SUPPLY AGREEMENT

Exhibit 10.01

SUPPLY AGREEMENT

     THIS SUPPLY AGREEMENT (the “Agreement”) is made as of January 1, 2006 (the “Effective Date”), by and between Mead Johnson & Company, a corporation organized under the laws of Delaware with offices located at 2400 West Lloyd Expressway, Evansville, Indiana 47721 (“PURCHASER”), and Martek Biosciences Corporation, a Delaware corporation with offices located at 6480 Dobbin Road, Columbia, Maryland 21045 (“SELLER”).

WITNESSETH THAT:

     WHEREAS, PURCHASER and SELLER entered into a License Agreement dated as of October 28, 1992 and amended by letter agreement dated January 21, 2004 *, which License Agreement is amended by this Agreement solely to the extent expressly provided herein (as so amended, the “License Agreement”) wherein SELLER has granted to PURCHASER in the Territory (as defined therein) 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; and

     WHEREAS, PURCHASER wishes to purchase the Martek Product from SELLER; and

     WHEREAS, SELLER is willing to supply Martek Product for use by PURCHASER to manufacture, use, market and distribute the Mead Johnson Product in accordance with the terms of the License Agreement; and

     WHEREAS, such purchase and supply of Martek Product shall be subject to the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and of the mutual undertakings herein contained, the parties agree as follows:

ARTICLE 1. DEFINITIONS

     Unless defined herein, all capitalized terms will have the meaning stated in the License Agreement, as amended hereby. References herein to SELLER and PURCHASER shall also be deemed as references to Licensor and Licensee, respectively, for purposes of the License Agreement.

     1.1 “ARA” shall mean arachidonic acid.

     1.2 “Annual Forecast” shall have the meaning specified in Section 2.2.1.

     1.3 “DHA” shall mean docosahexaenoic acid.

     1.4 “LCPUFA” shall mean any fatty acid, other than linoleic acid, gammalinolenic acid and alphalinolenic acid, which contains at least eighteen (18) carbon atoms and at least two (2) double bonds.

     1.5 “Martek Product Specifications” shall mean the specifications for the Martek Product to be supplied hereunder, as set forth in Exhibit C attached hereto, as such Exhibit may be modified by written agreement of the parties.

     1.6 “Unit of the Martek Product” shall mean that quantity of Martek Product containing one (1) kilogram of DHA and/or ARA.

     1.7 “Infant Formula Product” shall mean an enteral product formulated for the nutritional support of premature infants and/or a breast milk substitute formulated industrially in accordance with applicable Codex Alimentarius and United States Food and Drug Administration standards to satisfy the total normal nutritional requirements of infants up to between four and six months of age and adapted to their physiological characteristics and fed in addition to other foods to infants up to approximately one year of age.

ARTICLE 2. PURCHASE AND SUPPLY OF COMPOUNDS

     2.1 Purchase . (a) During the Term of this Agreement and subject to the terms of this Agreement, PURCHASER shall purchase and/or shall direct the Designee(s) (as defined in Exhibit B hereto) to purchase, from SELLER, PURCHASER’s total requirements of DHA and ARA as required by PURCHASER 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.

     (b) As partial consideration for the rights granted to PURCHASER hereunder, including without limitation the pricing provisions and price protection provided in Exhibit A attached hereto, PURCHASER agrees that during the Term of this Agreement Section 2.2 (i) of the License Agreement shall be of no force or effect, and after the Term of this Agreement, Section 2.2(i) of the License Agreement shall only apply with respect to actions which occur after the Term of this Agreement. Notwithstanding the above, to the extent PURCHASER elects to add new countries to the Territory after the Effective Date of this Agreement, the incremental additional License Fee cost to PURCHASER shall be *, after the Effective Date of this Agreement, to *, provided that SELLER has established specific License Fees for those particular countries.

