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RECEIVED GRACE OCT - 71983
0625S75 Centtruction Product* Division
October 5, 1983
TO: FROM SUBJ:
E. J. BctMtcM
A. N. Crawford
Monokote Royalty Payments From Zonollte Licensees
cc: R. A. Merther G. A. Tierney A. E. Uade
Vermiculite Intermountain Inc., a Zonollte Licensee, had a problem with a Monokote royalty payment showing up as unexplained cash on one of their statements. In looking into this problem, it is apparent that we need to establish some internal control system to keep track of Monokote royalty payments.
It has also come to our attention that Grace has been paying the royalty for the Zonollte Licensee's usage of the American Hoehst surfactant, AOK, used in our Monokote formula.
The attached chart summarizes the royalty information for each Zonollte Licensee. A review of this chart shows that most of our Licensees are deliquent in royalty payments as far back as 1979. Because of the present accounting of royalties, it is possible that the Licensees are current and we may have applied their royalty payments to their ore sales account!
The chart also shows that Grace has paid $6,386 in AOK royalty to American Hoechst for AOK used by our Zonollte Licensees.
The bottom of the chart shows the corresponding Monokote production calculated from the Licensee's AOK usage reports. Using our own average selling price for Monokote, the approximate gross sales were also calculated.
It seems reasonable to expect our Zonollte Licensees to pay the royalty for AOK usage. For example, if Vermiculite Products paid their 1982 Monokote royalty of $2,500 plus the AOK royalty of $2,169, their total royalty of $4,669 is only 0.11Z of Gross Sales. Solico would also be paying less than 1.0Z of Gross Sales. Vermiculite Intermountain and Robinson are in a different situation by paying a minimum royalty of $l,000/yr. and little or no Monokote sales.
0625676
2-
Based on che above, Che following action is suggested:-
(1) A letter should be sent to each Licensee asking them to send all future royalty checks to the attention of the Vermiculite Development Manager, BFD marketing in Cambridge.
As these checks come in, a copy will be filed to maintain a payment record. The check will then be sent to sales accounting with the instruction to credit the royalty Income Account No. N6-238-3300.
The letter should be written individually and should ask for payment of back royalties for any years not paid.
(2) We should also consider notifying our Licensees that we can no longer afford to pay their royalty to American Hoechat for AOK usage. We should offer to forgive all AOK royalties prior to 1984, and notify them that we will start to collect AOK royalties effective January 1, 1984.
Please advise if you agree with the above suggestions.
ANC:mg
A. N. Crawford
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