Exhibit 10.63
LICENSE AND RESEARCH AND DEVELOPMENT AGREEMENT
     This License and Research and Development Agreement (this “Agreement”) is
entered into as of March 14, 2006 (the “Effective Date”), by and between LANDEC
CORPORATION, a California corporation (together with its Affiliates referred to
herein as “Landec”), and AIR PRODUCTS AND CHEMICALS, INC., an entity organized
and existing under the laws of Delaware (together with its Affiliates referred
to herein as “APD”). APD and Landec are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”
Background
     Landec has certain proprietary know-how and technology relating to certain
polymer materials. APD develops, manufactures and distributes, among other
things, gases and specialty chemicals to diversified markets and geographies.
The Parties desire that Landec and APD collaborate using Landec’s know-how and
technology to develop certain personal care, latent catalyst, cleaning and
nonwoven products using Landec’s know-how and technology and to license to APD
certain of that know-how and technology, for APD to exploit, as more fully
described herein.
     The Parties agree as follows:
Agreement
     1. Certain Definitions. For the purposes of this Agreement, the capitalized
words and phrases defined in the preamble of this Agreement have the respective
meanings set forth therein, and the following capitalized words and phrases have
the meanings ascribed to them below:
     1.1 “Adhesives” shall mean a viscoelastic material that remains permanently
tacky and will adhere to a wide variety of solid surfaces.
     1.2 “Affiliate” shall mean with respect to a party: (i) any company at
least fifty percent (50%) of whose issued and voting capital is owned or
controlled, directly or indirectly, by said party, or (ii) any company which
owns or controls, directly or indirectly, at least fifty percent (50%) of the
issued and voting capital of said party, or (iii) any company owned or
controlled, directly or indirectly, to the extent of at least fifty percent
(50%) of the issued and voting capital, by any of the foregoing.
     1.3 “Ag Field” shall mean: (a) the treatment, coating, sale and/or use of
seeds or agricultural products including without limitation corn, soybean,
cotton and the like for farming, ornamental and/or other uses, (b) tubers, seeds
and/or plant grafts, (c) all other crops, and (d) all other fruits, vegetables,
flowers and the like.
     1.4 “APD Fields” shall mean the Exclusive Fields together with the Reserved
Fields provided, however, that the APD Fields shall exclude the Excluded Fields.

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     1.5 “APD Improvements” shall only mean Improvements to the Patent
Properties or the Existing Know-How created solely by APD without any assistance
or involvement by Landec. APD Improvements shall exclude Improvements by those
individuals without knowledge of any of the Existing Know-How or any portion of
the Intelimer Instruction.
     1.6 “APD IP” shall mean (i) the APD Improvements and (ii) the Joint Use
Improvements in the APD Fields.
     1.7 “Buy-Out Option” shall have the meaning given to it in Section 6.5.
     1.8 “Commercialized” or “Commercialize” shall mean that Net Sales of
Products in a particular Reserved Field have exceeded one hundred thousand
dollars ($100,000) or more in any given calendar year.
     1.9 “Direct Profits” shall mean Net Sales arising out of sale or
exploitation of Products (or *** products as provided in Sections 4 and 6.2)
minus the following: (a) container purchase costs; (b) freight and warehouse
costs; (c) raw material costs; (d) variable manufacturing costs including
additional toll charges for third party processors; (e) fixed manufacturing
costs (including depreciation) allocated in the same manner that APD allocates
such fixed manufacturing costs for its general accounting purposes and
(f) supply chain costs that are directly related to the manufacture and internal
product management of Products, as sourced from third party processors or
in-house production.
     1.10 “Excluded Fields” shall mean Pharmaceuticals, the Food Field, the ***
and Adhesives.
     1.11 “Exclusive Fields” shall mean products for: (a) personal care, which
are not regulated by the FDA, including without limitation i) cosmaceutical
products (which may be regulated by the FDA), ii) sunscreen products which are
regulated by the FDA and iii) non-pharma transdermal even if applied via an
adhesive system ) (collectively the “Personal Care Field”), (b) Thermoset Latent
Catalysts, (c) household, industrial and institutional cleaning, excluding floor
finishes (e.g. and not by way of limitation, polymers and polymer-based
formulations used in the manufacture of hard surface cleaners, equipment
cleaning, vehicle cleaning, laundry cleaning, cleaning for food & beverage
institutions), and (d) disposable nonwovens (e.g., and not by way of limitation,
polymers and polymer-based formulations used in the manufacture of disposables
such as paper towels, industrial wipes, surgical gowns, diapers, similar hygiene
products, among other disposable nonwoven products).
     1.12 “Existing Know-How” shall mean all information relating to the Landec
Intelimer Materials which is necessary or useful to the manufacture, use or sale
of the Products, which on the Effective Date Landec owns or is free to license
to APD and shall include, but not be limited to, the Intelimer Instruction. For
the avoidance of doubt, the Existing Know-How shall constitute at least part of
the Proprietary Information of Landec or Landec’s licensor(s) if any.
     1.13 “Food Field” shall include, without limitation, the following: the
packaging, including bulk, pallet and container packaging, of any food related
products including without limitation fresh produce, such as fruits and
vegetables, flowers, meat, fish and the like.
 

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     1.14 “Governmental Authority” shall mean any government or agency,
instrumentality or other subdivision thereof, including courts and tribunals,
and the states, provinces and other subdivisions thereof.
     1.15 “Improvements” shall mean all improvements to the Patent Properties or
the Existing Know-How developed by either Party hereunder (solely or jointly by
the Parties or, subject to Section 2.5, jointly with third parties) including
but not limited to inventions, patents, know-how, trade secrets and confidential
information which is recorded, developed, conceived of, created and/or reduced
to practice during the Term.
     1.16 “Infringement Notice” shall have the meaning set forth in Section 9.2
of this Agreement.
     1.17 “Intelimer Instruction” shall have the meaning given to it in
Exhibit B.
     1.18 “Joint Use Improvements” shall mean Improvements created jointly by
the Parties which result in one or more patent applications or issued patents
covering a field of use (as opposed to a process or composition of matter).
     1.19 “Landec Field” shall mean all fields other than the APD Fields.
     1.20 “Landec Improvements” shall mean Improvements: (i) created solely by
Landec without any assistance or involvement by APD; (ii) created jointly by APD
and Landec or otherwise using the resources of both Parties, (iii) created by
Landec and a third party provided that such improvements are licensable to APD,
or (iv) acquired, or licensed by Landec and sublicensable to APD.
     1.21 “Landec IP” shall mean the Licensed Technology and the Joint Use
Improvements in the Landec Field.
     1.22 “Landec Intelimer Materials” shall mean any of Landec’s proprietary
temperature-responsive materials exhibiting a pre-defined thermal transition.
     1.23 “Laws” shall mean laws, statutes, ordinances, rules, regulations,
judgments or decrees administered, promulgated or issued by any Governmental
Authority.
     1.24 “Licensed Technology” shall mean the Patent Properties, the Existing
Know-How and any Landec Improvements.
     1.25 “Licensed Trademarks” shall mean the mark “INTELIMER”, including all
registered and common law rights thereto and goodwill associated therewith, and
any foreign equivalent or representation thereof where Landec has the rights to
such mark. Exhibit C sets forth the territories in which the mark is currently
registered.
     1.26 “Minimum Payments” shall have the meaning given to it in Section 6.2.

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     1.27 “Net Sales” shall mean all money received from sales of products minus
amounts paid to unaffiliated third parties (distributors, agents and the like)
for sales costs directly related to the sale of such products.
     1.28 “Patent Properties” shall mean the patents and patent applications
listed on Exhibit A covering the Landec Intelimer Materials, the inventions
described and claimed therein, and any continuations, continuations-in-parts,
divisionals, reexamination certificates, reissuances, renewals or extensions
thereof or related by a priority claim therewith, and any and all foreign
patents, utility models (i.e., petty patents), registrations and patent
applications corresponding thereto (and any extension, reissue, reexamination or
substitute of any of the foregoing, which will be automatically incorporated in
and added to this Agreement and shall periodically be added to Exhibit A).
     1.29 “Person” shall mean an individual or entity of any kind, including a
Governmental Authority.
     1.30 “Personal Care Field” shall have the meaning given to it in
Section 1.11.
     1.31 “Pharmaceuticals” shall mean therapeutics requiring FDA approval.
     1.32 “Product” shall mean a product for use in the APD Fields (i) that is
developed using the Licensed Technology or an Improvement; (ii) which comprises
any of the Landec Intelimer Materials, or (iii) that is covered by any of the
Patent Properties.
     1.33 “Proprietary Information” of a disclosing Party disclosed to the
receiving Party hereunder shall mean any confidential information relating to
the disclosing Party’s business and/or technology and which is labeled as
confidential or proprietary or identified in writing as confidential or
proprietary.
     1.34 “Proprietary Rights” shall mean all intellectual property rights
whether registrable or not of any sort anywhere in the world.
     1.35 “R&D Period” shall have the meaning set forth in Section 3.1.
     1.36 “Reserved Fields” shall initially mean the fields of (i) architectural
and industrial coatings (excluding powder coatings) and (ii) electronics (e.g.
processing materials for semiconductor component manufacturing, battery
materials or flat panel displays); or such other fields as replace these initial
Reserved Fields in accordance with Section 5.
     1.37 “Term” shall have the meaning given to it in Section 10.1.
     1.38 “Thermoset Latent Catalysts” shall mean Landec Intelimer Materials
used as catalysts, effectors, activators, cross-linkers, initiators and/or
precursors thereof to enhance or inhibit polymerization.
     1.39 “Work Plan” shall mean the work plan that is attached hereto as
Exhibit B, which is incorporated by reference herein, as amended, modified,
extended or replaced upon mutual agreement of the Parties.

