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EXHIBIT 10.1
LICENSE AGREEMENT, DATED APRIL 29, 1997, BETWEEN INTEGRATED
PRODUCE SYSTEMS, INC., AND FARMINGTON FRESH
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LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of
April 29, 1997 (the "Effective Date") by and between Integrated Produce Systems,
Inc., a Pennsylvania corporation ("IPS"), having its principal office at 2
International Plaza, Suite 245, Philadelphia, Pennsylvania 19113, and Farmington
Fresh, a California corporation ("FF"), having its principal place of business
at 7735 South State Route 99, West Frontage Road, Stockton, California 95215.
R E C I T A L S:
A. IPS is the owner of certain "Patent Rights" and "Technical
Information" (as later defined herein) relating to fresh cut produce processing.
The Patent Rights and "Technical Information" specifically include technologies
and knowledge that facilitate the maintenance of the integrity of fresh cut Fuji
apples, which inhibit the enzymatic browning and subsequent degradation of such
apples. However, the Patent Rights and Technical Information do not include the
design of machinery and processing plants which apply the Patent Rights and
Technical Information to Fuji apples.
B. FF has represented to IPS, in order to induce IPS to enter into this
Agreement, that FF is experienced in the handling, packing, shipping, marketing
and sale of apples, including Fuji apples in the central region of California,
and that FF will commit itself to a thorough, vigorous and diligent program of
exploiting the Patent Rights so that public utilization will result therefrom.
Such commitment will include the design, development, and construction of
machinery and one processing plant in cooperation with IPS for the application
of the Patent Rights and Technical Information to Fuji apples.
C. IPS desires to have the Patent Rights and Technical Information
utilized and is willing to grant a license thereunder. FF desires to obtain a
license under the Patent Rights and Technical Information upon the terms and
conditions hereinafter set forth.
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
1.1 "Affiliate" means, with respect to each party to this Agreement,
any natural person, corporation, proprietorship, firm, partnership, limited
liability company or other business entity (each being a "Business Entity")
controlling, controlled by or under common control with such party; and
"control" shall mean (i) the direct or indirect ownership of more than fifty
percent (50%) of the voting stock, capital or equity, or more than a fifty
percent (50%) interest in the income or profits of such Business Entity or (ii)
the ability to direct the management or control the policy decisions of such
Business Entity.
1.2 "Bankruptcy Event" means that the Business Entity in question
becomes insolvent or voluntary or involuntary proceedings by or against such
Business Entity are instituted in bankruptcy or under such insolvency law, or a
receiver or custodian is appointed for such Business Entity, or proceedings are
instituted by or against such Business Entity for reorganization or the
dissolution of such Business Entity, which proceedings, if voluntary, shall not
have been dismissed within 60 days of the date of filing, or such Business
Entity makes an assignment for the benefit of creditors, or substantially all of
the assets of such Business Entity are seized or attached and not released
within 60 days thereafter.
1.3 "Field of Use" means Fuji apples or parts thereof and their
handling, processing, marketing and sale.
1.4 "IPS Know-How" means certain confidential and proprietary knowledge
relating to the development, manufacture, processing and marketing of fresh-cut
apples.
1.5 "IPS Processing Aids" means "Apple Fresh TM" and other products
produced by IPS that help maintain the integrity of fresh-cut apple products.
1.6 "Joint Patents" means (i) patents and patent applications; (ii)
together with any and all patents issuing upon
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such applications; (iii) all continuations, continuations-in-part, additions,
divisions, renewals, extensions or examinations and reissues of any of the
foregoing, claiming inventions in the Field of Use and any United States or
foreign patents granted upon such applications, which are based upon inventions
and improvements discovered or made by inventors of FF, jointly with inventors
of IPS, within the Field of Use, during the term of this Agreement.
1.7 "Licensed Product" shall mean any apple or part thereof which:
(a) is covered in whole or in part by an issued,
unexpired claim or a pending claim contained in the
Patent Rights in the country in which any Licensed
Product is made, used or sold;
(b) is manufactured by using a process which is covered
in whole or in part by an issued, unexpired claim or
a pending claim contained in the Patent Rights in the
country in which any Licensed Process is used or in
which such product or part thereof is used or sold;
or
(c) is treated or processed according to IPS Know-How.
1.8 "Licensed Process" shall mean any process which is covered in whole
or in part by a valid claim or a pending claim contained in the Patent Rights or
is IPS Know-How.
1.9 "Net Sales" means, with respect to sales of Licensed Products, the
amount of gross sales of the Licensed Products by FF, its Affiliates, or
assigns, to Third Parties, net of: (1) ordinary and customary quantity, cash,
trade and promotional discounts actually taken for wholesale sales; (2)
separately invoiced sales, excise and other taxes and duties paid or allowed by
the selling party and any other similar governmental charges imposed upon the
production, importation, use or sale of Licensed Products; (3) actual freight,
shipping and insurance charges billed to customers and so identified on invoices
to customers; (4) allowances and credits actually given to customers for
rejected goods; and (5) uncollectible accounts. Sales between or among FF and
its Affiliates shall be excluded from the computation of Net Sales except where
such Affiliates are end users, but Net Sales shall include the subsequent final
sales to Third Parties by such Affiliates.
1.10 "Patent Rights" shall mean all of the following IPS intellectual
property:
(a) the United States and foreign patents and/or patent
applications listed in Exhibit A;
(b) United States and foreign patents issued from the
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applications listed in Exhibit A and from divisionals
and continuations, continuations-in-part, reissues,
re-examinations and extensions of these applications;
(c) claims of U.S. and foreign continuation-in-part
applications, and of the resulting patents, which are
directed to subject matter specifically described in
the U.S. and foreign applications listed in Exhibit
A;
(d) claims of all foreign patent applications, and of the
resulting patents, which are directed to subject
matter specifically described in the United States
patents and/or patent applications described in (a),
(b), or (c) above; and
(e) any reissues of United States patents described in
(a), (b), (c), or (d) above.
1.11 "Technical Information" means all existing unpatented proprietary
and confidential information, data and know-how (including IPS Know-How) in the
Field of Use, discovered, invented, revealed, obtained, used or reduced to
practice by IPS, prior to the date hereof and currently possessed by IPS, in
connection with the development, manufacture, processing, marketing, use, sale
and commercialization of fresh-cut Fuji apple products, including but not
limited to: the IPS Processing Aids; research data and methods; design data and
information (including machinery designs and IPS Processing Aids formulations
and any specifications on production protocols for Licensed Products approved by
FF); engineering and test data; product and component specifications; bills of
materials; drawings, parts and component lists; production and shipping
techniques; methods of product handling; methods of line manufacture; quality
control data and methods and any similar or related information; and data and
know-how; with respect to which IPS has the right to disclose to Third Parties
and as to which IPS has the right to grant licenses. "Technical Information"
excludes any of the foregoing that are included in a Valid Claim of the Patent
Rights or of the Joint Patents. "Technical Information" also excludes any
specifications or directions for the production of any IPS Processing Aid.
1.12 "Territory" means that portion of the State of California, defined
as an area demarcated by horizontal lines from the Pacific Ocean through Merced
to the South and Chico to the North, to the Nevada border.
1.13 "Third Party(ies)" means any person or entity other than IPS, FF
or their respective Affiliates.
1.14 "Valid Claim" means a claim of an unexpired Licensed Patent or
Joint Patent or Patent Right that has not been withdrawn, canceled or disclaimed
or held unenforceable, unpatentable or invalid by a decision of a court or
governmental body of competent jurisdiction in an unappealed or unappealable
decision, or a claim of a patent application.
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ARTICLE II
GRANT OF LICENSE
2.1 IPS hereby grants to FF the right and personal license (the
"License") to make, have made, use, lease and sell the Licensed Products, and to
practice the Licensed Processes (in the Territory for the Field of Use) during
the term of this Agreement unless sooner terminated according to the terms
hereof.
2.2 In order to establish a period of exclusivity for FF, IPS hereby
agrees that it shall not grant any other license to make, have made, use, lease
and sell Licensed Products or to utilize Licensed Processes (in the Territory
for the Field of Use) during the period of time (the "Initial Term") commencing
with the Effective Date of this Agreement and terminating with the first to
occur of:
(a) the expiration of three (3) years after the first
commercial sale of a Licensed Product or first
commercial use of a Licensed Process; or
(b) the expiration of four (4) years after the Effective
Date of this Agreement.
