Exhibit 10.38
SALE AND LICENSING AGREEMENT
(FOR CERTAIN TECHNOLOGY IN CONNECTION WITH
ANIMAL FEED, FERTILIZER, AND RELATED PRODUCTS)
This Sale and Licensing Agreement (the "Agreement") is made effective as of
March __, 2003 (the "Effective Date") by and between AGWAY, INC., a Delaware
corporation with offices at 000 Xxxxxxxxx Xxxxx, Xx Xxxx, Xxx Xxxx 00000
("Agway"), and PLANET POLYMER TECHNOLOGIES, INC., a California corporation with
offices at 0000 Xxxxxxxxxxxx Xxxxxx, Xxxxx X, Xxx Xxxxx, Xxxxxxxxxx 00000
("Planet").
1. BACKGROUND OF THE TRANSACTION.
a. Agway originally licensed from Planet, pursuant to
the November 12, 1998 License Agreement between Planet and Agway Consumer
Products, Inc. (the "License Agreement"), certain technology owned by Planet
(the "Planet Technology"), including the Patent Rights and the Animal Feed
Technology (defined below). Agway Consumer Products, Inc. subsequently assigned
the License Agreement, including all of its rights, duties, privileges and
obligations under the License Agreement, to Agway as of March 16, 1999.
b. Agway and Planet subsequently entered into a March 1,
2000 agreement entitled "Sub-Agreement to License Agreement (Animal Feed)"
(referred to in this Agreement as the "Animal Feed Sub-Agreement") that defines
a Sales Royalty as consideration for the grant of certain licenses, a Minimum
Annual Royalty as consideration for the exclusivity of such licenses, and
related terms and conditions in connection with Agway's license under the
License Agreement to use certain of the Planet Technology to create and sell
Products.
c. Agway also licensed from Planet, pursuant to the
August 16, 1999 license agreement between Planet and Agway Consumer Products,
Inc., as amended August 31, 1999, (the "Fertilizer License Agreement"), certain
Fertilizer Technology (defined below) owned by Planet.
d. Planet, Agway, Inc. and Agway Holdings, Inc.
subsequently entered into a letter agreement dated November 14, 2000 (the
"Letter Agreement") for, inter alia, (i) the sale, assignment and transfer by
Planet to Agway of certain patents and patent applications referred to in
Exhibit A to the Letter Agreement (collectively the patents and patent
applications to be sold, assigned and transferred by Planet to Agway pursuant to
the Letter Agreement are referred to as the "Patent Rights" and are listed in
Exhibit A attached to this Agreement), including the animal feed related Patent
Rights referred to in Exhibit B attached to this Agreement (the "Animal Feed
Patent Rights"), for a price of $250,000 cash at closing and continuation of
royalty payments equal to the payments that Planet would otherwise be entitled
to receive pursuant to the License Agreement; and (ii) the grant to Planet of an
irrevocable, exclusive, worldwide, royalty free license to use and commercially
exploit all rights related to the Patent Rights for all uses other than food and
agricultural initiatives, in consideration of the payment of $150,000 by Planet
to Agway.
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e. The Letter Agreement required that the sale and
assignment be consummated by Planet's delivery to Agway by November 17, 2000 (or
as soon thereafter as reasonably practicable) of (i) patent assignments in usual
and customary form, together with (ii) such other documents and instruments of
conveyance as Agway deemed reasonably necessary and appropriate, including sale
agreements evidencing the transaction contemplated by the Letter Agreement that
would include such representations, warranties and covenants (including
indemnification of Agway by Planet) as are usual and customary of transactions
of the type contemplated by the Letter Agreement.
f. On or about November 19, 2000, Agway paid $250,000 to
Planet for the Patent Rights and Planet paid $150,000 to Agway for the Planet
License (referred to above and further defined below).
2. PURPOSE. This Agreement is one of the "sale agreements"
contemplated by the Letter Agreement for the sale, assignment and transfer of
certain of the Patent Rights by Planet to Agway. Specifically, this Agreement
addresses the sale, assignment and transfer of the Animal Feed Patent Rights;
licenses to Agway certain technology and "know-how" of Planet related to the use
of certain of the Patent Rights in connection with animal feed and fertilizer
products and related products in Agway's "Field of Business" (as defined below);
defines the royalty rights in favor of Planet; confirms the "license-back" to
Planet by Agway of the right to use certain of the Patent Rights in connection
with products outside of Agway's Field of Business; and includes related terms
and conditions. This Agreement contains certain terms and conditions that the
parties have negotiated since executing the Letter Agreement that are different
than certain of the terms and conditions of, or contemplated by, the Letter
Agreement.
3. DEFINITIONS. In addition to the terms defined throughout this
Agreement, the following terms as used in this Agreement are defined as follows:
a. "Agway's Field of Business" shall mean the
development, production, sale, distribution and/or marketing of (i) animal feeds
and other products intended for animal consumption; (ii) all fertilizer,
agronomy, crops, turf (e.g., golf courses and commercial lawn care) and lawn and
garden nutrient products; and (iii) any other products as may be mutually agreed
upon in writing by Agway and Planet.
b. "Products" shall mean coated controlled release urea
products developed, produced, distributed or marketed in or for Agway's Field of
Business that are made from, incorporate, or utilize in any way the Animal Feed
Patent Rights and/or the Licensed Technology.
c. "Animal Feed Technology" shall include any technology
developed or acquired by Planet before or after the Effective Date that (i) is
necessary or useful to develop and commercialize Products that are animal feeds
and/or other products intended for animal consumption; and (ii) has not been
assigned to Agway or agreed to be assigned to Agway pursuant to this Agreement.
