Document:

exv10w50

 

Exhibit 10.50

LICENSE AND SUPPLY AGREEMENT

This License and Supply Agreement (“Agreement”) is made and entered into as of
the sixth day of June, 2003 (“Effective Date”), by and between (i) Martek
Biosciences Corporation, a Delaware USA corporation (“Licensor”), and (ii)
Nestec Ltd., a corporation organized under the laws of Switzerland with offices
located at Avenue Nestlé 55, CH – 1800, Vevey, Switzerland (“Licensee”).

WITNESSETH:

     WHEREAS, Licensor has developed certain technology relating to the use of
Omega-3 and Omega-6 long-chain polyunsaturated fatty acid-containing
triglycerides for incorporation into infant formula;

     WHEREAS, Licensee and its affiliates are in the business of developing,
manufacturing and marketing infant nutritional products;

     WHEREAS, Licensee desires to obtain a non-exclusive license from Licensor
to use, market, import, export, distribute, offer for sale and sell Omega-3 and
Omega-6 long-chain polyunsaturated fatty acid-containing triglycerides produced
by Martek using the Technology (as defined hereunder), and Licensor is willing
to grant such license subject to the conditions and pursuant to the terms set
forth in this Agreement; and

     WHEREAS, Licensee, in addition, desires to purchase, or to have its
designee purchase, the Martek Products (as defined hereunder) from Licensor for
purposes of enabling Licensee to manufacture, use and sell the Licensee Product
(as defined hereunder) and Licensor is willing to supply such Martek Products
to Licensee or to any Licensee designee approved in writing by Martek subject
to the conditions and pursuant to the terms set forth in this Agreement.

     NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, each party hereby agrees with the other as
follows:

ARTICLE I

DEFINITIONS

     Section 1.1.
“Affiliate” shall mean any person, corporation, firm,
partnership or other entity which directly or indirectly owns Licensee, is
owned by Licensee or is owned by a party which owns Licensee to the extent that
the owning entity has in excess of fifty percent (50%) of the equity having the power
to vote on or direct the affairs of the owned entity.

*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.

 

 

     Section 1.2.
“Designee” shall mean any entity that is designated by
Licensee, and is approved by Licensor in writing subject to Licensor’s right to
withdraw such approval in its discretion, to order quantities of the Martek
Products from Licensor solely for (a) microencapsulation and/or other
processing approved by Licensor and (b) resale to Licensee.

     Section 1.3.
“Infant Formula Product” shall mean a breast milk substitute
formulated industrially in accordance with applicable Codex Alimentarius and/or
United States Food and Drug Administration standards (i) to satisfy the total
normal nutritional requirements of infants from birth up to between four (4)
and six (6) months of age and adapted to their physiological characteristics or
fed in addition to other foods to infants up to approximately one (1) year of
age and older or (ii) to satisfy the normal nutritional requirements of infants
born prematurely, as well as nutritional requirements of infants with special
dietary needs.

     Section 1.4.
“Licensed Patents” shall mean the patents and patent
applications attached hereto as Exhibit 1 attached hereto and all other patents
and patent applications in the Territory owned by Licensor or licensed to
Licensor (with the right to sublicense) which cover the Technology, including
all patents and patent applications covering inventions, improvements or
modifications conceived or developed and owned by or licensed to Licensor (with
the right to sublicense) during the term of this Agreement and included in the
Technology, and all divisionals, continuations, continuations-in-part,
reexaminations and extensions thereof.

     Section 1.5.
“Licensee Product” shall mean any product (i) which is an
Infant Formula Product, (ii) which is developed and/or manufactured by or for
Licensee or its Affiliates, (iii) which bears Licensee’s brand or the brand of
an Affiliate and (iv) which if sold in any country where any Licensed Patent
has issued, would infringe any such Licensed Patent but for the license granted
in Article II hereof.

     Section 1.6.
“Martek Products” shall mean triglycerides containing Omega-3
and/or Omega-6 long-chain polyunsaturated fatty acids produced by or for
Licensor, by microbial fermentation according to Martek’s technology and the
Licensed Patents.

     Section 1.7.
“Specifications” shall mean the specifications for the Martek
Products that are attached hereto as Exhibit 2, as they may be changed by
written agreement between the parties’ technical personnel from time to time.

     Section 1.8.
“Technology” shall mean Licensor’s trade secrets, goodwill,
data, know-how, technology and practices for incorporating the Martek Products into Infant Formula Products, and any modifications, improvements, and
enhancements to any of the foregoing made by Licensor, which are proprietary to

*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.

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Licensor and which, in Licensor’s opinion, are necessary or useful in the
production and development of the Licensee Products.

     Section 1.9.
“Territory” shall mean the countries or other geographic
areas listed in Exhibit 3 attached hereto.

     Section 1.10.
“Third Party” shall mean any party other than Licensor,
Licensee and Affiliates.

     Section 1.11.
“Trademark(s)” shall mean the Licensor trademarks FORMULAID,
NEUROMINS, DHASCO and ARASCO. Exhibit 4 attached hereto sets forth the
Trademarks and the jurisdictions where they have been registered as of the date
of this Agreement.

     Section 1.12.
“Unit of the Martek Products” shall mean that quantity of
the Martek Products containing one (1) kilogram of docosahexaenoic acid and/or
arachidonic acid.

ARTICLE II

GRANT OF LICENSE AND OTHER
RIGHTS

     Section 2.1.
License. Licensor hereby grants to Licensee, under the
Licensed Patents, the Technology, and Licensor’s other proprietary rights, for
the term of this Agreement and subject to the conditions of this Agreement, a
non-exclusive right and license, in the Territory, directly or through
sublicense to an Affiliate, (i) to incorporate, or permit a Designee to
incorporate, the Martek Products provided hereunder into or with one or more
Infant Formula Products to produce the Licensee Product and (ii) to use,
market, import, export, distribute, offer for sale and sell the Licensee
Product.

     Section 2.2.
Transfer of the Martek Products. Nothing in this Agreement
shall be construed to permit Licensee or its Affiliates to sublicense the
Martek Products or the Technology or otherwise unilaterally transfer to any
Third Party the Martek Products or the Technology except as the same are
incorporated into or used in the manufacture of the Licensee Product.
Notwithstanding the foregoing, Licensee may transfer the Martek Products, or
may direct Licensor to transfer the Martek Products, to any Designee solely for
(a) microencapsulation and/or other processing that may be approved in writing
by Licensor and (b) resale to Licensee. The parties agree that any Designee
may perform said microencapsulation and/or other approved processing, outside
of the Territory.

     Section 2.3.
Sublicensing. The grants to Licensee under this Article II
shall not include the right to grant sublicenses, except sublicenses to its
Affiliates.

*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.

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     Section 2.4.
Trademarks. In addition to the license granted hereunder
relating to the Martek Products and the Technology, Licensor hereby grants to
Licensee the non-exclusive, right and license to use the Trademarks solely on
and in connection with the sale of any Licensee Product that contains a Martek
Product, with the further agreement that Licensee may elect to so use the
Trademarks at Licensee’s sole discretion. If Licensee so uses the Trademarks,
the rights granted in this Section 2.4 shall be subject to the following terms
and conditions:

     (i)       Licensee shall not use the Trademarks as or as part of its corporate
or business name or the name of any business entity which is controlled by it,
whether an Affiliate or otherwise.

     (ii)     Licensee and its Affiliates shall have no right to sublicense to
Third Parties any of the rights in the Trademarks conveyed hereunder.

     (iii)     Licensee and its Affiliates shall not affix or use the Trademarks on
any product other than a Licensee Product that contains a Martek Product.

     (iv)       Licensee recognizes and acknowledges Licensor’s ownership of the
Trademarks and Licensor’s intent to protect the Trademarks in the Territory.
Licensee covenants and agrees that it and its Affiliates shall not challenge,
or cause a Third Party to challenge, Licensor’s right, title or interest in and
to the Trademarks anywhere in the world. All uses by Licensee or its
Affiliates of the Trademarks in the Territory shall inure to the benefit of
Licensor, and Licensee and its Affiliates shall make no use or apply for any
registration thereof except as permitted by this Agreement. Upon reasonable
request by Licensor and at Licensor’s expense, Licensee shall assist Licensor,
including but not limited to the execution of appropriate documents, in
effectuating, registering, and otherwise maintaining Licensor’s rights in the
Trademarks. Nothing in this Agreement shall be construed so as to require
Licensor to take any actions or measures to protect or secure any rights in or
obtain or apply for registration of the Trademarks.

     (v)     Licensee covenants that to the extent that any Trademark is, or
Licensor notifies Licensee that any Trademark has been registered in any
jurisdiction in the Territory, Licensee will use the trademark registration
symbol ® at least one time per label, labeling or packaging of the Licensee
Product that contains a Martek Product or on the labels, labeling or packaging
thereof and on all material originating with Licensee or its Affiliates and
used to promote the sale of any Licensee Product that contains a Martek Product
in the applicable jurisdiction, and the following legend prominently shall
appear at least once in each such Licensee Product or material in each such
jurisdiction: “[Trademark]® is a registered trademark of Martek Biosciences Corporation.” Until such time
as Licensor obtains a registration on any Trademark in a particular
jurisdiction,

*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.

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Licensee shall substitute the symbol “TM” in place of the
symbol ® and remove the reference to “registered” for the foregoing legend in
such jurisdiction.

     (vi)       Licensee covenants that Licensee Products that contain any Martek
Product manufactured for and by it and sold by it under the Trademarks shall be
of as high a quality as other like products sold by Licensee. Upon written
request by Licensor no more than once per calendar year, Licensee shall furnish
to Licensor, free of cost, (i) representative samples of products sold by
Licensee under the Trademarks to ensure compliance with the covenant set forth
in this Section 2.4(vi), and (ii) representative samples of printed items used
or to be used by Licensee in connection with the Trademarks to ensure
appropriate size and placement of the Trademarks, subject to applicable laws
and regulations.

     (vii)       Licensee shall advise Licensor of any infringement of any Trademark
of which it or its Affiliates becomes aware, but Licensee and its Affiliates
shall not bring any action with respect to any such infringement without
Licensor’s prior written consent. Licensee and its Affiliates shall cooperate
with Licensor, at Licensor’s request and at Licensor’s expense, with respect to
any of Licensor’s efforts to protect its interests in the Trademarks. Nothing
in this Agreement shall be construed so as to require Licensor to take any
actions or measures with respect to any alleged, suspected or known
infringement of the Trademarks.

     (viii)     Nothing in this Section 2.4 or in this Agreement shall be construed
to require Licensee or its Affiliates to use any of the Trademarks on the
Licensee Product or on the labels, labeling or packaging thereof or on
materials used to promote the sale of the Licensee Product.

ARTICLE III

PURCHASE AND SUPPLY OF THE MARTEK
PRODUCTS

     Section 3.1.
Purchase of the Martek Products. During the Term of this
Agreement and subject to Section 3.2.(ii), Licensee shall purchase and/or shall
direct the Designee(s) to purchase, from Licensor, Licensee’s total
requirements for the Martek Products as required by Licensee for manufacture of
the Licensee Product.

