**Exhibit 10.01**SUPPLY AGREEMENT     THIS SUPPLY AGREEMENT (the “Agreement”) is made as of January 1, 2006 (the “Effective Date”),by and between Mead Johnson & Company, a corporation organized under the laws of Delaware withoffices located at 2400 West Lloyd Expressway, Evansville, Indiana 47721 (“PURCHASER”), and MartekBiosciences Corporation, a Delaware corporation with offices located at 6480 Dobbin Road, Columbia,Maryland 21045 (“SELLER”).WITNESSETH THAT:     WHEREAS, PURCHASER and SELLER entered into a License Agreement dated as of October 28, 1992and amended by letter agreement dated January 21, 2004 *, which License Agreement is amended bythis Agreement solely to the extent expressly provided herein (as so amended, the “LicenseAgreement”) wherein SELLER has granted to PURCHASER in the Territory (as defined therein) certainrights under Licensed Patents (as defined therein) and Technology (as defined therein) (A) toproduce the Mead Johnson Product (as defined therein), (B) to use and make the Martek Product (asdefined therein) for purposes of making and having made the Mead Johnson Product and (C) to use,market and distribute directly or indirectly the Mead Johnson Product, in each case as furtherspecified in the License Agreement; and     WHEREAS, PURCHASER wishes to purchase the Martek Product from SELLER; and     WHEREAS, SELLER is willing to supply Martek Product for use by PURCHASER to manufacture, use,market and distribute the Mead Johnson Product in accordance with the terms of the LicenseAgreement; and     WHEREAS, such purchase and supply of Martek Product shall be subject to the terms andconditions set forth in this Agreement.     NOW, THEREFORE, in consideration of the foregoing premises and of the mutual undertakingsherein contained, the parties agree as follows:ARTICLE 1. DEFINITIONS     Unless defined herein, all capitalized terms will have the meaning stated in the LicenseAgreement, as amended hereby. References herein to SELLER and PURCHASER shall also be deemed asreferences to Licensor and Licensee, respectively, for purposes of the License Agreement.     1.1 “ARA” shall mean arachidonic acid.     1.2 “Annual Forecast” shall have the meaning specified in Section 2.2.1.     1.3 “DHA” shall mean docosahexaenoic acid. *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
 

 
     1.4 “LCPUFA” shall mean any fatty acid, other than linoleic acid, gammalinolenic acid andalphalinolenic acid, which contains at least eighteen (18) carbon atoms and at least two (2) doublebonds.     1.5 “Martek Product Specifications” shall mean the specifications for the Martek Product to besupplied hereunder, as set forth in Exhibit C attached hereto, as such Exhibit may be modified bywritten agreement of the parties.     1.6 “Unit of the Martek Product” shall mean that quantity of Martek Product containing one (1)kilogram of DHA and/or ARA.     1.7 “Infant Formula Product” shall mean an enteral product formulated for the nutritionalsupport of premature infants and/or a breast milk substitute formulated industrially in accordancewith applicable Codex Alimentarius and United States Food and Drug Administration standards tosatisfy the total normal nutritional requirements of infants up to between four and six months ofage and adapted to their physiological characteristics and fed in addition to other foods toinfants up to approximately one year of age.ARTICLE 2. PURCHASE AND SUPPLY OF COMPOUNDS     2.1 Purchase. (a) During the Term of this Agreement and subject to the terms of thisAgreement, PURCHASER shall purchase and/or shall direct the Designee(s) (as defined in Exhibit Bhereto) to purchase, from SELLER, PURCHASER’s total requirements of DHA and ARA as required byPURCHASER for use in Infant Formula Products in accordance with the terms of the License Agreementas amended hereby. All quantities of the Martek Product purchased by PURCHASER or any Designeeunder this Agreement shall be used solely for purposes of production, distribution and/or sale ofthe Mead Johnson Product.     (b) As partial consideration for the rights granted to PURCHASER hereunder, including withoutlimitation the pricing provisions and price protection provided in Exhibit A attached hereto,PURCHASER agrees that during the Term of this Agreement Section 2.2 (i) of the License Agreementshall be of no force or effect, and after the Term of this Agreement, Section 2.2(i) of the LicenseAgreement shall only apply with respect to actions which occur after the Term of this Agreement.Notwithstanding the above, to the extent PURCHASER elects to add new countries to the Territoryafter the Effective Date of this Agreement, the incremental additional License Fee cost toPURCHASER shall be *, after the Effective Date of this Agreement, to *, provided that SELLER hasestablished specific License Fees for those particular countries.     2.2 Forecasts and Orders.     