By way of example and not by way of limitation, "technology" as used in the
preceding sentence shall include, but not be limited to, all know-how; trade
secrets;
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inventions; data; processes; techniques; procedures; compositions; devices;
methods; formulas; protocols; information, including, without limitation, all
chemical, biochemical, toxicological, and scientific research information;
compositions of matter; chemical complexes, including improved chemical
complexes; association compounds; blends, mixtures or compositions of coating
materials; polymer materials; and new products or processes relating thereto;
whether or not patentable and whether developed by Planet alone or with Agway or
a third party, including, but not limited to, carnuba wax/stearic acid coating
technology.
d. "Fertilizer Technology" shall include any technology
developed or acquired by Planet before or after the Effective Date that (i) is
necessary or useful to develop and commercialize Products that are fertilizer
products, agronomy, crops, turf (e.g., golf courses and commercial lawn care)
and lawn and garden nutrient products, and (ii) has not been assigned to Agway
or agreed to be assigned to Agway. By way of example and not by way of
limitation, "technology" as used in the preceding sentence shall include, but
not be limited to, all know-how; trade secrets; inventions; data; processes;
techniques; procedures; compositions; devices; methods; formulas; protocols;
information, including, without limitation, all chemical, biochemical,
toxicological, and scientific research information; compositions of matter;
chemical complexes, including improved chemical complexes; association
compounds; blends, mixtures or compositions of coating materials; polymer and
non-polymer materials; and new products or processes relating thereto; whether
or not patentable and whether developed by Planet alone or with Agway or a third
party, including, but not limited to, carnuba wax/stearic acid coating
technology.
e. "Licensed Technology" shall mean the Animal Feed
Technology and the Fertilizer Technology.
f. "Net Sales and Revenues" shall mean Agway's gross
sales and revenues from (i) Products, less adjustments for returns, allowances
and discounts, as recognized under generally accepted accounting principles and
under methods historically used and consistently applied by Agway for its CPG
Nutrients business or any of its successors; and (ii) sublicenses of, or other
rights granted with respect to, the Animal Feed Patent Rights and/or the
Licensed Technology to third parties. Proceeds and/or revenues received from the
assignment, sale or other transfer of this Agreement shall not be included in
Net Sales and Revenues, so long as the transferee in Agway's transfer of this
Agreement expressly assumes all of Agway's obligations under this Agreement.
g. "Pre-Tax Earnings/(Loss) Before Sales Royalty" shall
mean net income or loss from Products Before Sales Royalty and any provision for
federal income tax liability determined in accordance with generally accepted
accounting principles and with methods historically used and consistently
applied by Agway for its CPG Nutrients business.
h. "Full Fiscal Year" shall mean the accounting and
reporting cycle of Agway, which begins on the first day of July and ends on the
last day of June.
i. "Affiliate" shall mean any company that, directly or
indirectly, is controlled by or controls a party to this Agreement, or is under
common control with a party to
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this Agreement. Ownership of 50% or more of the voting stock of, or membership
interest in a company shall be regarded as control.
j. "Final Clearance" shall mean either a United States
Food and Drug Administration ("FDA") letter of no objection for the Product or
the coating currently used for the Product or written approval by the FDA of a
Feed Additive Petition submitted by Agway for the Product or the coating
currently used for the Product.
4. ASSIGNMENT OF PATENT RIGHTS.
a. Planet has executed and delivered to Agway an
assignment of certain of the Patent Rights, including the Animal Feed Patent
Rights, (the "Assignment") a copy of which Assignment is attached as Exhibit C;
and Agway confirms that the Assignment has been recorded in the United States
Patent and Trademark Office.
b. Planet confirms the assignment of the patents listed
in the Assignment. Planet shall execute and deliver to Agway further
assignments, in substantially the same form as the Assignment, of (i) any
subsequent patent applications derived from current research initiatives related
to the Products, not including products related to and/or incorporating lysine;
and (ii) any international patent applications related to the Animal Feed Patent
Rights.
c. Planet will execute all such further assignments and
related documents, prepared by or for Agway, as may be reasonably necessary to
secure to Agway its ownership of the Animal Feed Patent Rights throughout the
world
d. The parties acknowledge and agree that the assignment
of the Animal Feed Patent Rights by Planet to Agway is final, and that no
breach, termination or expiration of this Agreement and/or the License, or
failure to pay royalties, shall invalidate the Assignment or cause or give rise
to any claim for any reversion of the Patent Rights to Planet, provided,
however, that Planet may reacquire the Animal Feed Patent Rights pursuant to
Section 10a of this Agreement.
e. Planet hereby fully and forever releases and waives
any agreement by Agway to grant to Planet an option to repurchase the Patent
Rights. Nothing contained in the previous sentence shall be interpreted or
construed as indicating that the parties ever entered into an agreement granting
Planet an option to repurchase the Patent Rights.
5. LICENSE OF THE LICENSED TECHNOLOGY.
a. Subject to the terms and conditions of this
Agreement, including the payment of royalties to Planet as provided in this
Agreement, Planet hereby grants to Agway an exclusive, perpetual, irrevocable,
worldwide license (the "License") to use any and all of the Licensed Technology
to develop, have developed, make, have made, use, offer to sell and sell
Products in Agway's Field of Business. The License includes the right to grant
sublicenses to third parties to use the Licensed Technology to make, use or sell
Products in Agway's Field of Business. Agway shall notify any sub-licensees
under this paragraph of all rights and obligations
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of Agway under this Agreement that are sublicensed to such sub-licensee, and
Agway shall notify Planet within 30 days of the grant of any sublicense under
this paragraph.
b. All improvements to the Licensed Technology by Agway,
its employees or agents, shall be the sole and exclusive property of Agway, and
Agway shall have the right to file and prosecute applications for letters patent
on any such improvements.
6. CONSIDERATION.
a. Agway will pay Planet as follows:
(i) Payment. In order to continue to limit
Planet's use of the Animal Feed Patent Rights to outside of Agway's
Field of Business pursuant to the Planet License, Agway will pay to
Planet the amount of $30,000 by wire transfer upon the execution of
this Agreement.
(ii) Sales Royalty. Agway will pay Planet an
on-going Sales Royalty on Net Sales and Revenues from sales of Products
(the "Sales Royalty") as follows:
(1) Sales Royalty amounts calculated
and determined to be due to Planet pursuant to this Section
6a(ii) shall be payable for the term of 15 years immediately
following the later of (a) the Effective Date; or (b) the date
the patent relating to the Product is issued ("Royalty
Termination Date"). No Sales Royalty shall be calculated or
become due on Net Sales and Revenues received by Agway after
the Royalty Termination Date.