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     1.40 “Year” shall mean a year of this Agreement (i.e. Year 1 shall mean
that period commencing on the Effective Date and ending on the first anniversary
of the Effective Date).
2. Licenses
     2.1 Technology License to APD. Subject to the terms and conditions of this
Agreement, Landec hereby grants to APD an exclusive, worldwide,
non-transferable, non-sublicensable, license for all rights to use, make, have
made, market, sell, offer for sale, import and export and otherwise exploit the
Licensed Technology within the APD Fields; provided, however, that Landec shall
retain the right to use the Licensed Technology within the APD Fields solely as
needed to perform its obligations under Section 3 below. For the avoidance of
doubt, the forgoing license shall include the right to have third parties
manufacture Products on behalf of APD and the right of APD’s customers to use
Products delivered to them by or on behalf of APD. Notwithstanding the forgoing,
the license granted in this Section 2.1 shall be subject to the terms of License
and Development Agreement between Landec and ************ under which ***
retains a non-exclusive right to use and sell ************ and which, without
APD’s consent, which consent shall not be unreasonably withheld, shall not be
amended, renewed, expanded or extended by Landec.
     2.2 Technology License to Landec. Subject to the terms and conditions of
this Agreement, APD hereby grants to Landec an exclusive, worldwide,
non-transferable, non-sublicensable, license for all rights to use, make, have
made, market, sell, offer for sale, import and export and otherwise exploit the
APD Improvements within the Landec Field; provided, however, that APD shall
retain the right to use the APD Improvements within the Landec Field solely as
needed to perform its obligations under Section 3 below. For the avoidance of
doubt, except as may be explicitly set forth in the Supply Agreement, the
forgoing license shall include the right to have third parties (who are not
primary polymerization competitors of APD) manufacture products utilizing the
APD Improvements on behalf of Landec and the right of Landec’s customers to use
products utilizing the APD Improvements delivered to them by or on behalf of
Landec in the Landec Field. To the extent that Landec generates any revenue by
selling products produced using the APD Improvements in the Landec Field, then
Landec shall pay APD a royalty of two percent (2%) of the Net Sales for the
Intelimer polymer included in any product which is made using the APD
Improvements.
     2.3 Ownership. Except for the licenses expressly granted under this
Section 2, Landec retains all right, title and interest in and to the Landec IP.
Thus, Landec is free to transfer, license and otherwise exploit the Landec IP in
the Landec Field worldwide. Except for the licenses expressly granted under this
Section 2, APD retains all right, title and interest in and to the APD IP. Thus,
APD is free to transfer, license and otherwise exploit the APD IP in the APD
Fields worldwide.
     2.4 Restrictions. APD will not use the Licensed Technology for a purpose
other than to exploit Products for use within the APD Fields as expressly
permitted in this Agreement. Landec will not use the APD Improvements for a
purpose other than as expressly permitted herein.
 

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     2.5 Improvements Developed with Third Parties. Each Party shall use
commercially reasonable efforts to include provisions in third party development
contracts that would permit the other Party hereto to receive a license to any
Improvements co-developed with a third party and a Party hereto. For those
Improvements co-developed by a Party with a third party under a development
contract containing the forgoing provisions, the developing Party hereby grants
the other Party hereto a license to such Improvement pursuant to Section 2.1 or
Section 2.2, as applicable.
     2.6 Trademark License and Restrictions.
     (a) License Grant. Subject to the provisions of this Agreement, Landec
grants to APD a non-exclusive, non-transferable, worldwide, royalty-free license
to use the Licensed Trademarks solely in connection with the manufacture,
marketing, advertising, sale and offer for sale of the Products in the APD
Fields. The foregoing is not an obligation upon APD to use such Licensed
Trademarks and APD shall have sole discretion as to whether such Licensed
Trademarks are used.
     (b) Restrictions. APD agrees that the Products bearing any Licensed
Trademarks (which may, as deemed appropriate by APD, be co-branded with APD
trademarks) will be manufactured, sold and distributed in accordance with all
applicable Laws and regulations and that such products and APD shall use all
reasonable efforts to avoid adversely upon the name of Landec or APD. APD shall
not challenge or diminish any of Landec’s rights in the Licensed Trademarks
during the term of this Agreement or thereafter. APD shall not sublicense,
explicitly or implicitly any rights in the Licensed Trademarks without the prior
express written consent of Landec. APD shall not at any time incorporate any of
the Licensed Trademarks or any mark or marks so nearly resembling the same as to
be likely to deceive or cause confusion, in its corporate or business name or
logo. APD shall not at any time use or apply to register in its name the
Licensed Trademarks or any mark or marks confusing similar thereto. Except for
APD trademarks associated with co-branding hereunder, all use of the Licensed
Trademarks shall accrue to the benefit solely of Landec. APD agrees to provide
test samples of Products upon Landec’s reasonable request.
     (c) Procedure. APD shall provide to Landec for inspection a certificate of
analysis, label and product and marketing literature (including all materials
using any of the Licensed Trademarks) for the first commercial product in each
product family (intended for a specific application) that incorporates a
Licensed Trademark or which will be marketed or distributed using a Licensed
Trademark a reasonable time prior to the initial sale or distribution of each
such product. Landec shall have the right to make reasonable changes, including
without limitation changes in the color and font of the mark. At Landec’s
request, APD will reasonably assist Landec in monitoring the use of the Licensed
Trademarks by conducting an annual review with Landec of APD’s use of the same.
APD will at all times comply with any trademark usage guidelines that may be
provided by Landec. In the event of infringement of any of the Licensed
Trademarks by any third party, APD will cooperate and assist Landec in the
enforcement of Landec’s rights therein. Nothing herein shall require APD to use
the Licensed Trademarks.
     (d) Failure to Comply. In the event that APD fails to comply with the
provisions of this Section 2.6, Landec may give written notice specifying the
failure to comply. Unless the

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failure to comply is remedied within thirty (30) days after such notice, Landec
may terminate APD’s rights solely under this Section 2.6 immediately upon
written notice to APD. Upon such termination, APD shall cease all use of the
Licensed Trademarks subject to allowing APD and its customers to exhaust any
preexisting compliant inventory and compliant advertising bearing the Licensed
Trademarks for up to ninety (90) days thereafter. Termination of this
Section 2.6 shall not terminate the license under the Licensed Technology.
     3. Work Plan and Research Obligations.
     3.1 Work Plan. The specific research and development activities to be
performed by Landec, together with any assistance to be provided by APD are set
forth in the Work Plan. Each of the Parties shall perform its obligations under
the Work Plan during the time period in which the Work Plan is in effect which
shall be for a period of three (3) Years following the Effective Date and which
may be extended by the Parties as provided herein. Prior to the second
anniversary of the Effective Date, the Parties shall mutually agree on whether
or not to continue the Work Plan for Years four (4) and five (5) of this
Agreement and the Parties shall mutually agree on the scope of the R&D that will
occur under such Work Plan (e.g., what R&D shall occur, and which party will
conduct such R&D). As more fully described in the Work Plan, Landec shall
provide to APD agreed upon levels of research and development services, in
connection with the Licensed Technology, and technical service and manufacturing
support within the APD Fields during the R&D Period. The Work Plan is divided
into two parts: the Intelimer Instruction Period and the R & D Period (as
defined below).
     (a) Intelimer Instruction Period. During the period commencing on the
Effective Date and continuing until May 28, 2006 (the “Intelimer Instruction
Period”), Landec shall transfer copies of its technology and teach APD about
Landec’s Intelimer technology by delivering the Intelimer Instruction, as more
fully described in the Work Plan, to an extent and a degree reasonably
sufficient for APD to replicate the Existing Know-How and manufacture of Landec
Intelimer Materials.
     (b) R & D Period. The period commencing on the Effective Date and
continuing until the expiration or termination of the Work Plan shall be
referred to herein as the “R&D Period”. During the R & D Period, Landec shall
provide mutually agreed upon levels of research and development services,
application development, technical service, customer support and manufacturing
support in connection with the licensed technology within the APD Fields as
further described in the Work Plan. Each of the Parties shall provide to the
other Party reasonable technical information and assistance in connection with
such other Party’s work under the Work Plan. During the R&D Period, on a
mutually agreed upon regular basis, each Party shall supply to the other Party
reasonable documentation concerning such Party’s progress and Improvements under
the Work Plan.
     (c) A breach of the Work Plan shall not be a breach of this Agreement
unless a Party materially fails to satisfy a material obligation under the Work
Plan. With respect to the Intelimer Instruction, APD shall notify Landec in
writing of such material failure by June 6, 2006 and Landec shall have sixty
(60) days to remedy such breach from receipt of notice thereof.

