**EXHIBIT 10.4**

 

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**Commission. Confidential Treatment Requested Under**

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**EXENATIDEONCE WEEKLY PEN SUPPLY AGREEMENT**

** **

This EXENATIDE ONCE WEEKLY PEN SUPPLY AGREEMENT (“Agreement”)is entered into as of May 11, 2009 (the “Effective Date”), by and betweenAmylin Pharmaceuticals, Inc. (“Amylin”), a Delaware corporation, and EliLilly and Company (“Lilly”), a corporation organized and existing under the lawsof the State of Indiana.  Amylin andLilly are sometimes referred to herein individually as a “Party” andcollectively as “Parties”.  References to“Amylin” and “Lilly” and “Party” or “Parties” shall include their respectiveAffiliates.

 

**RECITALS**

** **

1.                                       Amylin andLilly are parties to that certain Collaboration Agreement, effective September 19,2002, as amended, pursuant to which Amylin and Lilly have agreed to cooperatein the development, manufacturing and marketing of Exenatide Once Weekly in adual chamber cartridge pen configuration (the “Pen Product”, as defined below).

 

2.                                       Under the termsof the Collaboration Agreement, Amylin is responsible for sale of Pen Productin the U.S. and Lilly is responsible for the sale of Pen Product in theTerritory outside the U.S.

 

3.                                       In furtheranceof the goals set forth in the Collaboration Agreement, the Parties desire toenter into this Agreement whereby Lilly will agree to purchase from Amylin andAmylin will agree to supply to Lilly the Pen Product in commercial quantitiesintended for commercial sale in the Territory outside the U.S., all on theterms and conditions set forth herein. In addition, the Parties desire to define how certain costs and expenseswill be applied and allocated for Pen Product intended for commercial sale inthe U.S.

 

4.                                       Amylin andLilly are parties to a separate Exenatide Once Weekly Supply Agreement,effective October 16, 2008, as amended (the “Vial Supply Agreement”), forthe purchase and supply of EQW Product in commercial quantities intended forcommercial sale in the Territory outside the U.S. and for the treatment of costand expenses applied and allocated to EQW Product intended for commercial salein the U.S.

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**AGREEMENT**

 

NOW, THEREFORE, in consideration of the foregoingpremises and the mutual covenants contained in this Agreement, the Partieshereby agree as follows:

 

**ARTICLE 1****DEFINITIONS**

 

When used and capitalized in this Agreement (otherthan the headings of the Articles and Sections), including the foregoingRecitals, the following terms will have the meanings assigned to them in this Article 1and include the plural as well as the singular. Capitalized terms not otherwise defined herein will have the meaningassigned to them in the Collaboration Agreement.

 

**1.1****                              ****“ActualComponent Manufacturing Cost”**means those costs actuallyincurred by Amylin for the acquisition and release of Components from ThirdParty Suppliers, including an appropriate allocation of any overheadcosts.  Such costs include, but are notlimited to:  (i) the landed cost ofpurchased materials, including, without limitation, invoice price, outsideprocessing costs, freight, duties, storage fees and brokers fees (volume ortrade discounts will be reflected in the calculation); (ii) conversioncosts (including, without limitation, direct labor and direct overhead)directly associated with the releasing and shipping of Components;  (iii) replacement costs for Componentsthat are determined to be defective or recalled during the quality controlprocess or for Components that are returned to Amylin from Lilly or to ThirdParty Suppliers from Amylin; (iv) Component breakage, damage andmanufacturing losses; (v) obsolete Components; and (vi) to the extentattributable to the acquisition of Components, any other costs consideredinventory costs or Costs of Products Sold under Generally Accepted AccountingPrinciples.  Amylin shall share detailsrelating to the Actual Component Manufacturing Cost in detail and frequency asLilly may reasonably request.

 

**1.2****                              ****“ActualManufacturing Cost”**means those costs actually incurred by Amylin orLilly for the acquisition of materials from Third Party Suppliers or Lilly, andManufacture and conversion into Pen Product. Such costs include, but are not limited to:

 

(a)                                  the landed costof purchased materials, including, without limitation, invoice price, outsideprocessing costs, freight, duties, and brokers fees (volume or trade discountswill be reflected in the calculation);

 

(b)                                 conversioncosts directly associated with the Manufacture of Pen Product at the Facilityincluding direct labor and direct overhead costs;

 

(c)                                  an appropriateallocation of the actual indirect overhead costs directly associated with theManufacture of Pen Product incurred by Amylin at the Facility;

 

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(d)                                 an appropriateallocation of costs based on actual headcount and actual FTE rate incurred byAmylin  outside of the Facility butdirectly associated with  the Manufactureof Pen Product, including but not limited to those items as set forth on Exhibit A;

 

(e)                                  depreciation ofany Pen Product specific capital investments at the Facility not included inthe Pen Product Initial Capital Investment and solely funded by Amylin as partof Capital Investments called out in section 3.8(f) of this Agreement;

 

(f)                                    Pen Productbreakage, damage and Manufacturing losses;

 

(g)                                 an allocationof the depreciation of those capital investments net of capitalized interest inand for Amylin’s San Diego Quality Control Laboratory to the extent suchcapital investments directly support Manufacture of the Pen Product;

 

(h)                                 an allocationof depreciation of those capital investments located at Third Party Suppliersbut owned by Amylin to the extent such capital investments directly supportManufacture of the Pen Product and have not been previously funded by Lilly;

 

(i)                                     replacement costsfor Pen Product that is determined to be defective or recalled during thequality control process or for Pen Product that is returned to Amylin fromLilly or any customer or to Third Party Suppliers from Amylin;

 

(j)                                     amortization ofany pre-paid assets of Amylin at a Third Party Supplier in accordance with theterms of the agreement with any such Third Party Supplier, as well as anappropriate carrying cost of such prepaid assets calculated in accordance with Section 1.2(l) below;

 

(k)                                  to the extentattributable to the Manufacture of Pen Product, any other costs consideredinventory costs or Costs of Products Sold under Generally Accepted AccountingPrinciples;

 

(l)                                     an appropriatecarrying cost applied to the ending monthly inventory utilizing the interestrate agreed to in the letter agreement between the Parties dated June 12,2006 (the “Letter Agreement”); and

 

(m)                               an allocationof Lilly resources directly associated with Manufacture of Pen Product charged at the actual FTE rate and any otherexpenses incurred by Lilly directly associated with the Manufacture of PenProduct as agreed to in advance by the Parties.

 

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### All of these costs and the methodology tobe used in allocating indirect or overhead costs among Manufacturing operationshereunder and other Amylin manufacturing operations, and among Pen ProductManufactured pursuant to this Agreement shall be determined in a mannerconsistent with U.S. GAAP, except as expressly set forth herein or as otherwiseagreed by the Parties.    Amylin shallshare reasonable details relating to the Actual Manufacturing Cost.  The Parties agree to annually review theinterest rate set forth in the Letter Agreement and Section 1.2(l) above.

###  

### For the avoidance of any doubt, theActual Manufacturing Costs for Pen Product sold either in the U.S. or in theTerritory outside the U.S. shall be calculated using the same methodologythrough the nude pen stage of production, with the exception that anyOUS-specific costs (e.g., OUS-specific analytical testing) would be charged [***]to Pen Product for sale OUS.  Followingthe nude pen stage of production, product destined for the U.S. market wouldincur additional costs related to subsequent steps in the manufacturing processincluding, but not limited to, labeling, packaging, storage and distributionand would be charged [***] to US Product. Revisions to allocations and methodology will not be made during theyear without the approval of the MSC.

###  

Any incremental costs for the Manufacture ofPen Product for which the primary benefit of such cost will be in a Territoryoutside the U.S. shall be attributed [***] to the Actual Manufacturing Cost forthe Pen Product to be sold in the Territory outside the U.S. and paid by Lillyhereunder if agreed to in advance by the Parties.  Likewise, any incremental costs for theManufacture of Pen Product for which the primary benefit of such cost will bethe U.S. Territory, such as packaging, shall be attributed [***] to the ActualManufacturing Cost  for the Pen Productto be sold in the U.S. if agreed to in advance by the Parties.

 

The foregoing definition of ActualManufacturing Cost assumes all of the manufacturing capacity of the Facilitywill be used to Manufacture Pen Product under this Agreement and EQW Productunder the Vial Supply Agreement; if at any time during the term of thisAgreement this is not the case, then this definition shall be modified as setforth in Section 4.9(b) below.

 

**1.3****                              ****“API”** will have themeaning set forth in Section 4.7 of this Agreement.

 

**1.4****                              ****“ApplicableLaws”**means all applicable U.S. statutes, ordinances, regulations, rules ororders, including, without limitation, the FD&C Act, the Regulatory Law,Prescription Drug Marketing Act, Generic Drug Enforcement Act of 1992 (21U.S.C. §3359, *et. seq.*), Anti-Kickback Statute(42 U.S.C. §1320 a-7b, *et. seq.*),Resource Conservation and Recovery Act, Clean Water Act, Clean Air Act, theDrug Enforcement Act, Occupational Safety and Health Act and cGMP, as well ascomparable laws of the European Union, all as amended from time to time**.**

 

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**Commission. Confidential Treatment Requested Under**

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**1.5****                              ****“ASC”** will have themeaning set forth in Section 2.1 of this Agreement.

 

**1.6****                              ****“AnnualAverage Unit Cost”** will have the meaning set forth in Section 3.5(a) ofthis Agreement.

 

**1.7****                              ****“BudgetSummary”** means the budget summary for the applicable periodprepared pursuant to Section 3.13(c) of this Agreement.