(2) Sales Royalty amounts shall be
calculated based on annual Net Sales and Revenues by applying
the following percentages to Net Sales and Revenues for each
of Agway's Full Fiscal Years:
4.67% of the first $10 million of Net Sales
and Revenues;
4% of the second $10 million of Net Sales
and Revenues; and,
3.33% of Net Sales and Revenues in excess of
$20 million.
(3) Notwithstanding the calculation of
the Sales Royalty above, whether any Sales Royalty amount is
due Planet and the amount of any such Sales Royalty shall be
subject to the following four rules.
(a) Rule No. 1: Agway shall
determine whether Agway's CPG Nutrients business
selling Products ("CPG Nutrients") has positive
quarterly Pre-Tax Earnings Before Sales Royalty on
Products for the fiscal quarter being measured; if
CPG Nutrients has positive quarterly Pre-Tax Earnings
Before Sales Royalty on Products for said quarter,
the Sales Royalty payment due Planet shall be
calculated as set forth above; however, if CPG
Nutrients did not have positive quarterly Pre-Tax
Earnings Before Sales Royalty on Products for said
quarter, no Sales
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Royalty shall be due Planet for said quarter. This
Rule No. 1 is personal to Agway and shall not apply
to any assignee or successor of Agway except for
purposes of calculating the cumulative Pre-Tax Loss
Before Sales Royalty carry forward for the benefit of
the assignee at the time of assignment of this
Agreement.
(b) Rule No. 2: The quarterly
Sales Royalty payment to Planet shall not exceed 50%
of CPG Nutrients' positive quarterly Pre-Tax Earnings
Before Sales Royalty on Products; if the quarterly
Sales Royalty payment otherwise due Planet exceeds
50% of CPG Nutrients' positive quarterly Pre-Tax
Earnings/(Loss) Before Sales Royalty on Products for
that quarter, then, the quarterly Sales Royalty
payment due Planet shall be reduced to an amount
equal to 50% of CPG Nutrients' positive quarterly
Pre-Tax Earnings/(Loss) Before Sales Royalty on
Products for that quarter. This Rule No. 2 is
personal to Agway and shall not apply to any assignee
or successor of Agway except for purposes of
calculating the cumulative Pre-Tax Loss Before Sales
Royalty carry forward for the benefit of the assignee
at the time of assignment of this Agreement.
(c) Rule No. 3: Until and
unless CPG Nutrients or any of its successors has
recouped CPG Nutrients' cumulative Pre-Tax Loss
Before Sales Royalty (as determined below), the
quarterly Sales Royalty payable to Planet, as
calculated under Section 6a (ii) (2) and modified as
specified under Rule No. 1 and Rule No. 2 above in
this Section 6a(ii) (3), will be reduced by one-half.
The cumulative Pre-Tax Loss Before Sales Royalty from
January 1, 1999, through December 31, 2002, was
$6,430,537.00 calculated as set forth on Exhibit E
attached to this Agreement. Additional Pre-Tax Losses
Before Sales Royalty incurred by Agway (but not any
assignee or successor to Agway) after December 31,
2002, determined utilizing the same methodology and
basis as set forth on Exhibit "E," shall increase the
cumulative Pre-Tax Loss Before Sales Royalty. Pre-Tax
Earnings Before Sales Royalty recognized by Agway
shall decrease the cumulative Pre-Tax Loss Before
Sales Royalty. If the cumulative Pre-Tax Loss Before
Sale Royalty is zero or there are cumulative Pre-Tax
Earnings Before Sales Royalties, the quarterly Sales
Royalty payment due Planet as calculated under
Section 6a(ii)(2) and modified as specified under
Rule No. 1 and Rule No. 2 above in this Section
6a(ii)(3) shall be paid to Planet in full however, if
the cumulative Pre-Tax Loss Before Sales Royalty is
greater than zero, then the quarterly Sales Royalty
payment due Planet (as calculated under Section
6a(ii)(2) and modified as specified under Rule No. 1
and Rule No. 2 above in this Section 6a(ii)(3)) shall
be reduced by 50%. If the reduction in payment from
the application of this Rule No. 3 exceeds the
remaining cumulative Pre-Tax Loss Before Sales
Royalty amount, the percentage reduction shall
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be reduced to such lower percentage as necessary to
bring the cumulative Pre-Tax Loss Before Sales
Royalty to zero.
(d) Rule No. 4: Any quarterly
Sales Royalty payment to Planet, as calculated under
Section 6a(ii)(2) and modified as specified under
Rule Xx. 0, Xxxx Xx. 0 and Rule No. 3 above in this
Section 6a(ii)(3), shall be further reduced by any
amount or amounts required to be paid to third
parties by Agway for that quarter for any licenses of
additional technology incorporated in the Products
pursuant to a settlement as provided in Section 10e
of this Agreement.
(iii) The Sales Royalty payment as calculated
above becomes earned at the end of each fiscal quarter and becomes due
and payable 45 days thereafter. With each such payment, Agway or any of
its successors shall furnish Planet a report in sufficient detail to
permit confirmation of the accuracy of the Sales Royalty payment made,
including without limitation, the sales of Products during the fiscal
quarter being reported, the Sales Royalty payment in United States
dollars, the method used to calculate the Sales Royalty payment and the
exchange rate used.
(iv) At the end of each Full Fiscal Year, an
annual Sales Royalty true-up will be calculated. The Sales Royalty
annual true-up will apply the Sales Royalty calculation under Section
6a(ii)(2) and modified as specified under Section 6a(ii)(3) above to
the Net Sales and Revenues for the Full Fiscal Year (subject to the
exception set forth in Section 6a(ii)(2) above) to determine the actual
amount due Planet for the Full Fiscal Year. This amount will be
compared to the amounts calculated as due Planet under the four
quarterly calculations for that corresponding Full Fiscal Year. If the
annual calculation indicates a higher amount due Planet, that payment
is due 90 days after the end of the Full Fiscal Year. If the annual
calculation indicates a lower amount is due Planet, the difference will
be deducted from the next succeeding payment(s) due Planet. Agway, or
any of its successors, shall furnish Planet a report in sufficient
detail to permit confirmation of the accuracy of the Sales Royalty
true-up, including without limitation, the sales of Products during the
fiscal year being reported, the Sales Royalty payment in United States
dollars, the method used to calculate the Sales Royalty payment and the
exchange rate used.
b. Minimum Annual Royalty. The sole purpose of the
Minimum Annual Royalty is to compensate Planet for granting exclusive rights to
Agway for the Licensed Technology.