     Section 3.2.
Forecasts, Supply and Orders.

     (i)     On the Effective Date of this Agreement, Licensee shall give Licensor
written notice of the quantity of the Martek Products, in each of the
applicable pricing alternatives set forth in Exhibit 5, which Licensee
estimates in good faith that it will order or direct the Designee(s) to order
from Licensor during the remainder of the current calendar year. Not later than November 30 of
each year during the term of this Agreement, Licensee shall give Licensor
written notice of 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.

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quantity of the Martek Products, in each of the
applicable pricing alternatives set forth in Exhibit 5, which Licensee
estimates in good faith that it will order or direct the Designee(s) to order
from Licensor during the next subsequent calendar year. In addition to the
foregoing, one (1) month before the commencement of each calendar quarter
during the Term of this Agreement, Licensee shall provide Licensor with
Licensee’s firm requirements of the Martek Products for the following quarter
and Licensee’s tentative requirements of the Martek Products for each of the
three (3) succeeding calendar quarters, specifying quantities by Designee and
requested delivery dates.

     (ii)       Licensor shall use commercially reasonable efforts to have available
for shipment to Licensee or to a Designee for Licensee’s account such
quantities of the Martek Products as Licensee forecasts in good faith pursuant
to Section 3.2(i) above and any additional quantities which Licensee may
require. Licensor and Licensee shall work together to further develop and
improve the production technology related to the Martek Products. In case for
any reason Licensor cannot or does not supply such quantities of the Martek
Products to Licensee, Licensee shall be allowed to use an alternative supplier
for quantities of Omega-3 and Omega-6 long-chain polyunsaturated fatty acids
equal to the quantities of Martek Products not delivered by Licensor.

     (iii)     Licensee shall issue and/or shall direct the Designee(s) to issue
formal purchase orders at least sixty (60) days in advance of the date on which
Licensee or the Designee requests that Martek ship the Martek Products and,
subject to the provisions of Section 3.2(ii) above, Licensor shall be obligated
to fill such orders as long as Licensee is not in default of this Agreement.

     (iv)     Purchase orders which have been received by Licensor shall be
considered firm orders and shall only be canceled or amended by mutual consent
of Licensor and Licensee.

     Section 3.3.
Order and Delivery Terms.

     (i)     The Martek Products shall be delivered F.O.B. Licensor’s place of
shipment to Licensee or a Designee, as specified in the applicable order.

     (ii)       Title to and risk of loss of the Martek Products shall be transferred
to Licensee upon delivery by Licensor to a carrier for shipment to Licensee or
a Designee.

     (iii)       In connection with ordering and delivering the Martek Products,
Licensor and Licensee or a Designee may employ their standard forms, but
nothing in these forms shall be construed to modify or amend the terms of this
Agreement and, in case of conflict herewith, this Agreement shall control.

*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.

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ARTICLE IV

TERM AND TERMINATION

     Section 4.1.
Term. This Agreement shall commence on the Effective Date
and, unless earlier terminated pursuant to another Section of this Article IV,
shall terminate as to each country in the Territory in which a Licensee Product
is sold, on the twenty-fifth anniversary of the date of first commercial sale
of any Licensee Product in such country and, as to each country in the
Territory in which a Licensee Product has not been sold prior to the
twenty-fifth anniversary of the date first written above, upon such
twenty-fifth anniversary (“Term”). Upon expiration of this Agreement as to
each country, Licensee shall have a fully paid, royalty free license to
continue to utilize the Martek Products and the Technology in such country as
provided for in Section 2.1 above. Upon expiration of this Agreement as to
each country, Licensee shall have a fully paid, royalty free license to
continue to utilize the Trademarks in such country in accordance with Section
2.4 above.

     Section 4.2.
Termination in Case of Material Breach; Opportunity to Cure.
Either party to this Agreement may terminate this Agreement upon thirty (30)
days written notice if the other party shall commit a material breach of this
Agreement and shall not cure such breach within such thirty (30) day period.

     Section 4.3.
Termination in Case of Infringement. Licensee shall have the
right to terminate this Agreement in a particular country within the Territory
if a court or other tribunal of competent jurisdiction determines by final
order that the Technology or any of the Martek Products infringes upon the
patent or other proprietary rights of any Third Party in such country;
provided, however, that if, prior to any such termination, Licensor develops a
non-infringing alternative or obtains a license from such Third Party, such
that Licensee could lawfully use the Technology and/or the Martek Products (as
the case may be) in connection with the Licensee Products at no additional cost
or expense to Licensee beyond that expressly provided in this Agreement,
Licensee shall not terminate this Agreement.

     Section 4.4.
Termination in Case of Insolvency. Notwithstanding any other
provisions of this Agreement, either party to this Agreement may terminate this
Agreement upon giving notice to the other, should the other commit an act of
bankruptcy, declare bankruptcy, be declared bankrupt, enter into an arrangement
for benefit of creditors, enter into a procedure of winding up or dissolution,
or should a Trustee or Receiver be appointed for the other or upon the
expropriation, takeover or nationalization of the other party or a majority
portion of its assets by governmental action.

     Section 4.5.
Termination at Will by Licensee. Licensee shall have the
right to terminate this Agreement at will, with or without cause, upon ninety
(90) days

*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.

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prior written notice to Licensor, provided that such termination
shall be effective no earlier than the first anniversary of the date upon which
Licensee made the last payment to Licensor under Section 5.1(i) below.

     Section 4.6.
Effect of Termination. Upon termination of this Agreement in
its entirety prior to its normal expiration, (a) Licensor shall have the right,
but not the obligation, to purchase from Licensee, at Licensee’s cost, unused
inventories of the Martek Products, and (b) Licensee and its Affiliates may
continue to distribute the Licensee Products if, to the extent lawful, Licensee
continues to pay any applicable royalty that may be payable under Section 5.3
below with respect to such Licensee Products and otherwise continues to comply
with the terms and conditions of this Agreement.

     Section 4.7.
Other Rights and Remedies; Limitation of Liability. Unless
another provision of this Agreement specifically provides to the contrary, the
rights of termination as herein provided shall be in addition to all other
rights and remedies which either party may have to enforce this Agreement or to
secure damages for the breach hereof, and the exercise of any right of
termination as herein provided by either party shall not relieve the other of
any of its obligations under this Agreement accruing prior to the effective
date of termination, including, but not limited to, the obligation to pay fees
and any applicable royalties pursuant to Article V below or to render reports
with respect thereto.

ARTICLE V

PAYMENTS BY LICENSEE

     Section 5.1.
License Fee. In return for the license and other rights
granted hereby, Licensee shall pay to Licensor a one-time, non-refundable
license fee of Eight Million U.S. Dollars (US$8,000,000.00), Five Million U.S.
dollars (US$5,000,000.00) of which is payable within five (5) business days
after the execution of this Agreement and Three Million U.S. dollars
(US$3,000,000.00) of which is payable not later than January 31, 2004. After
the license fee has been paid in full, a portion thereof equal to One Million
U.S. dollars ($1,000,000.00) shall be (a) creditable by Licensee against any
amounts payable by Licensee to Licensor in accordance with Section 5.2 below
and/or Section 5.3 below for the Martek Products or (b) refunded by Licensor to
Licensee on a dollar-for-dollar basis in respect of amounts paid to Licensor by
any Designee in accordance with Section 5.2 below.

     Section 5.2.
Product Pricing. In order to provide Licensee with payment
flexibility for different markets, Licensor makes available a variety of
pricing alternatives as set forth in Exhibit 5. During the term of this
Agreement, Licensee and the Designee(s) shall pay for the Martek Products in
any order submitted by

*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.

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Licensee or a Designee in accordance with the payment
alternative set forth in Exhibit 5 attached hereto which Licensee or a Designee
has selected in such order. Licensee hereby covenants and agrees to abide by
the conditions that may be applicable to the pricing alternative Licensee
selects in any order, which shall be applicable to the Martek Products
delivered to Licensee or a Designee pursuant to that order, and Licensee shall
certify in writing to Licensor, within five (5) business days after each
anniversary of the Effective Date, that Licensee has complied with this
covenant during the preceding twelve (12) month period. Calculations based on
annual ordering volumes shall be made using forecasts submitted to Licensor by
Licensee in accordance with Section 3.2(i). If the quantity forecasted for
purchase in accordance with a particular pricing alternative is less than the
quantity actually purchased during a calendar year in accordance with that
pricing alternative, Licensor shall invoice Licensee within thirty (30) days
after the end of the calendar year for an amount equal to the difference, if
any, between the total price paid in accordance with that pricing alternative
and the total purchase price payable in accordance with that pricing
alternative for the quantity of Martek Products actually purchased from
Licensor. Alternatively, if the quantity actually purchased during a calendar
year in accordance with a particular pricing alternative exceeds the quantity
forecasted for purchase in accordance with that pricing alternative, Martek
shall credit against future purchases of Martek Product by Licensee from
Licensor an amount equal to the difference, if any, between the total purchase
price payable for the quantity actually purchased in accordance with that
pricing alternative and the total price paid by Licensee in accordance with
that pricing alternative.

     Section 5.3.
Royalties.

     (i)     In addition to the amounts due from Licensee and the Designees under
Sections 5.1 and 5.2 above, Licensee shall pay royalties to Licensor if
required by the payment alternative set forth in Exhibit 5 attached hereto
which Licensee has selected in any order for the Martek Products.

     (ii)     All applicable royalties with respect to each Licensee Product sold
shall be paid quarterly within sixty (60) days of the close of each of
Licensee’s three (3) month and annual accounting periods, based on Licensee’s
fiscal year, with respect to Licensee’s and its Affiliates’ sales occurring
during such quarters, at Licensor’s office as set forth below. Quarterly
royalty payments shall be made in U.S. Dollars at the sales price applicable
thereto if in U.S. Dollars or, if in another currency, such quarterly royalty
payments shall be the sum of royalties due for the three (3) months of the
applicable quarter calculated for each such month using the beginning and
ending month’s published exchange rate, set one (1) business day prior to month
end, by Reuters divided by two (2) (if a Reuters exchange rate is not available for certain countries, an exchange rate established by a
recognized third party will be used).

*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.

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     Section 5.4.
Taxes. Any and all payments required under this Agreement to
be made by Licensee to Licensor shall be made free and clear of, and without
deduction or withholding for, any and all present or future non-U.S. taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as “Taxes”) unless
such Taxes are required by law or the administration thereof to be deducted or
withheld. If Licensee shall be required by law or administration thereof to
deduct or withhold any Taxes from or in respect of any sum payable hereunder,
(a) the sum payable shall be increased as may be necessary so that after making
all required deductions or withholdings (including deductions or withholdings
applicable to additional amounts paid under this Section) Licensor receives an
amount equal to the sum it would have received if no such deduction or
withholding had been made, (b) Licensee shall make such deductions or
withholdings; and (c) Licensee shall pay the full amount deducted or withheld
to the relevant taxation or other authority in accordance with applicable law.
Within 30 days after the date of any payment of Taxes, Licensee will furnish to
Licensor a copy of a receipt evidencing payment thereof.