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With respect to the R&D Period, APD shall notify Landec in writing of such
material breach within thirty (30) days of its knowledge of such breach and
Landec shall remedy such breach within sixty (60) days of receipt of notice
thereof. The parties agree that APD may request changes to the Work Plan
(preferably during the quarterly review meetings as described in Section 3.2)
and that Landec will use its reasonable efforts to meet such requests provided;
however, that Landec shall retain sole discretion over the use of Landec’s
resources.
     (d) The completion or termination of the Work Plan shall not cause a
termination of this Agreement.
     3.2 Review Meetings and Customer Visits. At least once per calendar quarter
during the R&D Period, at mutually agreeable times and locations,
representatives of the parties’ research and development teams and business
development staff shall meet either in person or by videoconference to discuss
the progress under the Work Plan. For in-person customer or toll producer visits
or review meetings requested by APD at a non-Landec facility and a non-APD
facility (other than a limited number of customer visits agreed to in the Work
Plan), APD shall pay all reasonable and previously authorized travel, meal and
lodging expenses of Landec personnel to attend each meeting that is conducted in
person if APD so requests the attendance of that person, and the Parties shall
otherwise bear their own costs associated with the Work Plan, participating in
such meetings or customer visits agreed to in the Work Plan.
4. Supply Agreement. Within sixty (60) days of the Effective Date, the parties
shall sign an agreement (the “Supply Agreement”) for APD to supply Landec with
its polymer requirements for ************, provided that APD is able to supply
such products to Landec, either from third party tollers or APD’s in-house
production, that meet the volume requirements and quality specifications
provided by Landec. APD shall apply a *** percent (***%) markup over Total
Manufacturing Cost (as defined in the Supply Agreement, the “TMC”) to arrive at
the final sales price to Landec. The Direct Profits arising from the difference
between the sales price to Landec and the TMC will be shared with Landec in the
same percentages as for Direct Profits arising from Product sales under
Section 6.2 of this Agreement. If APD achieves TMC reductions resulting from any
or all of increased production scale, decreased raw material costs, process
yield improvements, and overhead cost reductions then the sales price to Landec
will be reduced effective in the calendar quarter following the onset of such
cost reductions. APD shall be obligated to either: (i) match competitive offers
to Landec for such *** products, provided the quotations are from suppliers
capable of sustained production in similar quantities and quality as provided to
Landec by APD for such products at that time, or (ii) if APD is unwilling or
unable to do so, APD hereby releases Landec from its obligation to purchase its
requirement of *** products from APD. Unless otherwise agreed by the Parties,
the Supply Agreement shall not be terminated by any termination of this
Agreement and shall not be affected by any exercise of the Buy-Out Option. Any
failure to enter into a Supply Agreement or termination of the Supply Agreement
shall not terminate this Agreement.
5. Reserved Field Commercialization. There may be up to two (2) Reserved Fields
at any time during the Term. Each Reserved Field shall have a period of three
(3) Years to be
 

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Commercialized. If such Reserved Field is Commercialized during such three
(3) Year period, it shall convert to an Exclusive Field and the Parties may
mutually agree to add a replacement Reserved Field. If a Reserved Field is not
Commercialized during such three (3) Year period, then: (i) it automatically
reverts back to Landec; (ii) it ceases to be a “Reserved Field” as defined
herein; and (iii) the Parties may mutually agree to add a replacement Reserved
Field. For every new Reserved Field that is added, such Reserved Field shall
have three (3) years to become Commercialized or it will revert to Landec with
no further APD rights in such field as provided above.
6. Fees; Payment; Taxes.
     6.1 Scheduled Payments.
     (a) Payments upon Agreement Signing. In consideration for the Intelimer
Instruction to be given hereunder, APD shall make a non-refundable reimbursement
to Landec of one hundred thousand U.S. dollars ($100,000.00) upon the signing of
this Agreement. In partial consideration for the license to the Licensed
Technology granted hereunder, APD shall pay net to Landec by wire transfer a
non-refundable fee of eight hundred thousand U.S. dollars ($800,000.00) upon the
signing of this Agreement. For the avoidance of doubt, the total non-refundable
fee due upon the signing of this Agreement shall be nine hundred thousand U.S.
dollars ($900,000.00).
     (b) Quarterly Payments. In partial consideration for the license to the
Licensed Technology granted hereunder, prior to the start of each calendar
quarter beginning with the first calendar quarter in Year 2 and continuing
through the last calendar quarter in Year 3, APD shall pay net to Landec by wire
transfer a non-refundable fee of two hundred thousand U.S. dollars
($200,000.00). For the avoidance of doubt, the total non-refundable quarterly
payments payable hereunder shall be one million six hundred thousand U.S.
dollars ($1,600,000.00) and the total non-refundable amounts due under this
Section 6.1 shall be two million five hundred thousand U.S. dollars
($2,500,000.00). Notwithstanding the foregoing, no quarterly payments shall
become due or payable hereunder for the post termination period in the event
this Agreement is terminated under Section 10.2.
     6.2 Profit-Sharing. Commencing on the first anniversary of the Effective
Date and continuing through the tenth anniversary of the Effective Date, subject
to Sections 10.2 and 11.4 and provided that Landec is not in material breach of
this Agreement, APD shall pay net to Landec, forty percent (40%) of Direct
Profits from the APD Fields together with forty percent (40%) of Direct Profits
from *** products delivered to Landec under the Supply Agreement. From the tenth
anniversary of the Effective Date through the end of the Term, APD shall pay net
to Landec, ten percent (10%) of Direct Profits from the APD Fields together with
ten percent (10%) of Direct Profits from *** products delivered to Landec under
the Supply Agreement. Notwithstanding the forgoing and subject to Sections 10.2
and 11.4, APD shall make the following minimum payments (the “Minimum Payments”)
to Landec beginning in Year 2 and continuing through Year 5:
 

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Year 2: $500,000
Year 3: $1,000,000
Year 4: $1,000,000 (Note: Subject to Section 6.4)
Year 5: $1,000,000 (Note: Subject to Section 6.4)
     In the event that the Direct Profits payable to Landec in any given Year
(the “Direct Profit Payment”) is less than the Minimum Payment due for that
Year, APD shall pay Landec the difference between the Direct Profit Payment and
such Minimum Payment prior to the end of such Year. In the event that APD fails
to make payments under this Section 6.2 meeting the Minimum Payment due in any
given Year, Landec may convert the license in the Exclusive Fields to a
non-exclusive license and revoke the license in the Reserved Fields. For the
avoidance of doubt, there are no Minimum Payment obligations from Year 6 through
the end of the Term. A failure to make Minimum Payments because the actual sales
of Products were not high enough to trigger the Minimum Payments shall not
entitle Landec to terminate this Agreement but shall entitle Landec to the
remedies contained in this paragraph.
     6.3 Continued Technical Support. During the initial three (3) Years, Landec
will provide resources to reasonably facilitate the objectives described at
Exhibit G, as modified by the Parties in the Work Plan from time to time to
reflect commercial or technical circumstances and objectives. Such commitment
from Landec will be negotiated in good faith by the Parties and will be included
in future versions of the Work Plan. The foregoing commitment may continue, in
whole or in part, during Years 4 and 5, in accordance with the Work Plan and as
mutually decided by the Parties pursuant to Section 6.4. For the avoidance of
doubt, there are no ongoing support obligations from Year 6 through the end of
the Term.
     6.4 Changes to Minimum Payments. Notwithstanding the provisions of
Sections 6.2 and 6.3, within thirty (30) days following the mutual determination
of the Parties of the existence and scope of R&D efforts in Years 4 and 5
pursuant to Section 3.1, APD and Landec shall negotiate in good faith reducing
Minimum Payments to be commensurate with any reduction in Landec resources
provided under Section 6.3 for Years 4 and 5; provided, however, that APD shall
remain obligated to pay Landec, forty percent (40%) of Direct Profits as
provided in Section 6.2.
     6.5 Buy-Out Option. At any time commencing at the start of Year 11, or
commencing at the start of any succeeding Year, APD may pay Landec *** percent
(***%) of the Direct Profits arising from the sale or license of Products from
the immediate prior Year, excluding any non-recurring charge that occurred in
such Year and APD shall have no further obligations to make Direct Profit
Payments under Section 6.2. This balloon payment shall be in lieu of the 10%
Direct Profit Payments that would otherwise be due pursuant to Section 6.2 for
the remainder of the Term and is referred to herein as the “Buy-Out Option”.
     6.6 Sales, General and Administrative Costs. APD shall pay all of its costs
related to sales, administration and other general costs related to development,
sale and distribution of the Products. Such costs shall include, without
limitation, process engineering support and costs of technical services related
to sales and marketing. APD shall dedicate adequate working capital to permit it
to Commercialize the Products in the Reserved Fields and meet all of its
obligations hereunder related to the APD Fields. All of the foregoing costs and
working capital paid by APD shall be in amounts deemed solely by APD to be
adequate. It is contemplated by the
 

