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Amendment No. 1 To Supply Agreement Between Martek Biosciences Corporation And Mead Johnson Company, Llc

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Martek Biosciences Corporation | Mead Johnson Company, LLC | Mead Johnson Nutrition Company

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Title: Amendment No. 1 to Supply Agreement between Martek Biosciences Corporation and Mead Johnson Company, LLC
Date: 7/29/2010
Industry: Food Processing     Sector: Consumer/Non-Cyclical

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Exhibit 10.1

* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN

FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Amendment No. 1

to Supply Agreement

between

Martek Biosciences Corporation

and

Mead Johnson & Company, LLC

This Amendment No. 1 (the “ Amendment ”) to that certain Supply Agreement between (i) Martek Biosciences Corporation, a Delaware corporation, having its principal place of business at 6480 Dobbin Road, Columbia, Maryland 21045 (“ Martek ”) and (ii) Mead Johnson & Company, LLC, a Delaware limited liability company, and wholly-owned subsidiary of Mead Johnson Nutrition Company, with offices located at 2400 West Lloyd Expressway, Evansville, Indiana 47721 (“ MJN ”), which is dated as of January 1, 2006, as amended with respect to payment terms on August 6, 2009 by letter agreement (the “ Supply Agreement ”) is made and entered into effective as of June 1, 2010 (the “ Amendment Effective Date ”) by and between Martek and MJN.

WHEREAS , Martek and MJN entered into a License Agreement dated as of October 28, 1992 (as amended, the “ License Agreement ”) wherein Martek granted to MJN certain rights under Licensed Patents (as defined therein) and Technology (as defined therein) (A) to produce the Mead Johnson Product (as defined therein), (B) to use and make the Martek Product (as defined therein) for purposes of making and having made the Mead Johnson Product and (C) to use, market and distribute directly or indirectly the Mead Johnson Product, in each case as further specified in the License Agreement;

WHEREAS , pursuant to the Supply Agreement, Martek (“ SELLER ”) has agreed to supply, and MJN (“ PURCHASER ”) has agreed to purchase, Martek Product for use by MJN to manufacture, use, market and distribute the Mead Johnson Product in accordance with the terms of the License Agreement and the Supply Agreement; and

WHEREAS , the parties now wish to amend the Supply Agreement as provided herein.

NOW THEREFORE , in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. Amendments . The following changes to the Supply Agreement shall be effective as of the Amendment Effective Date:

A. The definition of “Infant Formula Product” is hereby amended by replacing the words “characteristics and fed” in the last full line thereof with the words “characteristics and/or fed”.

 

*

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

1


B. Section 2.1(a) is hereby deleted in its entirety and replaced with the following:

“During the Term of this Agreement and subject to the terms of this Agreement, PURCHASER shall purchase and/or shall direct the Designee(s) (as defined in Exhibit B hereto) to purchase, from SELLER, PURCHASER’s and its Affiliates’ total requirements of DHA and ARA as required by PURCHASER and its Affiliates for use in Infant Formula Products in accordance with the terms of the License Agreement as amended hereby. All quantities of the Martek Product purchased by PURCHASER or any Designee under this Agreement shall be used solely for purposes of production, distribution and/or sale of the Mead Johnson Product.

C. The third sentence of Section 2.2.1, which begins “The Annual Forecast shall be used…”, is hereby deleted in its entirety.

D. Section 2.3.1 is hereby amended by deleting everything after the first two sentences thereof, starting with “Price calculations…” and continuing through the end of the paragraph, and replacing it with the following:

“At the end of calendar year 2010, a price reconciliation for purchases in 2010 prior to June 1, 2010 shall occur as follows: If the quantity actually purchased (as reflected in Purchase Orders accepted by SELLER that satisfy the requirements of Section 2.2.3 above and which are scheduled for shipment within 2010) is less than the quantity specified in the Annual Forecast for 2010, SELLER shall invoice PURCHASER 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 and the total purchase price payable for Martek Product purchased prior to June 1, 2010, based on the quantity of Martek Product actually purchased from SELLER in calendar year 2010, as such price is determined using Exhibit A as in effect prior to the Amendment Effective Date. Alternatively, if the quantity actually purchased during calendar year 2010 exceeds the quantity specified in the Annual Forecast for purchase in 2010, SELLER shall credit against future purchases of Martek Product by PURCHASER from SELLER an amount equal to the difference, if any, between the total purchase price payable for Martek Product purchased prior to June 1, 2010, based on the quantity actually purchased in calendar year 2010, as such price is determined using Exhibit A as in effect prior to the Amendment Effective Date, and the total price paid by PURCHASER for such Martek Product, provided that if this Agreement has terminated, SELLER shall, in lieu of any such credit, pay such amount to PURCHASER.”

E. Section 2.3.3 is hereby amended by replacing the first sentence thereof with the following:

“PURCHASER and the Designee(s), as applicable, shall pay all correct invoices for amounts due in accordance with Section 2.3.1 above in the United States in U.S. dollars within * from the postmark date or date of electronic transmission, or transmission by facsimile, as applicable, of SELLER’s invoice, which invoice shall not be deemed to be delivered earlier than the date of delivery of the invoiced Martek Product; provided, however, that for invoices received by PURCHASER *.”