2.2.1 On the Effective Date of this Agreement, PURCHASER shall give SELLER written notice ofthe quantity of Martek Product which PURCHASER estimates in good faith that it will order or directthe Designee(s) to order from SELLER during the remainder of the current calendar year (the“Initial Annual Forecast”). Not later than November 30 of each calendar year during the Term ofthis Agreement, PURCHASER shall give SELLER written notice of the quantity of MartekProduct which PURCHASER estimates in good faith that it will order or direct the Designee(s) to *  The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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order from SELLER during the next subsequent calendar year (each, an “Annual Forecast”). TheAnnual Forecast shall be used to establish the per unit and per kilogram pricing for the MartekProducts purchased during the relevant calendar year in accordance with Section 2.3.1 and Exhibit Aattached hereto; provided that, for the remainder of calendar year 2006, the per kilogram pricingto be used, subject to the year-end adjustment pursuant to Section 2.3.1, shall be * per kilogram,notwithstanding the Initial Annual Forecast. In addition to the foregoing, one (1) month beforethe commencement of each calendar quarter during the Term of this Agreement, PURCHASER shallprovide SELLER with a forecast (a “Rolling Forecast”) of PURCHASER’s requirements for the MartekProduct for each of the succeeding four (4) quarters, specifying quantities and requested deliverydates. These forecasts will be PURCHASER’s good-faith, best estimate of requirements and shouldnot be considered a firm commitment.     2.2.2 PURCHASER expressly acknowledges that available supplies of the Martek Product have beenin the past, and, may from time to time in the future, be insufficient to meet current demand.Nevertheless, SELLER shall use commercially reasonable efforts to have available for shipment toPURCHASER or to a Designee for PURCHASER’s account such quantities of the Martek Product asPURCHASER forecasts in good faith pursuant to Section 2.2.1 above and any additional quantitieswhich PURCHASER may reasonably request. In case for any reason SELLER cannot or does not supplysuch quantities of the Martek Products as are forecasted in good faith by PURCHASER pursuant toSection 2.2.1 to PURCHASER, PURCHASER shall be allowed to use an alternative supplier forquantities of Omega-3 and Omega-6 long-chain polyunsaturated fatty acids equal to those quantitiesof Martek Products that were ordered by PURCHASER pursuant to a Purchase Order and not delivered bySELLER.     2.2.3 PURCHASER shall issue and/or shall direct the Designee(s) to issue formal purchaseorders (“Purchase Orders”) at least sixty (60) but no more than ninety (90) days in advance of thedate on which PURCHASER or the Designee requests that SELLER ship the Martek Product. SELLER shallaccept or reject any such Purchase Order within five (5) business days of receipt, provided thatSELLER shall not reject any Purchase Order for any quantities within the most recent forecast.     2.2.4 Purchase Orders which have been accepted by SELLER shall be considered as firm andbinding orders (subject to the provisions of Section 2.2.2 above) and shall only be canceled oramended by mutual written agreement of the parties.     2.3 Payment Terms.     2.3.1 Price. During the Term of this Agreement, PURCHASER and the Designee(s) shallpay for the Martek Product in any order submitted by PURCHASER or a Designee in accordance with theterms set forth in Exhibit A attached hereto. PURCHASER hereby covenants and agrees to abide bythe conditions set forth on Exhibit A, as amended by mutual agreement from time to time, whichshall be applicable to the Martek Product delivered to PURCHASER or a Designee pursuant to therelevant Purchase Order, and PURCHASER shall acknowledge in writing to SELLER, within thirty (30)days after each calendar year-end, that PURCHASER has complied with this covenant during thepreceding twelve (12) month period. Price calculations based on annual ordering volumesshall be made using the Annual Forecasts submitted to SELLER by PURCHASER in accordance withSection 2.2.1 and as further demonstrated in Exhibit A-1 attached hereto. At the end of each *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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calendar year, if the quantity actually purchased (as reflected in Purchase Orders accepted bySELLER that satisfy the requirements of Section 2.2 3 above and which are scheduled for shipmentwithin the corresponding calendar year) is less than the quantity specified in the Annual Forecastfor the relevant calendar year, SELLER shall invoice PURCHASER within thirty (30) days after theend of the calendar year for an amount equal to the difference, if any, between the total pricepaid, and the total purchase price payable for the quantity of Martek Product actually purchasedfrom SELLER in such calendar year as specified in Exhibit A. Alternatively, if the quantityactually purchased during a calendar year exceeds the quantity specified in the Annual Forecast forpurchase in such calendar year, SELLER shall credit against future purchases of Martek Product byPURCHASER from SELLER an amount equal to the difference, if any, between the total purchase pricepayable for the quantity actually purchased as specified in Exhibit A and the total price paid byPURCHASER, provided that if this AGREEMENT has terminated, SELLER shall, in lieu of any suchcredit, pay such amount to PURCHASER. Notwithstanding the foregoing, for calendar year 2006, theyear-end reconciliation described above shall be calculated as of December 1, 2006 based on actualshipments in 2006 prior to such date, plus shipments which are, as of December 1st,2006, scheduled to occur in December 2006, and any resulting credit shall be applied to invoicesissued in December 2006, and if any balance is remaining, payment shall be issued prior to December31st, 2006.     2.3.2 Taxes. The purchase price for the Martek Product is exclusive of any and allnational, state or local sales, use, value added or other taxes, customs duties and similar tariffsand fees which SELLER or its Affiliates may be required to pay or collect upon the delivery of theMartek Product, or otherwise. Should any tax or levy be made, PURCHASER agrees to pay such tax orlevy and indemnify SELLER for any claim for such tax or levy demanded.     