     2.2 Forecasts and Orders .

     2.2.1 On the Effective Date of this Agreement, PURCHASER shall give SELLER written notice of the quantity of Martek Product which PURCHASER estimates in good faith that it will order or direct the Designee(s) to order from SELLER during the remainder of the current calendar year (the “Initial Annual Forecast”). Not later than November 30 of each calendar year during the Term of this Agreement, PURCHASER shall give SELLER written notice of the quantity of Martek Product which PURCHASER estimates in good faith that it will order or direct the Designee(s) to

order from SELLER during the next subsequent calendar year (each, an “Annual Forecast”). The Annual Forecast shall be used to establish the per unit and per kilogram pricing for the Martek Products purchased during the relevant calendar year in accordance with Section 2.3.1 and Exhibit A attached hereto; provided that, for the remainder of calendar year 2006, the per kilogram pricing to be used, subject to the year-end adjustment pursuant to Section 2.3.1, shall be * per kilogram, notwithstanding the Initial Annual Forecast. In addition to the foregoing, one (1) month before the commencement of each calendar quarter during the Term of this Agreement, PURCHASER shall provide SELLER with a forecast (a “Rolling Forecast”) of PURCHASER’s requirements for the Martek Product for each of the succeeding four (4) quarters, specifying quantities and requested delivery dates. These forecasts will be PURCHASER’s good-faith, best estimate of requirements and should not be considered a firm commitment.

     2.2.2 PURCHASER expressly acknowledges that available supplies of the Martek Product have been in the past, and, may from time to time in the future, be insufficient to meet current demand. Nevertheless, SELLER shall use commercially reasonable efforts to have available for shipment to PURCHASER or to a Designee for PURCHASER’s account such quantities of the Martek Product as PURCHASER forecasts in good faith pursuant to Section 2.2.1 above and any additional quantities which PURCHASER may reasonably request. In case for any reason SELLER cannot or does not supply such quantities of the Martek Products as are forecasted in good faith by PURCHASER pursuant to Section 2.2.1 to PURCHASER, PURCHASER shall be allowed to use an alternative supplier for quantities of Omega-3 and Omega-6 long-chain polyunsaturated fatty acids equal to those quantities of Martek Products that were ordered by PURCHASER pursuant to a Purchase Order and not delivered by SELLER.

     2.2.3 PURCHASER shall issue and/or shall direct the Designee(s) to issue formal purchase orders (“Purchase Orders”) at least sixty (60) but no more than ninety (90) days in advance of the date on which PURCHASER or the Designee requests that SELLER ship the Martek Product. SELLER shall accept or reject any such Purchase Order within five (5) business days of receipt, provided that SELLER shall not reject any Purchase Order for any quantities within the most recent forecast.

     2.2.4 Purchase Orders which have been accepted by SELLER shall be considered as firm and binding orders (subject to the provisions of Section 2.2.2 above) and shall only be canceled or amended by mutual written agreement of the parties.

     2.3 Payment Terms .

     2.3.1 Price . During the Term of this Agreement, PURCHASER and the Designee(s) shall pay for the Martek Product in any order submitted by PURCHASER or a Designee in accordance with the terms set forth in Exhibit A attached hereto. PURCHASER hereby covenants and agrees to abide by the conditions set forth on Exhibit A, as amended by mutual agreement from time to time, which shall be applicable to the Martek Product delivered to PURCHASER or a Designee pursuant to the relevant Purchase Order, and PURCHASER shall acknowledge in writing to SELLER, within thirty (30) days after each calendar year-end, that PURCHASER has complied with this covenant during the preceding twelve (12) month period. Price calculations based on annual ordering volumes shall be made using the Annual Forecasts submitted to SELLER by PURCHASER in accordance with Section 2.2.1 and as further demonstrated in Exhibit A-1 attached hereto. At the end of each