 

**1.8****                              ****“CartridgeSupply Agreement”** means the Cartridge Supply Agreement, by andbetween Amylin and Lilly, dated as of April 20, 2007, as such agreementmay be amended from time to time.

 

**1.9****                              ****“cGMP”**will meancurrent Good Manufacturing Practices as detailed in “The Rules GoverningMedicinal Products in the European Community (EC) — Volume IV: Guide to GoodManufacturing Practice for Medicinal Products” and the “US Current GoodManufacturing Practices (cGMPs) for Finished Pharmaceuticals: 21 Code ofFederal Regulations (CFR) Parts 11, 210 and 211, and 820, all as amended fromtime to time, and any additional cGMPs promulgated by any regulatory authoritynot described above and provided to Amylin by Lilly and mutually agreed tobetween the Parties.

 

**1.10****                       ****“CollaborationAgreement”** means the Collaboration Agreement set forth in theRecitals of this Agreement, as such agreement may be amended from time to time.

 

**1.11****                       ****“Components”** mean the penmolded parts including a plunger rod, threaded sleeve, adapter, cartridgeholder and grip.  In addition, the finalassembly will also include a dual chamber cartridge and will include needles,packaging materials and labeling as may be agreed to by the MSC.

 

**1.12****                       ****“EffectiveDate”** will have the meaning set forth in the introductory paragraph of thisAgreement.

 

**1.13****                       ****“EQWProduct”** will have the meaning set forth in the Vial SupplyAgreement (previously refered to as the Exenatide Once Weekly SupplyAgreement).

 

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**1.14****                       ****“Facility”** means themanufacturing facility commissioned by Amylin and located at 8814, 8848 and8874 Trade Port Drive, West Chester, Ohio, as such facility may be from time totime approved, expanded or altered in accordance with this Agreement.

 

**1.15****                       ****“Five-YearForecast”**will have the meaning set forth in Section 5.1(a) ofthis Agreement.

 

**1.16****                       ****“ForceMajeure”** will have the meaning set forth in Section 16.14of this Agreement.

 

**1.17****                       ****“Forecast”**will have the meaning set forth in Section 5.1 (b) of this Agreement.

 

**1.18****                       ****“InspectionPeriod”** will have the meaning set forth in Section 5.8(a) of thisAgreement.

 

**1.19****                       ****“LatentDefect”** means defects that cause the Pen Product to fail to conform to theSpecifications or otherwise fail to conform to the warranties provided pursuantto Section 10.8 (hereof, which defects are not discoverable uponreasonable physical inspection as provided in Section 5.8(a).

 

**1.20****                       ****“Manufacture”,“Manufacturing”** or**“Manufactured”**means all operations involved in the manufacturing, quality control testing(including in-process, disposition and stability testing), disposition(releasing or rejecting), packaging and shipping of the Pen Product as morefully described in the MRD.

 

**1.21****                       ****“MRD”**means theManufacturing Responsibilities Document, which sets forth written instructionsregarding the Manufacture and other technical matters including, withoutlimitation, testing procedures and supply of the Pen Product under thisAgreement.

 

**1.22****                       ****“MSC”** will have themeaning set forth in Section 2.1 of this Agreement.

 

**1.23****                       ****“OUS”** means theTerritory outside the U.S.

 

**1.24****                       ****“Party”**or**“Parties”** will have the meaning setforth in the first paragraph of this Agreement.

 

**1.25****                       ****“PenProduct”** means the Product (whether to be used as trade,sample or clinical trial material) or placebo developed as a fixed-doseinjection of exenatide administered once per week for diabetes and any otherIndications for which such Product may be approved for use and Manufactured byAmylin configured for delivery in a dual chamber cartridge pen formulation, infinished form or in nude pens, including any components thereof and associatedpackaging components.

 

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**1.26****                       ****“PenProduct Initial Capital Investment”** shall mean the initialcapital investment made by Amylin and Lilly in and for the Facility for theManufacture of the Pen Product up to a capacity of [***] units, including, butnot limited to, the filling of the dual chamber cartridge and installing thecartridge in the pen to support both U.S. and OUS markets.  For Pen Product for sale in the U.S., thescope of the investments also includes facilities and equipment to package thecurrent presentation of  pens and needlesinto blister packs.  For clarification,Pen Product Capital Investment shall not include the capital investment made byAmylin in and for the Facility for EQW Product and compensated in accordancewith the Vial Supply Agreement.

 

**1.27****                       ****“PenProduct Manufacturing Development Costs”** shall mean thoseDevelopment Costs specifically related to developing the ability to ManufacturePen Product, including, without limitation, Manufacturing process developmentand Manufacturing and quality assurance technical support, until such time asManufacturing of Pen Product intended for commercial sale commences.  For purposes of clarification, Pen ProductManufacturing Development Costs shall not include any Development Costs whichare solely attributable to clinical studies of Pen Product, but may includecosts relating to manufacturing development irrespective of where those costswere incurred.  All Amylin and Lillypersonnel costs, including without limitation direct and indirect personnelcosts, will be charged at actual FTE cost, unless otherwise agreed to by theParties.

 

**1.28****                       ****“PurchaseOrder”** will have the meaning set forth in Section 5.4 of this Agreement.

 

**1.29****                       ****“QLT”** will have themeaning set forth in Section 2.3 of this Agreement.

 

**1.30****                       ****“QualityAgreement”**means the quality agreement, as revised and amendedfrom time to time between the Parties, that describes certain qualityexpectations and responsibilities relating to the Manufacture, release testingand supply of the Pen Product to Lilly. The Parties acknowledge that, if they so elect, there will be oneQuality Agreement applicable for Pen Product intended to be Commercialized inthe U.S. and another Quality Agreement applicable for Pen Product intended tobe Commercialized in the Territory outside the U.S.

 

**1.31****                       ****“QualityAudit”**will have the meaning set forth in Section 4.5(b) of thisAgreement.

 

**1.32****                       ****“QWT”** will have themeaning set forth in Section 2.3 of this Agreement.

 

**1.33****                       ****“RegulatoryAuthority”** will have the meaning set forth in theCollaboration Agreement.

 

**1.34****                       ****“RegulatoryLead”** will have the meaning set forth in the Collaboration Agreement.

 

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**1.35****                       ****“SCWT”** will have themeaning set forth in Section 2.2 of this Agreement.

 

**1.36****                    ****“Specifications”** for PenProduct means the specifications and quality control testing procedures for thedevelopment, Manufacturing, final release and testing of Pen Product andlabeling and packaging requirements, which may cover one or more versions ofthe Pen Product, including, without limitation, Pen Product having differentphysical features as set forth in the applicable Marketing Approvals, as thesame may be modified from time to time by the Parties in accordance with theterms of the Agreement.  TheSpecifications will be agreed to in accordance with the terms of the QualityAgreement.

 

**1.37****                       ****“StandardCost”** means the planned Pen Product Manufacturing costs for each SKU (whichshall not include depreciation of the Pen Product Initial Capital Investmentsshared by the Parties) divided by the production volume for such SKU as agreedto by the Parties as part of the annual plan.

 

**1.38****                       ****“Start-upQuality Audit”** will have the meaning set forth in Section 4.5(b) ofthis Agreement.

 

**1.39****                       ****“SuccessorManufacturer”** will have the meaning set forth in Section 11.4(d) ofthis Agreement.

 

**1.40****                       ****“ThirdParty Supplier”** shall have the meaning set forth in Section 4.7of this Agreement.

 

**ARTICLE 2****GOVERNANCE**

 

**2.1****                              ****Governanceof Activities.**  Lillyacknowledges that Amylin shall be responsible for day-to-day operationalmanagement of the Facility within the agreed-upon annual plan. Governance ofactivities contemplated by this Agreement will be effected through thegovernance structure established by the Parties, including the SCWT, the QLT,the Manufacturing Strategy Committee (the “MSC”) and the Alliance SteeringCommittee (the “ASC”).  The Partiesintend that MSC shall be responsible for oversight of the Facility and thecomplete Pen Product supply chain, including, but not limited to the followingitems:

 

(a)                                  outputrequirements of the Facility;

 

(b)                                 operationalperformance to plan or revised forecast;

 

(c)                                  establishingand overseeing sub-committees, as it deems necessary;

 

(d)                                 major capitalprojects;

 

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(e)                                  annual and longrange plans for Pen Product supply; and

 

(f)                                    sourcing andsupply agreements.

 

## The MSC shall also be responsible for reviewingand recommending for approval annual budgets and capital investments to the ASCunder the timing described for Binding Budgets in the CollaborationAgreement.  The MSC shall meet no lessthan [***] with agendas and pre-reads due at least five days in advance of themeeting or as directed by the MSC.

##  

## The MSC will establish governance processeswhich define how information (financials, operational performance, inventories,capital spend, etc.) will be reported and reviewed on a periodic basis(initially proposed to be monthly).  MSCwill also define the types and magnitude of decisions that it will delegate toSCWT or other sub-committees and which are required to be agreed upon by theParties through the MSC structure.

##  

## In the event that the Parties, through the SCWTor other sub-committees as established by the MSC, are unable to resolve anydispute in connection with this Agreement, the SCWT or sub-committee shallrefer such dispute to the MSC.  In theevent that the Parties, through the MSC, are unable to resolve any dispute inconnection with this Agreement, the MSC shall refer such dispute to the ASCwhich has been established by mutual understanding between the Parties inperformance of their obligations under other agreements between theParties.  If the issue can not beresolved by the ASC, then it shall be escalated to the Chief Executive Officerof Amylin and an Executive Committee Member from Lilly.

