LICENSE, SUPPLY AND R&D AGREEMENT

1.

Definitions.

1.1.

" Affiliate " means, with respect to any person or entity, any other person or entity which controls, is controlled by or is under common control with such person or entity. A person or entity will be regarded as in control of another entity if it owns or controls more than fifty percent (50%) of the equity securities of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority).

1.2.

" Commercially Reasonable Efforts " means those efforts, activities, measures, and resources of a diligent Third Party active in a similar field as the Party under the obligation to make such efforts would consider to be

commercially reasonable, feasible and viable to be performed, undertaken or made in or under the specific circumstances.

1.3.

" Confidential Information " means, with respect to each Party, proprietary data or information that belongs in whole or in part to such Party or information designated as Confidential Information of such Party hereunder, in all cases that, if disclosed in writing, is marked with the words "Confidential," "Proprietary" or words of similar import and, if disclosed orally or visually, is described in reasonable detail in a written notice sent by the disclosing party to the receiving party within thirty (30) days of the oral or visual disclosure requesting that such information be treated as Confidential Information hereunder.

1.4.

" Control " or " Controlled " means, with respect to any (a) item of information, including, without limitation, Know-How, or (b) intellectual property or other right, the possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise, to grant to the other Party access or a license, sublicense or other right to or under such item or right without violating the terms of any agreement or other arrangements with any Third Party existing before or after the Effective Date.

1.5.

" Direct Costs " means the cost of all raw materials and contract manufacturing charges (including direct labor, but excluding the costs of Operating Services paid by Monsanto to Landec pursuant to Section 5.4 ) incurred by Landec in manufacturing and supplying Polymer or Formulation ordered by Monsanto.

1.6.

" Ex Works " has the meaning set forth in Incoterms 2000, ICC Official Rules for the Interpretation of Trade Terms, ICC Publication No. 560.

1.7.

" Field " means the treatment and coating of seeds, including without limitation, the seeds of alfalfa, canola, corn, cotton and soybean, and the use of such coated seeds.

1.8.

" Formulation " means agricultural seed coatings using the Polymer or derivatives thereof.

1.9.

" Governmental Authority " means any government or agency, instrumentality or other subdivision thereof, including courts and tribunals, and the states, provinces and other subdivisions thereof.

1.10.

" Improvement " means all Patent Rights and other intellectual property rights on any improvement to the Polymer or derivatives thereof, methods for applying the Polymer or derivatives thereof to seed, or preparation and use of the Formulation, whether or not patentable or copyrightable, which is recorded, developed, conceived of, created or reduced to practice during the performance of the Work Plan during the Term. Improvements will not include anything conducted outside the Work Plan even though conducted during the Term.

1.11.

" Incotec License Agreement " means that Non-Exclusive License Agreement dated February 14, 2003 by and between Landec Ag and Incotec International, BV.

1.12.

" Joint Improvement " means any and all Improvements created or conceived jointly by (a) Monsanto or any one or more of its Affiliates, agents, employees, subcontractors, Third Parties acting on their behalf or sublicensees and (b) Landec or any one or more of its Affiliates, agents, employees, subcontractors, Third Parties acting on their behalf or licensees, provided that either Party or both Parties may assist with or be involved in reduction to practice, during the performance of the Work Plan during the Term.

1.13.

" Know-How " means inventions, discoveries, data, information, processes, methods, techniques, materials, systems, formulations, design, expertise, technology, or research results, whether or not patentable or copyrightable.

1.14.

" Landec Improvements " means any and all Improvements created or conceived solely by Landec or any one or more of its Affiliates, agents, employees, subcontractors, Third Parties acting on their behalf, or licensees, provided that either Party or both Parties may assist with or be involved in reduction to practice during the performance of the Work Plan during the Term. All Landec Improvements relating exclusively to the Field will be solely owned by Landec Ag.

1.15.