calendar year, 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 the corresponding calendar year) is less than the quantity specified in the Annual Forecast for the relevant calendar year, 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 the quantity of Martek Product actually purchased from SELLER in such calendar year as specified in Exhibit A. Alternatively, if the quantity actually purchased during a calendar year exceeds the quantity specified in the Annual Forecast for purchase in such calendar year, 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 the quantity actually purchased as specified in Exhibit A and the total price paid by PURCHASER, provided that if this AGREEMENT has terminated, SELLER shall, in lieu of any such credit, pay such amount to PURCHASER. Notwithstanding the foregoing, for calendar year 2006, the year-end reconciliation described above shall be calculated as of December 1, 2006 based on actual shipments in 2006 prior to such date, plus shipments which are, as of December 1 ^st , 2006, scheduled to occur in December 2006, and any resulting credit shall be applied to invoices issued in December 2006, and if any balance is remaining, payment shall be issued prior to December 31 ^st , 2006.

     2.3.2 Taxes . The purchase price for the Martek Product is exclusive of any and all national, state or local sales, use, value added or other taxes, customs duties and similar tariffs and fees which SELLER or its Affiliates may be required to pay or collect upon the delivery of the Martek Product, or otherwise. Should any tax or levy be made, PURCHASER agrees to pay such tax or levy and indemnify SELLER for any claim for such tax or levy demanded.

     2.3.3 Terms and Guarantee . PURCHASER and the Designee(s), as applicable, shall pay all correct invoices for amounts due in accordance with Section 2.3.1 above in the United States in U.S. dollars within * days 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. For any invoices containing invoicing errors, payment shall not be due with respect to the incorrect portions of the invoice only until the invoicing errors are corrected and a new invoice, with respect to the incorrect portions on the original invoice, is received by PURCHASER. In order to induce SELLER to fill orders for the Martek Product placed by the Designees, PURCHASER hereby assumes responsibility for, and unconditionally guarantees, the timely payment of amounts due from the Designees (the “Guaranteed Obligations”) within * days after receipt from SELLER of notice of nonpayment of any such amount. SELLER shall not be required, prior to any such notice to PURCHASER, to pursue or exhaust any of its rights or remedies against a defaulting Designee with respect to performance of any Guaranteed Obligation.

     2.3.4 Sample Analysis . SELLER shall have the right to analyze samples of the Mead Johnson Product at any time and from time to time for purposes of verifying that PURCHASER has complied with any conditions that may be applicable to the PURCHASER pursuant to the terms of this Agreement, including its exhibits and appendices, for any order of Martek Product. The expenses of such analyses shall be borne by SELLER; provided, however, that PURCHASER shall provide reasonable samples to SELLER without charge upon SELLER’s request, to be made no more often than quarterly, and provided, further, that PURCHASER shall be charged for, and

shall promptly pay the expense of any such analysis that discloses a failure to comply with any applicable condition.

          2.4 Order and Delivery Terms .

          2.4.1 Martek Product shall be delivered F.O.B. SELLER’s place of shipment to PURCHASER or Designee, as specified in the applicable Purchase Order.

          2.4.2 Title to and risk of loss of Martek Product shall be transferred to PURCHASER upon delivery by SELLER to a carrier for shipment to PURCHASER or the indicated Designee.

          2.4.3 In connection with ordering and delivering the Martek Product hereunder, PURCHASER’s standard forms shall govern each order; however, nothing in such forms shall be construed to bind SELLER in any way that modifies or contradicts any express term of this Supply Agreement or its exhibits and appendices.

ARTICLE 3. REPRESENTATIONS, WARRANTY AND DISCLAIMER .

          3.1 SELLER warrants that the Martek Product will be manufactured in compliance with (1) current good manufacturing practices promulgated by the U.S. Food and Drug Administration, (2) in accordance with the requirements of Article 5.2 herein and (3) in accordance with the Martek Product Specifications. Except as otherwise provided in Section 8.2, the exclusive liability of SELLER, and PURCHASER’s exclusive remedy, for failure of any Martek Product to conform to the Martek Product Specifications shall be the replacement of the nonconforming Martek Product or a refund of the purchase price paid by PURCHASER for the nonconforming Martek Product (including duty, freight, insurance charges, and other similar related expenses) at the SELLER’s sole option.