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Parties that all of the forgoing will be provided by APD after completing the
Work Plan; however, in the event that APD reasonably requests that Landec
provide any of the forgoing, APD shall reimburse Landec for the previously
authorized costs thereof. For the avoidance of doubt, except to the extent that
the Work Plan explicitly says that Landec is paying for any of the costs
described in this Section 6.6, after the Intelimer Instruction period, any and
all of the costs described in this Section 6.6 requested by APD and performed by
Landec or contained in the Work Plan shall be paid for by APD.
     6.7 Payment and Taxes. Payments due under Section 6.2 shall be paid monthly
within thirty (30) days of such time as APD receives payments from its customers
for Products or from Landec under the Supply Agreement. All payments shall be
made in United States dollars in immediately available funds. APD shall pay all
applicable sales, use, excise and similar taxes and duties in connection with
the Products and in connection with all payments made under this Section 6, as
well as any applicable bank and/or clearing charges, unless such charges are
paid by the customer. Amounts payable under this Section 6 or any other part of
this Agreement that are not paid when due shall bear interest at the rate of
Prime plus one and one-half percent (1.5%), where “Prime” means the prime U.S.
inter-bank lending rate on the first business day of the calendar quarter in
which such interest accrues, as reported in the Wall Street Journal.
     6.8 Audit. Landec shall have the right to appoint an independent third
party auditor, not unreasonably objectionable to APD and bound by
confidentiality obligations, to audit APD’s books and records related solely to
this Agreement, sales of Products and *** products and the calculation of Direct
Profits hereunder. The costs of such audit shall be paid for by Landec provided,
however, that (i) APD shall immediately pay the amount of the underpayment
revealed by the audit (if any); and (ii) in the event that such audit reveals an
underpayment of five percent (5%) or more, APD shall pay all costs associated
with conducting such audit. The audits permitted hereunder will not be performed
more often than annually. Any Direct Profit Payments not disputed within three
(3) years of their quarter shall be deemed acceptable and accurate.
     6.9 To the extent that a Landec patent in the *** Field is invalidated and,
as a result, a particular Product exploited by APD hereunder is not covered by
any Landec patent, then the Parties shall meet and reasonably discuss a Direct
Profit Payment reduction with respect to such Product; provided, however, that
if such Product (or the manufacture thereof) involves the use or exploitation of
Landec Intelimer Materials, Existing Know-How, Improvements or Proprietary
Information (provided that the foregoing have not entered the public domain)
then no reduction in the Direct Profit Payments payable hereunder shall occur.
7. Representations and Warranties.
     7.1 Each Party hereby represents and warrants to the other Party that it
has been duly incorporated and is validly existing in good standing as a
corporation under the laws of its jurisdiction of incorporation, with the
requisite corporate power and authority to enter into this Agreement.
 

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     7.2 Landec hereby represents and warrants to APD that, to the best of
Landec’s knowledge the Patent Properties and exploitation of Landec Intelimer
Materials in the APD Fields may be exploited in such a manner as to not infringe
any third party patents.
     7.3 Landec hereby represents and warrants that it solely owns all right,
title and interest in the Licensed Technology or otherwise has the right to
grant the licenses granted hereunder, and that Exhibits A, C, F and, to the best
of Landec’s knowledge, E are complete and accurate as of the Effective Date.
     7.4 Landec hereby represents and warrants that the Patent Properties are
valid and enforceable, and that a portion of the Licensed Technology in the APD
Field (excluding disposable nonwovens and electronics) is covered by the Patent
Properties.
     7.5 Landec hereby represents and warrants that to the best of its
knowledge: (i) the Existing Know-How and Patent Properties can be manufactured
in accordance with the Intelimer Instruction and used for the APD Fields, and
(ii) the manufacture, shipment, disposal and use of the Existing Know-How and
Patent Properties in the APD Fields does not violate any federal, state or
governmental regulations or standards (including, without limitation, OSHA, EPA,
among other US and non-US regulatory agencies, in each case, to the extent they
have jurisdiction) when manufactured and used in accordance with Landec’s
published specifications and recommended use (as contained in product data
sheets, formulation sheets and product bulletins), provided that an immaterial
failure to follow such recommended uses shall not relieve Landec of its
responsibilities hereunder.
     7.6 Landec hereby represents and warrants that it will disclose all of
Landec’s Existing Know-How, Landec Improvements and Proprietary Information, in
sufficient detail to allow APD to manufacture, use and sell the Product in the
APD Fields.
     7.7 Landec hereby represents and warrants that, as of the Effective Date,
the Landec Intelimer Materials do not infringe on those patents and patent
applications in the *** Field listed on Exhibit E. If APD suffers damages
arising out of a breach of this representation and warranty its only remedies
shall be termination under Section 10.2, indemnification under Section 11.1 and
the Impairment provisions of Section 11.4 and APD may set off the amounts for
which it would be entitled to an indemnity against Direct Profit Payments that
would otherwise be due to Landec hereunder.
8. Confidentiality.
     8.1 Confidential Information. Each Party shall treat as confidential all
Proprietary Information of the other Party, shall not use such Proprietary
Information except as set forth in this Agreement, and shall use its best
efforts not to disclose such Proprietary Information to any third party except
to is professional advisors under a duty of non-disclosure. Without limiting the
foregoing, each of the Parties shall use at least the same degree of care which
it uses to prevent the disclosure of its own Proprietary Information of like
importance to prevent the disclosure of Proprietary Information disclosed to it
by the other Party under this Agreement. Each Party shall disclose Proprietary
Information of the other Party only to its directors, officers,
 