2.3 After the expiration of the exclusive license under Section 2.2(a),
above (but not 2.2(b), the parties may, by mutual consent not to be unreasonably
withheld by either party, extend the period of the exclusive license for another
three (3) years (the "Extension Term"). The parties shall evidence their consent
to the Extension Term in writing not later than sixty (60) days before the end
of the Initial Term.
2.4 The license granted hereunder shall not be construed to confer any
rights upon FF by implication, estoppel or otherwise as to any technology not
specifically set forth in Exhibit A hereof.
2.5 The License shall be exclusive in the Territory. Outside the
Territory, IPS shall have, and hereby retains, the right to use, sublicense and
assign the Licensed Rights, including the Licensed Patents, to make, have made,
use, sell, have sold, market, distribute and/or commercialize products or
processes that are not used or to be used within the Field of Use. In addition,
notwithstanding any implication to the contrary in this Agreement, IPS shall
have the right outside the
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Territory to conduct research and development activities inside and outside the
Field of Use for its own benefit or that of a Third Party. Within the Territory,
IPS shall only have the right to conduct research and development activities on
Fuji and Gala apples at academic institutions.
2.6 The License granted by IPS to FF in this Article II does not
include any right to manufacture any IPS Processing Aids or any right to use any
trademark of IPS or any of its Affiliates and no other license, either express
or implied, is granted by IPS to FF hereunder with respect to the Licensed
Products, the Licensed Patents or the Technical Information except as
specifically stated in this Article II. The License granted hereunder is granted
only in the Territory and for the term and upon the conditions and subject to
certain rights of termination as set forth in this Agreement.
2.7 FF shall not have the right to sublicense the License granted
hereunder. The License is absolutely non-assignable and non-transferable by FF,
whether by purchase, operation of law or otherwise, including to any business
successor or Affiliate of FF, except with the prior written consent of IPS,
which consent shall not be unreasonably withheld.
ARTICLE III
DUE DILIGENCE
3.1 FF shall use its best efforts to bring one or more Licensed
Products or Licensed Processes to market through a thorough, vigorous and
diligent program for exploitation of the Patent Rights.
3.2 In addition, FF shall adhere to the following milestones:
(a) FF shall deliver to IPS on or within 180 days of
the date first written above a business plan
showing the amount of money, number and kind of
personnel and time budgeted and planned for each
phase of development of the Licensed Products and
Licensed Processes and shall provide similar
reports to IPS on an annual basis on or before the
ninetieth (90th) day following the close of FF's
fiscal year.
(b) FF shall develop a working model on or before August
1, 1997 and permit an in-plant inspection by IPS on
or before July 1, 1997, and thereafter permit
in-plant inspections by IPS at regular intervals with
at least six (6) months between each such inspection.
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3.3 FF's failure to perform in accordance with Paragraphs 3.1 and 3.2
above shall be grounds for IPS to terminate this Agreement pursuant to Paragraph
13.3 hereof.
3.4 The parties shall cooperate and collaborate with each other and
shall use their best efforts to develop, produce, process, promote, sell and
commercialize Licensed Products as soon as practicable, consistent with sound
and reasonable business practices.
ARTICLE IV
IPS TECHNICAL SUPPORT
4.1 IPS shall produce and sell to FF, and FF shall purchase from IPS,
the IPS Processing Aids pursuant to the following terms and conditions:
(a) The initial price shall be $30.00 per pound. However,
IPS may increase such price immediately and fully to
account for any increases in the published prices of
the raw materials included in any IPS Processing
Aids, in the amount that such increases in the price
of any raw material contribute to the price of the
IPS Processing Aids, upon delivery to FF of copies of
relevant publications showing such increases, such as
the Chemical Marketing Reporter, or as otherwise
evidenced in writing from IPS's sources of raw
materials. If the published prices reflect any
decreases, IPS may decrease prices for its IPS
Processing Aids in a method comparable to that
described above for any increases. It is acknowledged
and agreed by IPS and FF that it is unlikely that IPS
would implement any such price changes in amounts
less than 7.5% of the prior price for the raw
materials used by IPS.
(b) IPS Processing Aids shall be shipped to FF FOB IPS's
plant, and title to and risk of loss shall pass to FF
at the time the IPS Processing Aids are put in the
possession of a carrier at IPS's plant. Shipping
dates are approximate.
(c) IPS agrees to sell IPS Processing Aids to FF that
are manufactured, packaged and labeled in
conformity with federal, state, and local laws and
regulations. IPS warrants that the IPS Processing
Aids will conform to the specifications for IPS
Processing Aids in effect from time to time and
initially as set forth in Exhibit B hereto. If
and only if FF complies with all aspects of the
protocols and usage instructions and
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specifications provided by IPS, then the IPS
Processing Aids will help to maintain the integrity
of each Licensed Product in accordance with the
relevant specifications for such IPS Processing Aids.
EXCEPT FOR THE WARRANTIES EXPRESSED IN THIS
AGREEMENT, IPS MAKES NO OTHER WARRANTY, EITHER
EXPRESS OR IMPLIED WITH RESPECT TO THE IPS PROCESSING
AIDS AND IPS EXPRESSLY DISCLAIMS AND EXCLUDES ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
(d) The standard terms and conditions used by IPS for the
sale of IPS Processing Aids are attached hereto as
Exhibit C, provided, however, that IPS may hereafter
from time to time adopt other terms and conditions,
which shall become applicable upon written notice to
FF. The terms and conditions of this Agreement shall
prevail notwithstanding any different, inconsistent
or additional terms and conditions contained in any
purchase order submitted by FF.
(e) At least forty-five (45) days prior to the beginning
of each calendar quarter, FF shall provide to IPS in
writing a three (3) months rolling forecast of FF's
reasonably anticipated requirements for IPS
Processing Aids for such upcoming quarter, to assist
IPS in establishing and adjusting its production
schedule for IPS Production Aids for such next
upcoming calendar quarter (the "Quarterly Estimate").
In addition to the Quarterly Estimate, FF shall
deliver to IPS a purchase order for each shipment of
IPS Processing Aids listed in the Quarterly Estimate.
FF shall continue to provide IPS with Quarterly
Estimates and purchase orders for each calendar
quarter during the Initial Term and any Extension
Term of this Agreement. FF shall provide IPS with
purchase orders for IPS Processing Aids at least
thirty-five (35) days before FF desires to receive
such order from IPS. At any time up to and including
the date which is twenty (20) days before the date FF
desires to receive IPS Processing Aids pursuant to
such purchase order, FF may alter or cancel any such
purchase order, with no premium or penalty, other
than the resulting offset of the payments owing to
IPS pursuant to this Agreement.
(f) Except in case of a violation of laws, IPS's only
obligation for breach of the warranty set forth in
this section shall be, at the election of FF, to
replace the defective IPS Processing Aids at the FOB
point stated herein or to give credit for such
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defective IPS Processing Aids in an amount equal to
the purchase price paid by FF. FF'S SOLE, COMPLETE
AND EXCLUSIVE REMEDY IN CONNECTION WITH THE SALE OF
IPS PROCESSING AIDS UNDER THIS AGREEMENT IS LIMITED
TO REPLACEMENT OR CREDIT AS PROVIDED IN THIS SECTION.
Replacement or credit will be given only after IPS's
inspection of the goods and its agreement to the
substantially defective condition. All claims for
substantial defect shall be deemed waived unless made
in writing delivered to IPS within ten (10) days
after discovery of the substantial defect but in no
event later than sixty (60) days from the date of
shipment. All claims for damage and return due to
causes other than substantial defect must be made
within thirty (30) days from receipt of shipment. The
exclusive and limited remedy of replacement or credit
provided in this Section shall not fail of its
essential purpose by reason of timeliness, causes
beyond IPS's reasonable control, or FF's general
business concerns or satisfaction. Any action for
breach under this Section must be commenced by FF
within one year after the cause of action has
accrued.