##  

**2.2****                              ****SupplyChain Working Team.**  The Partieswill establish a supply chain working team for the Pen Product (the “SCWT”), orinclude the Pen Product in the SCWT established for the EQW Product.  The function of the SCWT shall be to plan,coordinate and manage supply chain activities for Pen Product, develop a riskmanagement plan related to ensuring supply of Pen Product, review operationalperformance of supply chain activities, engage in appropriate activities toreduce supply chain costs, establish customer service levels, serve as a forumfor communication for any supply chain issues, and resolve disputes related tosupply chain issues between the Parties.

 

# **The SCWT will meet at such other times as are agreed to bythe Parties, but no less than once each**[***].  Such meetings may be in-person, via videoconference, or via telephone conference. At least five (5) business days prior to each SCWT meeting, eachParty will provide written notice to the other Party of agenda items proposedby such Party for discussion or decision at such meeting, together withappropriate information related thereto. Written minutes will be kept of all SCWT meetings and will reflect,without limitation, material decisions made at such meetings.  Responsibility for keeping minutes willalternate between the Parties.

 

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**Commission. Confidential Treatment Requested Under**

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**2.3****                              ****QualityGovernance.**  The Partieshave established an Alliance Quality Working Team (the “QWT”) that meets on aregular basis to discuss and resolve quality-related issues and to review dataand/or perform the activities outlined in the Quality Agreement.  Pursuant to the Quality Agreement, theParties have also established an Alliance Quality Lead Team (the “QLT”)responsible for strategic quality issues that arise with respect to the PenProduct.  In the event that the QWT isunable to resolve any quality-related disputes, the QWT shall refer suchdispute to the QLT.  Further, if the QLTis unable to resolve such dispute, the QLT shall refer such dispute to the headof each Party’s Quality Department for resolution.  If despite their best efforts, the head ofeach Party’s Quality Department are unable to resolve such dispute, they shallrefer such dispute to the MSC for resolution.

 

**ARTICLE 3****PAYMENT OF DEVELOPMENT EXPENSES, PURCHASE ANDSUPPLY OF PEN PRODUCT AND COMPONENTS AND LIMITATION OF AGREEMENT**

 

**3.1****                              ****PenProduct Manufacturing Development Costs.**  Notwithstanding anything to the contrary inthe Collaboration Agreement or any previous formal or informal agreementsbetween the Parties, the Parties agree that Lilly shall be responsible for 53%of Pen Product Manufacturing Development Costs incurred up until commercialManufacture of Pen Product commences and Amylin shall be responsible for 47% ofPen Product Manufacturing Development Costs incurred up until commercialManufacture of Pen Product commences.

 

**3.2****                              ****Purchaseof Pen Product Requirements. **Subject to theterms and conditions of this Agreement, Amylin will Manufacture Pen Product forworldwide distribution; provided, however, that Amylin will not have anyresponsibility to package Pen Product for the Territory outside of theU.S.  Lilly shall purchase from Amylin,and Amylin shall supply and deliver to Lilly, Lilly’s requirements for the PenProduct for sale by Lilly in the Territory outside the U.S. in accordance with Article 5of this Agreement.  If at any time Amylinis not able to provide Lilly with the quantity of Pen Product Lilly desires topurchase in accordance herewith because of the capacity limitations of theFacility, the Parties agree to discuss in good faith how best to provide suchadditional quantities of Pen Product including, without limitation, increasingthe capacity of the Facility and/or securing another manufacturer (including,without limitation, Lilly) for Pen Product.

 

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**3.3****                              ****U.S.Pen Product Cost.**  The Cost ofProduct Sold to be allocated to Adjusted U.S. Operating Profit/(Loss) for anyCalendar Quarter as contemplated by Section 4.5(a) of theCollaboration Agreement for Pen Product shipped to non-Amylin, U.S.distribution sites shall be based on the Standard Cost plus any U.S. specificcosts and the U.S. pro-rata portion of any variances for such Calendar Quarter.

 

**3.4****                              ****OUS PenProduct Purchase Price. **Lilly shallpurchase Pen Product for sale OUS from Amylin at a price per unit equal to theStandard Cost plus any OUS specific costs and the OUS pro-rata portion of anyvariances for such Calendar Quarter. The purchase price for Pen Productpurchased by Lilly in each Calendar Quarter will be included as part of theperiodic reconciliation of Operating Profits or Loss for such Calendar Quarteras contemplated in Section 4.9 of the Collaboration Agreement.

 

**3.5****                              **[***]**True-Up.**

 

(a)                                Within[***]after the end of each [***], Amylin shall calculate an “[***] Average Unit Cost”.The [***] Average Unit Cost for any [***] shall be the quotient of (i) theActual Manufacturing Cost up through the nude pen stage of production minus anyU.S. or OUS-specific costs divided by (ii) the total number of Pen Productunits Manufactured in such year.  To theextent the average purchase price per unit for any [***] paid by Lilly pursuantto Section 3.4 differs from the [***] Average Unit Cost plus OUS-specificcosts for such [***], such difference will be included in the periodic reconciliationof Operating Profits or Loss for the [***] as contemplated in Section 4.9of the Collaboration Agreement.

 

(b)                               In addition,within [***] after the end of each [***], the Parties agree to true-up theinventory carrying costs for the previous[***] by re-calculating each [***]ending Pen Product inventory balance for the previous [***] utilizing theActual Manufacturing Cost in lieu of the Standard Cost.

 

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**3.6****                              ****Purchaseof Components. **Lilly willdefine those Components it chooses to purchase through Amylin for the OUSmarket.  Upon agreement at the SCWT andsubject to the terms and conditions of this Agreement, Lilly shall purchasefrom Amylin, and Amylin shall cause to be delivered by the applicable Third-Party Supplier to Lilly, Lilly’s requirements for any applicable Componentsneeded for final packaging that are not included in the Pen Product deliveredto Lilly by Amylin, all for sale by Lilly in the territory outside the U.S. andin accordance with Article 5 of this Agreement.  If at any time a Third- Party Supplier is notable to provide Lilly with the quantity of Components Lilly desires to purchasein accordance herewith, the Parties will allocate supply following theprocedures set forth in Section 5.3, below.

 

**3.7****                              ****ComponentPurchase Price. **Lilly shallpurchase any Components from Amylin at a price per unit of such Component equalto the Actual Component Manufacturing Cost for such Component.

 

Purchase Orders, as defined below, for Components will be submitted byLilly within [***] after the beginning of each [***] using a price provided byAmylin based upon Amylin’s good faith estimate of the Actual ComponentManufacturing Cost for such Components for such [***]. Actual ComponentManufacturing Costs for Components purchased by Lilly in each [***] will beincluded as part of the periodic reconciliation of Operating Profits or Lossfor such [***] as contemplated in Section 4.9 of the CollaborationAgreement.

 

**3.8****                              ****PenProduct Capital Investments.**

 

(a)                                The Partiesagree that the costs of the Pen Product Initial Capital Investment will beallocated 40% to Amylin and 60% to Lilly.

 

(b)                               Amylin agrees that if it intends torefinance any outstanding indebtedness, or incur additional indebtedness, theaggregate outcome of which would result in an additional Lien (whether anincrease of an existing Lien or a new Lien) being placed on the Facility, thenbefore entering into any binding commitment in connection therewith Amylinwill:  (1) provide Lilly with noless than thirty (30) days’ written notice of such intent (which notice shallinclude a reasonably detailed description of the proposed financing andpotential encumbrances), (2) consider in good faith any comments Lillyprovides to Amylin on the proposed financing (which comments Lilly must providewithin ten (10) days of Lilly’s receipt of Amylin’s notice), and (3) upon Lilly’s request, engage in a discussion between the Alliance SteeringCommittee Chairs regarding the proposed financing.  Amylin also agrees that before entering intoany binding commitment to refinance 

 

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outstanding indebtedness or incur additionalindebtedness, Amylin will: (1) ensure that such refinancing or incurrenceof additional indebtedness will not have any adverse impact on the ActualManufacturing Cost or the Product (as applicable in both the Vial SupplyAgreement and this Agreement); (2) ensure that the aggregate amount of allliens placed on the Facility (as such facility is currently configured andexcluding inventory) do not exceed [***] without Lilly’s consent, which consentshall not be unreasonably withheld; and (3) use Commercially ReasonableEfforts to obtain the financing party’s consent to exclude the Pen Equipment(Pen Equipment meaning the hard assets identified as equipment in lines 2through 5 on Exhibit B totaling an estimated $[***]) from being subject to any suchLien.  For the purposes of this Section, “Lien”means any mortgage, pledge, security interest, hypothecation, assignment,encumbrance, lease, lien, option, right of use, or other encumbrance of anykind.

 

(c)                                  If Amylin believes that it may breach anobligation under any loan or other financing agreement on the Facility, wheresuch breach could result in an adverse impact on Amylin’s continued ability toperform its obligations under the Vial Supply Agreement and this Agreement,then Amylin will promptly notify Lilly thereof and agree to meet with Lilly todiscuss.

 

(d)                                 Amylin agrees that it will not, directlyor indirectly, without Lilly’s prior written consent, which shall not beunreasonably withheld, enter into any agreement, transaction or other type ofarrangement with a third party involving the Facility which would result inLilly, either directly indirectly, being obligated to purchase any minimumamount of Product from such third party. Amylin shall proceed with implementing the Pen Product Initial CapitalInvestment project including payment of contractors and suppliers and shall ownthe equipment and other assets acquired. The Amylin and Lilly Pen team and/ or the SCWT Pen team are responsiblefor initiating the review and approval from the MSC, and the ASC of any capitalcommitments beyond the project budget of $216 million.  An estimate of the Pen Product InitialCapital Investment is set forth in Exhibit B.

