Trademark License Agreement

TRADEMARK LICENSE AGREEMENT


AGREEMENT made this 9th day of April, 1997 between The Pillsbury Company, a Delaware corporation located in Minneapolis, Minnesota ("Pillsbury" or "Licensor") and American Crystal Sugar Company, a Minnesota corporation located in Moorhead, Minnesota ("Licensee").


RECITALS


A. Pillsbury is the owner of many well known trademarks which, as a consequence of the consumer acceptance and quality of the products on which such trademarks are used, as well as substantial sales and advertising over many years, have come to symbolize goodwill of significant value belonging exclusively to Pillsbury. Pillsbury desires to provide to Licensee a license, on terms satisfactory to Pillsbury, to use the PILLSBURY trademark (the "Mark") in the United States to identify sugar to be sold by Licensee.


B. Licensee manufactures and sells various types of sugar in retail grocery stores and similar outlets and desires the right to use the mark to identify various types of sugar, and Pillsbury is willing to grant permission to do so on the terms and conditions hereinafter provided.


In consideration of the premises and the mutual promises herein contained, the parties agree as follows:


1. DEFINITIONS


a. The "Term" of this Agreement is the period from the date set forth above (the "Effective Date") to *CONFIDENTIAL TREATMENT REQUESTED*.


b. The "Mark" means the PILLSBURY trademark, together with the associated logos, trade dress and package appearance.


c. The "Licensed Products" or "Products" mean Dark Brown Sugar, Light Brown Sugar, Powdered Sugar, Granulated Sugar, Superfine Sugar, and Cube Sugar.


d. The "Territory" means the United States and its territories and possessions, and military installations.


e. The "First License Year" shall mean the period beginning on the Effective Date until September 30, 1997. Thereafter, each License Year shall commence on October 1st and end on the following September 30th.


f. "Associated Materials" means the labeling, packaging, advertising and promotional materials, including retail store signage and displays and other point of sale material, advertising and


promotional copy and strategy, television commercials and all other material intended to be distributed to the trade or public on which the Mark is used or is intended to be used.


g. "Gross Revenue Delivered" means the gross sales of Products without deductions for slotting fees, promotional/price allowances or other selling expenses or freight.


2. LICENSE GRANT


a. Subject to the terms and conditions herein, Pillsbury hereby grants to Licensee an exclusive license in the Territory to use the Mark on and in connection with the Licensed Products as defined above.


b. Licensee shall have no right to the Mark or to make, use or sell any goods utilizing the Mark, or otherwise to deal in or with the Mark, other than as may be expressly granted in this Paragraph 2. Licensee shall have no right to make, use or sell any goods utilizing any reproduction, counterfeit, copy or colorable imitation of the Mark, or otherwise deal in or with such Mark.


c. Nothing in this Agreement shall be construed to prevent Pillsbury from granting any other license or right to make, use or sell goods bearing the Mark, or from utilizing the Mark in any manner whatsoever, other than on goods constituting the Licensed Products sold in the Territory.


3. QUALITY STANDARDS


a. Licensee acknowledges Pillsbury's right to approve the quality, style and appearance of the Licensed Products and Associated Materials and any other materials used in connection therewith.


b. Licensee agrees to manufacture the Licensed Products at Licensee-owned manufacturing facilities, or any other facility approved in advance by Pillsbury, which approval shall not be unreasonably withheld or delayed. Pillsbury shall be permitted to audit the manufacturing of the Licensed Products at such facilities. If, with Pillsbury's prior written approval, Licensee subcontracts the manufacture of the Licensed Products, Licensee shall ensure that such subcontractor both complies and is contractually obligated to comply with the provisions of Paragraph 3(e) below, provided, however, Licensee shall remain fully and primarily liable to Pillsbury under this Agreement for the performance of any such subcontractors.