     Section 5.5.
Payment Terms and Guarantee. Licensee and the Designee(s),
as applicable, shall pay all correct invoices for amounts due in accordance
with Section 5.2 above within thirty (30) days from the postmark date or date
of transmission by facsimile, as applicable, of Licensor’s invoice. Neither
the postmark date nor the facsimile transmission date of Licensor’s invoice for
the purchase price for the Martek Products will be deemed to be earlier than
the date of delivery of such Martek Products. For any invoices containing
invoicing errors, such dates, with respect to the incorrect portions of the
invoice only, are extended until the invoicing errors are corrected and a new
invoice, with respect to the incorrect portions on the original invoice, is
received by Licensee. In order to induce Licensor to fill orders for the
Martek Products placed by the Designees, Licensee hereby assumes responsibility
for, and unconditionally guarantees, the timely payment of amounts due from the
Designees (the “Guaranteed Obligations”) promptly upon receipt from Licensor of
notice of nonpayment of any such amount. Licensor shall not be required, prior
to any such notice to Licensee, to pursue or exhaust any of its rights or
remedies against a defaulting Designee with respect to performance of any
Guaranteed Obligation.

     Section 5.6.
Sample Analysis. Licensor shall have the right to analyze
samples of the Licensee Product at any time and from time to time for purposes
of verifying that Licensee has complied with any conditions that may be
applicable to the pricing alternative(s) selected by Licensee for any order of
the Martek Products. The expenses of such analyses shall be borne by Licensor;
provided, however, that Licensee shall provide reasonable samples to Licensor without charge upon
Licensor’s request, to be made no more often than quarterly, and provided,
further,

*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.

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that Licensee shall be charged for the expense of any such analysis
that discloses a failure to comply with any applicable condition.

     Section 5.7.
Commercialization and Other Expenses. Licensee and its
Affiliates shall pay all expenses for their commercialization of the Licensee
Product.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

     Section 6.1.
Licensor’s Representations and Warranties. Licensor
represents and warrants to the Licensee as follows:

     (i) 
     Exhibit 1 attached hereto sets forth a complete and accurate list of
the Licensed Patents as of the date of this Agreement.

     (ii)     Licensor has all necessary corporate power and authority to enter
into this Agreement and perform its obligations hereunder with regard to the
Technology, the Licensed Patents and the Martek Products. Licensor’s
performance under this Agreement does not conflict with any other contract to
which Licensor is bound.

     (iii)       As of the date of this Agreement, Licensor has no actual knowledge
of the existence of any Third Party patents, other than Suntory’s patent #JP
2697834 in Japan directed to arachidonic acid technology, which would preclude
commercial exploitation in the Territory, by Licensee or its Affiliates, of the
Technology, the Martek Products, or the Licensed Patents.

     (iv)       Licensor warrants that the Martek Products will be manufactured in
compliance with current good manufacturing practices promulgated by U.S. Food
and Drug Administration, including knowledge or documentation of origin of all
raw materials, and in accordance with the Specifications. Licensor shall
supply a certificate of conformity with the Specifications. The exclusive
liability of Licensor, and Licensee’s exclusive remedy, for failure of any
Martek Product to conform to the Specifications shall be the replacement of the
nonconforming Martek Products at no additional charge to where it was delivered
and found to be in non-conformity or a refund of the purchase price paid by
Licensee for the nonconforming Martek Products (including duty, freight,
insurance charges, and other similar related expenses) at the Licensor’s sole
option.

     (v)       Once a year and at mutually agreeable times during Licensor’s normal
business hours, Licensee shall have the right but not the obligation to inspect
manufacturing facilities owned by Licensor where the Martek Products are
produced upon reasonable notice to Licensor.

*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.

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     Section 6.2.
Licensor’s Disclaimers.

     (i)     EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING WITHOUT
LIMITATION ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE
AND NONINFRINGEMENT, RELATING TO THE MARTEK PRODUCTS, THE TECHNOLOGY OR THE
TRADEMARKS. LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES AND HAS NO DUTY TO
ENSURE THAT THE TECHNOLOGY OR THE MARTEK PRODUCTS ARE USABLE WITH THE LICENSEE
PRODUCT OR THAT THE TECHNOLOGY OR THE MARTEK PRODUCTS ARE SAFE IN ALL DOSAGES
FOR ALL PERSONS OR CAN BE INCORPORATED SAFELY INTO THE LICENSEE PRODUCT. IT IS
HEREBY ACKNOWLEDGED AND AGREED THAT IT SHALL BE LICENSEE’S RIGHT AND OBLIGATION
TO DETERMINE THE SAFETY AND UTILITY OF EACH MARTEK PRODUCT AS IT RELATES TO THE
LICENSEE PRODUCT.

     (ii)     LICENSOR HEREBY DISCLAIMS ANY WARRANTY THAT THE TECHNOLOGY, THE
MARTEK PRODUCTS, THE LICENSED PATENTS OR THE TRADEMARKS ARE FREE FROM
INFRINGEMENT BY THIRD PARTIES. LICENSOR FURTHER DISCLAIMS ANY WARRANTY
RELATING TO THE PATENTABILITY OF, OR THE VALIDITY OF ANY PATENTS RELATING TO,
THE TECHNOLOGY OR THE MARTEK PRODUCTS AND MAKES NO REPRESENTATIONS WHATSOEVER
WITH REGARD TO THE SCOPE OF ANY LICENSED PATENTS OR THAT ANY LICENSED PATENTS
MAY BE COMMERCIALLY EXPLOITED WITHOUT INFRINGING OTHER PATENTS.

     (iii)       SUBJECT TO SECTION 11.2, LICENSOR HEREBY DISCLAIMS AND SHALL NOT BE
LIABLE FOR ANY DAMAGES OF ANY NATURE RESULTING OR ARISING FROM OR RELATING TO
(A) THE USE, MANUFACTURE, DISTRIBUTION, MARKETING, OR SALE BY LICENSEE, ITS
AFFILIATES OR ANY THIRD PARTY OF THE TECHNOLOGY, THE MARTEK PRODUCTS OR THE
LICENSEE PRODUCT, OR (B) ANY IMPROVEMENTS OR MODIFICATIONS TO THE TECHNOLOGY,
THE MARTEK PRODUCTS OR THE LICENSEE PRODUCT WHICH ARE NOT MADE BY AND
PROPRIETARY TO LICENSOR, UNLESS THE LIABILITY RESULTS FROM (X) LICENSOR’S
FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT OR (Y) LICENSOR’S
FAILURE TO MANUFACTURE THE MARTEK PRODUCTS IN ACCORDANCE WITH THE
SPECIFICATIONS.

     Section 6.3
Licensee’s Representations and Warranties. Licensee
represents and warrants to the Licensor as follows:

*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.

- 12 -

 

     (i)       The execution and delivery of this Agreement and the performance by
Licensee of the transactions contemplated hereby have been duly authorized by
all necessary corporate actions.

     (ii)       The performance by Licensee of any of the terms and conditions of
this Agreement will not constitute a breach or violation of any other agreement
or understanding, written or oral, to which it or its Affiliates is a party.

ARTICLE VII

LICENSEE’S COVENANTS

     Section 7.1.
Compliance with Law; Regulatory Approval. Licensee covenants
and agrees that it and its Affiliates and the Designees shall conduct all of
their operations dealing with the Technology, the Martek Products and the
Licensee Product in material compliance with all applicable laws, regulations
and other requirements which may be in effect from time to time, of all
national governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, including, without limiting the
generality of the foregoing, the Infant Formula Act of 1980, the Federal Food,
Drug, and Cosmetic Act, 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 which any Licensee
Product is sold. Licensee shall not impair Licensor’s ability to obtain
regulatory approval of the Martek Products by the competent governmental
authorities in the Territory. The parties recognize and acknowledge Licensee’s
intent to diligently pursue the commercialization of a Licensee Product;
provided, however, that nothing in this Agreement shall be construed so as to
obligate Licensee to take any specific action or measure to seek regulatory
approval for or to market Licensee Product.

     Section 7.2.
Performance and Product Quality. Licensee covenants and
agrees that it and its Affiliates shall exercise a reasonable standard of care
in the testing, manufacturing, marketing, packaging, distribution and sale of
each Licensee Product. Licensee further covenants and agrees that it and its
Affiliates shall 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 Licensee Products. In this
regard, and without limiting the applicability of the general indemnification
provisions applicable to the representations, warranties and covenants made by
the parties to this Agreement as provided in Article XI below, Licensee hereby
covenants and agrees to indemnify, defend and hold harmless Licensor and Licensor’s directors, officers,
employees and agents from and against all claims, actions or causes of action
(whether sounding in contract, negligence or strict liability), suits and
proceedings and all loss,

*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.

- 13 -

 

assessments, liability, damages, and expenses incurred in connection therewith (including reasonable attorneys’ fees) for
which Licensor or its directors, officers, employees or agents may become
liable or incur with respect to any product liability claim asserted against
Licensee, its Affiliates, Third Parties or Licensor relating to the
manufacturing, marketing, storage, packaging, distribution, sale or use of the
Licensee Product.

     Section 7.3.
Licensee’s Records. Licensee covenants and agrees that,
Licensee will keep true and accurate records adequate to permit any applicable
payments due to Licensor to be computed and verified. Such records shall be
made available upon prior written request by Licensor, during business hours,
for inspection by an independent accountant who is not the auditor of record
for Licensor and who is reasonably acceptable to Licensee and who shall be
bound by a confidentiality agreement with Licensee, to the extent necessary for
the determination of the accuracy of the payments made hereunder, and such
records shall be retained for a period of three years following the year to
which they relate. For the purposes of this Section 7.3, any of the four
largest accounting firms in the United States (as of the date of the audit)
shall be deemed acceptable to Licensee, provided that the firm selected by
Licensor is not Licensor’s auditor of record. The accountant shall provide
Licensor with a report containing his/ her conclusions, but not the inspected
records nor the information contained therein, and shall concurrently provide
Licensee with such report. Licensee shall promptly remit to Licensor the
amount of any underpayment discovered by an inspection conducted in accordance
herewith, and Licensor shall promptly remit to Licensee the amount of any
overpayment 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 the request for inspection, and Licensor
shall be entitled to no more than one (1) such inspection per calendar year,
provided that, if an inspection reveals an underpayment by Licensee 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. Licensor shall bear the full cost of such
inspection unless the audit discloses an underpayment by Licensee of five
percent (5%) or greater of any applicable royalties due hereunder, in which
case Licensee shall bear the full cost of the inspection. The provisions of
this Section 7.3 shall survive any termination or expiration of this Agreement
for the limited purpose of permitting Licensor to verify Licensee’s payment of
the correct prices for the quantities of the Martek Products purchased under
this Agreement.