 

(e)                                  Lilly willprovide to Amylin its cost incurred for such Pen Product Capital Investment,[***], within [***] of the [***].  Amylinwill prepare a report, in a format mutually agreed to by the Parties,aggregating the expenses incurred by each party, for such [***], and will invoiceLilly for their allocation of the costs incurred for such Pen Product CapitalInvestment on a [***] basis.  Lilly shallreimburse Amylin for such billed amounts within [***] of the date of theinvoice.  All past due amounts owed byLilly to Amylin under this agreement shall bear interest at the rate set forthin Section 4.9 of the Collaboration Agreement.

 

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(f)                                    Any capitalinvestments beyond the Pen Product Initial Capital Investment required toestablish or maintain production capability for the Pen Product will be basedupon recommendations of the SCWT and the MSC and the approval of such projectby the ASC.  Projects will be groupedinto two categories:  projects with a scopeless than [***] dollars ($[***]) each (collectively, “Minor Projects”), andprojects with a scope greater than or equal to [***] dollars ($[***]) each(collectively, “Major Projects”).  Projects classified as Minor but with an anticipated spend greater than[***] dollars ($[***]) must be listed individually.  Amylin may spend money on Minor Projectsincluded in the first year Budget Summary without prior approval by MSC.  Amylin at their sole discretion may maketrade-off decisions for Minor Projects not included in the Budget Summary provided(i) the spend for Minor Projects does not exceed the total approved MinorProject Budget amount for that year and (ii) the trade-off does notreplace a capital asset required to meet Regulatory requirements.  Spend for Major Projects must be approved bythe MSC prior to initiation of the project regardless of whether the Projectwas included in the Budget Summary or not. MSC will take action on such requests for approvals on a timely basis.

 

**3.9****                              ****Reimbursementfor Costs Incurred.**  Lilly willreimburse Amylin for Lilly’s share, based upon the allocation set forth in Section 3.8(a),of costs incurred by Amylin prior to the Effective Date for the Pen ProductInitial Capital Investment, as set forth on Exhibit C**,**together with interest at the interest rate agreed to in the Letter Agreementbetween Amylin and Lilly dated June 12, 2006, by making a cash payment ofsuch amount to Amylin within 10 working days of the Effective Date.

 

**3.10****                       ****True-Up**.  [***] following a launch of the Pen Productin one of the major OUS  markets (UnitedKingdom, France, Germany, Italy, Spain, or Japan), or the year in which annualsales volumes of the Pen Product exceed [***] units (whichever is first), theParties agree to true-up the capital split according to the process outlined inExhibit E.

 

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**3.11****                       ****Impairment.**  To the extent any or all of the Pen Productassets added as part of this Agreement cannot be used for the Manufacture ofPen Product, the Parties shall meet to discuss the potential impairment of suchassets.  As the assets covered in the PenProduct Initial Capital Investment are funded on a pay-as-you-go basis by bothParties, there would be no financial settlement associated with any suchimpairment.  If the Parties agree to takean impairment charge relating to capital investments for Pen Product other thanthe Pen Product Initial Capital Investment, as covered in Section 3.8(f) ofthis Agreement, and not funded on a pay-as-you-go basis, Lilly will pay toAmylin an amount equal to******[***]% ofany impairment charge determined in accordance with GAAP for all  non-depreciated capital investments in andfor the Pen Product assets and the Manufacture of Pen Product (excluding anyimpairment charge with respect to which Lilly makes a payment to Amylin asprovided in Section 3.10 of the Vial Supply Agreement), *less*:  (a) anyother amounts due and payable to Lilly from Amylin at the time of theimpairment charge and not deducted in calculating the payment made by Lillyunder Section 3.10 of the Vial Supply Agreement; and (b) any amountsfor any assets that can otherwise be utilized for other uses by Amylin and arenot deducted in calculating the payment made by Lilly under Section 3.10of the Vial Supply Agreement; *plus* any otheramounts due and payable to Amylin from Lilly at the time of impairment chargethat are not added in calculating the payment made by Lilly under Section 3.10of the Vial Supply Agreement.  In theevent any amounts are recovered by Amylin after the impairment charge, suchamounts shall be allocated between Lilly and Amylin in the same proportions as theimpairment charge.

 

**3.12****                       ****Audits.** Each Party will have the rightto audit the other Party’s financial books and records relating to thisAgreement and the calculation of Actual Manufacturing Cost under the same termsand in the same manner as set forth in Section 4.9(e) of theCollaboration Agreement.  Notwithstandingthe foregoing, any non-financial audit conducted by Lilly under this Agreementshall not count towards the annual limitation of one (1) audit per yearset forth in Section 4.9(e) of the Collaboration Agreement.

 

**3.13****                       ****Reporting.**

 

(a)                                  **Estimateof Actual Manufacturing Costs. **Amylin willprovide to Lilly a report containing a good faith estimate of the ActualManufacturing Cost, in a format similar to and with the similar detail as setforth in Exhibit D, within [***] prior to the end of each [***].

 

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(b)                                **ActualManufacturing Costs.**  Amylin willprovide to Lilly a report containing the Actual Manufacturing Cost, in a formatsimilar to and with the similar detail set forth in Exhibit D, within[***] after the end of each [***].

 

(c)                                 **Budgetand Long Range Plan.**  MSC willestablish and maintain business processes to develop and monitor budgets, plansand long-range plans.

 

1.              **Budget Summary.** On an[***], a budget summary shall be developed covering the following[***].  Such budget shall reflect Amylin’splan at the time such budget is created, but shall not be binding on Amylin.MSC shall  review on no less than a [***]the actual performance relative to the plan and shall agree upon any actions needed.

 

**2.****            ****Long-Range Plan.** On an [***], a long-range plan for anticipated Pen Product demand,capital and manufacturing costs will be developed, reviewed and approved byMSC.

 

**ARTICLE 4****MANUFACTURING AND QUALITY**

 

**4.1****                              ****QualityAgreement. **No laterthan[***] after the Effective Date, the Parties shall prepare and adopt theQuality Agreement or include the Pen Product under the Quality Agreement forthe EQW Product, as determined by the QLT. The Parties shall review the Quality Agreement at least once each [***]and shall modify it from time to time as necessary through issuance of arevised version of the Quality Agreement signed on behalf of each of theParties by an authorized representative incorporating the modification andstating the effective date and revision number of the modification.  The Quality Agreement will be subject to andnot inconsistent with the terms of this Agreement, the Collaboration Agreementand the Specifications.  In the event theinformation in the Quality Agreement on the one hand, and this Agreement, theCollaboration Agreement or the Specifications, as applicable, on the otherhand, conflict, this Agreement, the Collaboration Agreement or theSpecifications, as applicable, will control; provided, however that the QualityAgreement shall control for any cGMP compliance related issues.

 

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**4.2****                              ****Developmentof MRD.**  No later than [***] after theEffective Date, the Parties shall prepare and adopt the MRD or include the PenProduct under the MRD for the EQW Product, as determined by the SCWT.  The Parties shall review the MRD at leastonce each [***] and shall modify it from time to time as necessary throughissuance of a revised version of the MRD signed on behalf of each of theParties by an authorized representative incorporating the modification andstating the effective date and revision number of the modification.  The MRD will be subject to and notinconsistent with the terms of this Agreement, the Collaboration Agreement, andthe Quality Agreement.  In the event theinformation in the MRD, on the one hand, and this Agreement, the CollaborationAgreement or the Quality Agreement, on the other hand, conflict, the terms ofthe Collaboration Agreement, this Agreement or the Quality Agreement, asapplicable, will control.

 

**4.3****                              ****Manufacturing.**  Subject to the terms and conditions of thisAgreement, Amylin will use its Commercially Reasonable Efforts to Manufactureand supply Pen Product to Lilly, at the times and in the quantities set forthby Lilly in a Purchase Order and subject, however, to the quantity restrictionsset forth in this Agreement.  Amylin willensure that each shipment of the Pen Product delivered to Lilly:  (i) will have been manufactured inaccordance with the Specifications and cGMP in effect at the time of Manufacture,(ii) will not be adulterated or misbranded within the meaning of theFD&C Act, (iii) will not have been Manufactured or sold in violationof any Applicable Laws  in any materialrespect, and (iv) will have been Manufactured in accordance withapplicable Marketing Approvals and all regulatory requirements as defined inthe applicable Pen Product registration (e.g. European dossier) as provided byLilly to Amylin.

 

**4.4****                              ****Modifications.**  The Parties anticipate that theSpecifications will be modified from time to time to reflect improvements ormodifications to the Pen Product.  EachParty will provide the other with reasonable advance notice of any proposedmaterial modification and will consult with, and consider in good faith, thereasonable comments of such other Party regarding such proposed materialmodification.  Any proposed modificationto the Manufacturing process or Specifications shall be approved by the MSC orsuch subcommittee appointed by the MSC (subject to Section 5.2 of theCollaboration Agreement) prior to implementation or filing with any RegulatoryAuthority. Any modifications to the Manufacturing process or Specificationsrequired by a Regulatory Authority other than the FDA or The European MedicinesAgency (the “EMEA”) shall be solely paid for by Lilly.  Prior to any approved change in theManufacturing process or Specifications, the Parties shall identify, and, ifneeded, allocate between U.S. and OUS, all costs and risks, includingdevelopment costs, resulting from the changes, and a timeline for implementingthe changes.

