exv10w60



 





AMENDMENT TO MANUFACTURING AGREEMENT




     THIS AMENDMENT TO MANUFACTURING AGREEMENT (this “Amendment”) is made this
1st day of October, 2003, by and between CP Kelco U.S., Inc. (“CP Kelco”) and
Martek Biosciences Boulder Corporation (“Martek”).



     WHEREAS, CP Kelco and OmegaTech, Inc. (“OmegaTech”) executed a
Manufacturing Agreement (the “Agreement”) effective as of October 19, 2001
under which CP Kelco was to manufacture Products (capitalized terms not defined
herein shall have the meanings assigned thereto in the Agreement) for
OmegaTech;



     WHEREAS, Martek acquired OmegaTech’s business and pursuant to this
purchase was assigned the Agreement;



     WHEREAS, CP Kelco’s ability to manufacture * products for Martek is
contingent upon CP Kelco improving its production facilities at its San Diego
facility (the “Plant”); and



     WHEREAS, Martek has agreed to provide CP Kelco with the funds required for
the improvements subject to the terms of this Amendment.



     NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, CP Kelco and Martek agree as follows:



1. Temporary Improvements




     1.1 CP Kelco shall use, or continue to use, its best
efforts to construct and assemble temporary improvements (“Temporary
Improvements”) to its Plant so that the manufacturing of * for Martek complies
with good manufacturing practices set forth in 21 C.F.R. Part 110 and any other
regulations and guidance documents that the U.S.



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted
separately to the Securities and Exchange Commission





 









 








Food and Drug Administration has issued (“GMPs”). The Temporary
Improvements shall be sufficient to produce an initial two-batch production
run of * and shall be capable of readily being reassembled, assuming they are
disassembled, to enable additional production runs, as reasonably requested
by Martek (and subject to the ability of CP Kelco to proceed in a commercially
reasonable manner to produce additional runs of *, in light of the temporary
nature of these improvements) prior to the implementation of the Permanent
Improvements, as defined below.



     1.2 Martek shall have the right to inspect and approve the
Temporary Improvements before the initial production run to satisfy itself that
the Temporary Improvements are in compliance with GMPs. Upon satisfactory
inspection of the Temporary Improvements, Martek shall indicate its approval of
the same in writing to CP Kelco.



     1.3 Martek shall reimburse CP Kelco for all costs CP Kelco
incurs, up to a maximum of *, in connection with the assembly, disassembly and
reassembling of the Temporary Improvements (“Temporary Improvement Costs”). CP
Kelco shall provide Martek with an itemization of all such Temporary
Improvement Costs and any substantiation Martek reasonably requires in
connection therewith. All costs shall be limited to CP Kelco direct out of
pocket costs without any markup or other adjustments. Payments shall be made
within thirty (30) days of Martek’s receipt of itemization of such Temporary
Improvements costs. CP Kelco hereby acknowledges that Martek has, prior to the
date of this Amendment, paid CP Kelco *, which amount shall be applied towards
Martek’s obligation to reimburse CP Kelco for the cost of such Temporary



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








Improvements, or if less than *, such balance shall be applied to other
obligations of Martek under this Agreement.



2. Permanent Improvements




     2.1 By December 31, 2003, Martek and CP Kelco shall use
their reasonable best efforts to jointly develop the scope of permanent
improvements (“Permanent Improvements”) the Plant requires to enable the
continuous production of DHA-INT that will meet the Specifications and be
manufactured in accordance with GMPs. The parties shall seek to control the
costs of the Permanent Improvements and to limit the amount of time before the
Permanent Improvements are completed.



     2.2 If the parties reach agreement, in writing, as to the
scope and costs of the Permanent Improvements, and upon the written approval of
Martek, Martek shall pay CP Kelco 50% of the agreed cost within thirty (30)
days of Martek’s written approval to proceed, and, as soon as possible after
agreement is reached, CP Kelco shall proceed with the construction of the
Permanent Improvements. CP Kelco has provided, prior to the date of this
Amendment, a preliminary cost estimate * for the Permanent Improvements.