(i) If the Sales Royalty for a Full Fiscal Year
calculated in Section 6a(ii)(2) and (3) above, is less than the Minimum
Annual Royalty, as identified in Section 6b(iii) below, for the
corresponding Full Fiscal Year, then, payment of this incremental
difference is due to Planet resulting in full satisfaction of the
Minimum Annual Royalty.
(ii) If the annual Sales Royalty amount, solely
as calculated in Section 6a(ii)(2) and (3) above, is greater than the
Minimum Annual Royalty, as identified in
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Section 6b(iii) below, for the corresponding Full Fiscal Year, then,
the intent of the Minimum Annual Royalty has been fully satisfied.
Therefore, the Minimum Annual Royalty provision is not applicable for
the corresponding Full Fiscal Year.
(iii) Minimum Annual Royalty Schedule:
Full Fiscal Year Minimum Royalty
Fiscal Year One $233,333
Fiscal Year Two $400,000
Fiscal Year Three $440.000
Fiscal Year Four $484,000
Fiscal Year Five $532,666
Fiscal Year Six $585,333
Fiscal Year Seven $644,000
Fiscal Year Eight $666,667
Each Subsequent Fiscal Year Thereafter $666,667
(iv) Fiscal Year One shall commence on the first
day of the Full Fiscal Year immediately following Agway's receipt in
writing of the Final Clearance, which Agway is obligated to exercise
due diligence and reasonable efforts to pursue and obtain, from the
federal Food and Drug Administration ("FDA") for Optigen polymer coated
urea. If Final Clearance from the FDA is received in writing by Agway
within the first 60 calendar days of a Full Fiscal Year, then, the
clearance shall be deemed to have been received in the prior Full
Fiscal Year, and Fiscal Year One shall commence as of the first day of
the Full Fiscal Year in which clearance was received.
(v) In order to maintain exclusivity of the
License and the Animal Feed Patent Rights in Agway's Field of Business,
the Minimum Annual Royalty must be made by October 31, immediately
following the Full Fiscal Year of measurement or as otherwise provided
below in this Section 6b(v). Agway may choose to not pay the Minimum
Annual royalty for any and all Full Fiscal Years, and Planet shall have
no rights or recourse against Agway for such payment for that year or
for any future Full Fiscal Years. If Agway fails to make a timely
Minimum Annual Royalty payment, Planet shall have the right to provide
Agway with a written notice of such failure to pay, and Agway will have
60 days from receipt of such notice to remedy such shortfall in
payment. If Agway does not cure its failure to make the Minimum Annual
Royalty payment within the 60-day cure period, then Planet's only
recourse and remedy will be to obtain non-exclusive licenses as set
forth in Section 10b, below, and this Agreement, including the License,
shall continue in full force and effect.
c. In the event that any Sales Royalty payments due
hereunder are not made when due, the payments shall accrue interest from the due
date at two (2) percentage points over the prime lending rate as of said date as
published in The Wall Street Journal; provided, however, that in no event shall
such rate exceed the maximum legal annual interest rate. The
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payment of such interest shall not limit Planet from exercising any other rights
it may have as a consequence of the lateness of any Sales Royalty payment.
d. All payments owed to Planet under this Agreement
shall be made by wire transfer to a bank account designated by Planet, unless
otherwise specified in writing by Planet. All payments due Planet under this
Agreement shall be paid in United States dollars, free of taxes payable in any
foreign country, except for such taxes as result in, and to the extent that the
same do result in a foreign tax credit applicable to the United States taxes
payable by Planet. With respect to each quarter, for countries other than the
United States, whenever conversion of payments from any foreign currency shall
be required, such conversion shall be made at the rate of exchange required of
Agway, or any of its successors, under generally accepted accounting principles
for the applicable accounting period.
e. Agway and its affiliates shall keep accurate books
and records as reasonably needed for determination of Sales Royalty payments due
under this Section. Such books and records shall be maintained for a period of
at least three years from the expiration of the relevant Sales Royalty payment
period.
f. Not more than once in each fiscal year, upon not less
than 30 days' prior written notice, Planet may have the books and records of
Agway's CPG Nutrients business, or any of its successors, examined, by an
independent certified public accounting firm (CPA Firm) reasonably acceptable to
Agway at a time and place reasonably acceptable to Agway, to the extent
necessary to verify the correctness of any Sales Royalty payment report
furnished under this Agreement. If such independent CPA Firm should determine
that an underpayment of Sales Royalty may have occurred, Agway may have Agway's
independent accountants review the applicable records and the report and
calculations of the CPA Firm to determine Agway's independent accountants'
assessment of the amount due under this Agreement. If the CPA Firm and Agway's
independent accountants do not agree, and the parties cannot agree to a mutually
satisfactory resolution, then, a third mutually agreeable nationally recognized
independent certified public accounting firm shall be hired by the parties to
finally resolve the correct amount due. The determination by the third
independent certified public accounting firm shall be final. The CPA Firm and
any third firm shall keep all information received in connection with any audit
confidential, and they shall report to Planet and Agway only the accuracy of
and/or any deficiencies in any such Sales Royalty payment report. The fee for
such CPA Firm and any third firm shall be paid by Planet, unless the audit
finally results in an upward adjustment of Sales Royalty payments due Planet by
more than 5% of the amount due under this Agreement. In such case, Agway shall
pay the full cost of such audits. In any event, Agway shall pay any finally
determined underpayment with interest in accordance with paragraph 6.c above.
7. LICENSE-BACK TO PLANET. Pursuant to the Letter Agreement,
Agway has granted Planet an exclusive, irrevocable, worldwide, royalty-free
limited license to use the Patent Rights, including the right to use the Animal
Feed Patent Rights, only for all uses other than and outside of the Products and
Agway's Field of Business (the "Planet License"). The parties hereby confirm the
Planet License, a copy of which is attached as Exhibit D.