 

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(a)                                  Either Partywill notify the other as soon as practical of any changes to any Specificationsor procedures that are required by the FDA, a Regulatory Authority orApplicable Laws that could have an impact on Amylin’s performance of thisAgreement.  Amylin shall utilize itsCommercially Reasonable Efforts to implement such changes.

 

(b)                                 In no eventwill Amylin be required to make a modification to the Pen Product that isprohibited by Applicable Laws or Regulatory Authorities.  In no event will Amylin be prohibited frommaking a modification to the Pen Product that is required by Applicable Laws orRegulatory Authorities; provided, however, that Amylin shall consult with Lillyprior to making any such modification, and provided further that Amylin shalluse its Commercially Reasonable Efforts to implement any such modification.  Any modifications to the Pen Product will bein accordance with the terms of the Quality Agreement.

 

**4.5          Audit; Safety;Applicable Laws.**

 

(a)                                  Quality Controland Assurance.  Amylin willperform quality control testing and quality oversight on the Pen Product to bedelivered to Lilly hereunder in accordance with this Agreement, the QualityAgreement, the MRD, Specifications and cGMP.

 

(b)                                 Quality Auditof the Facility by Lilly Representatives.  Lilly shall have the right, upon no less thanthirty (30) days’ notice and in accordance with the Quality Agreement, toconduct an initial OUS commercial readiness audit of the Facility duringregular business hours for the purpose of conducting a quality controlinspection to assure cGMP compliance of the Facility used in the Manufacturingof Pen Product to be delivered to Lilly (the “Start-Up Quality Audit”).  Following the Start-Up Quality Audit, upon noless than thirty (30) days’ advance written notice to Amylin and in accordancewith the terms of the Quality Agreement, no more than one (1) time perCalendar Year, Amylin will permit Lilly’s representatives (such representativesto be reasonably acceptable to Amylin) to conduct an audit of the Facilityduring regular business hours for the purpose of conducting a quality controlinspection to assure cGMP compliance of the Facility used in the Manufacturingof Pen Product to be delivered to Lilly (the “Quality Audit”); provided,however, that such restriction of one (1) such audit per Calendar Yearshall not apply in cases where Lilly attends an audit or inspection conductedby a

 

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Regulatory Authority.  In addition, Lilly representatives shall havethe right to re-inspect the Facility, upon reasonable advance written notice toAmylin and during regular business hours: (i) to ensure appropriateremedial actions are being taken in response to a significant adverse findingidentified during a prior Lilly Quality Audit of the Facility, (ii) if anaudit of the Facility conducted by a Regulatory Authority results in a criticalfinding, or (iii) if any Pen Product is, or has the potential to be,recalled from the market by either Amylin and/or Lilly due to Manufacturingissues.  Lilly representatives will beadvised of the confidentiality obligations under this Agreement, and will followsuch security, safety and facility access procedures as are reasonablydesignated by Amylin.  Amylin may requirethat at all times the Lilly representatives be accompanied by an Amylinrepresentative to assure protection of Amylin Confidential Information orconfidential information of a Third Person, if applicable.   Amylin will respond in writing to anywritten audit observation provided by Lilly within sixty (60) days in the formof a mutually agreed upon action plan.

 

Notwithstanding the above, Amylin shallprovide Lilly with the right to conduct pre-inspection assessments and reviewsof the Facility prior to the date on which a foreign regulatory agency will beconducting a Pen Product pre-approval inspection.  Amylin shall reasonably cooperate with Lillyto address any needed actions identified.

 

(c)                                  SafetyProcedures.  Amylin willhave responsibility for developing, adopting and enforcing safety proceduresfor the handling and production of Pen Product by Amylin and the handling anddisposal of all waste relating thereto. Amylin’s responsibility for the handling of any particular Pen Productwill terminate as to that particular Pen Product upon delivery thereof to Lilly’scommon carrier.

 

(d)                                 Applicable Laws.  Lilly and Amylin will each comply with allApplicable Laws in performing its obligations hereunder, including, withoutlimitation, laws with respect to the protection of the environment.

 

**4.6****                              ****Accessto the Facility by Lilly.** Amylin will permit Lilly to appoint one (1) or more employee(s) tobe its person in the plant at the Facility, who shall have reasonable accessduring normal business hours.  The scopeof such person’s role in the Facility with respect to the Pen Product shall bethe same as the role for such person with respect to the EQW Product as setforth in the Vial Supply Agreement.  Theperson in the plant shall have 

 

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access to information thatimpacts budget, operational performance, and timelines. In addition, Amylinwill permit a reasonable number of Lilly employees reasonable access duringnormal business hours to the Facility in order to observe and review theManufacturing process.  The partiesacknowledge that the foregoing access rights are not intended to permit Lillyany level of audit rights in addition to those described in Section 4.5above. Lilly will comply with Amylin’s written instructions established toenhance the safety or security of the Facility or of persons at or near theFacility.

 

**4.7****                              ****ThirdParty Suppliers.**  The Partiesacknowledge that Amylin will Manufacture the Pen Product and that certainmaterials, including active pharmaceutical ingredient (“API”), diluents andcomponent parts for the Pen Product and certain testing services will bepurchased by Amylin from third party suppliers (“Third Party Suppliers”).  The MSC shall be responsible for overseeingnegotiations for any supply agreements with Third Party Suppliers not alreadyin place as of the Effective Date (including any amendments, modifications orextensions of those already in place) in accordance with the Letter Agreementbetween Amylin and Lilly dated January 30, 2004 except that the referencesto the Joint Commercialization Committee in the letter are hereby replaced byMSC.  Amylin shall use its CommerciallyReasonable Efforts to cause all Third Party Suppliers to fulfill theirobligations under their agreements with Amylin. The Parties agree that Amylin will not be liable to Lilly, itsAffiliates and their respective directors, officers, shareholders, employees oragents for any Third Party Suppliers’ failure to deliver or failure of any PenProduct as a result of materials or components manufactured by Third PartySuppliers or the failure of such materials or components to comply withapplicable Specifications, any representations or warranties of such ThirdParty Supplier or Applicable Laws.  Inthe event Amylin receives any indemnification payments or other recovery fromThird Party Suppliers performing services on behalf of Amylin, such amounts shallbe divided between Amylin and Lilly in proportion to their respective shares,at the time of the payment, of U.S. EQW Gross Profit and OUS EQW Gross Profitspecifically associated with sales of Pen Product (as such terms are defined inExhibit E of the Vial Supply Agreement) (less any royalty obligation toAmylin from Lilly) under the Collaboration Agreement, as amended.  To the extent legally or contractuallypermissible, Amylin shall obtain a written assignment of all patent rights andknow-how that such Third Party Suppliers may develop by reason of workperformed under this Agreement.

 

**4.8****                              ****Records. **Each of the Parties shallkeep accurate records of its activities under this Agreement to the extentrequired by Applicable Laws and in accordance with the Quality Agreement.  Access to such records will be made availableby Amylin to Lilly during 

 

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normal business hours uponLilly’s reasonable written request. The provisions of this Section 4.8shall not supersede the audit provisions set forth in Section 4.5  Amylin further agrees to provide Lilly withsuch information regarding the Manufacture and testing of Pen Product hereunderas may be required to obtain or maintain Marketing Approval of Pen Product oras may otherwise be required or requested by any Regulatory Authority.

 

**4.9****                              ****Use ofFacility and Adjusted Costs.**

 

(a)                                  Use of Facility.  As of the date hereof, the Partiesacknowledge and agree that the Pen Product assets covered by this Agreementwill be constructed for the commercialization of Pen Product on aworldwide-demand basis.  At any futuredate, Amylin may propose to the MSC that the Pen Product assets be used for apurpose other than Pen Product.  If theParties, through the MSC, cannot come to an agreement regarding such proposal,then the matter shall be escalated using the dispute resolution procedure setforth in the Collaboration Agreement.  Ifthe Parties’ senior executives cannot mutually resolve the matter after goodfaith due deliberation, then Amylin shall have the final right to decide how touse the Pen Product assets subject to Section 4.9(b), below.

 

(b)                                 Adjusted Costs.   Prior to a final decision being reached onany additional use(s) of the Pen Product assets covered by this Agreementother than for Pen Product, the Parties shall agree in good faith to modify thedefinition of Actual Manufacturing Cost set forth in Section 1.2 and anyother applicable Terms.  Any suchmodification to the Agreement shall take into account, among other things:  (1) the actual cost of the portion ofthe existing Pen Product assets to be used by Amylin for any use other than forPen Product, (2) an allocation of site-wide support facilities andresources that takes into account the planned use of the Pen Product assetsother than for Pen Product, and (3) a prospective refund of a portion ofLilly’s up-front funding of the Pen Product Initial Capital Investment.  All capital expenses and costs associatedwith the planned use of the Pen Product assets other than for Pen Product shallbe Amylin’s sole responsibility.

 

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**ARTICLE 5****PURCHASE OF PEN PRODUCT; FORECASTS**

 

**5.1****                              ****Forecasts.**

 

(a)                                  [***]Forecast.  Lilly will submit toAmylin no later than [***] after the Effective Date a [***] forecast (the “[***]Forecast”) of Lilly’s anticipated purchase requirements of Pen Product for theTerritory outside the U.S.; provided, however, that while the [***] of the[***] Forecast shall be in [***], [[***] of the forecast shall be for[***].  Thereafter, Lilly shall annuallyprovide to Amylin a [***] Forecast as part of the long-range planning process.The Parties agree that each [***] Forecast will be used for planning purposesonly and will not be binding on either Party.