(g) IPS shall not be responsible for any loss of or
damage to FF's Processed Products from any cause
whatsoever, except for the gross negligence or
willful misconduct of IPS, its employees or agents;
otherwise, IPS shall not indemnify nor be liable to
FF, its assigns, successors or purchasers or to any
person or entity for any claims, losses, expenses or
judgments arising out of or resulting in any way from
goods furnished under this Agreement where liability
is premised upon any theory including, but not
limited to warranty, negligence or strict liability.
IPS's total, complete and exclusive liability
hereunder shall be limited to replacement or credit
as provided above or termination of this Agreement as
provided below, and shall not exceed the value of the
substantially defective goods furnished. IPS SHALL
NOT BE LIABLE FOR LOSS OF PROFITS, DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES
UNDER THIS AGREEMENT.
4.2 During the Initial Term of this Agreement and any Extension Term,
and subject to the provisions of this Agreement, IPS shall, at its expense,
provide to FF the following technical assistance and support:
(a) Furnish to FF during the start-up phase of processing
fresh cut Fuji apples, as and to the extent deemed
necessary by IPS, custom protocol development, a
distribution study to monitor the
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temperature and physical distribution characteristics
to which the apples are subject, evaluations of taste
and appearance, the provision of microbiological
data, field audits (expected to occur at least
annually during the term of this Agreement) and
monitoring (expected to be on a weekly basis) of the
manufacturing process during the first 4-6 weeks of
the start-up phase.
(b) Furnish to FF copies of selected Technical
Information and provide engineering recommendations
in connection therewith, including compliance with
current Good Manufacturing Practices in
Manufacturing, Packing or Holding Human Food ("GMP")
issued by the U.S. Food and Drug Administration under
21 C.F.R. Part 110, related equipment information,
material interior specifications, tooling
requirements and drawings, final product test
procedures, test equipment drawings, production
routings and processes, quality control and
inspection procedures and related equipment drawings
(including, but not limited to, fresh cut apple
process flow diagrams), lists of required materials
and other components and their proportions in
relevant manufacturing processes, and contractors to
assist in the provision of the aforementioned
support, all with respect to FF's ability to use,
make and sell Licensed Products (collectively,
"Engineering Support"), such Engineering Support to
be provided through the period of exclusivity as
defined in Paragraphs 2.2 and 2.3, above.
(c) Provide to FF Hazard Analysis and Critical Control
Point ("HACCP") service, including sanitation audit
and personnel training and any microbial testing in
connection therewith, to commence on or about May 1,
1997, through the remaining term of this Agreement.
(d) Instruct FF's personnel in the art and science of
processing the Licensed Products in order to best
maintain the integrity of fresh-cut Fuji apple
products (including a tour of a fresh cut produce
processing facility for up to four members of FF's
staff).
(e) Provide research and development resources,
application technologies, assistance in the
determination of the shelf-life of currently
undeveloped pack sizes (specifically, packs weighing
4 ounces and 1 pound) and the configurations (shrink
wrapped "clamshell" basket) to best preserve the
fresh cut Fuji apples; assistance in the development
of treatments and processes for specific fresh Fuji
apple products, and under the direction of FF,
testing, evaluating and recommending products to FF,
including those that do not use or incorporate any of
the Technical Information or are subject to any Valid
Claims of a Licensed Patent or a Joint Patent,
including, without limitation, expanding the Field of
Use.
(f) IPS will use commercially reasonable efforts to
assist FF in the evaluation and launch of fresh-cut
apple varieties other than Fuji apples, such as Gala
apples. To the extent that IPS and FF
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agree that apple varieties other than Fuji apples are
to be launched using IPS's Processing Aids for such
other apple types, IPS and FF will enter into a
separate agreement with respect to such other apple
varieties, substantially in the form of this
Agreement.
(g) In order to assist in FF's packaging of the fresh-cut
Fuji apple products, IPS or its affiliate, Respire
Films, Inc. ("Respire"), will, on a purchase order
basis, supply Respire packaging film (bags or
rollstock) to FF at a fair market price, as
determined relative to the film/bag specifications,
graphics and quantity necessary to meet FF's
requirements. The price for such packaging will be no
greater than that charged to any other purchaser of
such packaging film, taking into account any
differences in film/bag specifications, graphics or
quantity ordered. Such purchase orders shall be
negotiated on an arm's length basis by FF and Respire
separate and apart from this Agreement. Before being
used in connection with this Agreement, any
non-Respire packaging film must be checked and
validated by IPS scientists for performance with the
IPS Apple system.
ARTICLE V
ROYALTIES AND OTHER PAYMENTS
5.1 In consideration of the grant of the License and other rights
granted to FF by IPS under this Agreement, FF shall pay to IPS quarterly royalty
payments equal to 3.0% of Net Sales of Licensed Products, commencing on the
Effective Date; provided, however, that in no event shall such royalty payments
equal less than $250.00 for the first quarter of 1997, $1,500.00 per quarter for
the balance of 1997, 2,250.00 per quarter in 1998, and an additional $750.00 per
quarter for each additional year thereafter in which this Agreement remains in
effect (e.g., $3,000.00 per quarter for 1999, $3,750.00 per quarter for 2000,
and so on). Thus, in 1997 this would equate to $50,000 of revenue to FF from
Licensed Products per quarter, and based on a price range of $0.59 to $0.89 per
pack, would equate to sales of 18,727-28,249 packs per month. Within ten (10)
days after the end of each quarter, FF shall deliver to IPS a report stating the
gross sales and Net Sales of Licensed Products, the number of pounds of IPS
Processing Aids used in such quarter and the amount of royalties payable to IPS.
5.2 In addition to the royalty payments set forth in Section 5.1 of
this Agreement, FF shall make the following payments to IPS for Technical
Support:
(i) A fee of $15,000 for Engineering Support for the
five month period beginning May 1, 1996 and ending on
September 30, 1996. IPS and FF acknowledge that this
fee shall be invoiced at the rate of $3,000 per
month, of which May through September have already
been rendered and paid;
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(ii) FF will, upon written request from IPS, promptly
reimburse IPS for any direct expenses and
out-of-pocket costs that arise in connection with
IPS's provision of Engineering Support services, such
costs to have been pre-approved by FF; and
(iii) Beginning on commencement of production by FF, and
only during weeks when FF is in production for at
least 10 hours (unless otherwise agreed by the
parties), a weekly fee of $150 for HACCP services
plus any additional charges for any microbial testing
work that must be completed in connection with the
provision of such HACCP services, payable in monthly
installments.
5.3 FF shall pay in full for all IPS Processing Aids purchased from IPS
pursuant to Section 4.1 within thirty (30) days after the date of shipment from
IPS to FF. FF also shall pay to IPS all royalties, Engineering Support fees and
HACCP fees and any out-of-pocket costs accruing during each month as to costs
and quarter as to royalties, within thirty (30) days after the end of each such
period.
5.4 All royalties, fees and charges payable by FF pursuant to this
Agreement are net of applicable taxes, which taxes shall be the sole
responsibility of FF, except taxes on IPS's net income; provided, however, that
FF may withhold from its payments to IPS such amounts as are required by
applicable law.
5.5 All payments required to be made by FF to IPS under this Agreement
shall be made by check payable to IPS or wire transfer to an account designated
by IPS from time to time.
5.6 FF shall have complete control of the processing and/or sale of the
Licensed Products and the terms and conditions of such sale, including the
pricing thereof, so long as they are made in good faith. The terms and
conditions of sale customarily used by FF shall apply to all orders for and Net
Sales of the Licensed Products. FF reserves the exclusive right to adjust,
increase and/or change selling pricing and discount structures and other terms
and conditions involving FF's sale and pricing of the Licensed Products.
ARTICLE VI
REPORTS AND RECORDS
6.1 FF shall maintain, and shall cause its Affiliates to maintain, such
complete and accurate books and records as are necessary for the computation of
the payments to be made hereunder. FF shall maintain the records necessary for
these
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computations for each month for not less than three (3) years after such month.