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employees, consultants and advisors who are have a need to know such information
in order for such Party to carry out the activities and transactions
contemplated by this Agreement. Each Party shall promptly notify the other Party
of any actual or suspected misuse or unauthorized disclosure of the other
Party’s Proprietary Information.
     8.2 Exceptions. Notwithstanding the above, neither Party shall have
liability to the other with regard to any Proprietary Information of the other
which the receiving Party can prove:
     (i) was in the public domain at the time it was disclosed or has entered
the public domain through no fault of the receiving Party;
     (ii) was known to the receiving Party, without restriction, at the time of
disclosure;
     (iii) is disclosed with the prior written approval of the disclosing Party;
     (iv) was independently developed by employees or consultants of the
receiving party that have not received access to the Proprietary Information of
the disclosing party; or
     (v) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body; provided, however, that the
receiving Party shall provide prompt notice of such court order or requirement
to the disclosing Party to enable the disclosing Party to seek a protective
order or otherwise prevent or restrict such disclosure.
     8.3 Regulatory Filings. Landec agrees that the version of this Agreement
that it files with the U.S. Securities and Exchange Commission shall include a
request to seek confidential treatment in a manner mutually agreed upon by the
Parties. Except as required to be submitted to the U.S. Securities and Exchange
Commission or as contained in a mutually acceptable announcement or press
release, the terms of this Agreement shall be maintained confidential.
9. Intellectual Property; Patent Matters.
     9.1 Licensed Technology and Improvements.
     9.1.1 Subject to the terms and conditions of this Agreement, any APD
Improvements and Joint Use Improvements with at least one claim applicable to or
covering at least one of the APD Fields shall be solely owned by APD and any
Landec Improvements and other Joint Use Improvements with at least one claim
applicable to or covering at least one of the Landec Fields shall solely be
owned by Landec. Subject to Section 9.1.5 below, Landec hereby assigns to APD
all right, title and interest in and to any APD Improvements and Joint Use
Improvements in the APD Fields that Landec has or may hereafter acquire. Subject
to Section 9.1.5 below, APD hereby assigns to Landec all right, title and
interest in and to any Landec Improvements and other Joint Use Improvements in
the Landec Field that APD has or may hereafter acquire. The Parties agree that a
patent application may include either or all of a Joint Use Improvement, a
composition of matter Improvement and/or a process Improvement. The Parties will
and hereby do assign ownership of patents and other intellectual property
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accordance with the terms and conditions of this Agreement and such Improvements
may be pursued as separate patents.
     9.1.2 Subject to Section 9.1.3, Landec shall, with the full co-operation of
APD, and in Landec’s sole discretion, be responsible for preparing, filing,
prosecuting, maintaining and renewing any patent applications and patents
covering the Landec IP worldwide and shall do so at its sole cost and expense.
Subject to Section 9.1.3, APD shall, with the full co-operation of Landec, and
in APD’s sole discretion, be responsible for preparing, filing, prosecuting,
maintaining and renewing any patent applications and patents covering the APD IP
worldwide and shall do so at its sole cost and expense. The prosecuting Party
shall promptly provide copies of all U.S. and foreign patent office
correspondences to the other Party, and the prosecuting Party shall have the
sole discretion as to prosecution strategy for Improvements, including appeals,
abandonment, claim coverage, maintenance fee payment and annuity fee payment,
without liability to the other Party.
     9.1.3 If a Party (the “Requesting Party”) wants to broaden the other
Parties’ patent coverage with respect to the APD Fields (where APD is the
Requesting Party) or the Landec Field (where Landec is the Requesting Party),
the Parties will reasonably discuss such action and the Requesting Party will
bear all costs for preparing, filing, prosecuting, maintaining and renewing any
patent applications and patents related to such request.
     9.1.4 In the event that either party wishes to abandon any Improvements it
owns hereunder within any part of the applicable territory that party shall
notify the other party in writing and, if mutually agreed between the parties,
shall transfer ownership and prosecution responsibility for such Improvements in
the applicable territory to the other party. Such abandonment shall not include
normal claim amendments, cancellations or other limitations made to patent
claims during routine prosecution.
     9.1.5 The parties shall make their reasonable endeavors to divide all
Improvements so it can be solely owned by one or other Party according to their
respective fields in accordance with Section 9.1.1 above. However,
notwithstanding Section 9.1.1 above, if by mutual written agreement the Parties
agree that some Improvement should be owned jointly, the Parties shall grant
each other exclusive cost-free licenses in their respective fields worldwide
under that jointly owned Improvement. Notwithstanding Section 9.1.2, the
procedures for filing, prosecuting, maintaining and renewing any such jointly
owned applications for protection of Improvement worldwide shall be agreed
between the Parties in writing on a case by case basis. Except as otherwise
agreed by the Parties, to the extent that any Improvement is useful in the
Landec Field and the APD Fields: (a) Landec hereby grants to APD a perpetual,
worldwide, non-sublicensable, non-transferable license to exploit within the APD
Fields such Improvement as may be owned by Landec, and APD shall pay Landec a
license fee equal to two percent (2%) of the Net Sales resulting from the sale
of Intelimer polymers containing such Improvements and (b) APD hereby grants to
Landec a perpetual, worldwide, non-sublicensable, non-transferable license to
exploit within the Landec Fields such APD Improvement or Joint Use Improvement
as may be owned by APD and Landec agrees to pay APD two percent (2%) of the Net
Sales resulting from the sale of Intelimer polymers containing such
Improvements. Notwithstanding anything herein to the contrary, in the event that
APD develops an APD Improvement or a Joint use Improvement in a Reserved Field
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to Landec an exclusive, perpetual, worldwide, sublicensable and transferable
license to sell and otherwise exploit within the Reserved Field such Improvement
as may be owned by APD and Landec agrees to pay APD two percent (2%) of the Net
Sales resulting from the sale of Intelimer polymers containing such Improvements
and Landec further agrees that any third party manufacturer of such Improvement
will not be a primary polymerization competitors of APD. Notwithstanding
anything herein to the contrary, without APD’s prior written approval, Landec
shall not have the right to transfer or sublicense any APD Improvement to a
direct polymerization competitor of APD. For the avoidance of doubt, during the
Term of the Agreement, any amounts payable by APD under this Section 9.1.5 shall
be included within and not be in addition to the Direct Profit Payments.
     9.1.6 Each Party agrees to cooperate with the other Party or its
designee(s) (at such other Party’s expense if not otherwise expressly set forth
herein), both during and after the term of this Agreement, in applying for,
obtaining, perfecting, evidencing, sustaining and enforcing their respective or
jointly owned rights in Improvements, including, without limitation, executing
such written instruments (including, without limitation, declarations,
assignments and powers of attorney) as may be prepared by such Party, using
protocols appropriate to research and development activities to ensure all
inventors sign appropriate documents, coordinating and agreeing on timing of
filing patent applications and scope of claims for related inventions in the
respective Fields and doing such other acts as may be necessary in the opinion
of such Party to obtain a patent, register a copyright, or otherwise enforce
such Party’s rights in such Improvement and such products, respectively.
     9.1.7 The parties hereto agree that Improvements generated within this
Agreement are part of a joint research agreement and effort, pursuant to 35
U.S.C. §103(c), and that each party will promptly execute any document,
including a terminal disclaimer, and other documents deemed necessary by the
U.S. Patent and Trademark Office (“USPTO”) to comply with this statutory
provision. This section 9.1.7 is excluded from any confidentiality restrictions
provided for in this Agreement and can be filed with the USPTO.
     9.2 Enforcement of Rights
     9.2.1 Notice of Alleged Infringement. Each Party shall provide written
notice (an “Infringement Notice”) promptly to the other Party of any alleged
infringement by a third party of the Licensed Technology or Improvement in the
APD Field, which becomes known to the first Party and, together with such
notice, provide the other Party with all evidence in the notifying Party’s
possession of such alleged infringement.
     9.2.2 Enforcement. Following an Infringement Notice from either Party, the
party that owns the relevant Proprietary Rights shall have the first right, but
not the obligation, to enforce, at its own expense and utilizing counsel of its
own choice, any actual or alleged infringement or misappropriation of the
Proprietary Rights. In the event that the owning Party does not elect to
initiate a suit or action as provided above within six (6) months of the
applicable Infringement Notice, the other Party shall have the right, but not
the obligation, to prosecute or defend against, at its expense and utilizing
counsel of its choice, any actual or alleged infringement or misappropriation of
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     9.2.3 Party to the Suit. In the event one Party gives notice to the other
Party that in the first Party’s opinion they should both take action against a
third party with respect to infringement of any jointly owned Improvement, and
in the event that the Parties cannot promptly agree to a joint enforcement
course of action, or if a Party indicates its intent not to act (“the
Non-Enforcing Party”), the Party which desires to take action through licensing,
litigation or arbitration, may take such action (“the Patent Enforcing Party”).
In that event, the Patent Enforcing Party shall solely be responsible for all
enforcement strategy, and attorneys’ fees and costs associated with the
enforcement, and shall solely receive all damages, awards, proceeds and
compensation from the infringer, whether from licensing, litigation or
arbitration, and even if the Non-Enforcing Party joined pursuant to Fed. R.Civ.
P. 19 or the like but is not an actively paying participant in the enforcement
action. The Non-Enforcing Party shall voluntarily join if deemed necessary by a
court or arbitrator pursuant to Fed. R. Civ. P. 19 or the like, but only if the
accused infringer is not a current customer, current joint venturer, or current
supplier to the joining Non-Enforcing Party. The Patent Enforcing Party shall
promptly reimburse the Non-Enforcing Party for all reasonable attorneys’ fees
and costs associated with the litigation or arbitration initiated by the Patent
Enforcing Party.
     9.2.4 Damages. Any award of damages or any other amounts awarded, recovered
or obtained in connection with a disposition of any suit or legal action under
this section shall be for the benefit of the Party bringing or entering the suit
or legal action, but only to the extent arising from infringements or
misappropriation within the APD Fields; all other proceeds shall be the property
of and shall be retained by or provided to Landec. In the event that Landec
refuses to bring suit for an infringement within the APD Fields and APD
successfully concludes such an action where a third party was found to infringe
in the APD Field, then the amount of Direct Profits payable hereunder shall be
reduced by a mutually agreed amount that represents the royalty that would have
been due from such infringer in relation to the sales that were made by such
infringer over the period of two (2) years prior to the date of final resolution
of such action. APD shall be permitted to settle such an action provided,
however, it must obtain Landec’s prior written consent, which will not be
unreasonably withheld, prior to agreeing to any such settlement in which there
is a reasonable likelihood that Landec would be adversely affected by any such
settlement.
     9.2.5 Options Upon Notice of Infringement. Landec and APD agree to work
cooperatively regarding issues concerning Proprietary Rights and similar matters
and to exercise reasonable business judgment in carrying out the objectives of
this Agreement to avoid exposing either Party to liability under patent or
similar Laws in any of the countries in the applicable territory.
10. Term and Termination.
     10.1 Term. The term of this Agreement shall commence upon the Effective
Date and continue thereafter until the later of (i) the last to expire of any of
the Patent Properties or (ii) twenty (20) years from the Effective Date (the
“Term”) unless terminated earlier, as provided herein.