          3.2 SELLER’s Representations and Warranties . SELLER represents and warrants to the PURCHASER as follows:

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

     (ii) SELLER has all necessary corporate power and authority to enter into this Agreement and perform its obligations hereunder.

     (iii) SELLER’s performance under this Agreement does not conflict with any other contract to which SELLER is bound.

          3.3 SELLER’s Disclaimers .

          3.3.1 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER 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 TECHNOLOGY, THE MARTEK PRODUCTS OR THE MARTEK TRADEMARKS. SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AND HAS NO DUTY TO ENSURE THAT THE TECHNOLOGY OR THE MARTEK PRODUCTS ARE USABLE WITH THE MEAD JOHNSON PRODUCT OR THAT THE MARTEK PRODUCTS ARE SAFE OR CAN BE INCORPORATED SAFELY INTO THE MEAD JOHNSON PRODUCT. IT IS HEREBY ACKNOWLEDGED AND AGREED THAT IT SHALL BE PURCHASER’S RIGHT AND OBLIGATION TO DETERMINE THE SAFETY AND UTILITY OF THE MARTEK PRODUCTS AS THEY RELATE TO EACH MEAD JOHNSON PRODUCT.

     3.3.2 SELLER HEREBY DISCLAIMS ANY WARRANTY THAT SELLER’S RIGHTS IN THE TECHNOLOGY OR USE OF THE MARTEK PRODUCT ARE FREE FROM INFRINGEMENT BY THIRD PARTIES. SELLER FURTHER DISCLAIMS ANY WARRANTY RELATING TO THE PATENTABILITY OF, OR THE VALIDITY OF ANY PATENTS RELATING TO, THE TECHNOLOGY, OR THE MARTEK PRODUCT 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.

     3.3.3 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER 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 PURCHASER, ITS AFFILIATES OR ANY THIRD PARTY OF THE TECHNOLOGY, THE MARTEK PRODUCT, OR THE MEAD JOHNSON PRODUCTS, OR (B) ANY IMPROVEMENTS OR MODIFICATIONS TO THE TECHNOLOGY, THE MARTEK PRODUCT, OR THE MEAD JOHNSON PRODUCTS WHICH ARE NOT MADE BY AND PROPRIETARY TO SELLER, [

     3.3.4 PURCHASER’s Warranties . PURCHASER represents and warrants to the SELLER as follows:

ARTICLE 4. TERM, TERMINATION

     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 on the tenth (10 ^th ) anniversary of the Effective Date (the “Term”).

     4.2 Termination :

     4.2.1 Termination in Case of Material Breach; Opportunity to Cure . Either party to this Agreement may terminate this Agreement upon sixty (60) days prior written notice if the other party shall commit a material breach of this Agreement and shall not cure such breach within such sixty (60) day period.

     4.2.2 Termination in Case of Infringement . PURCHASER shall have the right to terminate this Agreement in a particular jurisdiction within the Territory if the parties receive a written opinion of a mutually agreeable outside patent counsel, or a court or other tribunal of competent jurisdiction determines by final order, that the Technology or any material portion thereof or the Martek Product infringe upon the patent or other proprietary rights of any Third Party in such jurisdiction; provided, however, that if, prior to any such termination, SELLER develops a non-infringing alternative that is fully compliant with all applicable laws and regulations and meets PURCHASER’S specifications and requirements as a substitute for the Martek Product, or obtains a license from such Third Party, such that PURCHASER could lawfully use the Technology and/or the Martek Product (as the case may be) in connection with the Mead Johnson Products at no additional cost or expense to PURCHASER beyond that expressly provided in this Agreement, PURCHASER shall not terminate this Agreement.