IPS and its auditors shall have the right no more often than once per six-month
period during the term of this Agreement, upon reasonable prior notice, to
examine all of the books and records of FF and its Affiliates, relating to
royalties and other payments accruing to IPS under this Agreement, during
reasonable business hours and without unreasonable disruption of FF's business,
for the purpose of verifying any computations made under this Agreement, such
examination, subject to the next sentence, to be at IPS's expense. If, as a
result of any such examination, IPS determines that, with respect to the period
being examined, (i) there has been an underpayment of the aggregate amount of
royalties and other payments which should have been paid, in excess of five
percent (5%), FF shall reimburse IPS for the reasonable, documented cost of such
examination and the reasonable, documented cost (including reasonable attorneys'
fees), if any, of the recovery by IPS of such underpayment, or (ii) there has
been an overpayment of royalties and other payments which should have been paid,
the amount by which royalties and other payments have been overpaid shall
promptly be returned to FF.
ARTICLE VII
PATENT PROSECUTION
7.1 All proprietary rights (including without limitation, rights in and to the
Technical Information, Patent Rights, copyrights and trade secret rights, in
each case, relating to the Field of Use) necessary for, related to or arising in
connection with the design, development, manufacture, and use of the Licensed
Products, (i) developed, invented, discovered, owned or possessed by IPS on or
prior to the date hereof or (ii) developed, invented, discovered, owned or
acquired by IPS during the term of this Agreement, shall be the property of IPS,
held and used, subject to the License granted to FF hereunder. As to any rights
developed, invented or discovered jointly by IPS and FF during the term of this
Agreement, the same shall be owned by both parties and shall be deemed to be
Joint Patents. It is expected that FF will design, engineer, develop and create
machines and production facilities which will apply the Patent Rights and the
Technical Information and the Licensed Processes to the apples in order to
produce Licensed Products. Any such machines and facilities designed, invented
and built solely by FF and its agents shall belong exclusively to FF. If IPS
wishes to use such inventions, then IPS and FF shall discuss and agree how this
may occur on a case by case basis. IPS acknowledges that the design of the
"clamshell" package was that of FF and IPS agrees not to promote this design to
other processors of fresh-cut apples. If IPS wishes to promote such design
actively, then IPS and FF shall agree on how this may occur on a case by case
basis.
7.2 Upon execution of this Agreement, the parties shall
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prepare a mutually agreed to listing of the respective proprietary rights of
each party and of the proprietary rights held jointly by the parties. Said
listing shall be attached hereto as Exhibit "D" and incorporated herein by
reference. The parties shall by mutual agreement revise and update such Exhibit
"D" not less frequently than every six (6) months. The parties have discussed
and understand that (i) FF does not want to be forced, as a result of IPS
dealing with third parties, to have to compete against the benefits of FF's own
process engineering and trade secrets; and (ii) IPS does not want to be
restricted by FF, except pursuant to this Agreement in the Territory during the
term hereof in the Field of Use, in pursuing the IPS business plan and
exploiting all IPS marketing opportunities in full. In recognition of these
goals, the parties agree (a) to pay reasonable royalties to the other party
whenever using or licensing jointly owned proprietary rights to third parties;
and (b) that IPS will obtain the prior written consent of FF to the licensing of
jointly owned proprietary rights to third parties by IPS only when such
licensing involves the clamshell concept of approximately ten (10) snackpaks of
approximately 3.5 oz. each in the Field of Use.
7.3 Either party may wish to obtain patent protection for its
exclusively owned rights, and both parties may wish to do so for the jointly
owned rights. Whichever of the parties owns the underlying rights shall pay all
costs and expenses necessary or appropriate to obtain patent protection for such
rights in the United States and in other countries where patent protection is
commercially justified. Each party shall execute and deliver and cause its
employees to execute and deliver to the other party all documents requested
which may be necessary in connection with the filing, prosecution, maintenance
and enforcement of such patent protection.
7.4 If either party becomes aware of any infringement of any of the
Patent Rights or of the Joint Patents, it shall promptly notify the other in
writing of all available details. IPS shall have the first right to bring suit
against such infringers. If IPS elects not to bring such a lawsuit within six
months of receipt of notice of such infringement, then FF shall have the right
to pursue such action. In any proceeding brought by IPS, FF shall have the right
to employ its own counsel, at its own expense and without right to
reimbursement, if FF reasonably believes that IPS's defense of patent rights is
insufficient. If IPS pays the expenses of such a lawsuit, any proceeds of such
lawsuit shall first be used to reimburse IPS, on a dollar-for-dollar basis, for
its out-of-pocket expenses of the lawsuit, including attorneys' fees, and the
balance, if any, shall be divided equally between the parties. If FF pays the
expenses of such a lawsuit, any proceeds of such lawsuit shall first be used to
reimburse FF, on a dollar-for-dollar basis, for its out-of-pocket expenses of
the lawsuit, including attorneys' fees, next against amounts that otherwise
would have been payable by FF to IPS under Article V hereof, and the balance, if
any, shall be retained in full by FF. If deemed necessary or desirable by
counsel, the party not joining in such lawsuit may be joined as a
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nominal party plaintiff. The party bringing suit shall bear the legal expenses
of the party involuntarily brought into the lawsuit. Settlement of any such
lawsuit while the Licenses granted pursuant to Article II are exclusive shall
require the written consent of both parties, otherwise it shall require the
consent of only the party bringing the lawsuit.
7.5 In any infringement suit which either party may institute against
any third party to enforce the Patent Rights or the Joint Patents pursuant to
this Agreement, the other party hereto shall, at the request and expense of the
party initiating such suit, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, specimens, and the like.
7.6 Nothing contained in this Agreement shall be construed to convey
any rights or proprietary interest in the Technical Information, Licensed
Patents, Copyrights and Trade Secrets of FF, other than the specific rights
granted under this license.
ARTICLE VIII
PRODUCT LIABILITY
8.1 FF shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold IPS, its officers, employees and
Affiliates, harmless against all claims and expenses, including legal expenses
and reasonable attorneys' fees, arising out of the death of or injury to any
person or persons or out of any damage to property and against any other claim,
proceeding, demand, expense and liability of any kind whatsoever resulting from
the production, manufacture, sale, use, lease, consumption or advertisement of
the Licensed Product(s) or arising from any obligation of FF hereunder.
8.2 FF shall obtain and carry in full force and effect liability
insurance which shall protect FF and IPS in regard to events covered by the
foregoing paragraph.
8.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, IPS
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESSED
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR
PENDING.
ARTICLE IX
EXPORT CONTROLS
It is understood that the parties are subject to United
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States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms Export
Control Act, as amended and the Export Administration Act of 1979), and that
their obligations hereunder are contingent on compliance with applicable United
States export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by FF that FF shall not export data or
commodities to certain foreign countries without prior approval of such agency.
IPS neither represents that a license shall not be required nor that, if
required, it shall be issued.
ARTICLE X
WARRANTIES
10.1 IPS represents and warrants to FF, as a material inducement for FF
to enter into this Agreement, that:
(i) This Agreement, when executed and delivered by IPS,
will be the legal, valid and binding obligation of
IPS, enforceable against IPS in accordance with its
terms;
(ii) IPS has not granted rights in the Territory, in or to
the Patent Rights or the Licensed Process to any
person other than FF;
(iii) IPS does not have any knowledge that any of the
Patent Rights or the Licensed Process infringes the
proprietary rights of any Third Party;
(iv) the IPS Processing Aids, Patent Rights and Licensed
Process comply with all requirements, rules and
regulations of the United States Department of
Agriculture, the Food and Drug Administration, the
State of California, and all other governmental
bodies having jurisdiction; and
(v) IPS does not have any knowledge of any patent or
other proprietary technology of IPS other than the
Patent Rights, the Licensed Process, and the
Technical Information which would be required to
make, have made, use and sell the Licensed Products;
provided, however, that IPS gives no representation
or warranty that any patent application or potential
patent application within the Patent Rights will be
granted or, if granted, that any such patent will be
valid.
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10.2 FF represents and warrants to IPS, as a material inducement for
IPS to enter into this Agreement, that:
(i) FF is a corporation duly organized, validly existing
and in good standing under the laws of the State of
California, and has all requisite power and authority
to execute, deliver and perform this Agreement;
(ii) this Agreement, when executed and delivered by FF,
will be the legal, valid and binding obligation of
FF, enforceable against FF in accordance with its
terms and does not conflict with any material
agreement to which FF is a party; and
(iii) FF does not have any knowledge that any of the
processes or materials it uses infringes the
proprietary rights of any Third Party.