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     10.2 Early Termination.
     (a) Upon any material breach of, or material default under, this Agreement
(including failure to make any payment due hereunder or abandonment of a
substantial portion of the Licensed Technology by APD) by a Party, if the
non-breaching Party notifies the breaching Party within ninety (90) days of
gaining knowledge of such breach, the non-breaching Party may terminate this
Agreement upon written notice to the breaching Party unless the breaching Party
cures such breach or default within sixty (60) days (or with respect to late
payments under Section 6, within thirty (30) days) after the date of such
written notice. If APD exercises the Buy-Out Option in accordance with
Section 6.5, then this Agreement shall terminate as of the date of such
exercise. In the event that the aggregate revenues of APD in the *** Field are
******* below those Revenue Projections listed in Exhibit D in any one of the
*** and such shortfall is caused by ********, then, at either Party’s request,
the Parties shall engage in good faith discussions regarding terminating this
Agreement and transferring customer relationships and the licenses granted
hereunder back to Landec.
     (b) At anytime during the ***, APD may terminate this Agreement upon ninety
(90) days prior written notice if there is a ************, or based upon opinion
from counsel which has been made known to Landec (in a manner to preserve
attorney client privilege), ******************.
     10.3 Effect of Expiration or Termination. The termination or expiration of
this Agreement shall not: (a) relieve a Party hereto of any obligation accruing
to such Party prior to such termination; or (b) result in the waiver of any
right by a Party hereto accruing to such Party prior to such termination.
     10.4 Survival. The following sections of this Agreement shall survive
expiration or termination of this Agreement for any reason: Sections 1, 2.1
(only to the extent necessary to permit APD to exploit the APD Improvements or
Joint Use Improvements created prior to such termination on a non-exclusive
basis and APD shall pay Landec a license fee of two (2%) percent of the Net
Sales of Intelimer polymers), 2.2 (only to the extent necessary to permit Landec
to exploit the APD Improvements or Joint Use Improvements created prior to such
termination on a non-exclusive basis and Landec shall pay APD a license fee of
two percent (2%) of Net Sales of Intelimer polymers to the extent that they use
the APD Improvements or Joint Use Improvements), 2.3, 2.4, 4 (pursuant to the
terms of the Supply Agreement), 6.8, 8, 9, 10, and 12 through 15.
Notwithstanding the forgoing, (i) to the extent that Landec terminates this
Agreement for APD’s material breach, Section 2.1 (only to the extent necessary
to permit APD to exploit the APD Improvements or Joint Use Improvements created
prior to such termination on a non-exclusive basis) shall survive and APD shall
pay Landec a license fee of five percent (5%) of Net Sales of Intelimer
polymers; and (ii) to the extent that APD terminates this Agreement for Landec’s
material breach, Section 2.2 shall survive on a non-exclusive basis (only to the
extent necessary to exploit APD Improvements or Joint Use Improvements created
prior to such termination) and Landec shall pay APD a license fee of five
percent (5%) of Net Sales of Intelimer polymers to the extent that they use the
APD Improvements. Notwithstanding the forgoing, Section 2.1 shall not survive in
the event of any termination under Section 10.2 (b), except for APD’s continued
right to exploit the APD Improvements or Joint Use Improvements
 

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created prior to such termination provided that APD shall pay Landec a license
fee of five percent (5%) of Net Sales of Intelimer polymers.
     10.5 Not Sole Remedy. The foregoing termination rights are in addition to,
and not in lieu of, any other remedy available under this Agreement unless
otherwise expressly provided herein.
11. Indemnification.
     11.1 By Landec. Subject to Section 11.3 below, during the first three
(3) Years of the Term of this Agreement, Landec shall indemnify, defend and hold
APD and its directors, employees, agents and affiliates harmless from and
against all damages, losses, liabilities, costs (including without limitation
reasonable attorneys’ fees) and expenses (including any pre-approved settlement)
in connection with (i) any third party claim to the extent arising out of the
actual or alleged infringement or violation of any third party right by
exploitation of the Licensed Technology in the manner contemplated by this
Agreement; or (ii) any breach of the representations and warranties hereunder.
Notwithstanding the preceding sentence, Landec’s obligations under this
Section 11 will not apply to any claims, damages, liabilities, costs or expenses
to the extent that they arise out of: (x) specifications provided by APD that
are prepared without collaboration with Landec; (y) modifications of any
Licensed Technology in the APD Fields, which are not covered by Landec
Improvements or Joint Use Improvements, or that materially alter the form or
functionality thereof or (z) combinations of any of the Licensed Technology in
the APD Fields with any product not provided by Landec; provided that such
combination materially alters the form or function of the Licensed Technology or
that such claim, damage, liability, cost or expense arises out of or relates to
such non-Landec product ((x), (y) and (z), collectively, “Held Back Claims”).
Following the three (3) year indemnity period, APD shall have no claim and
Landec shall have no obligations with respect to (i) and (ii) above for claims
made after the first three (3) Years of the Term of this Agreement.
Notwithstanding anything to the contrary, Landec shall not be obligated to
indemnify APD pursuant to this Section 11.1 unless and until the total amount of
losses incurred by APD exceeds fifty-thousand dollars ($50,000.00 USD) in the
aggregate, in which event Landec shall indemnify APD for all losses as otherwise
provided herein.
     11.2 By APD. Subject to Section 11.3 below, during the Term of this
Agreement and thereafter, APD shall indemnify, defend and hold Landec and its
directors, employees, agents and affiliates harmless from and against all
damages, losses, liabilities, costs (including without limitation reasonable
attorneys’ fees) and expenses (including any pre-approved settlement) in
connection with: (i) any Held Back Claim; or (ii) any third party claim to the
extent arising out of any Product manufactured and/or sold by APD, except to the
extent that APD is entitled to indemnification from Landec under Section 11.1
above. APD’s indemnification obligation under this Section 11.2 shall be capped
at a total amount of two and one-half million dollars.
     11.3 Conditions to Indemnification. In any claim for defense or
indemnification hereunder, the indemnified party must (i) give the indemnifying
party prompt written notice of the applicable claim; (ii) reasonably cooperate
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party’s request and expense, in the defense and/or settlement of the claim; and
(iii) give the indemnifying party the right to control the defense and/or
settlement of the claim, except that the indemnifying party will not enter into
any settlement that adversely affects the indemnified party’s rights or
obligations without the indemnified party’s proper express written consent,
which will not be unreasonably withheld or delayed. The indemnified party may
participate in the defense and/or settlement of any such claim at its own
expense with counsel of its choosing. Notwithstanding the foregoing, any failure
of the indemnified party to comply with the provisions of this Section 11.3 will
not relieve the indemnifying party of any defense or indemnity obligations
hereunder except to the extent that the indemnifying party is prejudiced by such
failure.
     11.4 Impairment.
     (a) For the first three (3) Years, in the event that the Revenue Projection
(as defined below) in any such Year listed in Exhibit D (*** Field Customer
Sales Forecast) are not met due to: (i) ***, as reasonably documented,
confirming that the primary reason for *** not meeting *** the Revenue
Projection at Exhibit D is that *********************************, and/or
(ii) if ************************************ terminate or reduce the sale of
Products *** ************************************ ((i) and (ii) are referred to
herein as “Impairment”); then APD’s Direct Profit Payments payable under
Section 6.2 to Landec shall be reduced as described in this Section 11.4. In any
or all of the first 3 Years, if an Impairment occurs during such Year, then
APD’s Direct Profit Payments to Landec shall be reduced by the Impairment Amount
(as defined below) in the immediate following Year as described below.
     (b) A “Revenue Projection” for a particular Year shall mean the revenues in
the Personal Care Field projected for that Year, as described on Exhibit D.
     (c) A “Direct Profit Projection” for a particular Year shall mean the
Direct Profits in the Personal Care Field projected for that Year, as described
on Exhibit D.
     (d) The “Impairment Amount” shall be calculated by obtaining the percentage
by which the revenues in the *** Field in any of the first three (3) Years falls
below the Revenue Projection due to an Impairment for that Year and then
multiplying that percentage by the Direct Profit Projection for that Year to
obtain a dollar amount which shall be the Impairment Amount. Notwithstanding the
forgoing, for the purpose of calculating the Impairment Amount, the total
revenues for a Year shall include revenues from all customers of APD in the ***
Field, whether or not listed in Exhibit D and, for the avoidance of doubt, shall
also include the revenues from the patent owner(s) listed on Exhibit E and shall
include all revenues from those customers on Exhibit D that purchase more
Products than was projected for such customer.
     (e) The Direct Profit Payments to Landec which are reduced in accordance
with this Section 11.4 shall be reduced in the Year immediately following the
Year during which an Impairment has occurred by reducing each monthly Direct
Profit Payment by one twelfth of the Impairment Amount. By way of example, if
revenues in Year 2 were thirty percent (30%) below the Revenue Projection
((Revenue Projection-Actual Revenues from Customers in Exhibit D)/Revenue
Projection) in the *** Field, and this reduction was caused by Impairment, then
this percentage multiplied by the Direct Profit Projection for Year 2 would
determine the Impairment
 