     2.3 Upon satisfactory completion of the Permanent
Improvements, Martek shall pay and/or reimburse CP Kelco for the balance of all
costs directly incurred for the purchase, fabrication, and installation of the
Permanent Improvements (“Permanent Improvement Costs”). CP Kelco shall provide
Martek with an itemization of all such Permanent Improvement Costs and any
substantiation Martek reasonably requires in connection therewith, all such
costs to be limited to the direct out of pocket costs incurred by CP Kelco,
without any markup or other adjustment. Payment shall be made within thirty
(30) days of Martek’s receipt of itemization of such Permanent Improvement
Costs.



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to
the Securities and Exchange Commission



 









 








3. Term




     3.1 The term of the Agreement is hereby extended for six
months to June 30, 2005.



     3.2 If (i) the initial production run utilizing the
Temporary Improvements meets GMPs and product is in accordance with the
Specifications for DHA-INT and (ii) Martek agrees to proceed with the
construction of the Permanent Improvements in accordance with Section 2.2 of
this Amendment , the term of the Agreement shall automatically be extended an
additional 12 months until June 30, 2006.



     3.3 If (i) the initial production run utilizing the
Temporary Improvements meets GMPs and product is in accordance with the
Specifications for DHA-INT and (ii) Martek agrees to proceed with the
construction of the Permanent Improvements in accordance with Section 2.2 of
this Amendment, Martek shall have the option at anytime prior to August 31,
2005, upon written notice from Martek to CP Kelco, to extend the term of the
Agreement an additional 18 months until December 31, 2007.



4. Payment If the condition set forth in Section
3.2(i) is satisfied but Martek, in its sole and absolute discretion determines,
once the parties agree upon the scope and costs of the Permanent Improvements,
not to proceed with the construction of the Permanent Improvements, Martek
shall provide CP Kelco with a payment of $300,000 within 60 days of Martek’s
determination not to proceed. Such payment shall fully satisfy any and all
claims that CP Kelco may possess as a result of Martek’s determination not to
proceed with the construction of the Permanent Improvements, including, but not
limited to, any loss of revenue or profits associated with the



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








elimination or reduction of the Plant’s production capacity as a result of the
assembly, disassembly or reassembling of the Temporary Improvements. CP Kelco
shall have no other rights against Martek as a result of Martek’s determination
not to proceed with the construction of the Permanent Improvements. Martek’s
determination not to proceed shall be made no later than December 31, 2003,
provided that the completion of the development of the Permanent Improvements
as described in Section 2.1 above has been completed by November 30, 2003, or
if later, then by the date which is thirty (30) days following the completion
of the development of the Permanent Improvements described in Section 2.1.



5. Pricing



     5.1 Effective as of January 1, 2005, the Product Pricing
Schedule to the Agreement shall be amended in accordance with Schedule 1 to
this Amendment. Base Pricing shown represents a * previous Pricing before
Rebate for * Products, and * previous Pricing before Rebate for all other *.



     5.2 If Martek does not agree to the 12-month extension
set forth in Section 3.2 of this Amendment, Martek shall purchase and CP Kelco
shall deliver a minimum of * of Products at Base Pricing during the 6-month
period January 1, 2005 to June 30, 2005. Should Martek purchase less than the
minimum quantity during that period, Martek shall reimburse CP Kelco for net
lost profits pursuant to Section 5.5 below.



     5.3 If Martek agrees to the 12-month extension set forth
in Section 3.2 of this Amendment, the following terms shall apply:




	5.3.1	 	Martek shall purchase and CP Kelco
shall deliver a minimum of 125,000 kg of Products during each
of the 6-month periods: i)





*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities
and Exchange Commission



 









 









	 	 	January 1, 2005 to June 30, 2005, ii) July 1, 2005 to
December 31, 2005, and iii) January 1, 2006 to June 30,
2006. Should Martek purchase less than the minimum
quantity during any given period, Martek shall reimburse CP
Kelco for net lost profits pursuant to Section 5.5 below.
	 