" Laws " means laws, statutes, ordinances, rules, regulations, judgments or decrees administered, promulgated or issued by any Governmental Authority.

1.16.

" Licensed Know-How " means all Know-How developed by or on behalf of or acquired by, and in the possession or Control of, Landec, including Landec Improvements, which is necessary or useful to the manufacture, use or sale of Licensed Products, or otherwise relates to the Licensed Technology, except for any Know-How relating to the manufacture of Polymer.

1.17.

" Licensed Patent Rights " means (a) the Patent Rights referred to in Exhibit A and Exhibit B , (b) any Patent Rights claiming Landec Improvements, and (c) Patent Rights maturing from the aforementioned applications or maturing from applications in any country of the world that claim priority to any of such applications.

1.18.

" Licensed Product " means Polymer or Formulation that is made using the Licensed Technology.

1.19.

" Licensed Technology " means the Licensed Know-How, Landec Improvements, Joint Improvements and Licensed Patent Rights.

1.20.

" Licensed Trademarks " means those marks identified on Exhibit C ,

including all registered, applied for and common law rights thereto and the goodwill associated therewith, and any foreign equivalent or representation thereof where Landec has the rights to such mark or acquires the rights to such mark during the Term.

1.21.

" Major Market Countries " means the United States, Canada, Japan, Germany, France, United Kingdom of Great Britain and the Netherlands.

1.22.

" Monsanto Improvements " means any and all Improvements created or conceived solely by Monsanto or any one or more of its Affiliates, agents, employees, subcontractors, Third Parties acting on their behalf or licensees, provided that either Party or both Parties may assist with or be involved in reduction to practice during the performance of the Work Plan during the Term. All Monsanto Improvements will be solely owned by Monsanto.

1.23.

" Patent Rights " means any and all rights under any and all (a) U.S. or foreign patents, (b) U.S. or foreign patent applications, including without limitation, all provisional applications, substitutions, continuations, continuations-in-part, divisional applications, renewals, and all patents granted thereon, (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including, without limitation, supplementary protection certificates or he equivalent thereof, and (d) any other form of government-issued right substantially equivalent to any of the foregoing.

1.24.

" Polymer " means Landec’s temperature-sensitive polymer material.

1.25.

" Purchase Price " means 120% of Direct Costs, but excluding the costs of Operating Services paid by Monsanto to Landec Ag pursuant to Section 5.4 , relating to the manufacture of Polymer ordered by Monsanto.

1.26.

" Territory " means worldwide.

1.27.

" Third Party " means any person or entity other than Landec Corporation, Landec Ag or Monsanto or their respective Affiliates.

1.28.

Additional Definitions . Each of the following definitions are found in the body of this Agreement as indicated:

2.

License Grants and IP Ownership.

2.1.

License Grants to Monsanto. Except for the licenses granted by Landec Ag under the Incotec License Agreement:

2.1.1.

Patent and Know-How License. Subject to the terms and conditions of this Agreement, Landec hereby grants to Monsanto a co-exclusive license under the Licensed Technology to use, develop, market, distribute, sell, offer for sale, import and export Licensed Products for use in the Field during the Term in the Territory.

2.1.2.

Formulation License. Subject to the terms and conditions of this Agreement, Landec hereby grants to Monsanto a co-exclusive license under the Licensed Technology to make and have made Formulation for use in the Field during the Term in the Territory (the " Formulation

License "). Consistent with Section 4.1.2 , Monsanto covenants to Landec that it will not exercise its rights under the Formulation License before the first anniversary of the Effective Date.

2.1.3.

Trademark License. Subject to the terms and conditions of this Agreement, Landec hereby grants to Monsanto a co-exclusive license to the Licensed Trademarks for use solely in connection with the marketing, promotion, distribution and sale of Licensed Products in the Field during the Term in the Territory.

2.1.3.1.