c. Upon execution hereof, Licensee shall submit to Pillsbury for Pillsbury's modification (if deemed necessary by Pillsbury) and approval, a Product Manual containing good manufacturing practices; plant quality control procedures; consumer and manufacturing complaint procedures; product recall and withdrawal procedures; audit and inspection procedures; and finished product ingredient specifications and shelf life for the Licensed Products. With respect to the Licensed Products, Licensee shall adhere to the practices, procedures, specifications and quality programs


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contained in the Product Manual as approved by Pillsbury. Upon approval by Pillsbury, the Product Manual shall be deemed incorporated in its entirety into this Agreement.


d. Licensee shall comply with the methods of testing raw materials, ingredients and packaging materials, and finished Licensed Products in accordance with state and federal standards and in accordance with the Product Manual. No material alterations, modifications or other changes to the Licensed Products or Product Manual shall be made after their initial approval without further written approval of Pillsbury. Licensee shall maintain its manufacturing facilities and equipment in a clean and sanitary manner and in good working order. License shall conduct, at its own expense, certain tests of the Licensed Products pursuant to the quality standards set forth in the Product Manual and which test results shall, at Pillsbury's request, be delivered by Licensee to Pillsbury; provided, however, Licensee shall immediately advise Pillsbury of results that indicate material noncompliance with the Product Manual and upon instruction of Pillsbury immediately correct such defects.


e. Licensee acknowledges and agrees that Pillsbury, or a mutually acceptable third party, may inspect, or cause to be inspected, on reasonable notice, and subject to the Confidentiality Agreement between the parties executed on December 12, 1996, the following: manufacturing, warehouse and distribution facilities, ingredients and raw materials, and finished and in- process Licensed Products, and Pillsbury may audit or cause to be audited Licensee's quality control and sanitation programs. After each inspection and audit, Pillsbury will submit reports to Licensee, instructing corrective action if the facility, program or condition does not meet the requirements set forth in Title 21 of the Code of Federal Regulations and Chapters 3 and 4 of the Federal Food Drug and Cosmetic Act, as amended, or does not comply with the Product Manual. Licensee agrees to implement the necessary corrective action within a reasonable time; provided, however, Licensee shall immediately suspend utilizing a manufacturing and/or warehouse facility, when in Pillsbury's reasonable judgment, a defect or condition is found that causes or may cause a material health or safety risk. Licensee shall, for as long as the health or safety risk is present, refrain from utilizing the affected facility to make the Products. If Licensee continues to utilize the affected facility to manufacture the Products, Pillsbury shall have the right to immediately terminate or suspend this Agreement. Should this Agreement be so terminated or suspended, Licensee shall have no cause of action against Pillsbury in connection with such termination or suspension, including but not limited to, any claim for damages or compensation for losses or expenses incurred, or for lost profits. Licensee agrees to incorporate provisions consistent herewith into any agreement with any third parties whom Licensee may employ to manufacture, distribute or store any Products or components of Products.


f. Pillsbury has the unqualified right to withdraw its approval of any Products in the event that their quality ceases to materially conform with the specifications set forth in the Product Manual. Pillsbury has the unqualified right to withdraw its approval of any Associated Materials in the event that their quality ceases to materially conform with Pillsbury's standards for quality and for intellectual property protection.


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g. From time to time during the Term, Pillsbury may make any changes to the Product Manual or the standards of quality for Associated Materials. Licensee shall adhere to the so changed Product Manual and standards of quality for Associated Materials unless such changes render the manufacture or the affected Products impossible or commercially nonfeasible as measured by comparable branded products of Licensee.


h. From time to time, at Pillsbury's request, Licensee shall submit to Pillsbury, a reasonable quantity of representative Products and Associated Materials.


i. Licensee will submit to Pillsbury, for prior and prompt approval, samples of the Products prior to the first shipment date of the Products. Pillsbury shall make best efforts to approve or reject the Products within ten (10) business days of receipt of the samples from Licensee. Pillsbury shall advise Licensee of the reason for the rejection of any Products. Licensee shall make changes to the rejected Products to the reasonable satisfaction of Pillsbury prior to their sale or distribution.