2.3.3 Terms and Guarantee. PURCHASER and the Designee(s), as applicable, shall payall correct invoices for amounts due in accordance with Section 2.3.1 above in the United States inU.S. dollars within * days from the postmark date or date of electronic transmission, ortransmission by facsimile, as applicable, of SELLER’s invoice, which invoice shall not be deemed tobe delivered earlier than the date of delivery of the invoiced Martek Product. For any invoicescontaining invoicing errors, payment shall not be due with respect to the incorrect portions of theinvoice only until the invoicing errors are corrected and a new invoice, with respect to theincorrect portions on the original invoice, is received by PURCHASER. In order to induce SELLER tofill orders for the Martek Product placed by the Designees, PURCHASER hereby assumes responsibilityfor, and unconditionally guarantees, the timely payment of amounts due from the Designees (the“Guaranteed Obligations”) within * days after receipt from SELLER of notice of nonpayment of anysuch amount. SELLER shall not be required, prior to any such notice to PURCHASER, to pursue orexhaust any of its rights or remedies against a defaulting Designee with respect to performance ofany Guaranteed Obligation.     2.3.4 Sample Analysis. SELLER shall have the right to analyze samples of the MeadJohnson Product at any time and from time to time for purposes of verifying that PURCHASER hascomplied with any conditions that may be applicable to the PURCHASER pursuant to the terms of thisAgreement, including its exhibits and appendices, for any order of Martek Product.The expenses of such analyses shall be borne by SELLER; provided, however, that PURCHASERshall provide reasonable samples to SELLER without charge upon SELLER’s request, to be made no moreoften than quarterly, and provided, further, that PURCHASER shall be charged for, and *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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shallpromptly pay the expense of any such analysis that discloses a failure to comply with anyapplicable condition.          2.4 Order and Delivery Terms.          2.4.1 Martek Product shall be delivered F.O.B. SELLER’s place of shipment to PURCHASER orDesignee, as specified in the applicable Purchase Order.          2.4.2 Title to and risk of loss of Martek Product shall be transferred to PURCHASER upondelivery by SELLER to a carrier for shipment to PURCHASER or the indicated Designee.          2.4.3 In connection with ordering and delivering the Martek Product hereunder, PURCHASER’sstandard forms shall govern each order; however, nothing in such forms shall be construed to bindSELLER in any way that modifies or contradicts any express term of this Supply Agreement or itsexhibits and appendices.ARTICLE 3. REPRESENTATIONS, WARRANTY AND DISCLAIMER.          3.1 SELLER warrants that the Martek Product will be manufactured in compliance with (1)current good manufacturing practices promulgated by the U.S. Food and Drug Administration, (2) inaccordance with the requirements of Article 5.2 herein and (3) in accordance with the MartekProduct Specifications. Except as otherwise provided in Section 8.2, the exclusive liability ofSELLER, and PURCHASER’s exclusive remedy, for failure of any Martek Product to conform to theMartek Product Specifications shall be the replacement of the nonconforming Martek Product or arefund of the purchase price paid by PURCHASER for the nonconforming Martek Product (includingduty, freight, insurance charges, and other similar related expenses) at the SELLER’s sole option.          3.2 SELLER’s Representations and Warranties. SELLER represents and warrants to thePURCHASER as follows:     (i) Exhibit D attached hereto sets forth a complete and accurate list of the LicensedPatents as of the date of this Agreement.     (ii) SELLER has all necessary corporate power and authority to enter into this Agreementand perform its obligations hereunder.     (iii) SELLER’s performance under this Agreement does not conflict with any other contract towhich SELLER is bound.          3.3 SELLER’s Disclaimers.          3.3.1 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER HEREBY DISCLAIMS ANY AND ALLWARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT, RELATING TO *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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THE TECHNOLOGY, THE MARTEKPRODUCTS OR THE MARTEK TRADEMARKS. SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AND HAS NO DUTYTO ENSURE THAT THE TECHNOLOGY OR THE MARTEK PRODUCTS ARE USABLE WITH THE MEAD JOHNSON PRODUCT ORTHAT THE MARTEK PRODUCTS ARE SAFE OR CAN BE INCORPORATED SAFELY INTO THE MEAD JOHNSON PRODUCT. ITIS HEREBY ACKNOWLEDGED AND AGREED THAT IT SHALL BE PURCHASER’S RIGHT AND OBLIGATION TO DETERMINETHE SAFETY AND UTILITY OF THE MARTEK PRODUCTS AS THEY RELATE TO EACH MEAD JOHNSON PRODUCT.     3.3.2 SELLER HEREBY DISCLAIMS ANY WARRANTY THAT SELLER’S RIGHTS IN THE TECHNOLOGY OR USE OFTHE MARTEK PRODUCT ARE FREE FROM INFRINGEMENT BY THIRD PARTIES. SELLER FURTHER DISCLAIMS ANYWARRANTY RELATING TO THE PATENTABILITY OF, OR THE VALIDITY OF ANY PATENTS RELATING TO, THETECHNOLOGY, OR THE MARTEK PRODUCT AND MAKES NO REPRESENTATIONS WHATSOEVER WITH REGARD TO THE SCOPEOF ANY LICENSED PATENTS OR THAT ANY LICENSED PATENTS MAY BE COMMERCIALLY EXPLOITED WITHOUTINFRINGING OTHER PATENTS.     