ARTICLE XI
CONFIDENTIALITY
11.1 The Technical Information and any information disclosed by IPS to
FF, or by FF to IPS (respectively the "Disclosing Party" and the "Receiving
Party"), pertaining to the respective business of IPS or FF, including customer
lists, contractor lists, marketing methods and plans, sources of supply and
suppliers, cost information, pricing information, and the identities of IPS's or
FF's customers shall be treated by the Receiving Party as confidential
information (collectively, the "Confidential Information").
11.2 The Receiving Party will use its best efforts:
(i) To prevent the disclosure of the Confidential
Information to any Third Party, except as otherwise
permitted pursuant to this Article XI;
(ii) not to use the Confidential Information for any
commercial purpose other than pursuant to this
Agreement;
(iii) not to disclose the Confidential Information to its
officers, employees, contractors, agents or
representatives other than:
(1) attorneys, accountants and such of
its officers and employees who are
directly concerned with the
evaluation, production and sale of
the Licensed
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Product and, except for such
attorneys and accountants, who are
bound to Receiving Party by
confidentiality obligations no less
restrictive than the terms hereof;
and
(2) independent contractors, agents or
representatives bound to Receiving
Party by a confidentiality
obligation no less restrictive than
the terms hereof, and provided that
(A) Receiving Party takes reasonable
precautions to assure that such
disclosure is limited to such
officers or employees of such
independent contractors, agents or
representatives who reasonably
require the same in order to
properly fulfill their duties to the
independent contractors, agents or
representatives and who themselves
are bound to them by such a
confidentiality obligation, and (B)
Receiving Party notifies Disclosing
Party of the identity of such
independent contractor, agent or
representative.
11.3 Notwithstanding the foregoing, Receiving Party shall not have any
obligation to maintain the confidentiality of any information:
(i) Which is developed by Receiving Party in the course
of work entirely independent of any disclosure made
hereunder or the subject matter of this Agreement;
(ii) which Receiving Party receives from another party who
has the right to disclose the same;
(iii) which is or becomes published or otherwise publicly
available without the fault of Receiving Party;
(iv) which is already in the possession of Receiving Party
as of the date hereof; or
(v) which is disclosed in connection with Receiving
Party's exercise of its rights under, or in a dispute
regarding, this Agreement.
11.4 Upon the termination of this Agreement, Receiving Party shall,
within thirty (30) days of Disclosing Party's written request, return or destroy
all materials, copies and extracts that contain any Confidential Information
pursuant to this Article XI.
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11.5 Receiving Party acknowledges and agrees that a breach by Receiving
Party of the covenants contained in this Article XI would cause Disclosing Party
irreparable harm and that the extent of damages to Disclosing Party would be
impossible to ascertain and that there is and will be available to Disclosing
Party no adequate monetary damages or other remedy at law to compensate it in
the event of any such breach. Consequently, Receiving Party agrees that in the
event of a breach of any such covenant, in addition to any other relief to which
Disclosing Party is or may be entitled, Disclosing Party shall be entitled, as a
matter of course, to an injunction or other equitable relief, including the
remedy of specific performance, to enforce any or all of such covenants by
Receiving Party and its employees, agents or any of them.
ARTICLE XII
NON-USE OF NAMES
12.1 Neither party shall use the names of the other party nor of any of
its employees, nor any adaptation thereof, in any advertising, promotional or
sales literature without the prior written consent obtained from the other party
in each case, except that FF may state that it is licensed by IPS under one or
more of the patents and/or applications comprising the Patent Rights.
///
///
///
ARTICLE XIII
TERMINATION
13.1 This Agreement shall terminate prior to the end of the Initial
Term or any Extension Term upon the occurrence of any of the following events:
(i) If either party shall cease to carry on its business;
(ii) if either party is subject to a Bankruptcy Event; or
(iii) upon notice from one party to the other after an
event of force majeure has been in effect for six (6)
months or longer.
13.2 Should FF fail to pay IPS royalties or other payments
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due and payable hereunder, IPS shall have the right to terminate this Agreement
on thirty (30) days' notice, unless FF shall pay IPS within the thirty (30) day
period, all such royalties or other payments and interest due and payable. Upon
the expiration of the thirty (30) day period, if FF shall not have paid all such
payments, royalties and interest due and payable, the rights, privileges and
license granted hereunder shall terminate.
13.3 Upon any material breach or default of this Agreement by either
party, other than those occurrences set out in Paragraphs 13.1 and 13.2
hereinabove, which shall always take precedence in that order over any other
material breach or default referred to in this Paragraph 13.3, the other party
shall have the right to terminate this Agreement and the rights, privileges and
license granted hereunder by ninety (90) days notice to the defaulting party.
Such termination shall become effective unless the defaulting party shall have
cured any such breach or default prior to the expiration of the ninety (90) day
period.
13.4 FF shall have the right to terminate this Agreement at any time on
six (6) months' notice to IPS, and upon payment of all amounts due IPS through
the effective date of the termination.
13.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. FF and any sublicensee thereof
may, however, after the effective date of such termination, sell all Licensed
Products, and complete Licensed Products in the process of manufacture at the
time of such termination and sell the same, provided that FF shall pay to IPS
the royalties thereon as required by Article V of this Agreement and shall
submit the reports required by Article VI hereof on the sales of Licensed
Products.
13.6 Upon termination of this Agreement for any reason, any sublicensee
not then in default shall have the right to seek a license from IPS.
ARTICLE XIV
INSURANCE
14.1 FF shall maintain property, personal injury, and product liability
insurance coverage in commercially reasonable amounts. In discharge of the
above, FF will obtain and thereafter maintain product and general liability
insurance in the amount of at least Two Million Dollars ($2,000,000) per
occurrence with a deductible of not more than $25,000 per occurrence, together
with an umbrella general and product liability insurance policy for amounts in
excess of such limits,
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in the amount of Three Million Dollars ($3,000,000), against damage to or
destruction of property and injury to or death of individuals and against such
other risks as FF may reasonably determine, arising out of or in connection with
any use, manufacture or sale of Licensed Products. Any such insurance shall be
issued by an insurer rated A or better by A.M. Best & Co. FF will furnish IPS
upon request written confirmation issued by the insurer or an independent
insurance agent confirming that insurance is maintained in accordance with these
requirements.
ARTICLE XV
DISPUTE RESOLUTION
15.1 This Agreement shall be deemed to have been made and entered into
in the State of California, and it shall be construed according to the local,
domestic law of California without regard to conflict of law principles. Any
claim, controversy or dispute arising out of or relating to this Agreement or
any interpretation or breach thereof or performance thereunder, including
without limitation any dispute concerning the scope of this arbitration
provision, shall be settled by submission to final, binding and non-appealable
arbitration ("Arbitration") for determination, without any right by any party to
a trial de novo in a court of competent jurisdiction, after a twenty-five (25)
calendar day waiting period (the "Waiting Period"). During the Waiting Period,
the parties shall work reasonably and in good faith and shall use their best
efforts to amicably resolve the claim, controversy or dispute. The Arbitration
and all prehearing, hearing, post-hearing arbitration procedures, including
those for Disclosure and Challenge, shall be conducted in accordance with the
Commercial Arbitration Rules (the "Commercial Rules") of the American
Arbitration Association (herein referred to as the "Association") in San
Francisco, California, as supplemented by the procedures set forth in Exhibit E
attached hereto.
ARTICLE XVI
PAYMENTS AND NOTICES
16.1 Any notice, payment, or communication required or permitted under
this Agreement shall be made in writing and shall be deemed given if and when
delivered personally or by an overnight delivery service such as Federal Express
or three days after being deposited in the U.S. mail by certified or registered
mail, return receipt requested, postage prepaid, or telecopied with confirmation
of receipt and a hard copy delivered as described above, addressed as follows:
If to FF:
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Farmington Fresh
7735 South State Route 99
West Frontage Road
Stockton, California 95206
ATTN: President
Telephone: (209) 983-9700
Fax: (209) 983-1825
If to IPS:
Integrated Produce Systems, Inc.