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8. COMPETING PRODUCTS MARKETED BY AGWAY.
a. Agway shall not market, sell or distribute (directly
or indirectly) any product in Agway's Field of Business that is directly
competitive with a Product, unless Agway, at its option, either (i) agrees to
pay Planet the same Sales Royalty on sales of such directly competitive product
that Agway pays Planet on sales of Products pursuant to this Agreement, such
Sales Royalty to be based on the same percentage of annual Net Sales and
Revenues of such directly competitive product, and to be calculated and paid, as
set forth in Section 6 of this Agreement; or (ii) shall end the exclusive nature
of the License with respect to that existing Product, and Planet shall have a
non-exclusive license pursuant to paragraph b of Section 10, below. In the event
that Agway chooses option (i), Agway would retain the exclusive nature of the
License for that (and all other) Products.
b. Planet agrees that no products (1) sold by Agway as
of the Effective Date or within the immediately preceding 12 months, or (2) sold
by a successor to Agway or assignee (other than an Affiliate of Agway) of this
Agreement prior to the effective date of such succession or assignment, shall be
considered to be "directly competitive" with a Product within the meaning of
this Section 8.
9. NEW PRODUCTS AND/OR TECHNOLOGY IN AGWAY'S FIELD OF BUSINESS
DEVELOPED BY PLANET.
a. In the event Planet independently of Agway
(regardless of whether a third party is involved directly or indirectly)
develops a new technology (not based on, derived from, or that otherwise
utilizes any claim or claims of the Animal Feed Patent Rights or any part of the
Licensed Technology and that is not competitive with the Products) that Planet
has determined to have potential application as or for a new product in Agway's
Field of Business, Planet shall provide prompt written notice of such new
technology to Agway in sufficient detail for Agway to reasonably understand the
nature of the new technology, including, but not limited to, the potential new
product(s) for Agway's Field of Business that Planet envisions resulting from
such technology. Such notice shall include sufficient detail for Agway to
reasonably understand the nature of the new technology and proposed product(s),
an outline of anticipated funding needs, the anticipated length of any product
feasibility study being considered by Planet, Planet's desired result from such
study, and target market for the new technology and/or proposed product.
b. If Agway reasonably determines that the technology
and/or potential product to be developed does not compete with an existing
Product, then Agway shall have 150 days to determine by written notice to Planet
whether it wants to proceed with commercialization of the proposed new
technology. If Agway decides to proceed with commercialization, then the parties
shall use commercially reasonable efforts to negotiate in good faith
commercially reasonable terms acceptable to the parties for Agway to acquire the
new technology, or an exclusive license, with reasonable and customary sales
royalty to be paid to Planet, to use the new technology to develop, have
developed, make, have made, use, offer to sell and sell products in Agway's
Field of Business. If Agway decides not to proceed with commercialization,
Planet shall have no further obligation to Agway under this Agreement with
respect to the new
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technology, and shall have the right to grant an exclusive license to use,
and/or sell, and transfer or assign, the new technology to a third party and/or
to make, have made, use or sell the proposed product both outside and in Agway's
Field of Business. . The failure of Agway to respond to Planet in writing on or
before 150 days after the date of any notice of a proposed product or new
technology given by Planet to Agway shall be conclusively presumed to be an
election by Agway not to proceed with commercialization of the proposed product
or new technology.
c. If the parties cannot agree to such agreements as are
contemplated by this Section within 60 days after written notice by Agway to
Planet of its election to proceed with commercialization of the proposed product
or new technology, either party may submit the matter to arbitration pursuant to
Section 14 of this Agreement, and neither party shall take any further action
with respect to any commercialization of the proposed product or any new
technology or any product utilizing or based on the new technology once the
matter has been submitted to arbitration, until a decision of the arbitrator has
been rendered.
d. Any new technology and/or new product developed by
Planet that competes with one or more of the Products shall become a Product and
subject to all terms and provisions of this Agreement.
10. ADDITIONAL PROVISIONS REGARDING ANIMAL FEED PATENT RIGHTS AND
LICENSED TECHNOLOGY.
a. With respect to any patent applications and patents
covering any of the Animal Feed Patent Rights or new technology to be owned by
Agway pursuant to Sections 4b and 9 of this Agreement, Agway shall be
responsible for all costs and expenses related to preparing, filing and
prosecuting such patent applications, paying all maintenance fees related to any
such issued patents, and otherwise maintaining and defending such patents
(including, if applicable, opposition proceedings related to any European
patents, re-examination of issued patents, interference proceedings and
declaratory judgments regarding invalidity of any such issued patents). In the
event Agway decides to intentionally abandon (or fails to reasonably maintain or
defend) any of the patent applications and/or patents covering any of the Animal
Feed Patent Rights or new technology acquired by Agway from Planet pursuant to
Sections 4b and 9 of this Agreement, Agway shall provide reasonable prior
written notice to Planet of such intention to abandon (or its failure to
reasonably maintain or defend), and shall, upon receipt of prompt written notice
from Planet, transfer and assign such abandoned patent application and/or patent
to Planet
b. In the event, subject to the terms of this Agreement,
Agway's License for the Licensed Technology becomes no longer exclusive as to
any one or more Products, Agway grants to Planet a non-exclusive, irrevocable,
worldwide, royalty-free license to use the Animal Feed Patent Rights, and any
new technology acquired by Agway from Planet pursuant to Sections 4b and 9 of
this Agreement, only for such Products as to which Agway's License to use the
Licensed Technology is no longer exclusive, as set forth in the First Amendment
to the Planet License, a copy of which is attached hereto as Exhibit D-1.