Trademark Use. Monsanto may use the Licensed Trademarks in or on all packaging, labels, promotional materials, marketing literature, seed tags and other materials in any medium directly or indirectly relating to the Licensed Products (" Trademark Documentation "). When using each of the Licensed Trademarks, Monsanto agrees to use a footnote in substantially the following form: [Licensed Trademark] is a [registered] trademark of [Landec] once on each piece of Trademark Documentation. Monsanto will not be required to utilize the Licensed Trademarks in connection with the Licensed Products and may, at its option, use other trademarks on the Licensed Products.

2.1.3.2.

Marking. Any use of a Licensed Trademark will be marked with an "®" if and when Landec has obtained registrations thereof in the Territory or portions thereof in which Licensed Products will be promoted, and will be marked with a "™" for trademarks and ^"SM" for service marks prior to such registration.

2.1.3.3.

Restrictions. Monsanto agrees that it will not use any Licensed Trademark: (a) as a corporate name, business name, domain name or trade name, (b) in a manner that would reasonably be expected to impair materially the validity, reputation, or distinctiveness of any of the Licensed Trademarks, or (c) in a manner that would reasonably be expected to impair materially Landec’s reputation. Monsanto also agrees that it will not challenge or diminish any of Landec’s rights in the Licensed Marks during the Term of this Agreement or apply to register in its name any of the Licensed Trademarks.

2.1.3.4.

Quality Control. Monsanto agrees that the Licensed Products bearing any Licensed Trademarks (which may, as deemed appropriate by Monsanto, be co-branded with Monsanto trademarks) will be sold and distributed in accordance with all applicable Laws and regulations, including those Laws and regulations pertaining to the proper use and designation of the Licensed Trademarks. Monsanto also agrees to (a) display the

proper form of trademark notice associated with the Licensed Trademarks and (b) include, on any Licensed Product which bears a Licensed Trademark, a statement identifying Landec as the owner of such Licensed Trademark. Monsanto acknowledges and agrees that Landec is the sole and exclusive owner of all Licensed Trademarks. All goodwill associated with the Licensed Trademarks arising from any and all use of the Licensed Trademarks will inure to the sole benefit of Landec.

2.1.3.5.

Samples. Monsanto will provide to Landec for inspection all Trademark Documentation for the first Licensed Product 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 such Licensed Product. Such Trademark Documentation will be sent to: Dr. Steven Bitler, Landec Corporation, Vice President, Corporate Technology, 3603 Haven Avenue, Menlo Park, CA 94025. Landec will have the right to make reasonable changes to the way the Licensed Trademark is used or appears in such Trademark Documentation, including, without limitation, changes in the color and font of the mark (the " Approved First Use "). Any required changes will be provided by Landec to Monsanto within twenty (20) business days of submission of the Trademark Documentation by Monsanto to Landec. Monsanto will thereafter provide Trademark Documentation for Licensed Products to Landec for Landec’s inspection and approval of the use of the Licensed Trademark only if Monsanto makes material changes to the Approved First Use. At Landec’s request, Monsanto will reasonably assist Landec in monitoring the use of the Licensed Trademarks by conducting an annual review with Landec of Monsanto’s use of the same. Monsanto will, at all times, comply with any trademark usage guidelines that may be provided by Landec, provided that, following the Approved First Use, Landec may not require any changes to any Trademark Documentation which has been prepared or produced by Monsanto and which is consistent with the Approved First Use. In the event of infringement of any of the Licensed Trademarks by any third party, Monsanto will cooperate and assist Landec in the enforcement of Landec’s rights therein.

2.1.3.6.

Non-Compliance. In the event that Monsanto fails to comply with the provisions of this Section 2.1.3 , Landec may give written notice specifying the failure to comply. Unless Monsanto remedies its failure to comply within twenty (20) business days after receipt of such notice, Landec may terminate Monsanto’s rights solely under this Section 2.1.3 immediately upon written notice to Monsanto and Monsanto will cease to use any Licensed

Trademark in connection with the Licensed Products, provided however, that Monsanto will have ninety (90) days to sell off any existing inventory of Licensed Products bearing the Licensed Trademarks. Termination under this Section 2.1.3 will not terminate the licenses under Sections 2.1.1 and 2.1.2 .