4. PURE FOOD GUARANTEE, COMPLIANCE WITH LAWS AND INDEMNIFICATION


a. Licensee guarantees that the Products produced by it shall not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act, as from time to time amended, and regulations promulgated thereunder, and are not articles which, under the provisions of Sections 404 and 505 of such federal act may not be introduced into interstate commerce and are not in violation of the provisions of the Food Additives Amendment of 1958. This guarantee is in like terms extended and shall be applicable to any lawful state law or municipal ordinance in which the definitions of adulteration or misbranding are substantially the same as those in such federal act.


b. Licensee warrants that the Products shall be manufactured, sold and distributed in accordance with all applicable federal, state and local laws, rules, regulations, and guidelines. The policy of sale, distribution and exploitation of the Products by Licensee shall be of a high standard and shall in no manner reflect adversely upon the good name of Pillsbury or any of its programs, products, properties, or the Mark.


5. MARKETING AND ADVERTISING


a. Licensee shall introduce the Products supported by an introductory marketing program mutually acceptable to Pillsbury and Licensee.


b. Licensee shall submit to Pillsbury, for prior approval, all Associated Materials. Pillsbury shall make best efforts to indicate required changes and the reason therefor as soon as reasonably practicable, but in no event longer than ten (10) business days of receipt of Associated Materials from Licensee. Licensee shall amend or cause to be amended to the satisfaction of Pillsbury any Associated Materials.


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c. Licensee shall advise Pillsbury with respect to the compliance of Associated Materials with all federal, state and local labeling laws, regulations, and guidelines known to Licensee. In the event any Associated Materials fail to comply with any applicable labeling law, regulations or guideline, Licensee undertakes to hold Pillsbury harmless from any and all damages they may suffer as a result of failure to comply with such laws, regulations, and guidelines.


d. The parties agree that the Products will be branded as PILLSBURY products. Licensee shall also utilize on all Product packaging a marking legend that read: PILLSBURY is a [registered, when and if applicable] trademark of The Pillsbury Company. Used under license.


e. Licensee shall forward quarterly summaries of all consumer complaints about the Products to Pillsbury; provided, however, Licensee immediately shall forward to Pillsbury all consumer complaints about the Products, which complaints may materially affect the reputation or business of Pillsbury. Pillsbury and Licensee shall confer as to how to respond to such complaints. Pillsbury and Licensee shall each have the right to respond to all consumer complaints or inquiries concerning the Licensed Products.


6. GOODWILL


Licensee recognizes the significant value of the goodwill associated with the Mark and acknowledges that the Mark and all rights therein and goodwill pertaining thereto belong exclusively to Pillsbury, and that the Mark has and will continue to have a secondary meaning in the mind of the public to signify Pillsbury. Accordingly, License shall not do or permit to be done any act or thing or permit any Products to enter the stream of commerce or to be sold or distributed, that could reasonably be anticipated to impair the goodwill or other rights of Pillsbury and the Mark or that could reasonably be anticipated to otherwise prejudice, tarnish or damage the reputation of the Mark, Pillsbury, or the sale of Pillsbury's products.


7. PILLSBURY'S TITLE AND PROTECTION


a. Licensee acknowledges Pillsbury's title to the Mark and agrees that it shall not at any time do or cause to be done any act or thing or undertake any action any where that in any manner might infringe, or impair the validity, scope, or title of Pillsbury in the Mark. It is understood that Licensee or any affiliate of Licensee shall not acquire and shall not claim any title to the Mark adverse to Pillsbury by virtue of this Agreement the parties intending all utilization of the Mark by Licensee shall at all times inure to the exclusive benefit of Pillsbury.


b. Licensee agrees that, without the further written authorization of Pillsbury, it will not use the name of Pillsbury or any reproduction, counterfeit, copy or colorable imitation thereof, as a trading designation or in any other way, except to indicate, pursuant to Paragraph ...