of
the volume and Gross Sales for each type and form
(refrigerated or shelf-stable) of all royalty bearing Licensed
Products utilizing Trademarks sold by DFC or Hood pursuant to
the Hood Licenses during the immediately preceding calendar
quarter. Each summary shall be accompanied by payment from DFC
to LOL for the actual royalties owed for the immediately
preceding calendar quarter. The parties agree that the
obligation to pay royalties shall continue so long as
DFC/Morningstar is selling Licensed Products utilizing
Trademarks.
9.3 DFC guarantees that it shall pay the following minimum
royalties in connection with the sale of Licensed Products
utilizing Trademarks each calendar year during the term of
this Agreement.
(a) One Million Three Hundred Thousand Dollars
($1,300,000.00) for the 2002 calendar year which
amount shall be prorated on the basis of the number
of days left in the 2002 calendar year from the
Effective Date divided by 365;
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(b) One Million Eight Hundred Thousand Dollars
($1,800,000.00) for the 2003 calendar year;
(c) Two Million Three Hundred Thousand Dollars
($2,300,000.00) for the 2004 calendar year; and
(d) Three Million Dollars ($3,000,000.00) for the 2005
calendar year and each and every calendar year
thereafter during the term of this Agreement.
In the event that the actual royalties paid by DFC to LOL for
the sale of Licensed Products which utilize Trademarks for any
calendar year is less than the minimum royalty guarantee for
such calendar year, as described above, the parties agree that
on or before January 15 of the year immediately following the
calendar year in which the actual royalties paid are less than
the appropriate minimum guarantee, DFC shall pay to LOL the
difference between the appropriate minimum royalty and the
actual royalties paid by DFC to LOL for the sale of Licensed
Products utilizing Trademarks for such calendar year. The
parties agree that the obligation to pay minimum royalties
shall continue until payment is made for the calendar year in
which this Agreement is terminated. The parties agree that DFC
shall have the right to carry over any royalties paid for the
sale of Licensed Products which utilize Trademarks in excess
of the minimum royalty guarantee in one calendar year and
apply such excess to the minimum royalty guarantee requirement
only in the immediately succeeding calendar year. The parties
expressly agree that the portion or all of the excess royalty
carried over from one year to the immediately succeeding
calendar which is not needed in such succeeding calendar year
(given that DFC achieved the annual minimum royalty without
using some or all of the excess royalty from the previous
year) shall not be added to the actual royalties for such
succeeding calendar year and shall not be carried over to any
further succeeding calendar years.
9.4 The parties agree that all royalties payments made by DFC to
LOL shall be made in United States currency and shall be made
by wire transfer unless LOL requests an alternate form of
payment.
10. Brand Exposure.
10.1 DFC agrees to utilize good faith efforts to sell Licensed
Products utilizing Trademarks during the term of this
Agreement.
10.2 In order to ensure the good faith use of the Trademarks, DFC
agrees to make the following sales of Licensed Products,
excluding Basic Dairy Products, utilizing Trademarks each
calendar year during the term of this Agreement:
(a) Seventy-five Million Dollars ($75,000,000.00) of
sales of Licensed Products utilizing Trademarks
during the 2002 calendar year.;
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(b) One Hundred Million Dollars ($100,000,000.00) of
sales of Licensed Products utilizing Trademarks
during the 2003 calendar year;
(c) One Hundred Twenty-five Million Dollars
($125,000,000.00) of sales of Licensed Products
utilizing Trademarks during the 2004 calendar year;
(d) One Hundred Fifty Million Dollars ($150,000,000.00)
of sales of Licensed Products utilizing Trademarks
during the 2005 calendar year; and
(e) Two Hundred Million Dollars ($200,000,000.00) of
sales of Licensed Products utilizing Trademarks
during each of the 2006 calendar year and every
calendar year thereafter during the term of this
Agreement.
10.3 The parties agree that for the 2002 calendar year DFC shall be
allowed to include in its sales total sales made by DMA and
DMA's licensees. For the 2002 calendar year and all succeeding
years, DFC shall be allowed to include in its sales total
sales made by Hood under the Hood Licenses.
10.4 For purposes of determining whether or not DFC has met its
requisite brand exposure threshold, as set forth above, the
parties agree that DFC shall have the right to carry over any
sales of Licensed Products utilizing Trademarks in excess of
the appropriate brand exposure threshold in one calendar year
and apply such excess to the brand exposure threshold
requirement in the immediately succeeding calendar year. The
parties agree such excess may be used only to meet the
threshold requirement and shall not be added to the sales of
Licensed Products and thereby carried forward beyond the
immediately succeeding calendar year.