2.1.4.

Sublicensing . Monsanto may sublicense all or any portion of its rights and obligations under this Agreement only with the prior written approval of Landec, which approval will not be unreasonably withheld. Notwithstanding the foregoing, Monsanto will be free to grant sublicenses to all or any portion of its rights under this Agreement without Landec’s prior written consent to authorize its customers to use Formulation made by or on behalf of Monsanto.

2.2.

License Grants to Landec.

2.2.1.

In the Field. Subject to the terms and conditions of this Agreement, Monsanto hereby grants to Landec a non-exclusive, royalty-free license to exploit the Monsanto Improvements within the Field in the Territory solely to make and use (but not sell) Licensed Product, provided that Landec may sell Licensed Product that exploits the Monsanto Improvements at the direction of Monsanto pursuant to Section 5.3.1(b) .

2.2.2.

Outside the Field. Subject to the terms and conditions of this Agreement, Monsanto hereby grants to Landec a non-exclusive license for all rights to use, develop, make, have made, market, distribute, sell, offer for sale, import, export and otherwise exploit the Monsanto Improvements outside the Field in the Territory. Landec will pay a reasonable royalty, as mutually agreed, to Monsanto on net sales of products for use solely outside the Field, which are covered by the Monsanto Improvements.

2.3.

Retained Rights and Ownership.

2.3.1.

Licensed Technology and Licensed Trademarks. Except for the licenses expressly granted under Section 2.1 , Landec retains all right, title and interest in and to the Licensed Technology and Licensed Trademarks and, subject to Section 5.3.1 , is free to use the Licensed Technology and Licensed Trademarks in the Field in the Territory. In addition to the foregoing, Landec is free to transfer, license, use and otherwise exploit the Licensed Technology and Licensed Trademarks outside the Field in the Territory.

2.3.2.

Monsanto Improvements. Except for the licenses expressly granted under Section 2.2 , Monsanto retains all right, title and interest in and to the Monsanto Improvements and is free to transfer, license and otherwise exploit the Monsanto Improvements in the Territory.

2.3.3.

Joint Improvements. Subject to Sections 6.1.4 and 6.1.5 , the Parties are joint owners of any Joint Improvements and will have the right to make, have made, use, develop, market, distribute, sell, offer for sale, import and export products covered by the Joint Improvements for use in all fields in the Territory without any compensation to the other Party. No right or license is conveyed by this Section 2.3.3 to any Patent Right other than those Patent Rights included within the Joint Improvements.

2.3.4.

Disclosure. By the end of each calendar quarter during the Term, Landec will disclose any material Landec Improvements promptly in writing to Monsanto and Monsanto will disclose any material Monsanto Improvements promptly in writing to Landec.

3.

Annual Payments and Buy-Out Option.

3.1.

Annual Payments. On January 31 of each year from 2007 through 2011, Monsanto will pay to Landec Ag two million five hundred thousand dollars ($2,500,000) (each, an " Annual Payment "). For the sake of clarity, at the end of the Term, Monsanto will have paid to Landec Ag the total amount of twelve million, five hundred thousand dollars ($12,500,000).

3.2.

Buy-Out Option. At any time during the period starting on the Effective Date and ending on the fifth anniversary of the Effective Date, Monsanto has the option to purchase one-hundred percent (100%) of the equity of Landec Ag (the " Buy-Out Option ") by paying eight million dollars ($8,000,000) (the " Buy-Out Fee ") to Landec Corporation. Monsanto may exercise the Buy-Out Option by providing written notice to both Landec Ag and Landec Corporation of its desire to exercise the Buy-Out Option. Upon Landec Corporation’s receipt of Monsanto’s notice, Landec Corporation and Monsanto will negotiate and enter into a Stock Purchase Agreement for the sale of Landec Ag to Monsanto on terms consistent with the provisions of this Agreement (the " Stock Purchase Agreement ").