11
c. With respect to any patent applications and patents
covering any of the Licensed Technology or new technology to be owned by Planet,
Planet shall be responsible for all costs and expenses related to preparing,
filing and prosecuting such patent applications, paying all maintenance fees
related to any such issued patents, and otherwise maintaining and defending such
patents (including, if applicable, opposition proceedings related to any
European patents, re-examination of issued patents, interference proceedings and
declaratory judgments regarding invalidity of any such issued patents). In the
event Planet decides to intentionally abandon (or fails to reasonably maintain
or defend) any patent application or patent covering any of the Licensed
Technology or new technology to which Agway acquires exclusive rights pursuant
to Section 9 of this Agreement, Planet shall provide reasonable prior written
notice to Agway of such intention to abandon (or its failure to reasonably
maintain or defend), and shall, upon receipt of prompt written notice from
Agway, transfer and assign such patent application and/or patent to Agway.
d. Planet and Agway agree to cooperate fully in the
preparation, filing, and prosecution of any patent applications under this
Agreement. Such cooperation includes, but is not limited to:
(i) executing all papers and instruments, or
requiring its employees or agents to execute such papers and
instruments, so as to effectuate the ownership by the appropriate party
of such patent applications (and inventions covered by such patent
applications) and to enable the appropriate party to apply for and to
prosecute such patent applications in any country, and
(ii) promptly informing the other party of any
matters coming to its attention that may affect the preparation,
filing, or prosecution of any such patent applications.
e. Planet and Agway shall promptly notify the other in
writing of any allegation by a third party that the activity of either of the
parties relating to the Animal Feed Patent Rights or the Licensed Technology
infringe or may infringe the intellectual property rights of such third party.
Agway shall have the right to control the defense of any such claims by counsel
of its own choice. If Agway fails to proceed in a timely fashion with regard to
the defense of any such claims, Planet shall have the right to control the
defense of any such claim by counsel of its own choice, and Agway shall have the
right to be represented in any such action by counsel of its own choice. Neither
party shall have the right to settle any infringement claim or litigation under
this Section 10 in a manner that diminishes the rights or interests of the other
party or obligates the other party to make any payment or take any action
without the consent of such other party, which consent shall not be unreasonably
withheld.
f. Planet and Agway shall promptly notify the other in
writing of any actual, alleged or threatened infringement of any of the Animal
Feed Patent Rights of which it becomes aware, even if such infringing activity
may be by such party or any of its Affiliates, or any employee, representative
or contractor of any of them. Both parties shall use reasonable efforts in
cooperating with each other to terminate and resolve such infringement without
litigation. Agway shall have the right to bring and control any action or
proceeding with respect to
12
infringement of any Animal Feed Patent Rights or the Licensed Technology by
counsel of its own choice.
g. With respect to infringement of any of the Animal
Feed Patent Rights, if Agway fails to bring an action or proceeding within (i)
90 days following receipt by Agway of written notice of alleged infringement or
(ii) 10 days before the time limit, if any, set forth in the appropriate laws
and regulations for the filing of or recovery of damages in such actions,
whichever comes first, then Planet shall have the right to bring and control, at
its own expense, any such action by counsel of its own choice, and Agway shall
have the right to be represented in any such action by counsel of its own
choice. In the event a party brings an infringement action, the other party
shall cooperate fully, including if required to bring such action, the
furnishing of a power of attorney. Neither party shall have the right to settle
any patent infringement litigation under this Section in a manner that
diminishes the rights or interests of the other party without the prior written
consent of such other party. Except as otherwise agreed to by the parties as
part of a cost sharing arrangement, any recovery realized as a result of such
litigation, after reimbursement of any litigation expenses of Agway and Planet,
shall belong to the party who brought the action and if recovered by Agway shall
be treated as Net Sales and Revenues for purposes of calculating the Sales
Royalty.
h. Neither party shall have any obligation to enforce
rights under the Animal Feed Patent Rights for the benefit of the other party.
i In the event Agway is permanently enjoined from
exercising its license rights granted under the License pursuant to an
infringement action brought by a third party, or if both Agway and Planet elect
not to undertake the defense or settlement of such a claim of alleged
infringement involving the Licensed Technology for a period three months from
notice of such claim or suit, then Agway shall have the right to terminate the
License with respect to the infringing Licensed Technology by written notice to
Planet.
11. REPRESENTATIONS AND WARRANTIES.
a. Planet represents and warrants that:
(i) It has authority to enter into this
Agreement, all corporate action on behalf of Planet necessary to
consummate the transactions contemplated by this Agreement have been
taken by Planet, and entering into this Agreement will not violate any
agreements to which it is a party.
(ii) It has all necessary government licenses and
approvals required to conduct its business, and no consent or approval
of any third party (including without limitation stockholders,
government entities, self-regulatory bodies and licensees of any of
Planet's intellectual property) is necessary to consummate the
transactions contemplated by this Agreement.
(iii) It has no knowledge of any impediment to its
performance of this Agreement.
13
(iv) It is the sole and exclusive owner of the
Licensed Technology.
(v) The Animal Feed Patent Rights are genuine
and valid.
(vi) To the best of its knowledge, the Licensed
Technology does not infringe upon the proprietary rights of any
individual or entity.
(vii) It has not granted a license to any other
individual or entity to develop, market, exploit or commercialize the
Licensed Technology with respect to the Products in Agway's Field of
Business.
(viii) It does not have or expect to have in the
foreseeable future any source of income or revenue other than from
Agway, consulting fees and the nominal amounts related to the Xxxx
Industries, LLC royalty payments previously disclosed to Agway.
(ix) It is not, directly or indirectly, engaged
in any discussions regarding, or contemplating, any sale or change of
ownership or control of Planet.
(x) As of the date of the Assignment,
(1) Planet was the sole and exclusive
owner of the Animal Feed Patent Rights;
(2) Planet owned and conveyed to Agway
the Animal Feed Patent Rights free and clear of all liens and
encumbrances;
(3) no license or other rights relating
to the Animal Feed Patent Rights had been conveyed by Planet
to any party other than Agway;
(4) all corporate action on behalf of
Planet necessary to consummate the Assignment had been taken
by Planet; and
(5) no consent or approval of any third
party (including without limitation stockholders, government
entities, self-regulatory bodies and licensees of any of
Planet's intellectual property) was necessary to consummate
the Assignment.
b. Agway represents and warrants that:
(i). Agway has authority to enter into this
Agreement, all corporate action on behalf of Agway necessary to
consummate the transactions contemplated by this Agreement have been
taken by Agway, and entering into this Agreement will not violate any
agreements to which it is a party.
14
(ii) No consent or approval of any third party
(including without limitation stockholders, government entities,
self-regulatory bodies and licensees of any of Agway's intellectual
property) is necessary to consummate the transactions contemplated by
this Agreement and Agway has no knowledge of any impediment to its
performance of this Agreement.