     Section 7.4.
Protection of Licensor’s Proprietary Interest. Licensee
acknowledges and agrees that the Technology, Licensed Patents and the Martek
Products are proprietary to Licensor, and Licensee hereby covenants and
agrees that (i) Licensee and its Affiliates shall not use the Technology or the
Martek Products for any purpose not provided for hereunder, and (ii) shall not
challenge 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.

- 14 -

 

cause any Affiliate or Third Party to challenge Licensor’s rights
to the Technology, the Licensed Patents or the Martek Products. The provisions
of this Section 7.4 shall survive the termination (but not the expiration) of
this Agreement. Notwithstanding the foregoing provisions in this Section 7.4,
Licensee’s obligations as set forth in Section 7.4(ii) above shall not apply,
and shall not survive the termination of this Agreement, in any country of the
Territory in which such obligations are not enforceable in accordance with
applicable law or regulation. Licensee further covenants that, within thirty
(30) days after the Effective Date, Licensee shall cause all complaints, causes
of action, suits and other claims by Licensee and Affiliates challenging the
validity of any of the Licensed Patents and/or any of the Licensed Technology
to be dismissed in all jurisdictions worldwide, except in any country of the
Territory in which such obligation is not enforceable in accordance with
applicable law or regulation.

ARTICLE VIII

PATENT PROSECUTION AND
ENFORCEMENT

     Section 8.1.
Patent Applications. The responsibility for the prosecution
of, and the exclusive right to apply for, prosecute, maintain and enforce the
Licensed Patents shall be and remain with Licensor except as provided below.
Licensor shall exercise all reasonable efforts in this regard. Licensor shall
keep Licensee informed of the course of such patent prosecution.

     Section 8.2.
Infringement Notice. Licensee shall notify Licensor promptly
in writing of any infringement in the Territory of any issued Licensed Patent
or other interference with Licensor’s proprietary interests relating to the
Technology or the Martek Products which becomes known to Licensee. If Licensor
determines that a material infringement exists, Licensor shall communicate such
determination to Licensee in writing and take prompt action to attempt to
eliminate that infringement.

     Section 8.3.
Infringement Actions. If Licensor receives Licensee’s
infringement notice under Section 8.2 above and within a reasonable time
thereafter Licensor is unsuccessful in eliminating the infringement, Licensor
shall have the first right to bring, at its own expense, an infringement action
against any Third Party within a reasonable time no longer than six (6) months
from the date of Licensee’s notice of an infringement under Section 8.2 above.
If Licensor waives its right to bring such an infringement action in writing to
Licensee or has not eliminated such infringement or initiated an infringement
suit within six (6) months from the date of Licensee’s notice of infringement,
Licensee, after notifying Licensor in writing, shall be entitled to bring such infringement action
at its own expense. The party not bringing such infringement action shall
provide assistance, at the requesting party’s expense, as may be reasonably
requested by the party

*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.

- 15 -

 

bringing such action, including without limitation
joining an infringement suit as a party. In the event that Licensee brings an
infringement action in accordance herewith, any sums recovered by Licensee in
any such infringement action or in its settlement shall belong to Licensee;
provided, however, that for purposes of Section 5.3 above, after Licensee has
recovered its costs and expenses (including but not limited to attorney’s fees)
of such infringement action, any remaining damages attributable to the loss of
sales of the Licensee Product shall be considered an amount received by
Licensee or an Affiliate from the sale for value of the Licensee Product in the
period(s) to which such damages relate with royalties calculated pursuant to
Article V above, and any applicable royalties thereon shall be deemed timely
remitted by Licensee to Licensor hereunder if remitted to Licensor within sixty
(60) days of the date on which such damages are received by Licensee, and, in
the case of settlement, Licensee shall reasonably and in good faith determine
the portion of the settlement that represents compensation for loss of sales of
the Licensee Product and such portion shall be treated as if such portion were
damages attributable to loss of sales of the Licensee Product. The party
conducting such action shall have full control over its conduct, including
settlement thereof, provided that no offer of settlement or compromise shall be
binding on a party without its prior written consent (which consent shall not
be unreasonably withheld) unless such settlement fully releases such party
without any liability, loss, cost or obligation to such party.

     Section 8.4. Defense of Infringement Actions. Licensor and Licensee
hereby acknowledge and agree that each party shall be responsible for
defending, at its own expense, any infringement action brought against such
party by any Third Party, and Licensor and Licensee agree reasonably to
cooperate with the other in any such defense and in responding to any
threatened infringement action, and to provide assistance, at its own
(respective) expense, as may be reasonably requested by the defending party.

ARTICLE IX

ASSIGNMENT

     Section 9.1. Assignment. This Agreement and the rights granted hereunder
shall be assignable by Licensor, but shall not be assignable, in whole or in
part, by Licensee without the prior written consent of Licensor.

ARTICLE X

PARTIES’ RELATIONSHIP

     Section 10.1. Relationship between Parties. Neither party to this
Agreement shall have the power to bind the other by any guarantee or
representation that either party may give, or in any other respect whatsoever,
or to

*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.

- 16 -

 

incur any debts or liabilities in the name of or on behalf of the other
party, and for purposes of this Agreement, the parties hereto hereby
acknowledge and agree that they shall not be deemed partners, joint venturers,
or to have created the relationship of agency or of employer and employee
between the parties.

ARTICLE XI

INDEMNITY

     Section 11.1. Indemnity by Licensee. Licensee shall indemnify, defend and
hold harmless Licensor, its Affiliates and Licensor’s and its Affiliates’
directors, officers, employees and agents from and against all costs, expenses,
damages, losses and liabilities (“Losses”) asserted against them for which
Licensor or its directors, officers, employees or agents may become liable or
incur or be compelled to pay and resulting from a breach by Licensee or any
Licensee Affiliate of any of the Licensee’s covenants, representations and
warranties or other material terms and conditions contained herein, except to
the extent that any such Losses result from: (i) a defect caused by Licensor
or any Licensor Affiliate in the Martek Products ordered by Licensee or any
Licensee Affiliate or Designee from Licensor hereunder (excluding the
determination of the safety and utility of the Martek Product relating to its
use in a Licensee Product); (ii) the failure of Licensor or any Licensor
Affiliate to manufacture the Martek Products ordered by Licensee or any
Licensee Affiliate or Designee from Licensor in accordance with the
Specifications; (iii) any negligence or intentional wrongdoing of Licensor or
any Licensor Affiliate; or (iv) the breach by Licensor of this Agreement.

     Section 11.2 Indemnity by Licensor. Licensor shall indemnify, defend and
hold harmless Licensee, its Affiliates, and Licensee’s and its Affiliates’
directors, officers, employees and agents from and against all Losses asserted
against them for which Licensee, its Affiliates or the directors, officers,
employees or agents of either of them may become liable or incur or be
compelled to pay and resulting from: (i) a defect caused by Licensor or any
Licensor Affiliate in the Martek Products ordered by Licensee or any Licensee
Affiliate or Designee from Licensor hereunder (excluding the determination of
the safety and utility of the Martek Product relating to its use in a Licensee
Product); (ii) the failure of Licensor or any Licensor Affiliate to manufacture
the Martek Products ordered by Licensee or any Licensee Affiliate or Designee
from Licensor in accordance with the Specifications; (iii) any negligence
or intentional wrongdoing of Licensor or any Licensor Affiliate; or (iv)
the material breach by Licensor of this Agreement, except to the extent that
any such Losses result from of a material breach of any of the Licensee’s
covenants, representations and warranties or other material terms and
conditions contained herein.

     Section 11.3 Condition to Indemnification. If either party expects to
seek indemnification under this Article XI, it shall promptly give notice to
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.

- 17 -

 

indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any third party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after
receipt by the other party of such claim or suit; provided, however, that the
failure to give notice within such time period shall not relieve the
indemnifying party of its obligation to indemnify unless it shall be materially
prejudiced by the failure. Each party shall fully cooperate with the other
party in the defense of all such claims or suits. No offer of settlement,
settlement or compromise shall be binding on a party hereto without its prior
written consent (which consent shall not be unreasonably withheld) unless such
settlement fully releases such party without any liability, loss, cost or
obligation to such party.

     Section 11.4 Survival of Indemnity Obligation. The indemnification
obligations provided in this Agreement, including that provided in this Article
XI and in Section 7.2 above, shall survive the expiration or termination of
this Agreement, whether occasioned by the Agreement’s expiration pursuant to
Section 4.1 above or earlier termination pursuant to the other Sections of
Article IV above, for the longer of: (i) a period of five (5) years from the
date of such expiration or termination, and (ii) a period of five (5) years
from the date upon which Licensee ceases to sell Licensee Product.

ARTICLE XII

CONFIDENTIALITY

     Section 12.1. Disclosure of Information. All the Technology and all
other information exchanged by the parties pursuant to and in execution of
their obligations and in exercise of their rights under this Agreement shall be
deemed confidential. Licensor and Licensee acknowledge and agree that the
value of the Technology, the Martek Products, and the Licensee Products is
based, to a large extent, on maintaining the confidentiality of the Technology,
the Martek Products and the Licensee Products and preventing any unauthorized
dissemination to or use by Third Parties of information relating to the
Technology or the Martek Products. Disclosure of confidential and proprietary
information hereunder, whether orally or in written form, shall be safeguarded
by the recipient and shall not be disclosed to Third Parties and shall be made
available only to the receiving party’s employees or other agents who have a
need to know such information for purposes of performing
the party’s obligations, or for purposes of exercising the party’s rights,
under this Agreement and such employees or other agents shall have a legal
obligation to the employer or principal, as applicable, not to disclose such
information to Third Parties. Each party shall treat any and all such
confidential information in the same manner and with the same protection as
such party maintains its own confidential information. These mutual
obligations of confidentiality shall not apply to any information to the extent
that such information: (i) is or later becomes

*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.

- 18 -

 

generally available to the public, such as by publication or otherwise, through no fault of the receiving
party; (ii) is obtained from a Third Party having the legal right to make such
a disclosure; or (iii) is independently developed by a party without access to
the confidential information. Licensor, Licensee or Licensee’s Affiliates
shall not remove from any communications or other documents delivered by a
disclosing party any proprietary notices affixed thereto by the disclosing
party.

     Notwithstanding the foregoing, Licensor and Licensee may disclose
(including but not limited to disclosure in response to questions) or announce
to any Third Person, or issue a press release concerning (a) the fact, the
nature and the terms of this Agreement and the transactions to be performed
pursuant hereto; or (b) any otherwise confidential or proprietary information
as and to the extent required by applicable law or government agency of the
United States and the countries of the Territory, including, but not limited
to, any applicable disclosure requirements under the federal securities laws or
regulations thereunder, provided that in the case of each such disclosure,
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 as the other party may reasonably request, in accordance with
applicable law, in order to prevent, challenge, modify or protect such
disclosure; provided, however, that Licensor and Licensee may disclose the fact
and the terms of this Agreement to its attorneys and accountants without notice
to the other party.

