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EXHIBIT 10.16
Execution Copy
PATENT LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "AGREEMENT"), effective as of _______ on
the 4th day of September 1997, by and between Southern Foods Group, L.P., a
Delaware limited partnership (hereinafter called "SFG"), and Milk Products,
LLC, a Delaware limited liability company (hereinafter called "MILK PRODUCTS").
WHEREAS, SFG has obtained ownership of U.S. Patent No. 4,701,329
entitled "Calcium Fortified Milk" (the "PATENT") a copy of which is attached as
Exhibit A;
WHEREAS, Milk Products desires to use the Patent in connection with
its production and sale of various milk and dairy products (the "PRODUCTS");
WHEREAS, Milk Products will obtain financing pursuant to the terms of
that certain Credit Agreement of even date herewith among Milk Products, Bank
of America National Trust and Savings Association, as Agent and Letter of
Credit Issuing Bank and other financial institutions party thereto (such Credit
Agreement, together with any amendments thereto and renewals, extensions, and
replacements thereof the "MILK PRODUCTS CREDIT AGREEMENT") and SFG will obtain
financing pursuant to the terms of that certain Credit Agreement of even date
herewith among Licensee, SFG, the Lenders party thereto, and The Chase
Manhattan Bank, as Administrative Agent (such Credit Agreement, together with
any amendments thereto and renewals, extensions, and replacements thereof the
"SFG CREDIT AGREEMENT");
WHEREAS, in accordance with terms of the Milk Products Credit
Agreement, Milk Products executed that certain Security Agreement between Milk
Products and Bank of America National Trust and Savings Association, as Agent
(in such capacity "BOFA AGENT"), to secure the Secured Bank Obligations as
defined in the Security Agreement with a security interest in, among other
things, all of the inventory of Milk Products;
WHEREAS, in accordance with terms of the SFG Credit Agreement, SFG
executed that certain Security Agreement between SFG and The Chase Manhattan,
as Collateral Agent (in such capacity the "COLLATERAL AGENT"), to secure the
Obligations as defined in the Security Agreement with a security interest in,
among other things, all of the inventory of SFG;
WHEREAS, BofA Agent and the Collateral Agent are hereafter
collectively referred to as "SECURED PARTIES";
WHEREAS, Secured Parties require that each license entered into by SFG
or Milk Products provide each Secured Party with a limited right to sell any
and all finished goods inventory on hand covered by the licensed Patent;
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises hereinafter set forth, the parties agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, SFG hereby
grants to Milk Products a non-exclusive, royalty-free license to make, use and
sell any product covered by the claims of the Patent.
Subject to the term and conditions of this Agreement, Milk Products
hereby assigns to BofA Agent the right to dispose of any and all finished goods
inventory on hand of Products covered by the Patent, provided that BofA Agent
is otherwise exercising its rights pursuant to Section ___ of the Security
Agreement with respect to such inventory.
2. OWNERSHIP OF PATENT
Milk Products acknowledges the ownership of the Patent by SFG agrees
that it will do nothing inconsistent with such ownership.
3. INFRINGEMENT PROCEEDINGS
Milk Products agrees to notify SFG of any unauthorized products
infringing the Patent as it comes to Milk Products' attention. In the event
SFG fails to take action regarding any unauthorized products which infringe the
Patent, Milk Products shall have the right to take such action, including the
right to bring infringement proceedings.
4. INDEMNIFICATION BY MILK PRODUCTS
Milk Products hereby indemnifies and undertakes to defend and hold SFG
harmless from and against any and all claims, suits, losses, damages, fines,
penalties, and/or expenses including, but not limited to, attorney's fees
arising out of or based upon:
(a) Milk Products' or its manufacturing agents' processing,
distribution or sale of Products covered by the Patent; or
(b) Any breach by Milk Products or its manufacturing agents of
their obligations under this Agreement; or
(c) Any proceeding brought by any person, governmental agency or
consumer group in connection with the Products processed, sold or distributed
by Milk Products or its manufacturing agents covered by the Patent; or
(d) Any violation of any applicable law or any regulation or civil
claims relating to the manufacture, processing, sale, distribution, promotion
or advertising of Products covered by the
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Patent unless attributable to SFG's breach of its obligations under this
Agreement. SFG may participate in the defense of any such litigation.
5. RESPONSIBLE FOR ACTS OF MANUFACTURING AGENTS
Milk Products shall be solely responsible for the acts and omissions
of those with whom it or its manufacturing agents contract for any aspect of
the processing, distribution, or sale of the Products covered by the Patent.
6. MAINTENANCE OF INSURANCE
In order to assure its ability to discharge its obligations to SFG,
Milk Products agrees that it will maintain throughout the term of this
Agreement at its expense, comprehensive general liability insurance, including
product liability insurance and contractual liability coverage specifically
endorsed to cover the indemnity provisions in this Agreement, from a carrier
satisfactory to SFG, in a minimum amount of Five Million Dollars ($5,000,000)
combined single limit for each single occurrence, for bodily injury and
property damage which shall designate SFG as an additional insured therein.
The policy shall provide for thirty (30) day prior written notice to SFG from
the insurer in the event of any material modification, cancellation or
termination. Milk Products shall deliver certificates of such insurance
coverage to SFG prior to the sale and/or distribution of any Products covered
by the Patent.
7. TERM
This Agreement shall continue in force for the life of the Patent.
8. RELATIONSHIP
The relationship between SFG and Milk Products is that of licensor and
licensee. Milk Products, its contractors, agents and employees shall under no
circumstances be deemed agents, franchisees, representatives, employees or
partners of SFG.
9. ASSIGNMENT AND SUB-LICENSING
Milk Products shall have the right to assign this Agreement, in whole
or in part, for the benefit of creditors pursuant to the Milk Products Credit
Agreement. Milk Products shall not have the right to sublicense the Patent
without the prior written approval of SFG. Notwithstanding anything contained
in this Agreement to the contrary, the provisions of this section shall not
apply to (a) Milk Products sale of equity interests in Milk Products to third
parties or (b) any change in the control or ownership of Milk Products.
10. INTERPRETATION OF AGREEMENT
It is agreed that this Agreement shall be interpreted according to the
laws of the State of Texas, United States of America.
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11. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which taken together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
SOUTHERN FOODS GROUP, L.P.
BY SFG MANAGEMENT LIMITED LIABILITY
COMPANY, ITS GENERAL PARTNER
By: /s/ XXXXXXX X. XXXX
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Xxxxxxx X. Xxxx, Assistant Secretary
MILK PRODUCTS, LLC
By: /s/ XXXXX X. XXXXX
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Xxxxx X. Xxxxx, President
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