exv10w63



 







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 covering such Improvements in



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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 that APD fails to Commercialize,
then APD hereby grants



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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 the Proprietary Rights.



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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 with the indemnifying party at the indemnifying



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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





 




			
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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.




 









 





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.






 




			
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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.



 









 





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.




 









 











Exhibit D




*** Field Customer Sales Forecasts






 




			
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Exhibit E




See attached patent list.




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Exhibit F




Reserved




 









 





Exhibit G




APD Fields Customer Sales Forecasts




* * * *






 




			
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