     Section 12.2. Post-Termination Obligations. The mutual confidentiality
obligations of the parties under the provisions of this Article XII shall
survive the termination (but not expiration) of this Agreement for a period of
fifteen (15) years from the date of such termination. Upon termination of this
Agreement, unless Licensee is entitled to a fully paid, royalty free license to
use the Technology and the Martek Products pursuant to Sections 4.1 and 5.1
above, Licensee shall promptly return to Licensor all the Technology, Martek
Product samples, documents, records, and all other property or documentation
disclosed or delivered to Licensee or its Affiliates pursuant to this Agreement
and then in existence, subject to the retention by Licensee of one (1) copy
thereof for archival purposes only.

ARTICLE XIII

LIMITATION OF LIABILITY

     Section 13.1
Indirect Damages. IN NO EVENT 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, INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS OR BUSINESS OPPORTUNITY, WHETHER BASED ON

*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.

- 19 -

 

BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER THEORY UPON WHICH ONE PARTY
MAY SEEK REMEDIES AGAINST THE OTHER.

     Section 13.2. Maximum Aggregate Liability. LICENSOR’S TOTAL LIABILITY TO
LICENSEE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT IN ANY CALENDAR
YEAR DURING THE TERM OF THIS AGREEMENT, WHETHER BASED ON BREACH OF CONTRACT OR
TORT (INCLUDING NEGLIGENCE), SHALL IN NO EVENT EXCEED THE ACTUAL PROCEEDS
RECEIVED FROM LICENSOR’S INSURANCE COVERAGE AS PROVIDED FOR IN SECTION 13.3.

     Section 13.3. Insurance. Licensor shall take out and maintain in full
force and effect at all times while this Agreement is in effect and for three
(3) years thereafter commercial general liability insurance, including broad
form coverage for contractual liability, property damage, products liability
and personal injury liability (including both bodily injury and death), with
minimum limits of no less than ten million U.S. dollars (US$10,000,000.00) per
occurrence, and naming as additional insureds Licensee, its subsidiaries,
Affiliates, associates, licensees, successors and assigns and the directors,
officers, employees, agents and representatives of the foregoing. Licensor
shall deliver to Licensee a certificate or certificates of insurance evidencing
satisfactory coverage and indicating that Licensee shall receive thirty (30)
days unrestricted prior written notice of cancellation, non-renewal or of any
material change in coverage.

ARTICLE XIV

MISCELLANEOUS

     Section 14.1. Dispute Resolution. Licensor and Licensee covenant and
agree to use their diligent efforts to resolve any disputes that arise between
them in the future and are related to this Agreement through negotiation and
mutual agreement and, if good faith efforts to so negotiate and mutually agree
are unavailing, through binding arbitration under the procedures set forth
herein. When either party learns of a dispute subject to arbitration under
this Agreement, it shall promptly send written notice of the dispute to the
other party. The parties agree that for a period of thirty (30) days from the
sending of such written notice, they shall in good faith
negotiate to resolve the dispute. Subject to the foregoing, disputes
arising in connection with this Agreement shall be finally settled under the
Rules of the American Arbitration Association by three arbitrators appointed in
accordance with such Rules. Unless the parties to such 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 and
enforceable in any court of competent jurisdiction.

*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.

- 20 -

 

     Section 14.2. Information Exchange. During the Term of this Agreement,
the parties shall promptly notify each other of any report of an adverse event
associated with the use of a Martek Product in any Licensee Product. Licensee
shall have sole discretion in determining what action, if any, is to be taken
in connection with any such adverse event report relating to a Licensee
Product.

     Section 14.3. Force Majeure. Neither party to this Agreement shall be
liable for damages due to delay or failure to perform any obligation under this
Agreement if such delay or failure results directly or indirectly from
circumstances beyond the control of such party. Such circumstances shall
include, but shall not be limited to, acts of God, acts of war, civil
commotions, riots, strikes, lockouts, acts of the government in its sovereign
capacity, perturbation in telecommunications transmissions, inability to obtain
suitable equipment or components, accident, fire, water damages, flood,
earthquake, or other natural catastrophes. If remittance of U.S. Dollars is
prevented or impaired for reasons of force majeure, the party owing the money
shall settle such obligations in the manner as may be reasonably instructed by
the party to whom the obligation is owed. Should the effect of force majeure
continue for more than three (3) 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) days notice
to the party impaired by force majeure.

     Section 14.4. Construction of Agreement. This Agreement shall be
construed and the respective rights of the parties shall be determined under
and pursuant to the laws of the State of Delaware, United States of America,
without regard to the principles of conflict of laws thereof. The parties
expressly exclude the applicability of the Convention on Contracts for the
International Sale of Goods.

     Section 14.5. Notices. Notices required under this Agreement shall be in
writing and sent by registered mail, by facsimile transmission, by nationally
recognized overnight courier service, or by hand delivery, with written
verification of receipt and date of receipt, to the respective parties at the
following addresses:

	 	 	 
	 	 	
Notices to Licensor:

Martek Biosciences Corporation

6480 Dobbin Road

Columbia, Maryland 21045 USA

Facsimile: (410) 740-2985

Attn: General Counsel

Notices to Licensee:

Nestec Ltd.

Avenue Nestlé 55

CH – 1800,

*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.

- 21 -

 

	 	 	 
	 	 	
Vevey, Switzerland

Facsimile:     

Attn:     

or to such other address as either party may designate by a notice given in
compliance with this paragraph, and shall be deemed effective when received.

     Section 14.6.
Entire Agreement. The terms and provisions contained in
this Agreement and its Exhibits constitute the entire agreement between the
parties on the subject matter hereof and shall supersede all previous
communications, representations, agreements or understandings, either oral or
written between the parties hereto with respect to the subject matter hereof.
No agreement or understanding varying or extending this Agreement will be
binding upon either party hereto, unless in a writing which specifically refers
to this Agreement, and signed by duly authorized officers or representatives of
the respective parties.

     Section 14.7. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No person, firm or corporation other than the parties
hereto and their successors and permitted assigns shall derive rights or
benefits under this Agreement.

     Section 14.8. Counterparts. This Agreement may be executed in
counterparts.

     Section 14.9. Severability. If any provision of this Agreement is
declared void or unenforceable by any relevant judicial or administrative
authority, such declaration shall not of itself nullify the remaining
provisions of this Agreement. Consequently, the parties shall meet to
determine the effect of any such declaration and any variations to this
Agreement which are mutually desirable.

     Section 14.10. Waiver. No waiver by either party of any breach of any of
the terms or conditions herein provided to be performed by the other party
shall be construed as a waiver of any subsequent breach, whether of the same or
of any other term or condition hereof.

     Section 14.11 Headings. Section headings contained in this Agreement are
inserted for convenience of reference only. The section headings shall not be
deemed to be a part of this Agreement for any purpose and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.

*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.

- 22 -

 

     THEREFORE, the parties hereto have caused this Agreement to be duly
executed in their respective behalves as of the day and year first written
above.

	 	 	 	 	 
	MARTEK BIOSCIENCES	 	
NESTEC LTD. (Licensee)
	CORPORATION (Licensor)	 	 	 
	 	 	 
	By:	/s/ Henry Linsert, Jr.
	 	
By:	/s/ G.S. Gillett

	Print Name:	Henry Linsert, Jr.
	 	
Print Name:
	G.S. Gillett

	Print Title:	CEO
	 	
Print Title:
	Senior Vice President

	Date:	6/12/03
	 	
Date:
	June 6, 2003

	*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.

- 23 -

 

EXHIBIT 1

LICENSED PATENTS

“Microbial Oil Mixtures and
Uses Thereof”

	 	 	 	 	 	 	 	 	 
	Country	 	Status	 	Application No.	 	Publ. or Patent No.
	
	 	
	 	
	 	

	Australia	 	
Granted 7 Nov 95
	 	12392/92
	 	 	661,297	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Canada	 	
Granted (15 Dec 98)
	 	2,101,274
	 	 	2,101,274	 
	

	Europe,
(designates
Austria, Belgium,
Denmark, France,
Germany, Great
Britain, Greece,
Italy,
Luxembourg, Monaco,
Netherlands, Spain,
Sweden, and
Switzerland/
Liechtenstein)	 	
Granted 18 Apr 01

Opposition Pending

*
	 	92904388.3

*
	 	 	0 568 606	 
	

	Indonesia	 	
Granted 20 Jun 95
	 	P 001678
	 	 	ID 0000174	 
	

	Israel	 	
Granted 1 Apr 96

Granted 14 Oct 97
	 	100733

114253
	 	 	100733
114253	 
	

	Japan	 	
Granted 19 Dec 97

Opposition Pending
	 	504606/92
	 	 	06-505153
(published)
2731035 (granted)	 
	

	Mexico	 	
Granted 6 Jan 97
	 	9200320
	 	 	183638	 
	

	New Zealand	 	
Granted 16 Feb 95
	 	241359
	 	 	241359	 
	

	OPAI (French Africa)	 	
Granted 29 Dec 97
	 	PV 60396
	 	 	10348	 
	

	PCT	 	Nationalized

Published 6 Aug 92
	 	PCT/US92/00522
	 	 	WO92/12711	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Russia	 	
Granted 27 Oct 97
	 	93052410.13
	 	 	2,093,996	 
	

	Singapore	 	
Granted 10 Jan 02
	 	9608986.7
	 	 	49307	 
	

	South Africa	 	
Granted 28 Oct 92
	 	92/0452
	 	 	92/0452	 
	

	South Korea	 	
Granted 9 Jan 02

Granted 20 Mar 01

Granted 25 Oct 01
	 	1993-0702205

2000-7003480

2001-7002283
	 	 	321543
292103
313987	 
	

	Sri Lanka	 	
Granted 17 Jun 94
	 	10526
	 	 	10526	 
	

	United States	 	
Granted 20 Dec 94

Granted 27 Aug 96
	 	07/944,739

08/358,474
	 	 	5,374,657
5,550,156	 

	 	 	*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.

- 24 -

 

“Arachidonic Acid and
Methods for the Production and Use Thereof”

	 	 	 	 	 	 	 	 	 
	Country	 	Status	 	Application No.	 	Publ. or Patent No.
	