11. Termination.
11.1 This Agreement may be terminated immediately by either party
in the event DFC or LOL:
(a) becomes insolvent;
(b) files or has filed involuntarily against it a
petition under the United States Bankruptcy Code or
under or pursuant to any state bankruptcy act or
under any similar federal or state law which is not
removed within one hundred twenty (120) days.
(c) admits in writing its inability to pay its debts
generally as they become due;
(d) suspends or terminates its operations or liquidates
or dissolves; or
11.2 In the event DFC fails to meet the requisite brand exposure
threshold (including carryover rights), as set forth in
Section 10 above, for any calendar year during the term of
this Agreement, the parties agree that LOL shall have the
option, every year
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such threshold requirement is not met or exceeded by DFC
(unless DFC terminates such license as provided below in
this Section), to terminate the license rights granted in
Sections 2.1 of this Agreement with respect to all Licensed
Products except for Basic Dairy Products and any Value Added
Dairy Products that have become royalty free pursuant to
Section 2.4. Such option may be exercised by LOL upon (i)
delivery to DFC of written notice within 90 days following
LOL's receipt of notice of DFC's failure to meet brand
exposure thresholds for the preceding calendar year or
within 120 days of the end of a calendar year in which DFC
failed to meet the brand thresholds and (ii) payment to DFC
of the fair market value of such license rights. The parties
agree that fair market value shall be determined such that
minimal or no value shall be placed on license rights for
those products which DFC is not utilizing at any time which
LOL exercises its option and such that the value assigned to
products in development and/or test market shall be
discounted for appropriate likelihood of success. Fair
market value shall be determined as follows: (i) DFC shall
obtain a reputable, independent, and experienced entity to
establish a fair market value of the license rights; (ii)
LOL shall obtain a reputable, independent, and experienced
entity to establish a fair market value of the license
rights; and (iii) the entity selected by DFC and LOL shall
agree upon a third reputable, independent, and experienced
entity which entity shall make a determination designating
the DFC fair market value or the LOL fair market value as
the final market value of the license rights. In the event
LOL does not exercise its right to terminate such license
rights, the parties agree that DFC, upon at least sixty (60)
days written notice to LOL, may terminate such license
rights and the obligations set forth in Sections 9 and 10 of
this Agreement.
12. Effects of Termination.
12.1 Upon the termination of this Agreement, the license and
rights granted hereunder shall immediately become null and
void and DFC/Morningstar shall discontinue all uses of
Trademarks; provided, however, DFC/Morningstar shall have a
period of three (3) months from the date of termination to
sell or otherwise dispose of any existing inventory of
Licensed Products which display or utilize Trademarks. The
parties agree that the terms and conditions of this
Agreement, including but not limited to the provisions
pertaining to reporting and payment of royalties and quality
control and quality assurance, shall apply to all sales and
other dispositions of Licensed Products occurring during
such three (3) months period.
12.2 Upon the termination of this Agreement, LOL shall have the
option to purchase, at DFC/Morningstar's actual cost, a
portion or all of any Licensed Products and any labeling
materials, advertising or promotional materials, literature,
art work, copy or store displays which display the
Trademarks which are in DFC/Morningstar's custody or control
at the time of termination. DFC/Morningstar agrees that any
such labeling materials, advertising or promotional
materials, literature, art work, copy, or store displays not
purchased by LOL as described herein shall be destroyed by
DFC no later than one hundred twenty (120) days after the
termination of this Agreement.
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DFC/Morningstar further agrees to provide LOL with written
documentation signed by an officer of DFC certifying the
destruction of such materials.
13. Production and Operations Expenses.
The parties agree that except as expressly set forth herein
DFC/Morningstar shall bear all costs and expenses arising from the
manufacture, packaging, storage, distribution, marketing, sale and
other operational expenses relating to Licensed Products.
14. Consumer Correspondence.
The parties agree that all packaging for Licensed Products which
utilize Trademarks shall bear a toll-free telephone number that is
owned by or on behalf of DFC. DFC shall be responsible for handling,
in a commercially reasonable manner, all consumer correspondence
relating to Licensed Products which utilize Trademarks. Within fifteen
(15) days following the end of each calendar quarter during the term
of this Agreement and within fifteen (15) days following the end of
each month for four (4) months after the termination of this
Agreement, DFC agrees to provide to LOL a summary of all consumer
correspondence (written, oral, or otherwise) which DFC received or is
aware of during the preceding month and which correspondence relates
to Licensed Products which utilize Trademarks. DFC further agrees to
immediately notify and provide LOL with details of any six (6) or more
consumer complaints relating to Licensed Products utilizing Trademarks
of a similar nature which are received by DFC during any consecutive
four (4) week period during the term of this Agreement and the three
(3) months following such termination.