 

(b)                                 RollingProduction Forecasts.  TheParties, through the SCWT, will work together to develop forecasts, inventorytargets, and production capacity requirements for Manufacture of Pen Productand submit the same to the Amylin Supply Operations.  No later than [***] prior to the commencementof each [***] following the Effective Date, the Lilly SCWT leader or designeewill provide to the Amylin SCWT leader or designee an estimate of the totalquantity of Pen Product required to be delivered for the following [***] andthe succeeding [***] (the “Forecast”). The Parties agree that the Forecast will be for general planningpurposes only and will not be binding on either Party.  Amylin will maintain a level of inventory ofmaterials and components for the Manufacture of Pen Product as agreed upon bythe SCWT.

 

**5.2****                              ****SafetyStock.**  The SCWT shall mutually agreeupon the appropriate levels of safety stock of Pen Product and Components (asapplicable) to be maintained by each Party for its respective territory. Afterthe Effective Date, the SCWT shall review safety stock targets of Pen Product,Components, and other critical raw materials to be used in the Manufacture ofPen Product on at least [***] and review performance against such targets on atleast [***].

 

**5.3****                              ****Limitationsof Supply. **Amylin will useits Commercially Reasonable Efforts to make available at least [***] of theForecast.  If at any time Amylinanticipates that it will be unable to supply in whole or in part the quantitiesof Pen Product set forth in a Lilly Purchase Order for any reason, includingwithout limitation, Force Majeure, Amylin will inform Lilly as soon as possiblevia email of such anticipated shortfall. Amylin will also notify Lilly of the underlying reason for theshortfall, proposed remedial measures, the date

 

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such inability to supply the full order ofPen Product is expected to end, and a proposed amount of Pen Product to bedelivered to Lilly.  In the event fewerunits of Pen Product are available than the Parties desire to purchase, theParties will allocate available Pen Product on a pro rata basis based upon theForecasts included in the most recent [***] business plan approved by unanimousvote of the ASC; provided, however, that if a Party believes that a pro rataallocation based upon such Forecasts is not the appropriate allocation method,such Party may request that the Parties meet to discuss the issue, and theother Party shall agree to meet and consider in good faith the reasonablecomments of the other Party.  If aftersuch meeting, the Parties are unable to decide on the appropriate method forallocation, then the matter shall be resolved in accordance with Section 3.1(e)(ii) ofthe Collaboration Agreement.

 

(a)                                  Limitations ofAPI.  In the event of a limitationof supply of API, Amylin agrees that it shall not adversely impact the supplyof Pen Product to Lilly by unreasonably allocating such limited APIdisproportionately to any other exenatide-containing product, and the Partiesagree that API will be allocated as between EQW Product and Pen Product on apro rata basis based upon the forecasts for EQW Product and Pen Productincluded in the most recent annual business plan approved by unanimous vote ofthe ASC.

 

(b)                                 Limitations ofComponents.  In theevent of a limitation of supply of any Components, Amylin will inform Lilly assoon as possible via email of such anticipated shortfall.  Amylin will also notify Lilly of theunderlying reason for the shortfall, proposed remedial measures, the date suchinability to supply the Component is expected to end, and the proposed amountof the Component to be delivered to Lilly. In the event of a limitation of supply of any Component used in both EQWProduct and Pen Product, the Parties agree that such Components will beallocated as between EQW Product and Pen Product on a pro rata basis based uponthe forecasts for EQW Product and Pen Product included in the most recentannual business plan approved by unanimous vote of the ASC.  In the event fewer units of the Component areavailable than the Parties desire to purchase, the Parties will allocateavailable Component on a pro rata basis based upon the Forecasts included inthe most recent [***] business plan approved by unanimous vote of the ASC;provided, however, that if a Party believes that a pro rata allocation basedupon such Forecasts is not the appropriate allocation method, such Party mayrequest that the Parties meet to discuss the issue, and the other Party shallagree to meet and consider in good faith the reasonable comments of the otherParty.  If after such meeting, theParties are unable to decide on the appropriate method for allocation, then thematter shall be resolved in accordance with Section 3.1(e)(ii) of theCollaboration Agreement.

 

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**5.4****                              ****PurchaseOrders.**  Lilly will purchase Pen Productsolely by submitting to Amylin written purchase orders (“Purchase Orders”).  Purchase Orders will be submitted by Lillywithin [***] after the beginning of each [***] using the Standard Cost.  The SCWT will establish a reasonable minimumorder size for Pen Product prior to submission of the first Forecast, and Lillyshall not submit Purchase Orders for less than such minimum order size unlessotherwise agreed by the Parties.  Theterms and conditions of this Agreement will be controlling over any terms andconditions in any such Purchase Orders, Amylin’s acknowledgement forms, or anyother forms.  Upon submission to Amylinin accordance with this Section 5.4, a Purchase Order shall be deemedaccepted by Amylin except to the extent it exceeds [***]% of the most recentapplicable Forecast; provided however, that acceptance of a Purchase Ordershall not guarantee that Amylin will have supply sufficient to fill suchPurchase Order at the time such Purchase Order is submitted, it being agreedthat Amylin shall fill such Purchase Order as soon as sufficient supply isavailable.  Lilly will submit each suchPurchase Order to Amylin at least [***] in advance of the date specified ineach Purchase Order by which delivery of the Pen Product is required.  Notwithstanding the foregoing, Amylin willuse Commercially Reasonable Efforts, but will not be obligated, to meet any requestof Lilly for delivery of Pen Product in less than [***], and further, Amylinwill attempt, but will not be obligated, to accommodate any changes requestedby Lilly in delivery schedules for Pen Product following Amylin’s receipt ofPurchase Orders from Lilly in accordance with this Section 5.4.  Amylin will notify Lilly in writing of itsacceptance or rejection of a specific Purchase Order within [***] of receiptthereof (e-mail notification is acceptable). Amylin shall not have the right to reject a Purchase Order submitted toAmylin in accordance with this Section 5.4, except to the extent itexceeds the most recent applicable Forecast by more than [***]%; providedhowever, that acceptance of a Purchase Order shall not guarantee that Amylinwill have supply sufficient to fill such Purchase Order at the time suchPurchase Order is submitted, it being agreed that Amylin shall fill suchPurchase Order as soon as sufficient supply is available.** **Upon receipt and acceptance ofeach Purchase Order by Amylin hereunder, Amylin will use CommerciallyReasonable Efforts to supply the Pen Product in such quantities on the deliverydates specified in such Purchase Order, unless otherwise mutually agreed to inwriting by the Parties, except to the extent such Purchase Order exceeds theapplicable Forecast by more than [***]%. Purchase Orders accepted by Amylin may not be cancelled except by mutualagreement of the Parties.

 

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**5.5****                              ****TitleTransfer; Shipment of Pen Product.**  Shipment of Pen Product ordered by Lilly willbe to one or more distribution service providers designated by Lilly.  Amylin will not make direct shipments tofinal customers in the Territory outside the U.S.  Lilly will select and pay the carrier to beused.  Pen Product will be shipped FCA(Amylin Facility) Incoterms 2000 or as may otherwise be required pursuant toApplicable Laws.  Title and risk of lossor damage to the Pen Product will remain with Amylin until the Pen Product isdelivered to the carrier, at which time title to Pen Product will rest in, andrisk of loss or damage to Pen Product will pass to Lilly.  Lilly will cause Pen Product to be picked upat the Facility dock no later than [***] after the later of (i) thedelivery date specified in the applicable Purchase Order, and (ii) the dateAmylin makes such Pen Product available for shipment.  Any discrepancies between quantity shippedfrom Amylin and quantity arriving at Lilly will be jointly investigated.

 

**5.6****                              ****Use ofa Single Lot in both US and OUS**.  Pen Product from a single production batch orlot shall not be made available for use by Amylin inside the U.S. and by Lillyoutside the U.S. without the prior written consent of Amylin.  No later than [***] prior to the planned dateof the first application for marketing approval to a Regulatory Authority otherthan the FDA, the Parties agree to discuss in good faith whether Pen Productfrom a single production batch or lot shall be used both in the U.S. andoutside the U.S.  If the Parties agreethat such split uses are appropriate, then the Parties agree to work towards aprocedure that will describe how Pen Product from a single production batch orlot shall be made available for use by Amylin inside the U.S. and by Lillyoutside the U.S.  If the Parties are notable to agree that such split uses are appropriate or are unable to agree uponsuch a procedure, then Lilly shall be responsible for the first $[***] oflosses per [***] arising from any inventory rendered obsolete solely due to thefact that a single production batch or lot was not available for use by Amylininside the U.S. and by Lilly outside the U.S. The remainder of any such losses shall be allocated in accordance withthe last sentence of Section 5.9.

 

**5.7****                              ****Taxes**.  Lilly acknowledges it is responsible for anyValue Added Tax and sales taxes related to the purchase of Pen Product.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**5.8****                              ****Inspection;Rejection.**

 

(a)                                  Lilly shall beallowed a maximum of [***] from the date of receipt of any shipment forinspection and provision of written notice to Amylin of rejection of any portionor all of that shipment (“Inspection Period”). If Lilly does not deliver such written notice to Amylin within suchInspection Period, Lilly shall be deemed to have accepted the shipment, exceptin the case of Latent Defects.