3.3.

Long-Term Supply. To assist with Monsanto’s decision to exercise its Buy-Out Option, after the second anniversary of the Effective Date, the Parties will use good faith efforts to negotiate and agree upon the margin over Purchase Price that Monsanto will pay Landec to manufacture and supply Polymer to Monsanto pursuant to the supply agreement that the Parties will negotiate and enter into pursuant to Section 3.4.3 below if Monsanto exercises its Buy-Out Option.

3.4.

Effects of Buy-Out. If Monsanto elects to exercise its Buy-Out Option, then the following will occur upon the closing of the Stock Purchase Agreement for the sale of Landec Ag to Monsanto:

3.4.1.

Acceleration of Payments. Monsanto will pay to Landec Corporation any unpaid Annual Payments or Annual Supply Fees that would have otherwise been paid to Landec Ag during the Term of this Agreement.

3.4.2.

IP Ownership and Licenses.

3.4.2.1.

Monsanto will own (a) those Licensed Patent Rights that are owned by Landec Ag, including, without limitation, the Patent Rights listed on Exhibit B and (b) any Licensed Know-How and Licensed Trademarks owned by Landec Ag. Any license from Landec Ag to Monsanto pursuant to Section 2.1 will terminate.

3.4.2.2.

To the extent any Licensed Patent Rights including, without limitation, the Patent Rights listed on Exhibit A , or other items of Licensed Technology are owned by Landec Corporation and not Landec Ag, Landec Corporation will grant to Monsanto a perpetual, irrevocable, royalty-free, exclusive license under such Licensed Patent Rights and other items of Licensed Technology to use, develop, make, have made, market, distribute, sell, offer for sale, import and export Licensed Products for use in the Field in the Territory with the right to sublicense all or any portion of such Licensed Patent Rights for use in the Field in the Territory.

3.4.2.3.

To the extent any Licensed Trademarks are owned by Landec Corporation and not Landec Ag, Landec Corporation will grant to Monsanto a perpetual, irrevocable, royalty-free, exclusive, non-transferable license under such Licensed Trademarks for use solely in connection with the marketing, promotion, distribution and sale of Licensed Products in the Field in the Territory with the right to sublicense all or any portion of such Licensed Trademarks for use in the Field in the Territory.

3.4.3.

Supply of Polymer. The Parties’ obligations under Section 4 will terminate. Landec Corporation and Monsanto will negotiate and enter into a new supply agreement pursuant to which Monsanto will order and purchase from Landec its total requirement of Polymer and Landec will manufacture and sell to Monsanto an amount of Polymer equal to such total requirement during such term, provided that Landec (a) has the capability to meet Monsanto’s demand, (b) can manufacture Polymer in accordance with Specifications and (c) can provide Polymer to Monsanto at a price and on other terms that are competitive to the prices and other terms offered by other bona fide suppliers. Subject to any agreements reached during negotiations pursuant to Section 3.3 above, when negotiating the new supply agreement, Landec Corporation and Monsanto will agree upon a price for the Polymer, as well as a supply term. In addition, this supply agreement will provide that Landec will give priority to Monsanto over any other customers in allocating its Polymer production capability.

3.4.4.

Termination of Other Provisions. This Agreement will terminate in its entirety and Landec Corporation and Monsanto will have no further obligations under this Agreement, provided , however , that the following provisions of this Agreement will survive after the closing of the Stock Purchase Agreement for the sale of Landec Ag to Monsanto: Section 2.2 (License Grants to Landec), Section 3.4 (Effects of Buy-Out), Section 6 (Intellectual Property), Section 7 (Confidentiality), Section 8 (Representations, Warranties and Covenants), and Section 11 (Miscellaneous Terms).