2 International Plaza, Suite 245
Philadelphia, PA 19113
ATTN: President
Telephone: (610) 521-4400
Fax: (610) 521-5985
or to such other address as any party may from time to time duly specify by
notice given to the other party in the manner specified above.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 Relationship of Parties. Nothing contained in this Agreement shall
create a joint venture or partnership between the parties. FF shall be an
independent contractor in performing its obligations hereunder. Neither party
shall be liable for any of the debts or obligations of the other and neither
party shall have any authority or right to act for or incur any liability of any
kind, express or implied, in the name of or on behalf of the other party.
17.2 Survival of Provisions. The obligations of the parties undertaken
pursuant to Article V through XII, inclusive, of this Agreement shall survive
the termination of this Agreement.
17.3 Successors and Assigns. This Agreement and the rights hereunder
may not be assigned by FF, whether by operation of law or otherwise, but may be
assigned by IPS in connection with a sale of substantially all of the assets of
IPS or to any Affiliate of IPS, provided that the obligations of the assignor
are assumed by the assignee thereof.
17.4 Binding Nature. This Agreement shall be binding upon
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and inure to the benefit of the parties hereto and their respective successors,
legal representatives and permitted assigns.
17.5 Force Majeure. Neither party shall be liable for any loss, damage,
detention, or delay resulting from causes beyond its reasonable control or
resulting from acts of God or of the public enemy, acts of the government in
either its sovereign or contractual capacity, priorities, allocations, fires,
floods, epidemics, quarantine restrictions, strikes, labor disputes, freight
embargoes, unusually severe weather, insurrection or riot, damages or shortages
in transportation, or inability due to causes beyond its reasonable control to
obtain necessary labor, materials, or manufacturing facilities; provided,
however, that if an event of force majeure prevents either party from fulfilling
its obligations under this Agreement for a period of six months or longer, then
the other party shall have the right, but not the obligation, to terminate this
Agreement.
17.6 Entire Agreement; Amendments. This Agreement and all exhibits
hereto contain the entire agreement and understanding of the parties relating to
the subject matter hereof, and merge and supersede all prior discussions,
agreements and understandings of every nature between them relating to the
subject matter hereof. This agreement may not be changed or modified, except by
an agreement in writing signed by an authorized officer of the party hereto
against whom the same is sought to be enforced.
17.7 Waiver. Any delay or forbearance by either party in exercising any
right hereunder shall not be deemed a waiver of that right.
17.8 Invalidity. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity of any other provision of this Agreement, and such
provision(s) shall be deemed modified to the extent necessary to make it (them)
enforceable.
17.9 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
17.10 Gender; Number. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, any other gender, masculine, feminine or neuter, as
the context requires.
17.11 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday, then the final day shall be deemed to be the next
day
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which is not a Saturday, Sunday or holiday.
17.12 Third Party Beneficiaries. Notwithstanding anything to the
contrary contained herein, no provision of this Agreement is intended to benefit
any party other than FF and IPS and their successors and assigns, and shall not
be enforceable by any other party.
17.13 Further Assurances. After the date hereof, at the request of IPS
and at IPS's expense, FF shall execute and deliver to IPS or cause to be
executed and delivered to IPS, such further instruments of conveyance and
transfer and take such other actions as IPS may reasonably require to perfect
IPS's title to the Licensed Rights, as contemplated by this Agreement.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
and duly executed this Agreement the day and year set forth below.
FARMINGTON FRESH INTEGRATED PRODUCE SYSTEMS, INC.
A California Corporation A Pennsylvania Corporation
By:/s/ David N. Rajkovich By:/s/ Paul L. Devine
-------------------------- --------------------------------
Name: David N. Rajkovich Name: Paul L. Devine
-------------------------- --------------------------------
Title: President Title: President
-------------------------- --------------------------------
Date: April 18, 1997 Date: April 29, 1997
-------------------------- --------------------------------
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EXHIBIT "A"
LISTING OF IPS "PATENT RIGHTS"
NONE
27
[IPS LOGO]
[INTEGRATED PRODUCE SYSTEMS, INC. LETTERHEAD]
- --------------------------------------------------------------------------------
July 23, 1997
Dave Rajkovich
President
Farmington Fresh
P.O. Box 30667
Stockton, CA 95213
Dear Dave:
By way of this letter, Integrated Produce Systems, Inc.(TM) is notifying you
that Exhibit "A" in the Fuji/Granny Smith License Agreement dated April, 1997,
has be updated. The Listing of IPS "Patent Rights" in Exhibit "A" has changed
from "none" to "pending". We will update you as to the status of the patent
periodically.
Please let me know if I can be of any further help.
Sincerely,
/s/ Karen Penichter
- ----------------------------------
Karen Penichter
Vice President, Sales
cc: Mr. Pat McCarty, Mr. Paul Devine, Mr. Keith Neal, Mr. Rudy Bilawski
28
EXHIBIT "B"
SPECIFICATIONS FOR IPS PROCESSING AIDS
29
[INTEGRATED PRODUCE SYSTEMS, INC. LOGO]
IPS's Apple System(TM) is a proprietary processing aid composed of FDA GRAS
ingredients and a complimentary application technology. The Apple System(TM) is
designed to maintain the quality of fresh-cut or minimally processed apples.
The processing aids in IPS's Apple System(TM) are variety and application
specific. The processing aid is part of a systems approach which takes into
account raw material, packaging, process control, and the other variables
affecting product quality.
TYPICAL ANALYSIS
VISUAL - a white free-flowing powder
SOLUBILITY - readily soluble in water at 50F and above
pH - typically at 2.2 to 2.8 when used according to protocol
ASSAY - Assays at 96.3 plus or minus 1.0% Purity of active ingredients by AOAC
HPLC procedures
MODE OF ACTION
IPS's Apple System(TM) is a synergistic combination of an application specific
processing aid and packaging system. The System is designed to inhibit browning
and to maintain the natural colors, taste and texture of the fresh sliced apple.
The inhibition of browning is achieved, during processing, by making
non-reactive the complexed intermediates which are responsible for the
browning.
LABELING REQUIREMENTS
All ingredients in IPS's processing aid are GRAS (Generally Recognized as Safe)
according to the FDA's Code of Federal Regulations. When used in accordance
with prescribed processing protocols, the use of IPS's Apple System(TM) does
not have to be reflected on the packaged product.
30
EXHIBIT "C"
IPS PROCESSING AIDS
TERMS AND CONDITIONS OF SALE
31
INTEGRATED PRODUCE SYSTEMS, INC. TERMS AND CONDITIONS OF SALE
These terms, conditions and instructions shall apply to all sales of processing
aids (the "products") by Integrated Produce Systems, Inc, ("Seller") to you
("Buyer") from the date of your receipt of these terms, whether received by
mail, by telephone, or by electronic means until such time as you have received
a revised edition of these terms and conditions or other notice from Seller of
their revocation.
PLEASE RETAIN THIS DOCUMENT IN YOUR FILES FOR FUTURE REFERENCE.
1. ACCEPTANCE. No order for products shall be binding upon Seller until
customer credit is approved and until accepted in writing by an authorized
Seller representative. Buyer shall be deemed to have agreed to all terms and
conditions of sale in effect at the time Buyer submits its order to Seller and
to any special terms and conditions contained in any quotations and
acknowledgement or other writing signed by an authorized representative of
Seller. Buyer shall also be deemed to have agreed to all changes or additions
to such terms and conditions which become effective subsequently, and prior to
Seller's acceptance of Buyer's order unless Buyer notifies Seller in writing to
the contrary within 5 working days after Buyer receives notification of the new
or changed conditions, in which case the Buyer's order shall be deemed canceled.
2. INTERPRETATION. These terms and conditions supersede all terms and
conditions (printed or otherwise) on the purchase order form of Buyer and all
other inconsistent terms submitted by Buyer prior to acceptance of the order
by Seller. This writing is intended by the parties as a final expression of
their agreement and is intended also as a complete and exclusive statement of
the terms and conditions of their agreement, which can be modified or rescinded
only in writing signed by both parties. Failure of Seller to object to the
provisions contained in any order or other communication from Buyer (including
but not limited to penalty clauses) shall not be construed as a waiver of these
terms and conditions of sale nor an acceptance of any terms or conditions of
Buyer. The acceptance of all orders shall be deemed to be contracts entered
into in the Commonwealth of Pennsylvania and shall be construed in accordance
with the substantive laws of Pennsylvania. The United Nations Convention on
Contracts for the International Sale of Goods shall not apply to the agreement
between Buyer and Seller.