3.3.3 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER HEREBY DISCLAIMS AND SHALL NOTBE LIABLE FOR ANY DAMAGES OF ANY NATURE RESULTING OR ARISING FROM OR RELATING TO (A) THE USE,MANUFACTURE, DISTRIBUTION, MARKETING, OR SALE BY PURCHASER, ITS AFFILIATES OR ANY THIRD PARTY OFTHE TECHNOLOGY, THE MARTEK PRODUCT, OR THE MEAD JOHNSON PRODUCTS, OR (B) ANY IMPROVEMENTS ORMODIFICATIONS TO THE TECHNOLOGY, THE MARTEK PRODUCT, OR THE MEAD JOHNSON PRODUCTS WHICH ARE NOTMADE BY AND PROPRIETARY TO SELLER, **[**     3.3.4 PURCHASER’s Warranties. PURCHASER represents and warrants to the SELLER asfollows: (i) The execution and delivery of this Agreement and the performance by PURCHASERof the transactions contemplated hereby have been duly authorized by all necessarycorporate actions. (ii) The performance by PURCHASER of any of the terms and conditions of thisAgreement will not constitute a breach or violation of any other agreement orunderstanding, written or oral, to which it or its Affiliates is a party.ARTICLE 4. TERM, TERMINATION     4.1 Term: This Agreement shall commence on the Effective Date and, subject to priortermination of this Agreement in accordance with the terms hereof, shall terminate on the tenth(10th) anniversary of the Effective Date (the “Term”).     4.2 Termination: *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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     4.2.1 Termination in Case of Material Breach; Opportunity to Cure. Either party tothis Agreement may terminate this Agreement upon sixty (60) days prior written notice if the otherparty shall commit a material breach of this Agreement and shall not cure such breach within suchsixty (60) day period.     4.2.2 Termination in Case of Infringement. PURCHASER shall have the right toterminate this Agreement in a particular jurisdiction within the Territory if the parties receive awritten opinion of a mutually agreeable outside patent counsel, or a court or other tribunal ofcompetent jurisdiction determines by final order, that the Technology or any material portionthereof or the Martek Product infringe upon the patent or other proprietary rights of any ThirdParty in such jurisdiction; provided, however, that if, prior to any such termination, SELLERdevelops a non-infringing alternative that is fully compliant with all applicable laws andregulations and meets PURCHASER’S specifications and requirements as a substitute for the MartekProduct, or obtains a license from such Third Party, such that PURCHASER could lawfully use theTechnology and/or the Martek Product (as the case may be) in connection with the Mead JohnsonProducts at no additional cost or expense to PURCHASER beyond that expressly provided in thisAgreement, PURCHASER shall not terminate this Agreement.     4.2.2.1 Volumes in Case of Infringement Termination. In the event that PURCHASERterminates this Agreement as to a particular jurisdiction within the Territory based on Section4.2.2, SELLER agrees to annually credit the * of PURCHASER for the particular jurisdiction to *used in determining PURCHASER’s * Schedule A for future purchases of Martek Product.     4.2.3 Termination in Case of Insolvency; Government Action. Notwithstanding any otherprovisions of this Agreement, either party to this Agreement may terminate this Agreement upongiving notice to the other, should the other commit an act of bankruptcy, declare bankruptcy, bedeclared bankrupt, enter into an arrangement for benefit of creditors, enter into a procedure ofwinding up or dissolution, or should a trustee or receiver be appointed for the other or upon theexpropriation, takeover or nationalization of the other party or a majority portion of its assetsby governmental action.     4.2.4 Other Termination Rights. In addition to the termination rights set forthabove, either party may terminate this Agreement upon twelve (12) months prior written noticeprovided that such notice shall not be given until after the fifth (5th) anniversary ofthe Effective Date of this Agreement.     4.2.5 Termination of License Agreement. This Agreement shall automatically terminatein the event of the termination of the License Agreement.     4.3 Effect of Termination. Upon termination of this Agreement in its entirety otherthan pursuant to Section 4.2.5 or on account of PURCHASER’s breach of this Agreement, PURCHASER andits Affiliates and Designees may continue to manufacture, produce, use, market, offer for sale,sell, promote and distribute, to the extent lawful, any Mead Johnson Products containing MartekProduct purchased hereunder until its inventory of such Mead Johnson Products is exhausted. Upontermination of this Agreement pursuant to Section 4.2.4 or on account of PURCHASER’s breach of thisAgreement, *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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SELLER shall have the right, but not the obligation, to purchase from PURCHASER, itsAffiliates and Designees, at the cost paid for such Martek Product, PURCHASER’s unused inventoriesof the Martek Product.     4.4 Effect on License Agreement. Upon termination of this Agreement, notwithstandingany other provision hereof, the amendments to Sections 2.2(i) (subject to the last phrase of thefirst sentence of Section 2.1(b) hereof)**,**4.1(ii), 4.1(iii), 6.1, 6.2, and 6.3 of the LicenseAgreement as set forth herein shall be of no further force or effect.     4.5 No Royalties. As of the date of this Agreement, the parties declare that noroyalties are due from PURCHASER to SELLER under the License Agreement for actions which haveoccurred prior to the Effective Date or which occur during the Term of this AgreementFurthermore, to SELLER’s knowledge without inquiry, PURCHASER is current on all payments due toSELLER whether for license fees or product delivered. *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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ARTICLE 5. COVENANTS     5.1 During the Term of this Agreement, Sections 6.1, 6.2 and 6.3 of the License Agreementshall be deemed deleted in their entirety and replaced with Sections 5.2, 5.3 and 5.4 below.     