3.5.

Failure to Exercise the Buy-Out Option. If Monsanto does not elect to exercise its Buy-Out Option within the time period described in Section 3.2 and does not otherwise terminate the Agreement, then upon expiration of the Term, Monsanto will be deemed to have terminated this Agreement pursuant to Section 9.2 and will pay to Landec Ag the Termination Fee (described in Section 9.2.1 ) on the last day of the Term.

3.6.

Undertakings Relating to Buy-Out Option. In order to preserve the value to Monsanto of the Buy-Out Option, Landec agrees as follows for the period of time after the Effective Date until (a) immediately prior to the closing of the Stock Purchase Agreement (the " Buy-Out Closing ") or (b) Monsanto decides not to exercise its Buy-Out Option:

3.6.1.

As of the date of the Buy-Out Closing, all of the Licensed Patent Rights listed on Exhibit B and Licensed Trademarks owned by Landec Ag will be owned free and clear of any liens or encumbrances, and will be registered in the name of Landec Ag.

3.6.2.

As of the date of the Buy-Out Closing, with the exception of the Incotec License Agreement, no third party will hold any licenses or sublicenses to any of the Licensed Patent Rights or Licensed Trademarks for use in the Field.

3.6.3.

Landec Ag will not transfer any of its material assets, except for transfers in the ordinary course of business which will not adversely affect the ability of Landec Ag to continue its operations; provided that, prior to the date of the Buy-Out Closing, Landec Ag may transfer all of its remaining cash to Landec Corporation, including the Annual Payments and Annual Supply Fees.

3.6.4.

As of the date of the Buy-Out Closing, Landec Ag will be free of any indebtedness, and its working capital (excluding cash) will be at a level consistent with similar seasonal periods in its prior fiscal years.

3.6.5.

Landec Ag will continue to conduct its business in the ordinary course, except for changes made pursuant to this Agreement, and will maintain its property in substantially the condition currently existing, normal wear and tear excepted.

3.6.6.

Landec Ag will preserve its corporate existence and good standing.

3.6.7.

Landec Ag will not change the overall character of its business, operations, activities or practices except as provided in this Agreement.

3.6.8.

As of the date of the Buy-Out Closing, Landec Ag will release any liens existing on any of its assets which would adversely affect the value of Landec Ag to Monsanto in any material respect.

3.6.9.

Except as provided in accordance with the Stock Purchase Agreement, Landec will not permit Landec Ag to issue any additional equity securities of any class, or any securities convertible into or exchangeable into any of its equity securities, and will not transfer any of the equity securities of Landec Ag to any other person (other than a transfer to an Affiliate of Landec which is expressly subject to the Buy-Out Option and subject to the other conditions set forth in this Section 3.6 ).

3.6.10.

Landec Ag will not enter into any agreements, or take any other actions, which would prevent Monsanto from exercising the Buy-Out Option or materially and adversely affect the value to Monsanto of Landec Ag upon exercise of the Buy-Out Option.

4.

Supply of Licensed Product.

4.1.

Supply Agreement.

4.1.1.

Polymer. Beginning on the Effective Date, until the end of the Term or such earlier time as (a) the sale of Landec Ag to Monsanto in accordance with Section 3.2 or (b) the early termination of this Agreement in accordance with Sections 9.2 or 9.3 (the " Supply Term "), Landec will manufacture and supply Polymer to Monsanto. During the Supply Term, Monsanto will order and purchase from Landec under the terms and conditions stated in this Section 4 its total requirement of Polymer and Landec will, under the terms and conditions stated in this Section 4 , manufacture and sell to Monsanto an amount of Polymer equal to such total requirement.

4.1.2.