	5.3.2	 	Martek shall have the right to a
pricing rebate (reflected as a dollar for dollar immediate
purchase price reduction when earned on invoices so that
amounts due from Martek shall always be the net amount after
subtracting any rebates) for Products purchased during the
18-month extension period January 1, 2005 to June 30, 2006.
Cumulative rebate during the 18-month extension period shall
not exceed 20% of the actual Permanent Improvement Costs as
described in Section 2.3 above. Rebate shall be calculated
as follows: (Rebate $/kg) = (20% x Permanent Improvement
Costs) / *. (For example: If Permanent Improvement Costs
are *, the rebate would be: (20% x *).






	5.4	 	If Martek exercises its option for an additional
18-month extension under Section 3.3 of this Amendment, the
following terms shall apply:






	5.4.1	 	Martek shall purchase and CP Kelco
shall deliver a minimum of * of Products during each of the
6-month periods: i) July 1, 2006 to December 31, 2006, ii)
January 1, 2007 to June 30, 2007, and iii) July 1, 2007 to
December 31, 2007. Should Martek purchase less than the
minimum quantity during any given period, Martek shall





*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 









	 	 	reimburse CP Kelco for net lost profits pursuant to Section
5.5 below.
	 
	5.4.2	 	Martek shall have the right to a
pricing rebate (reflected as a dollar for dollar purchase
price reduction when earned on invoices so that amounts due
from Martek shall always be the net amount after subtracting
any rebates) for Products purchased during the 18-month
extension period July 1, 2006 to December 31, 2007.
Cumulative rebate during the 18-month period shall not exceed
30% of the actual Permanent Improvement Costs as described in
Section 2.3 above. Rebate shall be calculated as follows:
(Rebate $/kg) = (30% x Permanent Improvement Costs) / *.
(For example: If Permanent Improvement Costs are *, the
rebate would be: (30% x *).





     5.5 In the event that Martek purchases less than the minimum amounts
of Products during any given period as required under Sections 5.2, 5.3.1, or
5.4.1 above, then, the reimbursement due from Martek shall be the net lost
profits to CP Kelco, which will be determined as the purchase price for DHA
Gold in 15 kg kraft bags otherwise applicable under Schedule 1 hereof, less the
amount of * (“Variable Cost Reduction”), multiplied by the shortfall between
the minimum amounts of Products required and the actual quantity purchased
during the period in question. In addition, the amount of * (“Labor
Reduction”) shall also be similarly subtracted from the purchase price on
account of labor costs, provided, that CP Kelco is able to either redeploy its
workers to other projects, or



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








such workers’ services are discontinued so that CP Kelco is no longer paying
salaries or wages to such workers. In the event that CP Kelco is only able
to partially redeploy its workers, or discontinue the services of a portion of
its workers, then, the amount set forth above for the Labor Reduction shall be
reduced proportionately. CP Kelco shall take all commercially reasonable
measures to mitigate any damages to Martek. (For example: If Martek purchases
only * of Products during the 6-month period described in Section 5.2 above,
the shortfall would be * minimum minus * actual purchase = * and the applicable
pricing would be * DHAGold minus * Variable Cost Reduction minus * Labor
Reduction = * and the resulting reimbursement due from Martek to CP Kelco would
be *.



6. Rights Upon Termination




     6.1 If the Agreement shall terminate under Section 9.1.1 of the Agreement
as a result of a material breach by CP Kelco or under Section 9.1.2 if any of
the events set forth therein apply to CP Kelco, Martek shall be reimbursed the
costs advanced by Martek for the Permanent Improvement Costs, less cumulative
amortization of the Permanent Improvement Costs over the applicable contract
extension period at termination as per Section 5.3 and/or 5.4 (i.e., 18 months
or 36 months), less cumulative discounts previously received by Martek. Such
amount shall not be in lieu of, but shall otherwise be in addition to, any
other and further claims Martek may have against CP Kelco as a result of a
termination of the Agreement under Sections 9.1.1 and 9.1.2. In all other
cases, the discount available to Martek is non-refundable.



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








7. EFFECT Except as otherwise provided in, or
affected by, this Amendment, the Agreement shall remain in full force and
effect; except, however, Section 5.1.3 shall be deemed deleted from the
Agreement and of no further force or effect.