	 	
	 	
	 	

	Australia	 	
Granted 21 Nov 95

Granted 02 Dec 1999
	 	12355/92

48542/96
	 	 	661,674
713,567	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Canada	 	
Granted 2 Apr 02

Granted 28 May 02

	 	2,101,273

2,209,513
	 	 	2,101,273

2,209,513	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Eurasia	 	
Granted 28 Aug 00
	 	97-0090US
	 	 	1036	 
	

	Europe, (designates Austria,
 Belgium,
Denmark, France,

Greece, Germany,

Great Britain,

Ireland, Italy,

Luxembourg, Monaco,

Netherlands,

Portugal, Spain, Sweden, and
Switzerland/
Liechtenstein)	 	
Granted 6 Sep 00

Opposition Pending

*
	 	92904428.7

*
	 	 	0 568 608	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Indonesia	 	
Granted 22 Dec 95
	 	P-001679
	 	 	ID 0000393	 
	

	Israel	 	
Granted 1 Oct 95
	 	100,732
	 	 	100,732	 
	

	Japan	 	
*

Granted 7 Sep 01
	 	*

10-240168 (1998)
	 	 	10-512444

11-151075 (1999)
(published)
3229268 (granted)	 
	

	Mexico	 	
Granted 6 Jul 01

*	 	9200301
*	 	 	202940	 
	

	New Zealand	 	
Granted 8 Feb 95
	 	241,358
	 	 	241,358	 
	

	*	 	
*
	 	*	 	 	 	 
	

	OAPI (French Africa)	 	
Granted 15 Sep 94
	 	PV 60397
	 	 	09909	 
	

	PCT	 	
Nationalized

Published 6 Aug 1992

Published 11 Jul 1996
	 	PCT/92US/00517

(filed 22 Jan 92)

PCT/US96/00182

(filed 03 Jan 96)
	 	 	WO 92/13086

WO 96/21037	 
	

	*	 	
*
	 	*	 	 	 	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Russia	 	
Granted 29 Jan 98
	 	93-054772
	 	 	2120998	 
	

	Singapore	 	
Granted 30 Mar 99
	 	9703038.1
	 	 	42669	 
	

	South Korea	 	
Granted 1 Feb 00

Granted 29 Jun 01

(div of 702193)

Opposition Pending
*
	 	1993-702193

1999-7008800

*
	 	 	254300
 302036	 

	 	 	*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.

- 25 -

 

	 	 	 	 	 	 	 
	Country	 	Status	 	Application No.	 	Publ. or Patent No.
	
	 	
	 	
	 	

	South Africa	 	
Granted 28 Oct 92
	 	92/0454
	 	92/0454
	

	Sri Lanka	 	
Granted 27 Oct 93
	 	10527
	 	10527
	

	United States	 	
Granted 19 Aug 97
	 	08/367,881
	 	5,658,767

	 	 	*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.

- 26 -

 

 

“Docosahexaenoic Acid, Methods for its Production

and Compounds Containing the Same”

	 	 	 	 	 	 	 	 	 
	Country	 	Status	 	Application No.	 	Publ. or Patent No.
	
	 	
	 	
	 	

	Australia	 	
Granted 15 Jun 95
	 	73302/91
	 	 	660,162	 
	

	*	 	
*
	 	*	 	 	 	 
	

	Canada	 	
Granted 2 May 00
	 	2,076,018
	 	 	2,076,018	 
	

	Europe (designates Austria,
 Belgium,
Denmark, France,

Greece, Germany,

Great Britain,

Italy,

Luxembourg,

Netherlands,

Romania, Spain, Sweden, and
Switzerland/
Liechtenstein)	 	
Granted 22 Apr 1998

(opposition pending)
	 	91903945.3
	 	 	0 515 460	 
	

	Israel	 	
Granted 16 Jun 95

Granted 11 Jun 98
	 	97,126

111,174
	 	 	97,126

111,174	 
	

	Japan	 	
Granted 25 Sep 98

*
	 	504147/91

*
	 	 	5-503425
(published)

2830951 (granted)

11-092783 (published)	
	

	*	 	
*
	 	*	 	 	 	 
	

	PCT	 	
Nationalized

Published 22 Aug 1991
	 	PCT/US91/00733
	 	 	WO 91/11918	 
	

	Philippines	 	
Granted 3 Nov 98

Allowed

Allowed
	 	I 41991

I 54562

I 54563
	 	 	31568	 
	

	South Korea	 	
Granted 8 Jan 01

Granted 22 Dec 00

Granted 13 Apr 01
	 	701943

708207

7011087
	 	 	285870

284731

294293	 
	

	United States	 	
Granted 14 Mar 95

Granted 18 Apr 95

Granted 20 Feb 96

Granted 27 Jan 98
	 	07/916,874

07/479,135

08/386,079

08/583,845
	 	 	5,397,591

5,407,957

5,492,938

5,711,983	 

	 	 	*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.

- 27 -

 

 

EXHIBIT 2

SPECIFICATIONS

[attached]

               ARASCO®

Specifications

*

Rev. 4/23/02

*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.

- 28 -

 

               DHASCO®

Specifications
*

Rev. 7/17/00

 

 

 

 

*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.

- 29 -

 

EXHIBIT 3

TERRITORY

*

*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.

30

 

EXHIBIT 4

TRADEMARKS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	REGISTRA-
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	TION OR
	MARK	 	COUNTRY	 	CLASSES	 	STATUS	 	SERIAL NO.
	
	 	
	 	
	 	
	 	

	Neuromins
	 	United States	 	 	1,5,29	 	 	Reg. 12/8/98	 	 	2,209,435	 
	 
	 	Argentina	 	 	1	 	 	Reg. 7/13/00	 	 	1,798,850	 
	 
	 	Argentina	 	 	5	 	 	Reg. 3/20/01	 	 	1,822,815	 
	 
	 	Argentina	 	 	29	 	 	Reg. 7/13/00	 	 	1,798,842	 
	 
	 	*	 	 	*	 	 	*	 	 	*	 
	 
	 	*	 	 	*	 	 	*	 	 	*	 
	 
	 	*	 	 	*	 	 	*	 	 	*	 
	 
	 	Canada	 	 	N/A	 	 	Reg. 3/26/99	 	 	510,042	 
	 
	 	China	 	 	1	 	 	Reg. 8/14/99	 	 	1302546	 
	[in Chinese
characters]
	 	China	 	 	1	 	 	Reg. 8/14/99	 	 	1302547	 
	 
	 	China	 	 	5	 	 	Reg. 8/14/99	 	 	1302800	 
	[in Chinese
characters]
	 	China	 	 	5	 	 	Reg. 7/28/99	 	 	1297757	 
	 
	 	China	 	 	29	 	 	Reg. 7/14/99	 	 	1293972	 
	[in Chinese
characters]
	 	China	 	 	29	 	 	Reg. 7/14/99	 	 	1293973	 
	 
	 	European Community	 	 	1,5,30	 	 	Reg. 11/6/98	 	 	371,583	 
	 
	 	Japan	 	 	5	 	 	Reg. 6/30/00	 	 	4,395,702	 
	 
	 	Japan	 	 	29	 	 	Reg. 1/14/99	 	 	4,229,698	 
	 
	 	Japan	 	 	30	 	 	Reg. 1/14/99	 	 	4,229,699	 
	 
	 	Malaysia	 	 	1	 	 	Reg. 8/26/2002	 	 	990003415	 
	 
	 	Malaysia	 	 	5	 	 	Reg. 6/2002	 	 	990003414	 
	 
	 	Malaysia	 	 	29	 	 	Reg. 1/2002	 	 	990003416	 
	 
	 	Mexico	 	 	1	 	 	Reg. 7/30/97	 	 	554,719	 
	 
	 	Mexico	 	 	5	 	 	Reg. 7/30/97	 	 	554,720	 
	 
	 	Mexico	 	 	29	 	 	Reg. 7/30/97	 	 	554,721	 
	 
	 	Mexico	 	 	30	 	 	Reg. 7/30/97	 	 	554,722	 
	 
	 	*	 	 	*	 	 	*	 	 	*	 
	 
	 	Singapore	 	 	1	 	 	Reg. 4/1/99	 	 	T99/03166H	 
	 
	 	Singapore	 	 	5	 	 	Reg. 4/1/99	 	 	T99/03167F	 
	 
	 	Singapore	 	 	29	 	 	Reg. 4/1/99	 	 	T99/03168D	 
	 
	 	South Korea	 	 	1,5	 	 	Reg. 5/28/01	 	 	494,293	 
	 
	 	South Korea	 	 	29	 	 	Reg. 6/13/01	 	 	495,411	 

*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.

- 31 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	REGISTRA-
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	TION OR
	MARK	 	COUNTRY	 	CLASSES	 	STATUS	 	SERIAL NO.
	
	 	
	 	
	 	
	 	

	Neuromins (cont’d)
	 	Taiwan	 	 	1	 	 	Reg. 5/1/00	 	 	890,455	 
	 
	 	Taiwan	 	 	5	 	 	Reg. 10/16/00	 	 	908,731	 
	 
	 	Taiwan	 	 	29	 	 	Reg. 7/16/01	 	 	951,558	 
	 
	 	Venezuela	 	 	1	 	 	Reg. 9/28/00	 	 	P224027	 
	 
	 	Venezuela	 	 	5	 	 	Abandoned	 	 	7567-1999	 
	 
	 	Venezuela	 	 	29	 	 	Reg. 9/28/00	 	 	P224028	 
	

	Arasco
	 	United States	 	 	5	 	 	Reg. 5/23/95	 	 	1,894,738	 
	 
	 	Benelux	 	 	1,5	 	 	Reg. 9/22/94	 	 	558,581	 
	 
	 	Canada	 	 	N/A	 	 	Reg. 4/22/97	 	 	475,074	 
	 
	 	China	 	 	1	 	 	Reg. 2/28/97	 	 	952085	 
	 
	 	China	 	 	5	 	 	Reg. 4/14/97	 	 	978613	 
	 
	 	France	 	 	1,5	 	 	Reg. 10/6/94	 	 	94/539.090	 
	 
	 	France	 	 	5	 	 	Reg. 7/27/95	 	 	95/582.463	 
	 
	 	Germany	 	 	1,5	 	 	Reg. 6/22/95	 	 	2 908 191	 
	 
	 	Germany	 	 	5	 	 	Reg. 10/20/97	 	 	395 30 455	 
	 
	 	Indonesia	 	 	1,5	 	 	Reg. 5/19/1995	 	 	368,475	 
	 
	 	Israel	 	 	1	 	 	Reg. 7/1/96	 	 	94940	 
	 
	 	Israel	 	 	5	 	 	Reg. 7/1/96	 	 	94941	 
	 
	 	Italy	 	 	1,5	 	 	Reg. 7/25/96	 	 	685002	 
	 
	 	Japan	 	 	5	 	 	Reg. 8/29/97	 	 	3343313	 
	[in Korean
characters]
	 	South Korea	 	 	10	 	 	Reg. 9/27/97	 	 	367277	 
	 
	 	Spain	 	 	1	 	 	Reg. 5/5/95	 	 	1 923 229/2	 
	 
	 	Spain	 	 	5	 	 	Reg. 5/5/95	 	 	1 923 231/4	 
	 
	 	United Kingdom	 	 	1	 	 	Reg. 9/26/94	 	 	1,586,321	 
	 
	 	United Kingdom	 	 	5	 	 	Reg. 9/26/94	 	 	1,586,322	 
	

	Dhasco
	 	United States	 	 	1	 	 	Reg. 5/23/95	 	 	1,894,739	 
	 
	 	Benelux	 	 	1,5	 	 	Reg. 9/22/94	 	 	558,580	 
	 
	 	Canada	 	 	N/A	 	 	Reg. 4/23/97	 	 	475,083	 
	 
	 	China	 	 	1	 	 	Reg. 2/28/97	 	 	952084	 
	 
	 	China	 	 	5	 	 	Reg. 4/14/97	 	 	978614	 
	 
	 	France	 	 	1,5	 	 	Reg. 10/6/94	 	 	94/539.089	 
	 
	 	France	 	 	5	 	 	Reg. 7/27/95	 	 	95/582.461	 
	 
	 	Germany	 	 	5	 	 	Reg. 7/25/95	 	 	395 30 456	 

*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.