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Amount for Year 2 to be subtracted in equal monthly installments from the Direct
Profit Payments in Year 3. If the Direct Profit Projection was $200,000 in Year
2, the Impairment Amount would be $60,000 and the monthly Direct Profit payments
in Year 3 would be reduced by $5,000 per month. As a further example, if this
same thirty percent (30%) Impairment was offset by a five percent (5%) (as a
percent of the Revenue Projection) increase in revenues from a customer in the
*** Field in Exhibit D and an additional ten percent (10%) of revenues from a
customer in the *** Field not listed in Exhibit D then, in accordance with
Section 11.4 (d), fifteen percent (15%) would be multiplied by the Direct Profit
Projection to determine the Impairment Amount. If the Direct Profit Projection
was $200,000 in Year 2, the Impairment Amount would be $30,000 and the monthly
Direct Profit payments in Year 3 would be reduced by $2,500 per month.
     (f) APD agrees to provide Landec with information on the appropriate
customer contacts and access to those customers listed on Exhibit D in order to
verify the terms of this Section 11.4. Any amounts withheld from Landec in
accordance with this Section 11.4 shall count towards Landec’s total aggregate
liability under Section 12.2. The Minimum Payments described at Section 6.2
shall be reduced in the Year immediately following the Year during which the
Impairment has occurred by the same dollar amount as the Direct Profit Payments
are reduced by an Impairment under this Section 11.4. The Parties may agree to
pay certain amounts ***, to the *** which will count towards the Impairment
Amount.
     11.5 Sole Remedy. The indemnification obligations under this Section 11
shall be the indemnifying party’s sole obligation and the indemnified party’s
sole remedy with respect to any breach of Section 7 or other event giving rise
to indemnification hereunder.
12. Limitation of Liability and Disclaimers.
     12.1 INCIDENTAL AND CONSEQUENTIAL DAMAGES. NEITHER PARTY WILL BE LIABLE
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY SUBJECT
MATTER OF THIS AGREEMENT, EXCEPT IN CONNECTION WITH A BREACH OF SECTION 8 ABOVE
OR AS EXPRESSLY DESCRIBED IN SECTION 11.4 OR FOR LIABILITY ARISING OUT OF A
PARTY EXCEEDING THE SCOPE OF ANY LICENSE GRANTED TO SUCH PARTY HEREUNDER.
     12.2 LIMITATION OF OBLIGATIONS AND LIABILITY. IN NO EVENT WILL LANDEC BE
LIABLE UNDER THIS AGREEMENT WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR COST OF
PROCUREMENT OF SUBSTITUTE GOODS, SERVICES, TECHNOLOGY OR RIGHTS OR FOR ANY
AMOUNTS AGGREGATING IN EXCESS OF THE CUMULATIVE AMOUNTS ACTUALLY PAID BY APD TO
LANDEC PURSUANT TO SECTION 6.1 OF THIS AGREEMENT OR TWO AND ONE HALF MILLION
DOLLARS; WHICHEVER IS LESS. FURTHERMORE, THE AMOUNT OF ANY REDUCTION IN DIRECT
PROFIT PAYMENTS THAT WOULD HAVE
 

*   Certain information on this page has been omitted and filed seperately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

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BEEN PAID TO LANDEC PURSUANT TO SECTION 11.4 HEREOF SHALL FURTHER REDUCE
LANDEC’S TOTAL MAXIMUM LIABILITY HEREUNDER.
     12.3 DISCLAIMERS. TO THE EXTENT THAT LANDEC HAS PUBLISHED SPECIFICATIONS OR
OTHERWISE PROMOTED USAGE OF THE INTELIMER TECHNOLOGY FOR A CERTAIN APPLICATION,
THEN LANDEC HEREBY WARRANTS THAT SUCH TECHNOLOGY MAY BE USED FOR SUCH
APPLICATION, PROVIDED THAT IT IS USED IN COMPLIANCE WITH SUCH PUBLISHED
SPECIFICATIONS AND RECOMMENDED USES. OTHER THAN THE FORGOING REPRESENTATION AND
THOSE REPRESENTATIONS AND WARRANTIES CONTAINED AT SECTION 7, THE LANDEC
INTELIMER MATERIALS AND THE LICENSED TECHNOLOGY ARE PROVIDED “AS IS” AND WITHOUT
WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT.
13. Independent Contractors. The Parties are independent contractors and not
partners, parties to a joint venture or otherwise affiliated, and neither has
any right or authority to bind the other in any way.
14. Assignment. The rights and obligations of the Parties under this Agreement
may not be assigned or transferred (and any attempt to do so will be void)
except (a) to an Affiliate , and (b) this Agreement and the rights and
obligations hereunder may be assigned to an acquirer of all or substantially all
of the assets of the assigning Party to which this Agreement relates, or to an
acquirer of a majority of the voting power of the then outstanding capital
securities of the assigning Party. In the event that Section 14 (b) above shall
apply to an Affiliate of a Party hereto, then such Affiliate shall continue to
be bound by the rights and obligations of this Agreement. Any purported
assignment in violation of this section is void. Subject to the foregoing, this
Agreement is binding upon and shall inure to the benefit of the Parties and
their respective successors and assigns.
15. Miscellaneous.
     15.1 Amendment and Waiver. Except as otherwise expressly provided herein,
any provision of this Agreement may be amended and the observance of any
provision of this Agreement may be waived (either generally or any particular
instance and either retroactively or prospectively) only with the written
consent of the parties.
     15.2 Governing Law; Jurisdictions. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to
contracts made and to be performed wholly therein between parties residing in
New York, without regard to conflicts of laws provisions thereof and without
regard to the United Nations Convention on

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Contracts for the International Sale of Goods. All disputes arising out of or in
connection with this Agreement shall be finally settled by binding arbitration
under the rules of the American Arbitration Association (“AAA”) in accordance
with said rules. The location of such arbitration shall be in New York, New
York. The arbitration shall be conducted by a panel of three arbitrators who are
knowledgeable in the subject matter which is at issue in the dispute and at
least two of which shall be a registered U.S. Patent Attorneys or patent agents
(the “Panel”). Each Party shall have the right to appoint one member of the
Panel, with the third member to be mutually agreed by the two Panel members
appointed by the Parties, or, failing such agreement, shall be selected
according to the AAA rules. In conducting the arbitration, the Panel shall
determine what discovery will be permitted, consistent with the goal of limiting
the cost and time which the Parties must expend for discovery (and provided that
the Panel shall permit such discovery deemed necessary to permit an equitable
resolution of the dispute). The decision of the Panel shall be in writing and
shall set forth the basis therefore. The Parties shall abide by all awards
rendered in arbitration proceedings, and such awards may be enforced and
executed upon in any court having jurisdiction over the Party against whom
enforcement of such award is sought. The Panel shall also determine the steps,
if any, that a Party should take to correct any failure or breach by such Party
pertaining to any such dispute. The Parties shall share equally the Panel’s fees
and expenses unless otherwise determined by the Panel. Notwithstanding the
foregoing, either party may seek injunctive relief, to the extent permitted
herein, in any court of competent jurisdiction.
     15.3 Headings. Headings and captions are for convenience only and are not
to be used in the interpretation of this Agreement.
     15.4 Notices. All notices, requests, approvals, consents or other
communications required or permitted to be given herein shall be in writing and
shall be sufficiently given if delivered personally, forwarded by certified mail
with proper postage prepaid and return receipt requested (or by other prepaid
commercial delivery service that documents delivery) or transmitted by email
with an email acknowledgement confirming delivery by the recipient, in each case
to the Party to which directed at its address indicated below. Such
communications shall be deemed given upon delivery on a business day to the
address stated herein of the Party to which directed (notwithstanding any
acceptance, rejection or acknowledgment of such delivery) or, if not delivered
on a business day, the next succeeding business day. Any Party may from time to
time designate in writing any other address to which such communications shall
be sent.
If to APD, to:
Air Products And Chemicals, Inc.
7201 Hamilton Boulevard
Allentown, Pennsylvania 18195
Atten: Business Manager Personal Care Products
With a copy to: Office of Chief Patent Counsel