(iii) To the best of its knowledge, it is the sole
and exclusive owner of the Animal Feed Patent Rights.
c. Concurrently with the execution of this Agreement
Agway agrees to assign and transfer to Planet shares of capital stock of Planet
representing all of the capital stock of Planet directly or indirectly owned by
Agway (the "Planet Shares") by delivering to Planet of the share certificates
representing such shares together with an Assignment Separate From Certificate
in the form and content of Exhibit F attached. The Planet Shares when delivered
to Planet will be free and clear of all liens and encumbrances.
12. WARRANTY DISCLAIMER AND LIMITATION OF LIABILITY.
a. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER PARTY OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
b. EXCEPT IN REGARD TO THEIR RESPECTIVE INDEMNIFICATION
OBLIGATIONS, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY
SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES IN
CONNECTION WITH THIS AGREEMENT.
13. INDEMNIFICATION.
a. Agway shall indemnify, defend and hold harmless
Planet and its directors, officers, employees, representatives, agents, and
contractors from and against any product liability claim by a third party to the
extent arising solely out of the activities of Agway or its directors, officers
or employees.
b. Planet shall indemnify, defend and hold harmless
Agway and its directors, officers, employees, representatives, agents, and
contractors from and against any product liability claim by a third party to the
extent arising solely out of the activities of Planet or its directors, officers
or employees.
c. Planet shall indemnify, defend and hold harmless
Agway and its directors, officers, employees, representatives, agents, and
contractors from and against any and all claims, causes of action, demands,
judgments, losses, damages, liabilities, costs and expenses (including
attorneys' fees and court costs) caused by or arising out of any claim that the
Licensed
15
Technology or any part of the Licensed Technology infringes any patent,
copyright, trademark, trade secret or other proprietary right of any third party
d. In the event either party seeks indemnification under
this Section 13, it shall inform the other party of a claim as soon as
reasonably practicable after it receives notice of the claim, shall permit the
other party to assume direction and control of the defense of the claim
(including the right to settle the claim solely for monetary consideration), and
shall cooperate as requested (at the expense of the other party) in the defense
of the claim.
14. DISPUTE RESOLUTION.
a. Except as otherwise provided in this Agreement, if
any dispute arises between the parties relating to the interpretation, breach or
performance of this Agreement or the grounds for the termination thereof, and
the parties cannot resolve the dispute within 30 days of a written request by
either party to the other party, the parties agree to hold a meeting, attended
by a Vice President or President of each party, to attempt in good faith to
negotiate a resolution of the dispute prior to pursuing other available
remedies.
b. 1f within 60 days after such written request, the
parties have not succeeded in negotiating a resolution of the dispute, or as
otherwise provided in this Agreement such dispute shall be submitted to final
and binding arbitration under the then current commercial rules and regulations
of the American Arbitration Association ("AAA") relating to voluntary
arbitrations. The arbitration proceedings shall be held in Syracuse, New York if
instituted by Planet, and in San Diego, California if instituted by Agway. The
arbitration shall be conducted by one arbitrator, who is knowledgeable in the
subject matter at issue in the dispute and who shall be selected by mutual
agreement of the parties or, failing such agreement, shall be selected in
accordance with the AAA rules.
c. The decision of the arbitrator shall be final and
binding on the parties. The arbitrator shall prepare and deliver to the parties
a written, reasoned opinion conferring his/her decision. Judgment on the award
so rendered may be entered in any court having competent jurisdiction thereof.
d. Each party shall initially bear its own costs and
legal fees associated with such arbitration. The prevailing party in any such
arbitration shall be entitled to recover from the other party the reasonable
attorneys' fees, costs, and expenses incurred by such prevailing party in
connection with such arbitration.
15. TERMINATION OF LICENSE.
a. Planet may terminate the License upon written notice
to Agway in the event Agway fails to make any payment (other than a payment of
the Minimum Annual Royalty) that is due and payable pursuant to this Agreement
and/or upon Agway's material breach of any of the provisions of this Agreement,
which failure or breach is not cured within 60 days after Agway receives written
notice from Planet of such failure or breach.
16
(i) In the event Planet terminates the License
pursuant to Section 15a, above, Planet shall have an exclusive,
irrevocable, world-wide, royalty free license to use the Animal Feed
Patent Rights and any new technology acquired by Agway from Planet
pursuant to Sections 4b and 9 of this Agreement to sell, market and
otherwise distribute products, including, but not limited to, Products.
(ii) Nothing contained in this Section 15a shall
give Planet any rights to or in any assets of Agway (other than the
license to use Agway's Animal Feed Patent Rights and any new technology
acquired by Agway from Planet pursuant to Sections 4b and 9 of this
Agreement as set forth in Section 15a(i) above), including, but not
limited to Agway's plant facilities and equipment, trademarks,
know-how, or related business information.
b. Agway may terminate the License (i) upon 60 days'
advance written notice to Planet upon Planet's material breach of any of the
provisions of this Agreement, which breach is not cured (if capable of being
cured) within the notice period, or (ii) if any of the representations and
warranties made by Planet in this Agreement prove to be inaccurate or false in
any material respect, or (iii) if Agway determines that the market or the cost
of entry into the market for Products is not, or is no longer, viable, or (iv)
any regulatory body makes a determination or finding that Agway reasonably
believes will severely reduce or eliminate the market for one or more Products,
or will present an untenable technical or financial barrier to entry into the
market for such Product or Products.
(i) In the event Agway terminates the License
pursuant to Section 15b, above, Planet shall have an exclusive,
irrevocable, world-wide, royalty free license to use the Animal Feed
Patent Rights and any new technology acquired by Agway from Planet
pursuant to Sections 4b and 9 of this Agreement to sell, market and
otherwise distribute products, including, but not limited to, Products.