 

(b)                                 Promptlyfollowing notice of rejection, Amylin and Lilly shall mutually determinewhether the rejected shipment conformed to the Specifications and warrantiesand, if the rejected shipment did not so conform, in what ways the rejectedshipment did not so conform.  If the Partiescannot agree upon such issue by the end of the Inspection Period, then the Headof Quality (or any successor position) of Amylin and the Head of Quality  (or any successor position) of Lilly shallmutually determine in good faith whether the rejected shipment conformed to theSpecifications and warranties, using such further testing procedures as suchindividuals may agree, including, if such individuals so determine, submittingthe rejected items and Specifications to a mutually acceptable, independentlaboratory for determination of whether such items conformed to theSpecifications and warranties.  Lillyshall provide to Amylin samples of rejected Pen Product, as Amylin shallreasonably request for the purpose of performing additional testing pursuant tothis Section 5.8.  Thenon-prevailing Party shall bear all reasonable cost of such independentlaboratory assessment.

 

(c)                                  If it isdetermined that the rejected Pen Product was non-conforming, then Amylin shallreplace such Pen Product as promptly as practicable.  The Actual Manufacturing Cost of the rejectedPen Product, the Actual Manufacturing Cost of the replacement Pen Product andLilly’s cost of return or disposal of rejected, non-conforming Pen Productshall be included in Cost of Product Sold for purposes of Article 4 of theCollaboration Agreement, unless and to the extent that such costs are a resultof Amylin’s gross negligence or willful misconduct, in which event Amylin shallpay or reimburse such costs to Lilly in full. Rejected or non-conforming Pen Product shall be returned to Amylin ordisposed of, as directed by Amylin.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**5.9****                              ****InventoryObsolescence. **With respect toPen Product and Components, Lilly will be responsible for the inventory lossfor lots intended for sale in the Territory outside the U.S., based on  purchase orders submitted [***] in advanceand accepted by Amylin under Section 5.4, that are delivered to Lilly withthe product dating agreed upon by the SCWT. Inventory obsolescence related to all other Pen Product and Componentswill be shared by the Parties on a pro rata basis based on the Forecastsincluded in the most recent [***] business plan approved by the ASC, with Lillyand Amylin equally sharing the U.S. allocation and Lilly solely responsible forthe OUS allocation.

 

**ARTICLE 6****TRADE DRESS AND PACKAGING**

 

**6.1****                              ****TradeDress and Packaging.**  Amylin willensure that the Pen Product that is delivered to Lilly hereunder is preparedand packed for shipment in compliance with applicable Marketing Approvals andcGMP, and in accordance with the MRD/Quality Agreement.  All trade dress and packaging for PenProduct, including use of Product Trademarks, Amylin Marks and Lilly Marksshall be consistent with the requirements of Section 9.5 of theCollaboration Agreement.

 

**6.2****                              ****Lot Numbering. **Amylin’s lot numbers will beaffixed on the containers for the Pen Product and on each shipping carton inaccordance with Applicable Laws.

 

**6.3****                              ****ReleaseTesting.**  The QLT willestablish procedures for release testing Pen Product Manufactured for Lilly toensure that Pen Product conforms to Applicable Laws.

 

**ARTICLE 7****REGULATORY AND RECALL**

 

**7.1****                              ****RegulatoryResponsibility. **All mattersrelated to the Parties’ regulatory responsibilities, including, withoutlimitation, recall of Pen Product, regulatory communications, cooperationbetween the Parties, quality assurance and manufacturing audits, will be as setforth in this Agreement, the Quality Agreement and the CollaborationAgreement.  The QLT will also coordinatecontacts with Regulatory Authorities with respect to the Pen Product, it beinganticipated that each Party shall have the right to participate in keyregulatory decisions and meetings.  Ifany Regulatory Authority requires the Regulatory Lead to have the ability toinstitute recalls unilaterally in a particular Regulatory Jurisdiction, thenthe Regulatory Lead shall have such right. All costs of recall incurred by the Parties in accordance herewith willbe shared by the Parties in proportion to their respective shares, at the timeof the recall, of U.S. EQW Gross Profit and OUS EQW Gross Profit specificallyassociated with sales of Pen Product (as such terms are defined in Exhibit Eof the Vial Supply Agreement) under the Collaboration Agreement, as amended,except to the extent due to a Party’s gross negligence or willful misconduct,in which case that Party will be solely responsible for such costs of recall.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**ARTICLE 8****INTELLECTUAL PROPERTY**

 

Pursuant to the Collaboration Agreement, the Parties have each grantedto the other all licenses to patents, know-how or other intellectual propertynecessary for the performance of the Parties’ obligations under theCollaboration Agreement.  Any inventionsresulting from the activities contemplated by this Agreement shall also begoverned by the provisions of the Collaboration Agreement, except to the extentAmylin’s rights to license certain intellectual property may be limited by itsDevelopment and License Agreement with Alkermes Controlled Therapeutics Inc.II, dated May 15, 2000, as amended.

 

**ARTICLE 9****REPRESENTATIONS AND WARRANTIES OF LILLY**

 

Lilly hereby represents and warrants to Amylin that,as of the Effective Date hereof:

 

**9.1****                              ****Organizationand Standing.** Lilly is a corporation duly organized, validlyexisting and in good standing under the laws of the State of Indiana.

 

**9.2****                              ****Powerand Authority.** Lilly has all requisite corporate power andauthority to execute, deliver, and perform this Agreement and to consummate thetransactions contemplated herein.  Theexecution, delivery, and performance of this Agreement by Lilly does not, andthe consummation of the transactions contemplated hereby will not, violate anyprovisions of Lilly’s organizational documents, bylaws, or any Applicable Lawapplicable to Lilly, or any material agreement, mortgage, lease, instrument,order, judgment, or decree to which Lilly is a party or by which Lilly isbound.

 

**9.3****                              ****CorporateAction; Binding Effect.**  Lillyhas duly and properly taken all action required by law, its organizationaldocuments, or otherwise, to authorize the execution, delivery, and performanceof this Agreement and the other instruments to be executed and delivered by itpursuant hereto and the consummation of the transactions contemplated herebyand thereby.  This Agreement has beenduly executed and delivered by Lilly and constitutes, and the other instrumentscontemplated hereby when duly executed and delivered by Lilly will constitute,legal, valid, and binding obligations of Lilly enforceable against it inaccordance with its respective terms, except as enforcement may be affected bybankruptcy, insolvency, or other similar laws.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

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**9.4****                              ****GovernmentalApproval**.  Except ascontemplated by this Agreement, no consent, approval, waiver, order orauthorization of, or registration, declaration or filing with, any RegulatoryAuthority or any other Third Person is required in connection with theexecution, delivery and performance of this Agreement, or any agreement orinstrument contemplated by this Agreement, by Lilly or the performance by Lillyof its obligations contemplated hereby and thereby.

 

**9.5****                              ****Brokerage**.  No broker, finder or similar agent has beenemployed by or on behalf of Lilly, and no Person with which Lilly has had anydealings or communications of any kind is entitled to any brokerage commission,finder’s fee or any similar compensation, in connection with this Agreement orthe transactions contemplated hereby.

 

**9.6****                              ****Litigation**.  There are no pending or, to Lilly’sknowledge, threatened judicial, administrative or arbitral actions, claims,suits or proceedings pending as of the date hereof against Lilly relating tothe subject matter of this Agreement, which, either individually or togetherwith any other, will have a material adverse effect on the ability of Lilly toperform its obligations under this Agreement or any agreement or instrumentcontemplated hereby.

 

**9.7****                              ****NotDebarred.**  Lilly is notdebarred and has not and will not use in any capacity the services of anyPerson debarred under subsections 306(a) or (b) of the Generic DrugEnforcement Act of 1992.  If at any timethis representation and warranty is no longer accurate, Lilly will notifyAmylin of such fact.

 

**9.8****                              ****ApplicableLaws. **Lilly will comply with ApplicableLaws relating to its distributing, marketing, promoting and selling of the PenProduct.

 

**9.9****                              ****ImpliedWarranties.**  EXCEPT ASEXPRESSLY PROVIDED IN THIS ARTICLE 9, LILLY MAKES NO REPRESENTATION ORWARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTEOR OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORYWARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, WARRANTY OFFITNESS FOR A PARTICULAR PURPOSE AND WARRANTY OF NONINFRINGEMENT.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections200.80(b)(4) and 240.24b-2**

 

**ARTICLE 10****REPRESENTATIONS AND WARRANTIES OF AMYLIN**

 

Amylin represents and warrants to Lilly that, as ofthe Effective Date hereof:

 

**10.1****                       ****Organizationand Standing.** Amylin is a company duly organized, validlyexisting, and in good standing under the laws of Delaware.

 

**10.2****                       ****Powerand Authority.** Amylin has all requisite corporate power andauthority to execute, deliver, and perform this Agreement and to consummate thetransactions contemplated herein.  Theexecution, delivery, and performance of this Agreement by Amylin does not, andthe consummation of the transactions contemplated hereby will not, violate anyprovisions of Amylin’s organizational documents, bylaws, or any Applicable Lawsapplicable to Amylin, or any material agreement, mortgage, lease, instrument,order, judgment, or decree to which Amylin is a party or by which Amylin isbound.

 

**10.3****                       ****CorporateAction; Binding Effect.** Amylin has duly and properly taken allaction required by law, its organizational documents, or otherwise, toauthorize the execution, delivery, and performance of this Agreement and theother instruments to be executed and delivered by it pursuant hereto and theconsummation of the transactions contemplated hereby and thereby.  This Agreement has been duly executed anddelivered by Amylin and constitutes, and the other instruments contemplatedhereby when duly executed and delivered by Amylin will constitute, legal,valid, and binding obligations of Amylin enforceable against it in accordancewith its respective terms, except as enforcement may be affected by bankruptcy,insolvency, or other similar laws.