 

*

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

2


F. A new Section 2.5 is hereby added as follows:

“2.5*.”

G. A new Section 2.6 is hereby added as follows:

“2.6 Manufacturing Changes . PURCHASER will make commercially reasonable efforts to qualify and accept manufacturing changes implemented by SELLER from time to time.

H. Section 4.1 is hereby deleted in its entirety and replaced with the following:

“4.1 Term : This Agreement shall commence on the Effective Date and, subject to prior termination of this Agreement in accordance with the terms hereof, shall terminate as of January 1, 2016 (the “Term”); provided, however, that the Term may be extended by PURCHASER beyond December 31, 2015 at the sole discretion of PURCHASER, upon prior written notice given to SELLER at least twelve (12) months prior to the expiration of the initial Term, for an additional four (4) years (the “Extended Term”).”

I. Section 4.2.4 is hereby deleted in its entirety and replaced with the following: “[Reserved]”.

J. For the avoidance of doubt, Section 5.5 is hereby deleted in its entirety and replaced with the following:

“5.5 The parties reaffirm that Section 6.6 of the License Agreement applies, which reads as follows: Licensee covenants and agrees that it and its Affiliates shall, throughout the term of this Agreement, use reasonable efforts to use and develop the Technology and the Martek Product with respect to the Mead Johnson Product in a way which is consistent with the parties’ objective of developing a final marketed product which has a polyunsaturated fatty acid composition effectively equivalent to that of human breast milk.” The parties affirm that PURCHASER, in its sole discretion, may alter the level of Martek Product contained in the Mead Johnson Product if PURCHASER determines, in its sole discretion, that scientific information indicates that alternate levels of Martek Product may be more beneficial or as beneficial as existing levels. *

K. Exhibits A and A-1 are hereby deleted in their entirety and replaced with the Exhibit A attached to this Amendment.

2. Definitions . The capitalized terms used in this Amendment shall have the meaning set forth in the Supply Agreement and/or the License Agreement, as relevant, unless specifically defined in this Amendment.

3. Press Releases . Upon final execution of this Amendment, the parties shall each issue a press release in the forms set forth in Exhibit 1A and 1B attached hereto. Subject to Section 9 of the Supply Agreement, the parties shall agree on those portions of this Amendment to be redacted to the extent such Amendment is publicly filed with the Securities and Exchange Commission.

 

*

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

3


Neither party, nor any of their respective affiliates, shall make any public disclosures, including without limitation, press releases, securities filings or investor or analyst calls or presentations, of any information that has been redacted as described above.

4. Entity . MJN represents and warrants to Martek that MJN has converted its organizational form to a limited liability company and that such conversion did not involve any material changes in the operation, scope, assets, business or net worth of the company. Based on such representation and warranty, the parties acknowledge and agree that the conversion does not constitute an assignment for which consent is required pursuant to Section 10.7 of the Supply Agreement. All references to “MJN” and “PURCHASER” in this Amendment and the Supply Agreement shall be read to mean “Mead Johnson & Company, LLC.” MJN further represents and warrants to Martek that MJN is a wholly-owned subsidiary of Mead Johnson Nutrition Company.

5. Effect of Amendment . Except as expressly modified herein, all terms and conditions set forth in the Supply Agreement shall remain in full force and effect.

6. Counterparts . This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Amendment.

 

*

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

4


IN WITNESS WHEREOF , the parties have each caused this Amendment to be signed and delivered by their duly authorized representatives as of the date first written above.

 

Martek Biosciences Corporation

By:

 

/s/ Steve Dubin

Name:

 

Steve Dubin

Title:

 

Chief Executive Officer

Mead Johnson & Company, LLC

By:

 

/s/ Richard Baumgart

Name:

 

Richard Baumgart

Title:

 

Vice President, RSS and NASC

Martek First Amendment to Supply Agreement; RNB; 06/17/10

 

*

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

5


EXHIBIT 1A

PRESS RELEASE – MJN

MEAD JOHNSON EXTENDS

GLOBAL SOLE-SOURCE SUPPLY AGREEMENT

WITH MARTEK BIOSCIENCES

GLENVIEW, Ill., June 21, 2010 – Mead Johnson Nutrition Company (MJN: NYSE) announced today that it has extended its supply agreement with Martek Biosciences Corporation for DHA (docosahexaenoic acid) and ARA (arachidonic acid) for use in its infant formula products. Under the terms of the amendment, Martek will continue to be Mead Johnson’s global sole-source supplier of DHA and ARA for all of its infant formula products through Dec. 31, 2015, an extension of four years beyond the earliest possible termination date of the current agreement.

“Mead Johnson pioneered the inclusion of DHA and ARA in infant formula in the United States. We continue to choose Martek’s DHA and ARA because of their commitment to innovation and quality in DHA and ARA technology and science,” said Dirk Hondmann, senior vice president – global research & development. “The use of Martek’s


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