5.2 Compliance with Law; Regulatory Approval. Each of SELLER and PURCHASER (each foritself and on behalf of its Affiliates and Designees) covenants and agrees that it shall conductall of its operations dealing with the Technology, the Martek Product and the Mead Johnson Product,in material compliance with all applicable laws, regulations and other requirements which may be ineffect from time to time, of all national governmental authorities, and of all states,municipalities and other political subdivisions and agencies thereof, including, without limitingthe generality of the foregoing, the Federal Food, Drug, and Cosmetic Act, the Infant Formula Actof 1980, the regulations and other requirements of the United States Food and Drug Administration,similar state laws and regulations or similar laws and other requirements in the Territory,including any and all amendments, as may be applicable in any jurisdiction in theTerritory in which any Martek Product, or Mead Johnson Product, as applicable, is sold. It shallbe PURCHASER’s, and not SELLER’s, responsibility to secure any regulatory approvals in theTerritory that may be necessary in connection with exercise by PURCHASER of the rights grantedunder this Agreement, and in connection therewith, PURCHASER shall not intentionally impairSELLER’s ability to obtain any regulatory approval of the Martek Product by the competentgovernmental authorities in any Territory and for any product that SELLER may elect to pursue.     5.3 Performance and Product Quality. PURCHASER covenants and agrees that it and itsAffiliates, and to the extent applicable, its Designees, shall exercise a reasonable standard ofcare and quality control in the testing, manufacturing, marketing, packaging, distribution and saleof each Mead Johnson Product. PURCHASER further covenants and agrees that it and its Affiliatesshall maintain quality control, provide adequate tests of materials, provide quality workmanship,and do such other things as are reasonably required to assure high quality production of such MeadJohnson Products.     5.4 PURCHASER’s Records. PURCHASER covenants and agrees that, PURCHASER will keeptrue and accurate records adequate to permit SELLER to monitor PURCHASER’s compliance with theterms and conditions of this Agreement and the License Agreement, and to allow any applicablepayments due to SELLER hereunder or under the License Agreement to be computed and verified. Suchrecords shall be made available upon prior written request by SELLER, during business hours, forinspection by an independent accountant who is not the auditor of record for SELLER and who isreasonably acceptable to PURCHASER and who shall be bound by a confidentiality agreement withPURCHASER, to the extent necessary for the determination of the accuracy of the payments madehereunder, and such records shall be retained for a period of three years following the year towhich they relate. For the purposes of this Section 5.4, any of the four largest accounting firmsin the United States (as of the date of the audit) shall be deemed acceptable to PURCHASER,provided that the firm selected by SELLER is not SELLER’s auditor of record. The accountant shallprovide SELLER with a report containing his/her conclusions, but not the inspected records, nor theinformation contained therein, and shall concurrently provide PURCHASER with such report.PURCHASER shall promptly remit to SELLER the amount of any underpayment *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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discovered by an inspectionconducted in accordance herewith, and SELLER shall promptly remit to PURCHASER the amount of anyoverpayment so discovered to the extent that such overpayment exceeds the cost of the inspection.Each such inspection shall cover no more than the three (3) calendar years prior to the date of therequest for inspection, and SELLER shall be entitled to no more than one (1) such inspection percalendar year, provided that, if an inspection reveals an underpayment by PURCHASER of five percent(5%) or greater, then the accountant shall also be permitted to inspect such records covering a two(2) calendar year period preceding the three (3) year period of such inspection. SELLER shall bearthe full cost of such inspection unless the audit discloses an underpayment by PURCHASER of fivepercent (5%) or greater of any applicable royalties due hereunder, in which case PURCHASER shallbear the full cost of the inspection. The provisions of this Section 5.4 shall survive anytermination or expiration of this Agreement for the limited purpose of permitting SELLER to verifyPURCHASER’s payment of the correct prices for the quantities of the Martek Product purchased underthis Agreement.     5.4.1 Notwithstanding Section 5.1, PURCHASER retains its rights under the License Agreement toaudit the records of SELLER (Licensor under the License Agreement), as described in the lastsentence of Section 6.3 of the License Agreement, for all periods during which Section 2.2(i) ofthe License Agreement was in effect.     