15. Product Recall or Recovery.
Both parties agree to promptly notify the other party of all
circumstances that would cause a company, utilizing reasonable
business judgement, to consider the possibility of the implementation
of a product recall or recovery of Licensed Products which utilize any
Trademarks. In each event DFC/Morningstar shall make the initial
decision as to whether or not to implement a product recall or
recovery. DFC/Morningstar agrees to implement any product recall or
recovery in accordance with product recall and recovery procedures
mutually agreed upon by the parties. DFC/Morningstar shall permit LOL
to cooperate and assist in implementing such recall or recovery at
DFC/Morningstar's cost and expense. All such recalls and recoveries
shall be at DFC/Morningstar's sole cost and expense. If DFC reasonably
declines to implement a product recall or recovery, LOL may require
DFC to implement a product recall or recovery at LOL's cost and
expense. If it is later determined that DFC/Morningstar did not act
reasonably in declining to implement a product recall or recovery, it
shall reimburse LOL the costs of such recall or recovery.
16. Indemnification.
16.1 DFC/Morningstar hereby indemnifies and holds harmless LOL, and
will defend or cause LOL to be defended, from and against any
and all claims, demands, causes of action, losses, damages,
costs and expenses (including reasonable attorneys' fees)
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arising out of or in any way connected with the manufacture,
packaging, storage, distribution or sale of Licensed
Products by DFC/Morningstar; provided, however, such
obligation of indemnification shall not apply to any claims,
demands, causes of action, losses, damages, costs and
expenses arising out of or in any way connected with acts,
omissions, or negligence of LOL. This indemnity shall
survive the termination of this Agreement.
16.2 DFC/Morningstar represents and warrants that Licensed
Products shall not be misbranded or adulterated.
DFC/Morningstar hereby indemnifies and holds harmless LOL,
and will defend or cause LOL to be defended, from and
against any and all claims, demands, administrative actions,
causes of action, losses, damages, costs and expenses
(including reasonable attorney's fees) arising out of or in
any way connected with the misbranding or adulteration of
Licensed Products by DFC/Morningstar. This indemnity shall
survive the termination of this Agreement.
16.3 LOL represents and warrants to DFC/Morningstar that
Trademarks, Formula and Grip `N Go Intellectual Property are
owned by LOL and the use of Trademarks, Formula and Grip `N
Go Intellectual Property by DFC/Morningstar, as authorized
by this Agreement, shall not infringe upon the rights of any
third party.
16.4 LOL hereby indemnifies and holds harmless DFC/Morningstar,
and will defend or cause to be defended, from and against
any and all claims, demands, causes of action, losses,
damages, costs and expenses (including reasonable attorneys'
fees) arising out of or in any way connected with
DFC/Morningstar's authorized use of Trademarks, Formula or
Grip `N Go Intellectual Property. This indemnity shall
survive the termination of this Agreement.
17. Research and Development Services.
The parties agree to evaluate in good faith throughout the term of this
Agreement the possibility of LOL performing certain research and
development services on behalf of DFC/Morningstar relating to Licensed
Products upon terms and conditions as may be mutually agreed upon by
DFC and LOL.
18. Tax Considerations.
DFC/Morningstar agrees to provide information reasonable requested by
LOL which LOL deems necessary to attempt to qualify royalty revenue
received pursuant to this Agreement as member business for LOL.
19. Audit Rights.
DFC/Morningstar agrees to maintain complete and accurate
records relating to the sales Basic Dairy Products in Puerto Rico and
Canada and relating to sales of Licensed Products, all returns of such
products, and all royalties paid to LOL for such products.
DFC/Morningstar agrees to retain copies of such records for at least
five (5) years following
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the expiration of the calendar year during which sales of such
products were made. DFC/Morningstar agrees to permit such records to
be examined periodically, during normal business hours on a
confidential basis and following at least 48 hours prior notice, by
LOL audit personnel or an independent auditor or CPA firm designated
by LOL.
20. Termination of Agreements.
20.1 DFC, LOL and DMA agree that the License Agreement dated July
10, 2000 between Landean, LLC (DMA) and LOL is hereby
terminated as of the Effective Date and no rights,
obligations, or provisions shall survive as of the Effective
Date. Such License Agreement is completely superseded and
replaced by this Agreement.