- 32 -

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Germany	 	 	1,5	 	 	Reg. 6/22/95	 	 	2908192	 
	 
	 	Indonesia	 	 	1,5	 	 	Reg. 5/19/95	 	 	367,623	 
	 
	 	Israel	 	 	1	 	 	Reg. 7/1/96	 	 	94942	 
	 
	 	Israel	 	 	5	 	 	Reg. 7/1/96	 	 	94943	 
	 
	 	Italy	 	 	1,5	 	 	Reg. 7/25/96	 	 	685003	 
	 
	 	Japan	 	 	1	 	 	Reg. 12/25/96	 	 	3236317	 
	 
	 	Japan	 	 	5	 	 	Reg. 8/29/97	 	 	3343314	 
	[in Korean
characters]
	 	South Korea	 	 	10	 	 	Reg. 4/23/96	 	 	337927	 
	 
	 	United Kingdom	 	 	1	 	 	Reg. 9/26/94	 	 	1,586,323	 
	 
	 	United Kingdom	 	 	5	 	 	Reg. 9/26/94	 	 	1,586,324	 
	

	Formulaid
	 	United States	 	 	5	 	 	Reg. 12/21/93	 	 	1,812,662	 
	 
	 	Benelux	 	 	5	 	 	Reg. 8/4/94	 	 	561,563	 
	 
	 	Canada	 	 	N/A	 	 	Reg. 12/22/95	 	 	452,191	 
	 
	 	*	 	 	 	*	 	 	*	 	 	 	*	 
	 
	 	France	 	 	5	 	 	Reg. 8/22/94	 	 	94/533,500	 
	 
	 	Germany	 	 	5	 	 	Reg. 5/15/95	 	 	2 096 416	 
	 
	 	Indonesia	 	 	5	 	 	Reg. 5/19/95	 	 	371734	 
	 
	 	Israel	 	 	5	 	 	Reg. 2/4/96	 	 	94166	 
	 
	 	Italy	 	 	5	 	 	Reg. 7/25/96	 	 	684464	 
	 
	 	Japan	 	 	5	 	 	Reg. 4/25/97	 	 	3294461	 
	[in Korean
characters]
	 	South Korea	 	 	10	 	 	Reg. 11/13/97	 	 	382069	 
	 
	 	Spain	 	 	5	 	 	Reg. 10/5/95	 	 	1,918,547/2	 
	 
	 	United Kingdom	 	 	5	 	 	Reg. 8/8/94	 	 	1581072	 

*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.

- 33 -

 

EXHIBIT 5

PURCHASE PRICE

*

*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.

- 34 -<PAGE>

                                                                     EXHIBIT 4.1

                                                                    EXHIBIT A TO
                                                              EXCHANGE AGREEMENT

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT, OR AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE
CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT.

                                 PROMISSORY NOTE

April 24, 2003                                                  $_______________

         FOR VALUE RECEIVED, ARI NETWORK SERVICES, INC., a corporation organized
under the laws of the State of Wisconsin (the "ISSUER"), hereby promises to pay
to ___________________________________ (the "HOLDER") the sum of
_____________________ __________________________ and No/100 Dollars
($_____________) and to pay interest on the unpaid principal balance hereof at a
daily rate (floating quarterly as set forth below) expressed as a fraction, the
denominator of which is three hundred and sixty (360) and the numerator of which
is the Interest Rate (as hereinafter defined) compounded annually from the date
hereof (the "ISSUE DATE") until the same becomes due and payable. For purposes
of this Note, the "INTEREST RATE" shall mean a floating quarterly interest rate
(adjusted quarterly on the last day of each calendar quarter after the Issue
Date commencing on June 30, 2003) equal to the sum of two percent (2%) plus the
rate publicly announced as of the date for which such determination is being
made by The Wall Street Journal, Midwest edition (or, if not available, such
other comparable sources as may be reasonably selected by Issuer) as the then
current prime rate.

         Accrued interest shall be payable in arrears on the last day of each
calendar quarter beginning March 31, 2004 (with the first such installment of
interest due on March 31, 2004, to be equal to the interest that has accrued
from the Issue Date through and including March 31, 2004). Interest shall be
calculated based on a 360-day year and shall commence accruing on the date
hereof. Issuer shall make mandatory principal payments to the Holders,
quarterly, in the following installments: (i) commencing on March 31, 2004, and
on the last day of each and every calendar quarter thereafter up to and
including December 31, 2005, a principal installment in the amount of
_____________________________________Dollars ($________) per quarter; and (ii)
commencing March 31, 2006, and on the last day of each and every calendar
quarter thereafter until all outstanding principal and interest under this Note
is paid in full, a principal installment in the amount of
______________________________________ Dollars ($___________) per quarter
(except the last payment shall be such portion of $____________ necessary to pay
all remaining unpaid principal).

         All payments of principal and interest hereunder shall be made in, and
all references herein to monetary denominations shall refer to, lawful money of
the United States of America. All payments shall of principal and interest
hereunder be made to the order of the Holder, at the

<PAGE>

address set forth in Section 7 of this Note for notices to Holder, or such other
address for payment as the Holder shall hereafter provide to the Issuer by
notice in accordance with the notice procedures in Section 7. As long as the
notice of the address for notices and payment is clear and explicit, the Holder
may designate different addresses for payment and notices.

         Issuer may at its sole election at any time and from time to time
prepay all or any part of this Note without premium or penalty. All prepayments
shall be applied as follows: (i) first to accrued and unpaid interest that is
due and payable quarterly as provided herein, and (ii) then for principal. Upon
prepayment of part of the principal amount of this Note, the remaining principal
payments shall be reduced on a pro rata basis to an amount which will repay the
remaining principal balance of the Note over the same term as the Note would
have been paid by payment only of the mandatory principal payments.

1.       Events of Default. Each of the following occurrences shall constitute
an "EVENT OF DEFAULT" under this Note:

         (a)      Failure to Pay Principal or Interest. If Issuer shall fail to
pay any installment of principal or interest within fifteen (15) days of the
date scheduled for such payment.

         (b)      Breach of Covenant. If Issuer defaults in the performance or
observance of any material covenant set forth in this Note in a material respect
and Issuer fails to cure such default or commence good faith efforts to cure
such default during the period of sixty (60) days after receipt of written
notice to Issuer from the Agent of said default.

         (c)      Breach of Representation or Warranty. If any material
representation or warranty made by Issuer in this Note shall prove to have been
knowingly false (to the knowledge of the Issuer's chief executive officer or
chief financial officer) in a material respect on the Issue Date and the Holder
shall not have independent knowledge on the Issue Date of the inaccuracy of the
representation or warranty; provided, that the Holder is deemed to have
knowledge of any information that is or has been included in public securities
filings, press releases or other general publications (including but not limited
to product brochures) issued by the Company on or prior to the Issue Date or
which has been otherwise made available to any of them or RGC International
Investors, LDC, Rose Glen Capital Management, LP, RGC General Partner Corp. or
any of their affiliates for review on or prior to the Issue Date.

         (d)      Involuntary Bankruptcy; Appointment of Receiver, Etc. If an
involuntary case shall be commenced against Issuer and the petition shall not be
dismissed, stayed, bonded or discharged within sixty (60) days after
commencement of the case; or a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of Issuer in an involuntary case,
under any applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted under any
applicable federal, state, local or foreign law;

         (e)      Voluntary Bankruptcy; Appointment of Receiver, Etc. Issuer
shall have an order for relief entered with respect to it or shall have
commenced a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking

                                       2

<PAGE>

possession by a receiver, trustee or other custodian for all or a substantial
part of its property or assets; or Issuer shall make any assignment for the
benefit of creditors.

2.       Rights and Remedies.

         (a)      Acceleration. Upon the occurrence of any Event of Default
described in Sections 1(d) or (e), above, the unpaid principal amount of this
Note, and any and all accrued interest hereunder, shall automatically become
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisal, diligence, presentment, notice of intent to demand or accelerate and
of acceleration), all of which are hereby expressly waived by Issuer; and upon
the occurrence and during the continuance of any other Event of Default, the
Holder may declare, by written notice to the Issuer, the unpaid principal amount
of and any and all accrued and unpaid interest under this Note to be due and
payable, without presentment, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisal, diligence,
presentment, notice of intent to demand or accelerate and of acceleration), all
of which are hereby expressly waived by Issuer.

         (b)      Board Seat. Upon occurrence of an Event of Default described
in Section 1(a) above that is not cured during the period of ninety (90) days
following the occurrence of such Event of Default, Taglich Brothers, Inc.
("Taglich") shall have the right to appoint a designee to the Issuer's Board of
Directors, and Issuer shall take appropriate action to cause such designee to be
appointed to an unfilled seat on the Board of Directors. If no unfilled seat on
the Board of Directors exists, the Issuer shall take appropriate action to
create an additional seat. If such designee is so appointed, the Board of
Directors will cause the designee to be recommended to the shareholders in the
proxy statement for the next annual shareholder's meeting. After Taglich
notifies the Issuer of the name and contact information for such designee,
absent emergency circumstances the Issuer shall give such designee at least two
(2) business days' notice of any Board of Directors meeting of the Issuer that
such designee is entitled to attend under this Section 2(b). Prior to attending
any such meeting of the Board of Directors, such designee shall execute any
confidentiality agreement that the Issuer shall require all of the members of
its Board of Directors to execute. This Note is one of a series of Notes
representing indebtedness of the Company of an aggregate of $3,900,000.
Accordingly, notwithstanding the foregoing, Taglich shall only designate one
person to be appointed to the Board of Directors even if an occurrence of an
Event of Default has occurred in more than one Note similar in form to this
Note.

3.       Reporting Covenants. Issuer covenants and agrees that until all of the
outstanding principal and interest due under this Note is paid in full, unless
the Holder shall otherwise give its prior written consent thereto, the Issuer
agrees to send, or make available upon request, the following reports to the
Holder: (i) a copy of Issuer's Annual Report on Form 10-K, its Quarterly Reports
on Form 10-Q and any Current Reports on Form 8-K; and (ii) copies of all proxy
statements issued by the Issuer. The Issuer's obligations under this Section 3
shall be deemed satisfied if the report is filed with the SEC via EDGAR. If
Issuer is no longer required to file 10-Q and 10-K reports, the Issuer will
provide the Holder with a copy of Issuer's audited annual financial statements
within 105 days of the end of each fiscal year and its unaudited interim
quarterly financial statements within 45 days of the end of each fiscal quarter.