5.5 Product Use. In order to ensure the quality and efficacy of the Mead JohnsonProduct, PURCHASER covenants and agrees that for a period of * from the Effective Date of thisAgreement, PURCHASER shall include in any Mead Johnson Product for sale in the United States (i) *of total fatty acids as DHA and * of total fatty acids as ARA and (ii) of total fatty acids as ARAand DHA.     5.5.1 The parties’ reaffirm that (a) outside the United States and (b) in the United Statesafter the above * period has expired, Section 6.6 of the License Agreement applies, which reads asfollows: Licensee covenants and agrees that it and its Affiliates shall, throughout the term ofthis Agreement, use reasonable efforts to use and develop the Technology and the Martek Productwith respect to the Mead Johnson Product in a way which is consistent with the parties’ objectiveof developing a final marketed product which has a polyunsaturated fatty acid compositioneffectively *.ARTICLE 6. [Reserved]ARTICLE 7. LIMITATION OF LIABILITY *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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     7.1 Indirect Damages. UNLESS CAUSED BY THE INTENTIONAL MISCONDUCT OF A PARTY, IN NOEVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL,CONSEQUENTIAL OR EXEMPLARY DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, INCLUDINGBUT NOT LIMITED TO, LOSS OF PROFITS OR BUSINESS OPPORTUNITY, WHETHER BASED ON BREACH OF CONTRACT,TORT (INCLUDING NEGLIGENCE) OR ANY OTHER THEORY UPON WHICH ONE PARTY MAY SEEK REMEDIES AGAINST THEOTHER.     7.2 Maximum Aggregate Liability. UNLESS ARISING FROM THE INTENTIONAL MISCONDUCT ORGROSS NEGLIGENCE OF A PARTY OR IN THE CASE OF PRODUCTS LIABILITY, NEITHER PARTY’S TOTAL LIABILITYTO THE OTHER PARTY ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT IN ANY CALENDAR YEAR DURINGTHE TERM OF THIS AGREEMENT, WHETHER BASED ON BREACH OF CONTRACT OR TORT (INCLUDING NEGLIGENCE),SHALL EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO SELLER BY PURCHASER IN ACCORDANCE WITH THISAGREEMENT DURING SUCH CALENDAR YEAR. NOTWITHSTANDING THE ABOVE, SELLER’S TOTAL LIABILITY TOPURCHASER ARISING OUT OF INTENTIONAL MISCONDUCT, GROSS NEGLIGENCE OR PRODUCTS LIABILITY SHALL NOTEXCEED THE ACTUAL PROCEEDS RECEIVED FROM INSURANCE COVERAGE MAINTAINED IN ACCORDANCE WITH SECTION10.4, IT BEING UNDERSTOOD AND AGREED THAT SELLER SHALL USE COMMERCIALLYREASONABLE EFFORTS TO RECOVER THE FULL AMOUNT OF ANY CLAIM OR LIABILITY UNDER SUCH COVERAGE. ASPURCHASER IS SELF INSURED, PURCHASER’S TOTAL LIABILITY TO SELLER ARISING OUT OF INTENTIONALMISCONDUCT, GROSS NEGLIGENCE OR PRODUCTS LIABILITY SHALL NOT EXCEED THE AMOUNT OF INSURANCE CARRIEDBY SELLER, WHICH SHALL IN NO EVENT BE LESS THAN THAT REQUIRED PURSUANT TO SECTION 10.4.ARTICLE 8. INDEMNIFICATION      8.1 Indemnity by PURCHASER. Except with respect to Losses (as defined below) forwhich SELLER has agreed to indemnify PURCHASER pursuant to Section 8.2 below, and as limited bySections 7.1 and 7.2 above, PURCHASER shall indemnify, defend and hold harmless SELLER, SELLER’sAffiliates and SELLER’s Affiliates’ directors, officers, employees and agents from and against allcosts, expenses, damages, losses and liabilities (“Losses”) asserted against SELLER, SELLER’sAffiliates and SELLER’s Affiliates’ directors, officers, employees and agents for which any of themmay become liable or incur or be compelled to pay with respect to or involving the Martek Productsupplied pursuant to this Agreement and/or the Mead Johnson Product, except to the extent that anysuch Losses result from (i) a defect caused by SELLER or any SELLER Affiliate in the MartekProducts ordered by PURCHASER or any PURCHASER Affiliate or Designee from SELLER hereunder(excluding the determination of the safety and utility of the Martek Product relating to its use ina PURCHASER Product); (ii) the failure of SELLER or any SELLER Affiliate to manufacture the MartekProducts ordered by PURCHASER or any PURCHASER Affiliate or Designee from SELLER in accordance withthe Martek Product *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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Specifications; (iii) any gross negligence or intentional wrongdoing of SELLERor any SELLER Affiliate; or (iv) the material breach by SELLER of a material term or condition ofthis Agreement.     8.2 Indemnity by SELLER. Notwithstanding Section 3.1 herein and except as limited bySections 7.1 and 7.2 above, SELLER shall indemnify, defend and hold harmless PURCHASER, PURCHASER’sAffiliates, and PURCHASER’s Affiliates’ directors, officers, employees and agents from and againstall Losses asserted against PURCHASER, PURCHASER’s Affiliates or the directors, officers,employees or agents of either of them for which any of them may become liable or incur or becompelled to pay to the extent resulting from: (i) a defect caused by SELLER or any SELLERAffiliate in the Martek Products ordered by PURCHASER or any PURCHASER Affiliate or Designee fromSELLER hereunder (excluding the determination of the safety and utility of the Martek Productrelating to its use in a Mead Johnson Product); (ii) the failure of SELLER or any SELLER Affiliateto manufacture the Martek Products ordered by PURCHASER or any PURCHASER Affiliate or Designee fromSELLER in accordance with the Martek Product Specifications; (iii) any gross negligence orintentional wrongdoing of SELLER or any SELLER Affiliate; or (iv) the material breach by SELLER ofa material term or condition of this Agreement, except to the extent that any such Losses resultfrom a material breach of any of the PURCHASER’s covenants, representations and warranties or othermaterial terms and conditions contained herein.     