20.2 DFC, LOL, and DTMC, Inc. (a wholly owned subsidiary of DFC)
agree that the License Agreement dated July 10, 2000 between
DTMC and LOL is hereby terminated as of the Effective Date and
no rights, obligations, or provisions shall survive as of the
Effective Date. Such License Agreement is completely
superseded and replaced by this Agreement.
20.3 Xxxx Holding, DMA, and LOL agree that the three (3) Sublicense
Agreements dated July 10, 2000 between Landean, LLC (DMA) and
DFC are hereby terminated as of the Effective Date and no
rights, obligations, or provisions shall survive as of the
Effective Date. Such Sublicense Agreements are completely
superseded and replaced by this Agreement.
20.4 DFC and LOL agree that the License Agreement dated December
18, 1997, between LOL and Ultra Products Company (a wholly
controlled affiliate of DFC) shall be terminated upon
execution of the Xxxxxxx Co-Pack Agreement.
21. Other Obligations.
LOL and DFC/Morningstar do not hereby assume, do not agree to assume
and shall not be responsible for any liability or obligation of any
kind or nature of the other party, except as expressly provided in this
Agreement.
22. Entire Agreement; Amendments.
This Agreement and the Exhibits attached hereto constitute the entire
agreement between the parties and supersedes all previous discussions
and agreements. This Agreement may be amended or modified only by a
writing duly executed by authorized representatives of the parties.
23. Severability.
The provisions of this Agreement shall be severable and the invalidity
of any provision, or portion thereof, shall not affect the
enforceability of the remaining provisions of this Agreement.
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24. Waiver.
The waiver by either party of a breach of any provision of this
Agreement shall not constitute or be construed as a waiver of the same
or any other future breach of any provision(s) in this Agreement.
25. Injunctive Relief.
25.1 In the event either DFC/Morningstar or LOL commits a breach,
the parties hereby expressly agree that the other party shall
have the right to injunctive relief, including but not limited
to a permanent restraining order enjoining any continuing
breach and/or an order that the breaching party take such
actions as ordered by the court to ensure that the breach does
not reoccur.
25.2 The parties agree that the losing party in any action brought
shall pay the reasonable attorneys' fees and other costs
incurred by the winning party or parties, in the prosecution
or defense of such action.
26. Relationship of Parties.
This Agreement is not intended and shall not be construed to constitute
either party as the joint venture or franchising partner, employee,
agent or legal representative of the other, and neither party shall
have any authority, express, implied or apparent, to assume or create
any obligations on behalf of or in the name of the other party.
27. Notice.
Any notice required or permitted under this Agreement shall be deemed
to have been properly given if a written notice shall have been
hand-delivered to the addressee or a written notice shall have been
deposited, first class, postage prepaid, in the United States mail
addressed to the respective parties as follows or such other address as
each party may, in the future, designate in writing to the other party:
To DFC/Morningstar: Morningstar Foods, Inc.
Xxxx Foods Company
Xxxxx 0000
0000 XxXxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
To LOL: Land O'Lakes, Inc.
0000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Law Department
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28. Assignment.
Except as set forth in Section 2.7, neither this Agreement nor
DFC/Morningstar's rights or obligations may be assigned in whole or in
part, by DFC/Morningstar without the prior written consent of LOL;
provided, however, that DFC may assign this Agreement in connection
with the sale of all or substantially all of the assets of DFC. Any
prohibited assignment is void.
29. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the state of Minnesota or Federal trademark law where
applicable.
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IN WITNESS WHEREOF, authorized representatives of the parties hereto have
executed this Agreement effective the day and year first above written.
MORNINGSTAR FOODS, INC. LAND O'LAKES, INC.
By: /s/ XXXXXX XXXXXXXXXX By: /s/ XXXXXXXXXXX X. XXXXXXXXXX
--------------------------------------- ----------------------------------
Print Name: Xxxxxx Xxxxxxxxxx Print Name: Xxxxxxxxxxx X. Xxxxxxxxxx
Title: President Title: Ex. VP and COO
XXXX FOODS COMPANY DAIRY MARKETING ALLIANCE, LLC
By: /s/ XXXXX X. XXXXXX By: /s/ XXXXX X. XXXXXX
--------------------------------------- ----------------------------------
Print Name: Xxxxx X. Xxxxxx Print Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer Title: Secretary
DTMC, INC. XXXX HOLDING COMPANY
By: /s/ XXXXXXXX X. XXXXXXX By: /s/ XXXXXXXX X. XXXXXXX
--------------------------------------- ----------------------------------
Print Name: Xxxxxxxx X. Xxxxxxx Print Name: Xxxxxxxx X. Xxxxxxx
Title: President Title: Ex. VP and General Counsel
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