Formulation. For a period of one year from the Effective Date, Monsanto will order and purchase from Landec under the terms and conditions stated in this Section 4 its total requirement of Formulation and Landec will, under the terms and conditions stated in this Section 4 , manufacture and sell to Monsanto an amount of Formulation equal to such total requirement and be responsible for the coating of seeds. At any time after the first anniversary of the Effective Date and during the Term, Monsanto has the option to (a) continue to order Formulation from Landec or (b) take over all manufacturing and production of Formulation and coating of seeds. The Parties agree that upon Monsanto’s request and at Monsanto’s sole expense, Landec will assist Monsanto in the transfer of manufacturing and production of Formulation and coating of seeds from Landec to

Monsanto in order to allow Monsanto to commence commercial production of Formulation at any time specified by Monsanto on or after such first anniversary. If so requested by Monsanto, Landec will sell to Monsanto any equipment required by Monsanto for such manufacturing and production which is no longer required by Landec, at a purchase price equal to the fair market value thereof.

4.2.

Monsanto’s Responsibilities.

4.2.1.

Forecasts. By the end of each calendar quarter during the Supply Term, Monsanto will provide a non-binding six (6) month rolling forecast of its expected requirements for Licensed Product. Within thirty (30) business days following receipt of each such forecast, Landec will advise Monsanto in writing whether it has the capability to provide such estimated requirements or, if not, the amount of Licensed Products it has the capability to provide. Landec will, in determining its capability to provide Monsanto’s forecasted requirements, give priority to Monsanto over any other Landec customers. If Landec does not provide such written advice to Monsanto within such thirty (30) business day period, Landec will be deemed to have confirmed that it has the required capability to provide Monsanto’s forecasted amounts.

4.2.2.

Purchase Orders. From time to time, Monsanto will issue purchase orders for Licensed Product. These purchase orders will be binding upon Monsanto at the time of issue, and will also be binding upon Landec to the extent the amount of Licensed Product requested in the purchase orders does not exceed Landec’s capability as referred to in Section 4.2.1 above. Monsanto will provide at least sixty (60) days lead time for Licensed Product orders up to a quantity of 20,000 pounds and a lead time of at least ninety (90) days for larger Licensed Product orders. Landec will consult with Monsanto if additional suppliers are required to meet Monsanto’s requirements.

4.3.

Landec’s Responsibilities.

4.3.1.

Raw Materials. Landec will be responsible for (a) obtaining all raw materials, ingredients and components required to manufacture and supply Licensed Product to Monsanto; and (b) supplying all other facilities, equipment, materials, shipping supplies and personnel necessary to manufacture and supply Licensed Product, provided , however , that Monsanto will pay for such costs incurred by Landec through payment of the Purchase Price for Licensed Product that it orders from Landec in accordance with Section 4.4.2 .

4.3.2.

Specifications. Landec Ag will supply Licensed Product to Monsanto as so ordered and in accordance with the specifications that are mutually agreed to by Landec Ag and Monsanto during the Term (the " Specifications "). The Specifications may be modified or updated during the Supply Term as mutually agreed in writing by the Parties.

4.3.3.

Use of Third Parties. Landec is entitled to use one or more Third Parties to perform all or any part of the manufacturing of Licensed Product, including, but not limited to, the sourcing of raw materials, components and other items used in manufacturing Licensed Product. Landec will be responsible for ensuring that the performance by such Third Parties complies with the applicable provisions of this Agreement.

4.4.

Payment.

4.4.1.

Annual Supply Fee. On January 31 of each year from 2007 through 2011, Monsanto will pay to Landec Ag one hundred thousand dollars ($100,000) (the " Annual Supply Fee "). For the sake of clarity, at the end of the Supply Term (or earlier as provided by Section 3.4.1 ), Monsanto will have paid to Landec Ag the total amount of five hundred thousand dollars ($500,000) in Annual Supply Fees. In addition, if this Agreement is terminated early in accordance with Section 9.2 (or Section 9.3 , if Landec terminates for cause), Monsanto will also owe the total amount of five hundred thousand dollars ($500,000) in Annual Supply Fees.