8.3 Condition to Indemnification. If either party expects to seek indemnificationunder this Article 8, it shall promptly give notice to the indemnifying party of the basis for suchclaim ofindemnification, and the indemnifying party shall have sole authority to defend and/or settle suchclaim or suit. If indemnification is sought as a result of any third party claim or suit, suchnotice to the indemnifying party shall be given within fifteen (15) days after receipt by the otherparty of such claim or suit; provided, however, that the failure to give notice within such timeperiod shall not relieve the indemnifying party of its obligation to indemnify unless it shall bematerially prejudiced by the failure. Each party shall fully cooperate with the other party in thedefense of all such claims or suits at the expense of the indemnifying party. No offer ofsettlement, settlement or compromise shall be binding on a party hereto without its prior writtenconsent (which consent shall not be unreasonably withheld) unless such settlement fully releasessuch party without any liability, loss, cost or obligation to such party.     8.4 Survival of Indemnity Obligation. The indemnification obligations provided inthis Agreement, including that provided in this Article 8 and in Section 5.3 above, shall survivethe expiration or termination of this Agreement, whether occasioned by the Agreement’s expirationpursuant to Section 4.1 above or earlier termination pursuant to the other Sections of Article 4above.ARTICLE 9. CONFIDENTIALITY     9.1 Disclosure of Information. All the Technology and all other information exchangedby the parties pursuant to and in execution of their obligations and in exercise of their rightsunder this Agreement, including, without limitation, the terms of this Agreement and the MartekProduct Specifications, shall be deemed confidential. SELLER and PURCHASER acknowledge and agreethat the value of the Technology, the Martek Product, and the Mead *The asterisk denotes that confidential portions of this exhibit have been omittedin reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidentialportions have been submitted separately to the Securities and Exchange Commission.
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Johnson Products is based, to alarge extent, on maintaining the confidentiality of the Technology, the Martek Product, and theMead Johnson Products and preventing any unauthorized dissemination to or use by Third Parties ofinformation relating to the Technology, the Martek Product, or the Mead Johnson Products.Confidential and proprietary information hereunder, whether orally or in written form, shall besafeguarded by the recipient and shall not be disclosed to Third Parties and shall be madeavailable only to the receiving party’s employees or other agents who have a need to know suchinformation for purposes of performing the party’s obligations, or for purposes of exercising theparty’s rights, under this Agreement and such employees or other agents shall have a legalobligation to the employer or principal, as applicable, not to disclose such information to ThirdParties. Each party shall treat, and PURCHASER shall ensure that its Affiliates and Designeestreat, any and all such confidential information in the same manner and with the same protection assuch party maintains its own confidential information. These mutual obligations of confidentialityshall not apply to any information to the extent that such information: (i) is or later becomesgenerally available to the public, such as by publication or otherwise, through no fault of thereceiving party; (ii) is obtained from a Third Party having the legal right to make such adisclosure without obligations of confidentiality; or (iii) is independently developed by a partywithout access to the confidential information. SELLER, PURCHASER or PURCHASER’s Affiliates shallnot remove from any communications or other documents delivered by a disclosing party anyproprietary notices affixed thereto by the disclosing party.     Notwithstanding the foregoing, SELLER and PURCHASER may disclose (including but not limited todisclosure in response to questions) or announce to any Third Person, or issue a press releaseconcerning (a) the fact and the nature of this Agreement and the transactions to be performedpursuant hereto; or (b) any otherwise confidential or proprietary information as and tothe extent required by applicable law or government agency of the United States and thecountries of the Territory, including, but not limited to, any applicable disclosure requirementsunder the federal securities laws or regulations thereunder, provided that in the case of each suchdisclosure, announcement or press release, the disclosing party gives no less than five (5)business days prior written notice to the other party and gives the other party such assistance asthe other party may reasonably request, in accordance with applicable law, in order to prevent,challenge, modify or protect such disclosure; provided, however, that SELLER and PURCHASER maydisclose the fact and the terms of this Agreement to its attorneys and accountants without noticeto the other party. Furthermore, PURCHASER may deliver a copy of this Agreement (including draftsthereof) to any Affiliate or any Designee so long as any such recipient has undertaken, in writing,an obligation to maintain the terms of this Agreement in confidence.     9.2 Post-Termination Obligations. The mutual confidentiality obligations of theparties under the provisions of this Article 9 shall survive the expiration or termination of thisAgreement for a period of fifteen (15) years from the date thereof. Upon expiration or terminationof this Agreement, each party shall promptly return to the other all confidential or proprietaryproperty or documentation disclosed or delivered to such party pursuant to this Agreement and thenin existence, subject to the retention by such party of one (1) copy thereof for archival purposesonly.ARTICLE 10. GENERAL PROVISIONS * The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on Rule24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to theSecurities and Exchange Commission.