(ii) Nothing contained in this Section 15b shall
give Planet any rights to or in any assets of Agway (other than the
license to use Agway's Animal Feed Patent Rights and any new technology
acquired by Agway from Planet pursuant to Sections 4b and 9 of this
Agreement as set forth in Section 15b(i) above), including, but not
limited to, Agway's plant facilities and equipment, trademarks,
know-how, or related business information.
c. Upon termination of the License and except as
otherwise expressly provided in this Agreement, Agway shall have the right for
one year thereafter to dispose of all Products then in its inventory, and shall
pay Sales Royalties thereon as though the License had not terminated.
d. Termination of the License and/or Agreement shall not
affect any rights or obligations accrued prior to the effective date of such
termination. Agway's obligation to pay all Sales Royalties, if any, on Agway's
Net Sales and Revenues occurring prior to or after the termination of the
License and/or this Agreement shall survive any such termination and continue
for the full term set forth in Section 6a(ii) of this Agreement. By way of
clarification
17
and not by way of limitation, Agway's obligation to pay Minimum Annual Royalties
shall not survive termination of the License and/or Agreement
e. Except as provided in Section 4d, the rights provided
in this Section shall be in addition and without prejudice to any other rights
which the parties may have with respect to any breach or violations of the
provisions of this Agreement.
16. MISCELLANEOUS.
a. The failure by any party to this Agreement, at any
time, to enforce or to require strict compliance of performance by any other
party of any of the provisions of this Agreement shall not constitute a waiver
of such provisions and shall not affect or impair in any way its rights at any
time to enforce such provisions or to avail itself of such remedies as it may
have for any breach thereof.
b. The provisions of this Agreement shall be deemed
separable. If any part of this Agreement is rendered void, invalid, or
unenforceable, it shall be considered severed from this Agreement, and shall not
affect the validity or enforceability of the remainder of this Agreement.
c. No waiver, modification or amendment of any terms of
this Agreement shall be valid unless made in writing specifying such waiver,
modification, or amendment and signed by the parties hereto.
d. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including, but not limited to, fire, floods,
embargoes, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other party.
e. The obligations of Agway under this Agreement are
contingent upon the approval of the United States Bankruptcy Court, Northern
District of New York.
f. This Agreement will be governed by, and interpreted
and enforced in accordance with, the laws of the State of New York, U.S.A.,
without regard to its choice of law provisions; except where the federal laws of
the United States are applicable and have precedence.
g. Any notice required by this Agreement shall be sent
by Registered or Certified U.S. mail, or by telecopy, telex or cable and shall
be deemed delivered if sent to the following addresses of the respective parties
or such other address as is furnished by proper notice to the other party:
To Agway: To Planet:
Agway, Inc. Planet Polymer Technologies, Inc.
18
Attn: Xxxxxxx Xxxxxxx Attn: President
000 Xxxxxxxxx Xxxxx 0000 Xxxxxxxx Xxxx Xxxxxx, Xxxxx X
Xx Xxxx, Xxx Xxxx 00000 9985 Xxx Xxxxx, Xxxxxxxxxx 00000
With copy to: With copy to:
Bond, Xxxxxxxxx & King, PLLC Xxxxxxxxx, Xxxxxxx & French
Attn: Xxxxxx X. Xxxx, Xx. Attn: Xxxxxx X. Xxxxxxxxx
One Lincoln Center 000 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000 Xx Xxxxx, Xxxxxxxxxx 00000
h. This Agreement shall be binding on and inure to the
benefit of the parties to this Agreement and their successors and permitted
assigns, provided no assignment shall relieve the assigning party of its
obligations under this Agreement. The rights, duties, privileges and obligations
of each party under this Agreement shall not be assigned or delegated without
the prior written consent of the other party (which consent shall not be
unreasonably withheld); provided, however, that either party may assign this
Agreement and its rights and obligations hereunder without the other party's
consent in connection with the transfer or sale of all or substantially all of
the business of such party to which this Agreement relates to another party,
whether by merger, sale of stock, sale of assets or otherwise ("Sale of
Business") provided such party gives the other party at least 60 days written
notice of any contemplated Sale of Business and the opportunity to make an offer
to purchase such business. Any assignment not in accordance with this Agreement
shall be void.
i. Each of the parties will perform all other acts and
execute and deliver all other documents as may be necessary or appropriate to
carry out the intent and purposes of this Agreement.
j. This Agreement, including the attached Exhibits A, B,
C, D, D-1, E, and F which Exhibits are hereby incorporated in the Agreement by
reference, is the entire agreement of the parties regarding the subject matter
except for the Assignment and the Planet License, and any and all other
agreements, including, but not limited to, the Letter Agreement; licenses;
representations and understandings, whether oral or in writing, prior to the
Effective Date are hereby merged into and superseded by this Agreement.
The assent of the parties to this Agreement as of the Effective Date is
established by the following signatures of their authorized representatives.
AGWAY, INC. PLANET POLYMER TECHNOLOGIES, INC.
By: ____________________________ By: _________________________________
Title: _________________________ Title: ______________________________
Date: __________________________ Date: _______________________________
19
EXHIBIT A
PATENT RIGHTS
1. Controlled Release Urea Based Products - Allowed
2. Preserving Fresh Produce (PVOH) - Allowed
3. Preserving Fresh Produce (CMC) - Allowed
4. Preserving Fresh Produce (Chitosan) - Pending
5. Preserving Fresh Produce (PVDC) - Pending
6. Any subsequent patent applications derived from current research initiatives.
7. Any international patent applications related to the above patents and patent
applications.
20
EXHIBIT B
ANIMAL FEED PATENT RIGHTS
1. Controlled Release Urea Based Products - Allowed
2. Any subsequent patent applications derived from current research initiatives
as of November 14, 2000.
3. Any international patent applications related to the above patents and patent
applications.
21
EXHIBIT C
ASSIGNMENT
[Attach copy of Assignment of Patent Rights by Planet to Agway]
22
EXHIBIT D
PLANET LICENSE
[Attach copy of November 14, 2000 License Agreement licensing patent rights back
to Planet outside Agway's Field of Business]
23
EXHIBIT D-1
PLANET LICENSE AMENDMENT
[Attach copy of draft amendment to November 14, 2000 License Agreement]
24
EXHIBIT E
CPG NUTRIENTS
QUARTERLY STATEMENT OF OPERATIONS AND PLANET POLYMER SALES ROYALTY CALCULATION
25
EXHIBIT F
ASSIGNMENT SEPARATE FROM CERTIFICATE
[Attach copy of Assignment of Agway's shares of Planet Stock.]
26