4.4.2.

Purchase Price. During the Supply Term, Monsanto will purchase Licensed Product from Landec Ag for the Purchase Price. Payment for amounts invoiced by Landec Ag will be due and payable by Monsanto to Landec Ag within thirty (30) days after the date of each such invoice.

4.4.3.

Adjustment in Purchase Price.

4.4.3.1.

Increase in Direct Costs. Landec will use Commercially Reasonable Efforts to avoid increases to its Direct Cost, and will consult with Monsanto in good faith, in advance, to discuss any anticipated material increases in Direct Costs and alternatives for avoiding or minimizing such increases. Subject to the foregoing, to the extent that Landec’s Direct Costs do increase during the Supply Term, such increase will be passed through to Monsanto by a corresponding increase in the Purchase Price.

4.4.3.2.

Decrease in Direct Costs. Landec will use Commercially Reasonable Efforts, in consultation with Monsanto, to reduce its Direct Costs. To the extent that Landec’s Direct Costs are reduced during the Supply Term from the Direct Costs existing on the Effective Date as set forth on Exhibit D (the " Reduction Amount "), such Reduction Amount will be allocated 70% to Monsanto and 30% to Landec. For example, if the Direct Costs of the Polymer were to decrease from $4.00 to $2.00, the Direct Costs used in the calculation of Purchase Price would be reduced from $4.00 to $2.60

4.5.

Records and Audit. Landec will maintain complete and accurate records which are relevant to the determination of the Purchase Price that Monsanto pays for Polymer under this Agreement. Such records will be open during reasonable business hours for a period of three (3) years from the creation of individual records for examination at Monsanto’s expense and not more often than once per year by an independent certified public accountant selected by Monsanto. Landec’s records and accounting information will be Confidential Information for purposes of Section 7 of this Agreement.

4.6.

Sole Remedy. Provided that Landec has used Commercially Reasonable Efforts to manufacture and supply Licensed Product in accordance with the Specifications, Landec’s sole liability and Monsanto’s sole remedy for any failure to manufacture and supply Licensed Product pursuant to Section 4 hereof will be that Landec will manufacture and supply replacement Licensed Product in accordance with the Specifications satisfactory to remedy such failure.

4.7.

Title. All right, title and interest in and to Licensed Product in the possession or control of Landec will at all times remain the sole property of Landec until delivery to Monsanto under this Agreement, Ex Works Landec facility, or such other facility that Landec designates from time to time.

5.

Services. During the Term of this Agreement, Landec will provide to Monsanto Research and Development Services, Formulation and Manufacturing Services and General Administrative Services as described in Sections 5.1.2 , 5.1.3 and 5.1.4 below (each, an " Operating Service ") and Monsanto will provide to Landec certain Support Services and Sales and Marketing Services as described respectively in Sections 5.2 and 5.3 .

5.1.

Operating Services.

5.1.1.

Annual Plan and Budget. Landec and Monsanto have agreed upon a financial plan and budget for Landec Ag for the first year of the Term, which reflects the budgeted costs of the Operating Services necessary to run the business as contemplated by the Parties. In connection with the annual review meetings referred to in Section 5.4.1.1 , the Parties will review the prior year’s operations, and prepare and approve an updated financial plan and budget for the following year (the " Annual Plan and Budget "). The Annual Plan and Budget will also reflect capital expenditures contemplated to be made by Landec Ag.

5.1.2.

Research & Development Services.

5.1.2.1.

Work Plan. Landec will perform research, development, formulation, biological testing and technical support services in connection with the Licensed Technology within the Field

(" Research and Development Services ") in accordance with a mutually approved research and development work plan, which will be modified, amended and otherwise updated during the Term as mutually agreed by the Parties (the " Work Plan "). The Parties will create and mutually agree upon an initial Work Plan within sixty (60) d