8. ASSIGNMENT This Agreement, as amended herein, may not be
assigned by a party without the prior written consent of the other party, which
consent will not be unreasonably withheld. In the event that majority control
of the capital stock of CP Kelco (which shall include the stock of any ultimate
parent company) is sold, assigned or otherwise transferred to a third party
which in the reasonable opinion of Martek is deemed by Martek to be a
Competitor (defined below), then, Martek shall have the option to elect to
terminate this Agreement and the rights specified in Section 6.1 above shall be
available to Martek. “Competitor” shall be defined as any third party which
is in any aspect of the business of production, manufacturing, processing,
marketing, or performing research and development relating in any manner to
Omega-3 and Omega-6 long chain polyunsaturated fatty acids which includes, but
are not limited to, docosahexaenoic acid(DHA), arachidonic acid(ARA), or
eicosapentaenoic acid(EPA).



9. NOTICE Notices to Martek shall be sent to: Martek Biosciences
Corporation, 6480 Dobbin Road, Columbia Maryland 21045, and Facsimile: (410)
740-2985, Attn.: General Counsel. Notices to C.P. Kelco shall be sent to:
Richard B. Langston, CP Kelco U.S., Inc, 8355 Aero Drive, San Diego California
92123, and Facsimile: (858) 467-6440, with a copy to: CP Kelco U.S., Inc,
1313 N. Market Street, Wilmington Delaware 19894-0001, and Facsimile: (302)
594-6260, Attn: VP, Intellectual Property.



*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and
year set forth above.



	 	 	 	 	 
	 	 	CP KELCO U.S., INC.
	 
	 	 	 	 
	 	 	Jurgen Dominik
	 	 	Sr. Vice President,
	 	 	Manufacturing and Process R&D
	 
	 	 	 	 
	

	 	By:
	 	 /s/ Jurgen Dominik

	 
	 	 	 	 
	 	 	MARTEK BIOSCIENCES BOULDER CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	/s/ George P. Barker

	

	 	 
	 	George P. Barker
	

	 	 
	 	Sr. Vice President & General
Counsel







SCHEDULE 1

PRICING AMENDMENT




	 	 	 	 	 	 	 
	

	 	Base Pricinga,e

Eff 1/1/2005
	 	Rebated Pricingb

Eff 1/1/2005
	 	Rebated Pricingc

Eff 7/1/2006







1. For product purchased in *:




	 	 	 	 	 
	

	 	DHA Gold
	 	*
	

	 	Gold Value Fat
	 	*
	

	 	HUFA 3050
	 	*
	

	 	DHA INT
	 	*
	

	 	HUFA 2000 INT
	 	*
	

	 	HUFA 2050 (272kg)
	 	*







2. For product purchased in *:




	 	 	 	 	 
	

	 	DHA Gold
	 	*
	

	 	Gold Value Fat
	 	*
	

	 	HUFA 3050
	 	*
	

	 	HUFA 2050
	 	*







*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission



 









 








3. For product purchased in *:




	 	 	 	 	 
	

	 	DHA INT
	 	*







4. For product purchased in *




	 	 	 	 	 
	

	 	DHA Crude Oil
	 	*








	a)	 	Base Pricing reflects * previous Pricing before Rebate for *,
and * previous Pricing before Rebate for all other *.
	 
	b)	 	Rebated Pricing effective during the first 18-month extension
period 1/1/2005 to 6/30/2006 to be determined as per Section 5.3.2 when
actual Permanent Improvement Cost has been determined.
	 
	c)	 	Rebated Pricing effective during the second 18-month extension
period 7/1/2006 to 12/31/2007 to be determined as per Section 5.4.2
when actual Permanent Improvement Cost has been determined.
	 
	d)	 	* contain *, except as noted.
	 
	e)	 	All base prices are gross prices prior to any reduction earned
by Martek on account of rebates earned under Sections 5.3.2 and 5.4.2,
which amounts shall be subtracted from the gross prices set forth above
pursuant to this Agreement.





*The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on
Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the
Securities and Exchange Commission