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If to Landec, to:
Landec Corporation
3603 Haven Avenue
Menlo Park, California 94025-1010
Telephone Number: Main — (650) 306-1650; Direct — (650) 261-3686
Email: sbitler@landec.com
With a copy to: dtaft@landec.com
Attention: Steven P. Bitler, Vice President, Corporate Technology
with a copy to: APD Relationship Manager
     15.5 Entire Agreement. This Agreement, together with all attachments and
exhibits hereto, supersedes all prior proposals, oral or written, all
negotiations, conversations, or discussions between or among the parties
relating to the subject matter of this Agreement. The foregoing language shall
not be read to supersede the Supply Agreement to be negotiated by the Parties
pursuant to Section 4 provided, however, this Agreement shall govern any
conflicts between the Supply Agreement and this Agreement, unless the parties
explicitly state otherwise in the Supply Agreement.
     15.6 Force Majeure. Neither Party hereto shall be responsible for any
failure to perform its obligations under this Agreement (other than obligations
to pay money) if such failure is caused by acts of God, war, terrorism (actual
or threatened), strikes, revolutions, lack or failure of transportation
facilities, Laws or other causes that are beyond the reasonable control of such
Party. Obligations hereunder, however, shall in no event be excused but shall be
suspended only until the cessation of any cause of such failure. In the event
that such force majeure should obstruct performance of this Agreement for more
than six (6) months, the Parties hereto shall consult with each other to
determine whether this Agreement should be modified. The Party facing an event
of force majeure shall use its reasonable efforts in order to remedy that
situation as well as to minimize its effects. A case of force majeure shall be
notified to the other Party by email within five (5) days after its occurrence
and shall be confirmed by a letter. In no event shall this Section 15.6 serve to
extend the term of this Agreement.
     15.7 Severability. If any provision of this Agreement is held illegal,
invalid or unenforceable by a court of competent jurisdiction, then that
provision shall be interpreted to preserve the intent of the Parties if
possible, and if not, then that provision will be limited or eliminated to the
minimum extent necessary so that this Agreement shall otherwise remain in full
force and effect and be enforceable.
     15.8 No Implied License. Each Party recognizes that the other Party grants
no license, by implication or otherwise, except for the licenses expressly set
forth in this Agreement.
     15.9 Basis of Bargain. Each Party recognizes and agrees that the warranty
disclaimers and liability and remedy limitations in this Agreement are material
bargained for bases of this Agreement and that they have been taken into account
and reflected in determining the consideration to be given by each Party under
this Agreement and in the decision by each Party to enter into this Agreement.

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     15.10 Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile or electronic transmission), each of which
shall for all purposes be deemed to be an original and all of which shall
constitute the same instrument.
     15.11 Bankruptcy. The Parties agree that the licenses granted hereunder are
subject to Section 365(n) of the U.S. Bankruptcy Code.
(Signature Page Follows)

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     The Parties have caused their duly authorized representatives to execute
and deliver this Agreement as of the Effective Date.

                  AIR PRODUCTS AND CHEMICALS, INC.       LANDEC CORPORATION
 
               
By:
          By:    
 
 
 
         
 
Name:           Name: Gary T. Steele
 
 
 
            Title:           Title: President and Chief Executive Officer
 
 
 
           

ATTACHED AND INCORPORATED BY REFERENCE EXHIBITS A THROUGH G

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Exhibit A
Patent Properties
The Landec Patents licensed in the Exclusive Fields and Reserved Fields include
but are not limited to the following:
(1) Landec patents and patent applications relating to Landec internal docket
11551-X

  a.   US 6,199,318 Aqueous Emulsions of Crystalline Polymers for Coating Seeds
    b.   US 6,540,984 Aqueous Dispersions of Crystalline Polymers and Uses    
c.   US 20030147946 Aqueous Dispersions of Crystalline Polymers and Uses     d.
  CIP’s, continuations, divisionals and foreign equivalents

(2) Landec patents and patent applications relating to Landec internal docket
12969-X

  a.   US 20010018484 Polymeric Thickeners for Oil-Containing Compositions    
b.   US 6,989,417 Polymeric Thickeners for Oil-Containing Compositions     c.  
CIP’s, continuations, divisionals and foreign equivalents

(3) US 6,831,116 Polymeric Modifying Agents
(4) US 6,255,367 Polymeric Modifying Agents
(5) US 6,224,793 Encapsulated Active Materials
(6) All other Landec patents and patent applications to the extent that they
relate to the Exclusive or Reserved Fields.

 

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Exhibit B
Work Plan
(i) “Intelimer Instruction” shall mean the instruction to APD given by Landec’s
V.P. of Corporate Technology (currently Steven P. Bitler) who will commit up to
*** hours and Landec’s Chief Operating Officer (currently David D. Taft) who
will commit up to *** hours commencing on the Effective Date and continuing
until May 28, 2006 (the period from the Effective Date through May 28, 2006 is
sometimes referred to as the “Intelimer Instruction Period”) and which shall
include, without limitation:

  a)   Detailed review of relevant patents, patent applications, and patent
claims and trade secrets;     b)   Side Chain Crystalline (SCC) chemistry and
product design fundamentals;     c)   Manufacturing process know-how;     d)  
Introduction to tollers; toller process familiarization;     e)   EH&S,
including regulatory and Personal Care self-regulation requirements     f)  
Applications development know-how;     g)   End-use customer introductions and
familiarization with on-going product development     h)   Technical service
(including with customers) and manufacturing support;     i)   Other fundamental
aspects of Intelimer technology estate, including regulatory compliance and
registrations, and;     j)   Any other of Landec’s Existing Know-How, and
Proprietary Information in sufficient detail to allow APD to manufacture, use
and sell the Products, including, without limitation, complete documentation,
drawings, samples and audio-visual materials supporting same, in each case as
reasonably necessary to permit APD to manufacture, use and sell the Products.

     During the Intelimer Instruction Period, APD shall provide adequate and
trained resources, equivalent to at least one full time staff person, to receive
the Intelimer Instruction to assure that it is received with clear
understanding. Landec will provide written documentation of the Intelimer
Instruction to assist in the transfer of copies of the Licensed Technology. APD
will return with a written list of questions on the Licensed Technology within
thirty (30) days of the Effective Date to allow Landec adequate time to respond
to these questions before May 28, 2006.
     To complete the Intelimer Instruction Landec’s V.P. of Corporate Technology
and Landec’s Chief Operating Officer will visit APD’s headquarter facility in
Allentown, PA. to assure delivery of Intelimer Instruction a minimum of two
times before May 28, 2006.
(ii) R&D Plan: Within thirty (30) days of the Effective Date and during the R&D
Period, the Parties agree to meet to develop a detailed R&D plan for Year 1 that
can be modified from time to time, preferably during the quarterly review
meetings, by agreement of the parties but at the direction of APD. Annual work
plans for Years 2 and 3 will be developed at the appropriate time.
 

*   Certain information on this page has been omitted and filed seperately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

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     As a part of the R&D Plan, Landec will detail specific research and
development activities to be performed and APD will detail any assistance it
will provide for the Work Plan as well as application development, technical
services, customer support and manufacturing support APD requires from Landec.
During the R&D Period, Landec shall provide the equivalent of at least three
(3) full time staff persons as well as appropriate facilities to provide such
activities. APD assistance will be determined by APD and will include the
resources of sales, business development, application development technical
service and process engineering staffing deemed appropriate required to meet the
R&D Plan and to assist in accomplishing the Work Plan as detailed and modified
according to Section 3.1. The parties agree to collaborate to prepare detailed
plans, objectives and milestones of both parties to meet the short term and long
term objectives of the R&D Plan.

 

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Exhibit C
Territories in which Licensed Mark is Registered

I.   Landec has registered the INTELIMER mark as:   001   – Temperature
sensitive polymers for use in manufacture of films, coatings and adhesives,    
  In the following countries:       United States: Registration Number 1,653,373
    Canada: Registration Number 383,823     Japan: Registration Numbers 4095860
(English), 4100755 (English), 4124857 (Katakana), 423935 (Katakana)   II.  
Landec is permitted to grant APD a license under the following trademarks which
Landec’s eye care partner, Alcon, has registered the INTELIMER mark as:      
Class 1 – Polymers alone and in combination with other ingredients for the
manufacture of films, coatings, adhesives and medical devices,       In the
following countries:       Algeria, Argentina, Armenia, Australia, Austria,
Azerbaijan, Belarus, Benelux, Bolivia, Brazil, Bulgaria, Chile, China, Colombia,
Costa Rica, Croatia, Cuba, Denmark, Dominican Republic, Ecuador, Egypt, El
Salvador, Estonia, Finland, France, Germany, Greece, Guatemala, Honduras, Hong
Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan,
Kazakhstan, Korea North, Korea South, Kyrgyzstan, Latvia, Lebanon,
Liechtenstein, Lithuania, Macedonia, Malaysia, Mexico, Moldova, Monaco, Morocco,
New Zealand, Nicaragua, Norway, Pakistan, Panama, Paraguay, Peru, Poland,
Portugal, Romania, Russian Federation, San Marino, Saudi Arabia,
Serbia-Montenegro, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden,
Switzerland, Taiwan, Tajikistan, Thailand, Turkey, Turkmenistan, Ukraine, United
Kingdom, Uruguay, Uzbekistan, Venezuela, Vietnam, WIPO.

 

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Exhibit D
*** Field Customer Sales Forecasts
 

*   Certain information on this page has been omitted and filed seperately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

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Exhibit E
See attached patent list.
* * * *
 

*   Certain information on this page has been omitted and filed seperately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

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Exhibit F
Reserved

 

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Exhibit G
APD Fields Customer Sales Forecasts
* * * *
 

*   Certain information on this page has been omitted and filed seperately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.