Exhibit 10.21
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Agreement") is entered into effective as of the
first day of April, 2003, by and between SARA LEE CORPORATION (including its
Champion Athleticwear division), a Maryland corporation, and SARA LEE GLOBAL
FINANCE, L.L.C., a Delaware limited liability company, collectively referred to
hereinafter as "Champion", and CHAMPION LYTE, Inc. and CHAMPIONLYTE HOLDINGS,
INC. (successor to Meridian USA Holdings, Inc.), Florida corporations
collectively referred to hereinafter as "ChampionLyte").
WHEREAS, Champion is, and has been for many years, the owner and user of
the CHAMPION trademark and various trademark registrations for CHAMPION for a
wide variety of goods utilized by consumers who engage in an active lifestyle
(the "CHAMPION Mark"); and
WHEREAS, ChampionLyte uses as a trademark and tradename, and has registered
as a trademark on the Principal Register of the United States Patent and
Trademark Office, the designation "CHAMPION LYTE" for a sugar free sports drink
product under U.S. Trademark Reg. No. 2,460,374 (the "CHAMPION LYTE Mark"); and
WHEREAS, Champion has objected to ChampionLyte's use and registration of
the CHAMPION LYTE Mark; and
WHEREAS, Champion has instituted litigation in the United States District
Court for the Middle District of North Carolina, Civil Action No. 1:01CV01053
("the Litigation"), seeking a judgment enjoining ChampionLyte from all further
use of the CHAMPION LYTE Mark, and other relief; and
WHEREAS, ChampionLyte has denied liability to Champion and has
counterclaimed for its attorney fees in the Litigation; and
WHEREAS, Champion and ChampionLyte desire to resolve this dispute without
further controversy and to settle the clams in the Litigation.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants hereinafter set forth, the parties agree as follows:
1. Simultaneously with the execution of the license agreement described
in (Paragraph) 5 below, ChampionLyte will immediately assign its
registration(s) for the CHAMPION LYTE Mark, and any and all rights it
has or may have in the CHAMPION LYTE Mark, to Champion.
2. Simultaneously with the execution of the license agreement described
in (Paragraph) 5 below, ChampionLyte will cease and desist from all
further use of the CHAMPION LYTE Mark, except as allowed and permitted
by the License Agreement mentioned hereafter.
3. From and after the execution of the license agreement described in
(Paragraph) 5 below, ChampionLyte will not hereafter use the word
"CHAMPION" as a trademark or tradename in any form or combination,
except as allowed and permitted by the License Agreement mentioned
hereafter.
4. Simultaneously with the execution of the license agreement described
in (Paragraph) 5 below, ChampionLyte will abandon any and all current
applications to register the CHAMPION LYTE Mark, and will not seek to
register any trademark or tradename containing the word "CHAMPION" at
any time hereafter.
5. Within the next twenty days, Champion and ChampionLyte will enter into
a trademark license agreement ("License Agreement"), which will
include, among other things and in addition to standard commercial
terms applicable to such agreements, the following terms and
provisions:
a) Champion will grant ChampionLyte an exclusive license to use the
CHAMPION LYTE Mark in connection with sugar-free sports drinks
only, in the United States, Mexico and Canada.
b) The License Agreement will extend for an initial five-year term,
and two additional five-year terms at ChampionLyte's option,
subject to ChampionLyte meeting all the minimum sales and royalty
requirements.
c) If the License Agreement is not earlier terminated, and if
ChampionLyte has met all the requirements of the License
Agreement, after the first three five-year terms, the parties
will negotiate in good faith for two additional five-year terms
based upon new minimum sales, minimum royalties, and royalty
rates.
d) Minimum calendar year sales shall be as follows:
2003--$500,000 (measured from 4/1/03 to 3/3 1/04)
2004--$750,000
2005--$1,000,000
2006--$1,250,000
2007--$1,500,000
[renewal for 2d five years if sales in years 2005-07 average
at least $1,500,000]
2008--$2,000,000
2009--$2,500,000
2010--$3,000,000
2011--$3,500,000
2012--$4,000,000
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[renewal for 3d five years if sales in years 2010-12 average
at least $5,000,000]
2013--$5,000,000
2014--$6,000,000
2015--$7,000,000
2016--$8,000,000
2017--$9,000,000
Failure to meet minimum in any year results in termination.
Failure to meet averages stated results in no right to renew.
e) Royalties: 3% on all sales until sales reach %10,000,000
annually; 5% on all sales after sales reach $10,000,000 annually;
6% on all sales after sales reach $15,000,000 annually. Royalties
will be paid quarterly. Beginning with Contract Year 2 (calendar
year 2004), royalty minimums will be paid in advance (i.e. at the
beginning of the year). Reporting from ChampionLyte shall be
monthly. The advance will decrement against earned royalties.
f) ChampionLyte will not assign license to any of Champion's
competitors (to be further defined in the License Agreement but
including, by way of example, Nike, Russell, Gildan, Reebok,
Adidas, Umbro, Starter, Fruit, Vanity Fair, Warnaco, et al.).
g) ChampionLyte will pay for all litigation, cancellation, or
similar proceedings pending with respect to the CHAMPION LYTE
mark through and including the date of this Agreement. Champion
and ChampionLyte will consult as to the prosecution and defense
of any such proceedings currently pending. Champion will be
responsible for all litigation, cancellation or similar
proceedings with respect to the CHAMPION LYTE
trademark from and after the date of this Agreement and will
otherwise take all steps reasonable and necessary to protect and
defend the CHAMPION LYTE trademark from any infringement or
challenge by any party anywhere within the territory covered by
the License Agreement. In connection with the foregoing,
ChampionLyte hereby represents and warrants that to its knowledge
after diligent investigation, there are no claims, proceedings or
actions, existing or threatened against it with respect to its
adoption, use or registration of the CHAMPION LYTE mark, except
as set forth on Schedule A to this Agreement.
6. Champion and ChampionLyte will file a stipulation dismissing with
prejudice all claims in the Litigation. In addition, upon
assignment of the CHAMPION LYTE Mark to Champion as provided
herein, Champion will cause to be dismissed with prejudice the
trademark cancellation proceeding pending before the United
States Patent and Trademark Office's Trademark Trial and Appeal
Board, captioned Sara Lee Global Finance, L.L.C., v.
ChampionLyte, Inc., Cancellation No. 92032691.
7. Each party shall bear its own costs and attorney's fees in
connection with the Litigation and all matters relating thereto.
8. This Agreement shall be binding upon and inure to the benefit of
the parties, their officers, agents, legal representatives,
employees, successors, assigns, subsidiaries, licensees and all
those in active concert or participation with them.
9. Both parties warrant that the individual whose signature appears
below has been duly authorized to sign this Agreement and to bind
each party thereto.
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Accepted and Agreed to:
Champion ChampionLyte
By: /s/ Arthur Dabaugh (SEAL) By: /s/ Marshall Kanner (SEAL)
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Title: Assistant Secretary Title: Interim COO
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Dated: 3 April 2003 Dated: 3/28/03
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SCHEDULE A
Pending or threatened actions, claims or proceedings regarding
ChampionLyte's adoption, registration or use of the CHAMPION LYTE mark:
Champion Performance Products, Inc. d/b/a Champion Nutrition v.
ChampionLyte, Inc., TTAB Cancellation No. 92040440
Sara Lee Global Finance, L.L.C., v. ChampionLyte Inc., TTAB
Cancellation No. 92032691