     4.2.2.1 Volumes in Case of Infringement Termination . In the event that PURCHASER terminates this Agreement as to a particular jurisdiction within the Territory based on Section 4.2.2, SELLER agrees to annually credit the * of PURCHASER for the particular jurisdiction to * used in determining PURCHASER’s * Schedule A for future purchases of Martek Product.

     4.2.3 Termination in Case of Insolvency; Government Action . Notwithstanding any 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.

     4.2.4 Other Termination Rights . In addition to the termination rights set forth above, either party may terminate this Agreement upon twelve (12) months prior written notice provided that such notice shall not be given until after the fifth (5 ^th ) anniversary of the Effective Date of this Agreement.

     4.2.5 Termination of License Agreement . This Agreement shall automatically terminate in the event of the termination of the License Agreement.

     4.3 Effect of Termination . Upon termination of this Agreement in its entirety other than pursuant to Section 4.2.5 or on account of PURCHASER’s breach of this Agreement, PURCHASER and its Affiliates and Designees may continue to manufacture, produce, use, market, offer for sale, sell, promote and distribute, to the extent lawful, any Mead Johnson Products containing Martek Product purchased hereunder until its inventory of such Mead Johnson Products is exhausted. Upon termination of this Agreement pursuant to Section 4.2.4 or on account of PURCHASER’s breach of this Agreement,

SELLER shall have the right, but not the obligation, to purchase from PURCHASER, its Affiliates and Designees, at the cost paid for such Martek Product, PURCHASER’s unused inventories of the Martek Product.

     4.4 Effect on License Agreement . Upon termination of this Agreement, notwithstanding any other provision hereof, the amendments to Sections 2.2(i) (subject to the last phrase of the first sentence of Section 2.1(b) hereof) , 4.1(ii), 4.1(iii), 6.1, 6.2, and 6.3 of the License Agreement as set forth herein shall be of no further force or effect.

     4.5 No Royalties . As of the date of this Agreement, the parties declare that no royalties are due from PURCHASER to SELLER under the License Agreement for actions which have occurred prior to the Effective Date or which occur during the Term of this Agreement Furthermore, to SELLER’s knowledge without inquiry, PURCHASER is current on all payments due to SELLER whether for license fees or product delivered.

ARTICLE 5. COVENANTS

     5.1 During the Term of this Agreement, Sections 6.1, 6.2 and 6.3 of the License Agreement shall be deemed deleted in their entirety and replaced with Sections 5.2, 5.3 and 5.4 below.

     5.2 Compliance with Law; Regulatory Approval . Each of SELLER and PURCHASER (each for itself and on behalf of its Affiliates and Designees) covenants and agrees that it shall conduct all of its operations dealing with the Technology, the Martek Product and the Mead Johnson Product, in material compliance with all applicable laws, regulations and other requirements which may be 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 Federal Food, Drug, and Cosmetic Act, the Infant Formula Act of 1980, the regulations and other requirements of the United States Food and Drug Administration, similar state laws and regulations or similar laws and other requirements in the Territory, including any and all amendments, as may be applicable in any jurisdiction in the Territory in which any Martek Product, or Mead Johnson Product, as applicable, is sold. It shall be PURCHASER’s, and not SELLER’s, responsibility to secure any regulatory approvals in the Territory that may be necessary in connection with exercise by PURCHASER of the rights granted under this Agreement, and in connection therewith, PURCHASER shall not intentionally impair SELLER’s ability to obtain any regulatory approval of the Martek Product by the competent governmental authorities in any Territory and for any product that SELLER may elect to pursue.

     5.3 Performance and Product Quality . PURCHASER covenants and agrees that it and its Affiliates, and to the extent applicable, its Designees, shall exercise a reasonable standard of care and quality control in the testing, manufacturing, marketing, packaging, distribution and sale of each Mead Johnson Product. PURCHASER further covenants and agrees that it and its Affiliates