3. PRICES AND QUOTATIONS. Sales of products shall be at the prices stated in
the price quotation and shall be firm for 30 days from the date of quotation
and are thereafter subject to change until Seller accepts the order. Prices in
any price list or other literature are not offers to sell and are subject to
confirmation by Seller. No quotation is assignable by Buyer without the prior
written consent of Seller.
4. PAYMENT. Payment terms for all orders are net 30 days from the invoice date.
Seller has the right to charge a late charge of 1 1/2% per month on all unpaid
amounts from the due date until paid; provided, however, that the rate of the
late charge shall not exceed the highest applicable rate allowed by
Pennsylvania law. Receipt of any check or other commercial paper shall not
constitute payment until Seller shall have received in cash the full amount
thereof. In the event that payment for shipped products is not promptly made
when due; or in the event that the credit or the financial responsibility of
Buyer becomes impaired or unsatisfactory to Seller, Seller reserves the right
to demand cash or satisfactory security before making shipments. Upon the
failure of Buyer to provide cash or satisfactory security to fully satisfy
Seller's demands, Seller reserves the right to discontinue making shipments and
to cancel the sale, or any part of the sale, thereby terminating all obligation
on the part of Seller for delivery of the products, or any part of the products
sold.
5. SHIPPING AND RISK OF LOSS; SECURITY INTEREST. Unless otherwise agreed, all
sales shall be F.O.B., Seller's plant of manufacture. Delivery of products to a
carrier at Seller's plant shall constitute delivery to Buyer and Buyer assumes
all risk for subsequent loss or damage. Buyer is responsible for all
transportation, delivery, and insurance costs incurred in connection with the
delivery of the products to the designated site.
6. TAXES AND OTHER CHARGES. In addition to prices quoted or invoiced, Buyer
shall pay or reimburse Seller for its payment of any manufacture tax, retailers'
occupation tax, use tax, sales tax, excise tax, duty, custom, inspection or
testing fee, or other tax, or other charge of any nature whatsoever, imposed by
governmental authority, on or measured by any transaction between Seller and
Buyer.
7. LIMITED WARRANTY. From the date of shipment, Seller warrants the products
manufactured by it to be free from defects in material and workmanship for a
period of three months.
Seller's sole and exclusive obligation and Buyer's sole and exclusive remedy
hereunder for breach of this limited warranty is expressly limited, at the
Seller's option, to replace the defective products at the F.O.B. point stated
herein or to give credit for such defective products in an amount not to exceed
their purchase price, provided: (i) Buyer reports the defect to Seller in
writing and provides a description of the defective product and complete
information about the manner of its discovery within 10 days of its discovery
and in no event later than 60 days from the date of shipment; (ii) Seller has
the opportunity to investigate the reported defect and determines the defect
arises from faulty material or workmanship; and (iii) if deemed appropriate by
Seller, Buyer returns the affected product to a location designated by Seller.
The limited warranty set forth above shall not apply to (i) products repaired
or altered by any others than Seller so as, in Seller's opinion, to have
adversely affected the product, (ii) products subjected to negligence,
accidents or damage by circumstances beyond Seller's control, or (iii) products
subjected to improper storage or other than normal use or service. Seller's
sole and exclusive obligation hereunder shall be limited to the replacement of
the defective portion of the product or credit therefor as provided above. In
no event shall any claim for a breach of this limited warranty be made later
than 1 year after the cause of action has accrued. This reduced statute of
limitations shall supersede any contrary statute of limitations established at
law and is included herein with the mutual agreement of Buyer and Seller. THE
LIMITED WARRANTY SET FORTH ABOVE IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER
EXPRESS OR IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR WARRANTIES ARISING FROM A COURSE OF DEALING OR
USAGE OF TRADE. SELLER MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, STATUTORY OR
OTHERWISE, CONCERNING PRODUCTS SUPPLIED UNDER THESE TERMS AND CONDITIONS OR ANY
AGREMENT TO WHICH THEY APPLY. TECHNICAL ADVICE AND STATEMENTS AND
RECOMMENDATIONS RELATED THERETO ARE FURNISHED AS AN ACCOMMODATION TO BUYER.
SELLER ASSUMES NO LIABILITY FOR TECHNICAL ADVICE AND BUYER ACCEPTS SUCH ADVICE
AND STATEMENTS AT BUYER'S SOLE RISK.
32
8. LIMITATION OF LIABILITY. In addition to the limitations of Seller's
liability set forth in Section 7 above, the following limitations are also
applicable:
Seller shall defend Buyer in any suit or proceeding based on a claim that the
Seller's products infringe any United States patents if: Buyer notifies Seller
within 15 days after notice of possible infringement and gives Seller the
authority, information, and assistance (at Seller's expense) for the defense of
the suit. If Buyer's use of the products is enjoined in such a suit, Seller
shall, at its option: (i) procure for Buyer the right to continue using the
products; (ii) modify the products to render them non-infringing; (iii) replace
the products with non-infringing products; or (iv) refund the purchase price
paid by Buyer. Seller will not be responsible for any compromise or settlement
made without its written consent.
No products shall be returned without Seller's express authority and all
claims, except for claims under Section 7, must be made within 30 days after
delivery of the products and failure to do so shall constitute a waiver by
Buyer of any such claims. Seller reserves the right to charge a restocking fee
for any products it permits Buyer to return. Unless otherwise provided in an
agreement between the Buyer and the Seller, Seller has no knowledge as to
trademark or patent rights that third parties may claim in the products.
Consequently, Seller makes no warranty whatsoever with respect to the freedom
of the products from claims of infringement by third parties arising from
trademark, patent or other property rights in the products covered.
SELLER SHALL NOT INDEMNIFY NOR BE LIABLE TO BUYER, ITS ASSIGNS, SUCCESSORS OR
PURCHASERS OR TO ANY PERSON OR ENTITY FOR ANY CLAIMS, LOSSES, EXPENSES OR
JUDGMENTS ARISING OUT OF OR RESULTING IN ANY WAY FROM PRODUCTS FURNISHED
HEREUNDER WHERE LIABILITY IS PREMISED UPON ANY THEORY INCLUDING, WITHOUT
LIMITATION, NEGLIGENCE OR STRICT LIABILITY. SELLER'S TOTAL, COMPLETE AND
EXCLUSIVE LIABILITY HEREUNDER SHALL BE LIMITED TO REPLACEMENT OR CREDIT AS
PROVIDED ABOVE AND SHALL NOT EXCEED THE PURCHASE PRICE RECEIVED BY SELLER FOR
THE PRODUCTS IN RESPECT OF WHICH THE CLAIM IS MADE. SELLER SHALL NOT BE LIABLE
FOR LOST PROFITS, INTERRUPTION OF BUSINESS, INJURY TO PERSONS OR PROPERTY OR
SPECIAL, DIRECT OR INDIRECT, OR CONSEQUENTIAL DAMAGES, OR INCREASES IN COST OF
OPERATION. THE PARTIES EXPRESSLY AGREE THAT THE LIMITATIONS SET FORTH HEREIN
ARE AGREED ALLOCATIONS OF RISK AND SHALL SURVIVE THE DETERMINATION OF ANY COURT
OF COMPETENT JURISDICTION THAT ANY REMEDY PROVIDED HEREIN FAILS OF ITS
ESSENTIAL PURPOSE.
9. REMEDIES. In addition to Seller's remedies set forth herein or otherwise
available to it at law, if Buyer fails to make any payment when due, Seller
shall be entitled to: (i) offset the overdue amount against any other funds of
Buyer in Seller's custody; (ii) terminate Seller's obligations under these
terms and conditions and treat this agreement as if canceled by Buyer; (iii)
delay manufacture or delivery of all or part of the products sold to the Buyer
under this or any other agreement between Buyer and Seller; and/or (iv) recover
or require Buyer to return forthwith, at Buyer's expense (including proper
insurance with respect thereto), all products and other material which Seller
provided to Buyer and with respect to which Buyer failed to make timely payment.