                                       3

<PAGE>

4.       Negative Covenants. Issuer covenants and agrees that until all of the
outstanding principal and interest due under this Note is paid in full, unless
the Holder shall otherwise give its prior written consent, it shall not, and
shall not permit any of its subsidiaries to directly or indirectly create,
incur, assume or permit to exist any lien on or with respect to any of their
respective property or assets except (i) Permitted Liens, (ii) Customary
Permitted Liens, and (iii) liens securing indebtedness which is incurred to
refinance indebtedness which is secured by Permitted Liens (as defined below).

         (a)      Permitted Liens. For purposes hereof "PERMITTED LIENS" means
(i) liens (including extensions and renewals thereto) upon property (whether
real, personal, tangible or intangible) acquired after the Issue Date provided
that any such lien shall not extend to or cover any acquired property or assets
other than such item(s) of property or assets and any improvements on such
item(s); (ii) any interest or title of a lessor in the property subject to any
capitalized lease obligation or operating lease; (iii) liens on property of, or
on shares of capital stock or indebtedness of, any person existing at the time
such person becomes, or becomes a part of, the Issuer or any subsidiary of the
Issuer; provided that such liens do not extend to or cover any property or
assets of the Issuer or any subsidiary of the Issuer, other than the property or
assets acquired; (iv) liens in favor of the Issuer or any subsidiary of the
Issuer; (v) liens securing reimbursement obligations with respect to letters of
credit secured by Issuer in the ordinary course of business that encumber cash
deposits, documents or other property relating to such letters of credit and the
products and proceeds thereof; (vi) liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of products entered
into by the Issuer or any of its subsidiaries in the ordinary course of business
of the Issuer and its subsidiaries; (vii) liens securing the Issuer's
obligations in respect of bankers' acceptances issued or created to facilitate
the purchase, shipment or storage of inventory or other products in the ordinary
course of business which are limited to the inventory or products related
thereto; (viii) licenses, escrows or any security interests arising in the
ordinary course of business, granted by the Issuer with respect to any
intellectual property owned by the Issuer; (ix) liens encumbering property
acquired by the Issuer upon the acquisition of another entity subsequent to the
Issue Date; provided, that, the Issuer has agreed to assume the indebtedness of
such acquired entity; (x) liens securing other indebtedness hereinafter created
in an amount (in the aggregate) not to exceed the sum of One Million Five
Hundred Thousand Dollars ($1,500,000) plus the amount of credit provided to the
Issuer by a bank, finance company or other institutional lender in the ordinary
course of the lender's business as senior indebtedness; (xi) liens in existence
on the Issue Date; (xii) liens securing assets acquired by the Issuer; provided
such liens were in existence prior to the date of such acquisition by the
Issuer; and (xiii) purchase money liens on property of the Issuer to finance or
secure a portion of the purchase price thereof provided that in each case such
lien should be limited to the property so acquired and the indebtedness secured
by the lien does not exceed the purchase price of the property.

         (b)      Customary Permitted Liens. For purposes of this Note,
"CUSTOMARY PERMITTED LIENS" means (i) liens with respect to the payment of
taxes, assessments or governmental charges; (ii) liens arising by operation of
law of landlords, suppliers, mechanics, repair men, carriers, materialmen,
warehousemen or workmen and other liens imposed by law created in the ordinary
course of business; (iii) liens incurred or deposits made in the ordinary course
of business in connection with worker's compensation, unemployment insurance or
other types of social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than

                                       4

<PAGE>

for the repayment of borrowed money), surety, appeal and performance bonds; and
(iv) liens arising with respect to zoning restrictions, easements, licenses,
reservations, covenants, rights-of-way, utility easements, building restrictions
and other similar charges or encumbrances on the use of real property which do
not interfere with the ordinary conduct of the business of the Issuer or any of
its subsidiaries.

5.       Representations and Warranties of Holder. The Holder hereby represents
and warrants to the Issuer that:

         (a)      Investment Purpose. As of the date hereof, the Holder is
obtaining this Note for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the Securities Act of 1933, as amended (the
"1933 ACT"); provided, however, that by making the representations herein, the
Holder does not agree to hold this Note, for any minimum or other specific term
and reserves the right to dispose of this at any time in accordance with or
pursuant to an exemption under the 1993 Act and the assignment provisions set
forth in Section 8 below.

         (b)      Transfer or Re-sale. The Holder understands that (i) the sale
or re-sale of this Note has not been and is not being registered under the 1933
Act or any applicable state securities laws, and subject to the assignment
provisions set forth in Section 8, below, this Note may not be transferred
unless (a) the Holder shall have delivered to the Company an opinion of counsel
(which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that this Note may be sold or
transferred pursuant to an exemption from the registration requirements of the
1993 Act; or (b) this Note is sold or transferred to an "affiliate" (as defined
in Rule 144 promulgated under the 1933 Act (or a successor rule) ("RULE 144"))
of the Holder who agrees to sell or otherwise transfer this Note only in
accordance with this Section 5(b) and who is an Accredited Investor under the
1933 Act; or (c) this Note is sold pursuant to Rule 144; (ii) any sale of this
Note made in reliance on Rule 144 may be made only in accordance with the terms
of said Rule and further, if said Rule is not applicable, any re-sale of this
Note under circumstances in which the seller (or the person through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

         (c)      Authorization; Enforcement. The execution of this Note has
been duly and validly authorized by the Holder. This Note has been duly executed
and delivered on behalf of the Holder, and this Note constitutes the valid and
binding agreement of the Holder enforceable in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors rights generally or general principles of
equity.

6.       Representations and Warranties of the Issuer. The Issuer hereby
represents and warrants to the Holder that:

         (a)      Organization and Qualification. The Issuer is a corporation
duly organized and validly existing under the laws of the jurisdiction in which
it is incorporated, with full corporate

                                       5

<PAGE>

power and authority to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.

         (b)      Authorization; Enforcement. (i) Issuer has all requisite
corporate power and authority to enter into and perform this Note and to
consummate the transactions contemplated hereby and to issue and deliver this
Note in accordance with the terms hereof, (ii) the execution and delivery of
this Note by the Issuer and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Issuer its Board of
Directors, (iii) this Note has been duly executed and delivered by the Issuer,
and (iv) this Agreement constitutes, and upon execution and delivery by the
Issuer of this Note, such instrument will constitute, a legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors rights generally or general
principles of equity.

         (c)      Public Information. The information set forth in the Company's
most recently filed reports under the Exchange Act was and is correct in all
material respects as of the date of such reports and as of the date hereof, and
such information as of the date of such reports did not, and as of the date
hereof does not, contain any untrue statements of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not materially misleading. For purposes of this section 6 (c), the term
"material" or "materially" shall describe only information, facts and
statements, that, if false, would likely have a material adverse effect on the
rights of the Holder under this Note.

7.       Miscellaneous. Issuer hereby waives demand, presentment for payment,
notice of nonpayment, protest and notice of protest.

         Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:

                    If to the Issuer:

                           ARI Network Services, Inc.
                           11425 W. Lake Park Drive, Suite 900
                           Milwaukee, Wisconsin 53224-3025
                           Attention: Brian E. Dearing
                           Facsimile: (414) 973-4620

                                       6

<PAGE>

                           With copy to:

                                    Mark C. Witt, Esq.
                                    Godfrey & Kahn
                                    780 N. Water Street
                                    Milwaukee, Wisconsin 53202-3149
                                    Facsimile: (414) 273-5198

                           If to Holder:

                                    ________________________
                                    ________________________
                                    ________________________
                                    ________________________
                                    Attention:_________________

         Each party shall provide notice to the other party of any change in
address.

         The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

         The Issuer shall maintain records showing the principal and interest
amount and the dates of the payments on the Note. The Note shall be surrendered
when the final payment of principal and interest is made.

         The Issuer may make all payments on this Note to the Holder at the
address provided in the third paragraph of the preamble to this Note.
Notwithstanding any information available to the Issuer or actual knowledge of
the Issuer, until Issuer receives notice of a change of address in accordance
with the notice provisions contained in this Note, the Issuer may direct all
payments on this Note to the last address of which the Issuer has received such
notice, provided however, an Event of Default will not have occurred hereunder
if the Issuer timely makes payment to the Holder at an address that the Issuer
in good faith believes to be the current address of the Holder because the
Issuer has relied on a notice by the Holder which has not been given in
accordance with the provisions of this Note. In such event any such discrepancy
will be promptly resolved by the Issuer and the Holder upon discovery of the
issue. Notwithstanding any information available to the Issuer or actual
knowledge of the Issuer that a person has acquired this Note from the Holder,
the Issuer may make all payments to the Holder until this Note has been
surrendered for reissue to the acquiring person, together with such
documentation evidencing and confirming the acquisition of the Note, as the
Issuer in good faith requires. All such payments will be deemed to be valid
payments on this Note for the full amount of the payment. If this Note is
reissued to effect a transfer to a new person, the Note may be issued by the
Issuer for the then current principal balance if such balance is less than the
face amount of this Note at the time of reissue.

                                       7

<PAGE>

         If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

         This Note may be amended or modified only by an instrument in writing
signed by the Issuer and the Holder.

         This Note shall be binding upon the Issuer and its successors and
assigns and shall inure to the benefit the Holder and its permitted successors
and assigns.

         This Note shall be governed by and construed in accordance with the
laws of the State of Wisconsin applicable to contracts made and to be performed
in the State of Wisconsin (without regard to principles of conflict of laws).

         Whenever used in this Note, the singular number shall include the
plural, the plural the singular, and the masculine shall include the feminine
and the neuter, the words "ISSUER," and "HOLDER" shall be deemed to include
Issuer and the Holder as defined herein and their respective permitted
successors and assigns, and the word "person" shall be deemed to mean natural
persons, corporations, partnerships and all other legal entities.

         The Issuer and the Holder irrevocably consent to the exclusive
jurisdiction of the United States federal courts and state courts located in the
State of Wisconsin in any suit or proceeding based on or arising under this
Note, the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in such courts. Issuer and the
Holder irrevocably waive the defense of an inconvenient forum to the maintenance
of such suit or proceeding.

         This Note may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one instrument.

         IN WITNESS WHEREOF, Issuer has caused this Note to be signed in its
name by its duly authorized officer as of the date first above written.

                                      ARI NETWORK SERVICES, INC.

                                      By: ______________________________________
                                          Brian Dearing,
                                          Chairman and Chief Executive Officer

Acknowledged and agreed to:

HOLDER:

By: ___________________________________

Name: _________________________________

Title: ________________________________

                                       8

<PAGE>

________________________________
________________________________

Date:___________________________

                                       9

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