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     10.1 Dispute Resolution. SELLER and PURCHASER covenant and agree to use theirdiligent efforts to resolve any disputes that arise between them in the future and are related tothis Agreement through negotiation and mutual agreement and, if good faith efforts to so negotiateand mutually agree are unavailing, through binding arbitration under the procedures set forthherein. When either party determines that there is a dispute subject to arbitration under thisAgreement, it shall promptly send written notice of the dispute to the other party. The partiesagree that for a period of thirty (30) days from the sending of such written notice, they shall ingood faith negotiate to resolve the dispute. Subject to the foregoing, disputes arising inconnection with this Agreement shall be finally settled under the Rules of the American ArbitrationAssociation by three arbitrators appointed in accordance with such Rules. Unless the parties tosuch dispute agree otherwise in writing, any such arbitration shall be conducted in Baltimore,Maryland and the results of such Arbitration shall be final and binding on the parties andenforceable in any court of competent jurisdiction. Notwithstanding the foregoing, the partiesacknowledge and agree that each of them shall have the right to seek immediate injunctive and otherequitable relief through the courts in the event of any material breach of this Agreement by theother party that would cause the non-breaching party irreparable injury for which there would be noadequate remedy at law.     10.2 Information Exchange. During the Term of this Agreement, the parties shallpromptly notify each other of any report of an adverse event associated with the use of MartekProduct in any Mead Johnson Product. PURCHASER shall have sole discretion in determining whataction, if any, is to be taken by PURCHASER in connection with any such adverse event reported byPURCHASER relating to a Mead Johnson Product.     10.3 Force Majeure. Neither party to this Agreement shall be liable for damages dueto delay or failure to perform any obligation under this Agreement, other than an obligation tomake payments, if such delay or failure results directly or indirectly from circumstances beyondthe reasonable control of such party. Such circumstances shall include, but shall not be limitedto, acts of God, acts of war, acts of terrorism, civil commotions, riots, strikes, lockouts, actsof the government in either its sovereign or contractual capacity, perturbation intelecommunications transmissions, inability to obtain suitable equipment or components or rawmaterials, accident, fire, water damages, flood, earthquake, or other natural catastrophes. Ifremittance of U.S. Dollars is prevented or impaired for reasons of force majeure, the party owingthe money shall settle such obligations in the manner as may be reasonably instructed by the partyto whom the obligation is owed. Should the effect of force majeure continue for more than six (6)consecutive months, the adversely affected party may terminate this Agreement without liability(other than for claims arising prior to the effective date of termination) on thirty (30) daysnotice to the party impaired by force majeure.     10.4 Insurance. PURCHASER is self-insured (or is an additional insured under aDesignee policy) with respect to product liability insurance covering Mead Johnson Products.SELLER shall procure and maintain product liability insurance coverage of not less than Ten MillionDollars ($10,000,000.00) covering Martek Product, with PURCHASER named as an additional insured andloss payee. PURCHASER may request from SELLER a certificate evidencing such insurance and suchcertificate shall be promptly provided. The minimum insurance coverage set forth above shall bemaintained at all times unless changed to equivalent * The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on Rule24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to theSecurities and Exchange Commission.
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coverage by another carrier upon thirty (30)days prior written notice to PURCHASER. Any successor to or permitted assignee of this Agreementshall procure and maintain product liability insurance coverage of not less than Ten MillionDollars ($10,000,000.00) covering such successor’s or assignee’s applicable products.     10.5 Notices. Notices required under this Agreement shall be in writing and sent byregistered mail, by facsimile transmission, by nationally recognized overnight courier service, orby hand delivery, with written verification of receipt and date of receipt, to the respectiveparties at the following addresses:     Notices to SELLER:Martek Biosciences Corporation