10. FORCE MAJEURE. Seller shall not be held responsible or liable for any loss
or damage resulting from a delay in the delivery of the products or any failure
to perform its obligations to Buyer if the causes of such delay or failure are
attributable to acts of God or of the public enemy, acts of the government in
either its sovereign or contractual capacity, acts of the Buyer, priorities,
allocations, inability to obtain, at reasonable prices, utilities or operating
materials or machinery, or due to lock out or other labor dispute, strikes,
fires, floods, explosions, earthquakes, insurrection or riot, embargoes,
epidemics, quarantine restrictions, unusually severe weather, litigation or
other private or public proceedings, or other causes beyond the reasonable
control of Seller. In the event any delay occurs because of these causes, the
date of delivery shall be extended by at least the period of time attributable
to the delay.
11. DISPUTE RESOLUTION. Any claim, controversy or dispute arising out of or
relating to the agreement between Buyer and Seller or any interpretation or
breach thereof or performance thereunder, including without limitation any
dispute concerning the scope of this arbitration provision, shall be settled
by submission to final, binding and non-appealable arbitration ("Arbitration")
for determination, without any right by any party to a trail de novo in a court
of competent jurisdiction, after a 25 calendar day waiting period (the "Waiting
Period"). During the Waiting Period, the parties shall work reasonably and in
good faith and shall use their best efforts to amicably resolve the claim,
controversy or dispute. The Arbitration and all pre-hearing, hearing,
post-hearing arbitration procedures, including those for Disclosure and
Challenge, shall be conducted in accordance with the Commercial Arbitration
Rules (the "Commercial Rules") of the American Arbitration Association (herein
referred to as the "Association") in Philadelphia, Pennsylvania, as
supplemented by Buyer and Seller in any other agreement between the parties
concerning the subject matter hereof.
12. MISCELLANEOUS. These terms and conditions shall insure to the benefit of
and shall be binding upon the heirs, successors, and assigns of the parties
hereto. Buyer shall not assign its duties and obligations hereunder without
Seller's prior written consent. In case of any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity of any other provision hereof, and such
provision(s) shall be deemed modified to the extent necessary to make it (them)
enforceable. All days shall be counted to computing the number of days
hereunder. Buyer hereby expressly agrees that in making sales of products that
use in any manner the Seller's products, Buyer will be bound by and comply with
all federal, state, local laws, ordinances or regulations applicable. Buyer
agrees to indemnify Seller against loss or damage resulting from Buyer's breach
of, or failure to comply with, any of the provisions of this agreement or any
such laws, ordinances or regulations. Section headings used herein are for
convenience only; they form no part of these terms and shall not affect their
interpretation.
08/17/96
33
EXHIBIT "D"
PROPRIETARY RIGHTS OF PARTIES
FARMINGTON/EPL DEVELOPMENTS:
FARMINGTON EPL/IPS JOINT PUBLIC DOMAIN
---------- ------- ----- -------------
Trade Secrets Apple Fresh formula Bin Dumpers
Diptank: Apple Fresh Protocol Apple washers
-how to make up solution
- -take off system -solution monitoring Conveyors
- -water screen -solution dispensing
- -sump -solution concentration Dewatering systems
Plant Layout and Apple Raw Material Specs Atlas Pacific
Design (including Corer, peeler,
blueprints) Technical Knowledge: slicer
-Concept to minimize
Conveying system to bruising during dump, General Diptank
packaging conveying & packout design
-Apple sanitation procedures
Flume system to Plant
inspection stations -methods of minimizing slice Construction:
browning (i.e. seed cell
Clamshell Concept: removal) -Materials
approximately 10 -process holding time -Walls
snackpaks of -Apple inspection points -Floors
approximately 3.5 oz. -conveying/rinse system for the
slices including spray rate,
Sleeve Concept: volume, when to rinse
A rigid clipboard
band containing 4 to Dip Tank conveying system
6 3.5 oz. snack paks
with a self adhesive Processing room temperature
interior surface. profiles
Marketing of above Respire Film: G-80
Clamshell concept and
sleeve concept. Stability regime and method of
evaluation
Packaging Graphics
and design Trademarks:
Packout Machine -IPS Apple Fresh
modifications -IPS Apple System
-Respire
Trademarks:
Farmington Fresh
Apple Bites
34
EXHIBIT "E"
ARBITRATION PROCEDURES
a. Following the Waiting Period, the party seeking Arbitration shall
give notice of a demand to arbitrate (herein referred to as the "Demand") to the
other party and to the Association. The Demand shall include (i) the issues to
be determined, (ii) a copy of this arbitration provision, and (iii) to the
extent the parties cannot agree on a single arbitrator, the designation of one
arbitrator, who shall have no prior or existing personal or financial
relationship with the designating party.
b. Within thirty (30) days after receipt of the Demand, the other party
shall give notice (herein referred to as the "Response") to the party that
demanded arbitration, and to the Association, of (i) any additional issues to be
arbitrated, (ii) its answer to the issues raised by the party that sent the
Demand, and (iii) its designation of a second arbitrator, who shall have no
prior or existing personal or financial relationship with the designating party.
c. If a Response designating a second arbitrator is not received within
the above-mentioned thirty (30) day period, the Association shall immediately
designate the second arbitrator.
d. The two arbitrators as designated pursuant to the foregoing
provisions shall then designate a third arbitrator within ten (10) days after
the designation of the second arbitrator. If the two arbitrators cannot agree on
the designation of the third arbitrator within the ten (10) day period
allocated, the Association shall designate the third arbitrator.
e. The arbitration panel as designated above shall proceed with the
Arbitration by giving notice to all parties of its proceedings and hearings in
accordance with the Association's applicable procedures. Within fifteen (15)
days after all three arbitrators have been appointed, an initial meeting among
the arbitrators and counsel for the parties shall be held for the purpose of
establishing a plan for administration of the Arbitration, including:
(i) definition of issues;
(ii) scope, timing and type of discovery, which may at the
discretion of the arbitrators include production of
documents in the possession of the parties, but may
not, without the consent of the parties, include
depositions;
(iii) exchange of documents and filing of detailed
35
statements of claims and prehearing memoranda;
(iv) schedule and place of hearings; and
(v) any other matters that may promote the efficient,
expeditious and cost-effective conduct of the
proceeding.
The substantive law of the State of California shall be applied by the
arbitrators to the resolution of the dispute, provided that the arbitrators
shall base their decision on the express terms, covenants and conditions of this
Agreement. The arbitrators shall be bound to make specific findings of fact and
reach conclusions of law, based upon the submissions and evidence of the
parties, and shall issue a written decision explaining the basis for the
decision and award.
f. The parties agree that the arbitrators shall have no power to alter
or modify any express provision of this Agreement or to render any award which,
by its terms, effects any such alteration or modification.
g. Upon written demand to any party to the Arbitration for the
production of documents and things (including computer disc and data) reasonably
related to the issues being arbitrated, the party upon which such demand is made
shall promptly produce, or make available for inspection and copying, such
documents or things without the necessity of any action by the arbitrators,
provided, however, that no such demand shall be effective if made more than
ninety (90) days after the receipt of the Response.
h. Subject to the limitations imposed by subsection (f), the
arbitrators shall have the power to grant any and all relief and remedies,
whether at law or in equity, that the courts in the State of California may
grant and such other relief as may be available under the Commercial Rules,
other than punitive damages. Any award of the arbitrators shall include
pre-award and post-award interest at a rate or rates considered just under the
circumstances by the arbitrators. The decision of the arbitrators shall be final
and as an "award" within the meaning of the Commercial Rules and judgment upon
the arbitration award may be entered in the United States District Court for the
Northern District of California ("San Francisco District Court") or any other
court having jurisdiction, as if it were a judgment of that court. The parties
to this Agreement expressly consent to the jurisdiction of the Association,
including, without limitation, reasonable attorney's fees and the parties waive
any objection they may have as to jurisdiction and venue regarding the San
Francisco District Court.
i. The party which does not prevail in the Arbitration shall be
responsible for all fees and expenses incurred in connection with the
Arbitration, including, without limitation, reasonable attorney's fees.
j. Notwithstanding the foregoing, the parties specifically reserve the
right to seek a temporary judicial restraining order, preliminary injunction, or
other similar short term equitable
36
relief, and grant the arbitration tribunal the right to make a final
determination of the parties' rights, including whether to make permanent or
dissolve such court order. No party shall bring a civil action seeking
enforcement or any other remedy founded on this Agreement.