 

**10.4****                       ****GovernmentalApproval**.  Except ascontemplated by this Agreement, no consent, approval, waiver, order orauthorization of, or registration, declaration or filing with, any RegulatoryAuthority or any other Third Person is required in connection with theexecution, delivery and performance of this Agreement, or any agreement orinstrument contemplated by this Agreement, by Amylin or the performance byAmylin of its obligations contemplated hereby and thereby.

 

**10.5****                       ****Brokerage**.  No broker, finder or similar agent has beenemployed by or on behalf of Amylin, and no Person with which Amylin has had anydealings or communications of any kind is entitled to any brokerage commission,finder’s fee or any similar compensation, in connection with this Agreement orthe transactions contemplated hereby.

 

*****Confidential Treatment Requested**

 

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**17 C.F.R. Sections200.80(b)(4) and 240.24b-2**

 

**10.6****                       ****Litigation**.  There are no pending or, to Amylin’sknowledge, threatened judicial, administrative or arbitral actions, claims,suits or proceedings pending as of the date hereof against Amylin relating tothe subject matter of this Agreement, which, either individually or togetherwith any other, will have a material adverse effect on the ability of Amylin toperform its obligations under this Agreement or any agreement or instrumentcontemplated hereby.

 

**10.7****                       ****NotDebarred.** Amylin is not debarred and has not and will not usein any capacity the services of any Person debarred under subsections 306(a) or(b) of the Generic Drug Enforcement Act of 1992.  If at any time this representation andwarranty is no longer accurate, Amylin will immediately notify Lilly of suchfact.

 

**10.8****                       ****PenProduct Specifications.** Amylin will ensure that as of the date of delivery, Pen Productdelivered by Amylin to Lilly hereunder: (i) will conform to theSpecifications in effect at the time of manufacture, (ii) will have beenManufactured in accordance with cGMP and cQSR, as applicable, in effect at thetime of manufacture, (iii) will not be adulterated or misbranded by Amylinwithin the meaning of the FD&C Act, and (iv) will not have beenknowingly manufactured or sold in violation of any Applicable Laws of the U.S.in any material respect (collectively “Pen Product Warranty”).  Upon delivery to Lilly, FCA (Amylin’sFacility) Incoterms 2000, Amylin will convey good title to the Pen Product toLilly as of the date of shipment, free and clear of any lien or encumbrance.

 

**10.9****                       ****ApplicableLaws. **Amylin will comply withApplicable Laws relating to its supply of the Pen Product.

 

**10.10****                ****ImpliedWarranties.**  EXCEPT ASEXPRESSLY PROVIDED IN THIS ARTICLE 10, AMYLIN MAKES NO REPRESENTATION ORWARRANTY, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTEOR OTHERWISE, AND AMYLIN SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED ORSTATUTORY WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY,WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND WARRANTY OF NONINFRINGEMENT.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections200.80(b)(4) and 240.24b-2**

 

**ARTICLE 11****TERM OF AGREEMENT; TERMINATION**

 

**11.1****                       ****Term ofAgreement.**  Unlessearlier terminated in accordance with this Article 11, this Agreement willtake effect and commence on the Effective Date and will expire at such time asthe Collaboration Agreement expires.  Inthe event of termination of the Collaboration Agreement prior to itsexpiration, this Agreement shall continue in effect unless terminated at theoption of either Party as provided in Section 11.2(c) below.  This Agreement may also be terminated bymutual agreement of the Parties.

 

**11.2****                       ****Terminationfor Cause.**  In addition tothe Parties’ right to terminate by mutual agreement under Section 11.1above, this Agreement may be terminated as follows:

 

(a)                                 A Party mayterminate this Agreement immediately by providing written notice to the otherParty if the other Party is declared insolvent or bankrupt by a court ofcompetent jurisdiction, or a voluntary petition of bankruptcy is filed in anycourt of competent jurisdiction by the other Party or an involuntary petitionfor relief under the United States Bankruptcy Code is filed in a court ofcompetent jurisdiction against the other Party which is not dismissed withinthirty (30) days of its filing, or the other Party makes or executes anyassignment for the benefit of creditors.

 

(b)                                Either Partymay terminate this Agreement in the event of a material breach of thisAgreement by the other; provided that if the breaching Party cures suchmaterial breach within the cure period provided in Section 11.3, then theother Party will be obligated to continue to perform its obligations under thisAgreement, and this Agreement will continue in full force and effect.

 

(c)                                 Either Partymay terminate this Agreement immediately in the event the CollaborationAgreement is terminated for any reason.

 

**11.3****                       ****Proceduresfor Termination for Material Breach.**  A termination of this Agreement pursuant to Section 11.2(b) shallnot be effective unless the terminating Party complies with the followingprocedures:

 

### The terminating Party will give the other Partyprior written notice thereof, specifying in reasonable detail the allegedmaterial breach, and if such alleged material breach or material defaultcontinues unremedied for a period of thirty (30) days after the date of receiptof the notification or, if the material breach reasonably cannot be corrected orremedied within thirty (30) days, then if (i) the defaulting Party has notcommenced remedying said material breach within said thirty (30) days and isnot diligently pursuing completion of same, or (ii) said material breachor material default has not been corrected or remedied within one-hundredtwenty (120) days, then such terminating Party may immediately terminate thisAgreement by again providing written notification to the defaulting Party andsuch termination shall be effective as of the date that such notice wasdelivered to the other Party.  This Section 11.3will not be exclusive and will not be in lieu of any other remedies availableto a Party hereto for any breach or default hereunder on the part of the otherParty.

 

*****Confidential Treatment Requested**

 

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**11.4****                       ****Effectof Termination.**

 

(a)                                 Upontermination of this Agreement for any reason (whether due to breach of eitherParty or otherwise), Amylin will furnish to Lilly a complete written inventoryof all work in progress and an inventory of all finished Pen Product.  Unless otherwise agreed to between theParties, all stock on hand as of the effective date of any termination of thisAgreement will be dealt with promptly as follows:

 

#### 1.              Pen Product Manufactured and packagedpursuant to Purchase Orders from Lilly and accepted by Amylin will be deliveredby Amylin to Lilly, whereupon Lilly will pay Amylin therefore in accordancewith the terms hereof.

####  

#### 2.              Work in progress commenced by Amylinagainst accepted Purchase Orders from Lilly will be completed by Amylin anddelivered to Lilly, whereupon Lilly will pay Amylin therefore in accordancewith the terms hereof.

####  

(b)                                 In the event oftermination of this Agreement by Amylin for Lilly’s material breach ortermination of this Agreement in the event of termination of the CollaborationAgreement by Amylin for Lilly’s material breach, Lilly shall be solelyresponsible for any wind down costs****incurred bythe Parties that cannot be reasonably avoided. In the event of termination of this Agreement by Lilly for Amylin’smaterial breach or termination of this Agreement in the event of termination ofthe Collaboration Agreement by Lilly for Amylin’s material breach, Amylin shallbe solely responsible for any wind down costs****incurredby the Parties that cannot be reasonably avoided.  In the event of termination of this Agreementby mutual agreement of the Parties or for any other reason, including ForceMajeure, the Parties shall share in any wind down costs incurred by the Partiesthat cannot be reasonably avoided as follows: (i) in the event the terminationoccurs prior to the True-Up Date (as defined in Exhibit E), Lilly shallpay [***]% and Amylin [***]%; or (ii) in the event such termination occursafter the True-Up Date, then 

 

*****Confidential Treatment Requested**

 

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**17 C.F.R. Sections200.80(b)(4) and 240.24b-2**

 

Lilly and Amylin shall eachpay an amount based upon the calculation of each Party’s share of the PenProduct Capital Investments (as defined below) as determined pursuant to Exhibit E.  Wind down costs shall include, withoutlimitation, commitments to Third Party Suppliers that cannot be reasonablyavoided.

 

(c)                                 With respect tothe Pen Product Initial Capital Investment and any additional approved penproduct capital investments covered as outlined in section 3.8(f) (the PenProduct Initial Capital Investment, and any such additional approved penproduct capital investments, are collectively referred to as the “Pen ProductCapital Investments”) which have not been fully paid for at the time Amylinceases to Manufacture Pen Product in accordance with this Article:

 

#### 1.               in the event of termination of thisAgreement by Lilly for Amylin’s breach or termination of this Agreement in theevent of termination of the Collaboration Agreement by Lilly for Amylin’smaterial breach, Amylin will be solely responsible for any remaining costs ofcompleting such Pen Product Capital Investments, regardless of whether such PenProduct Capital Investments are usable by Amylin; or

####  

#### 2.               in the event ofexpiration of this Agreement ortermination of this Agreement for any reason other than as provided in Section 11.4(c)(1),unless otherwise agreed by the Parties, (i) each Party will be responsiblefor payment of its share of any remaining costs of completing such Pen ProductCapital Investments as follows: (a) in the event the termination occursprior to the True-Up Date (as defined in Exhibit E), Lilly shall pay[***]% and Amylin [***]%; or (b) in the event such termination occursafter the True-Up Date, then Lilly and Amylin shall each pay an amount basedupon the calculation of each Party’s share of the Pen Product CapitalInvestments (as defined below) as determined pursuant to Exhibit E, or (ii) ifthe parties agree, Lilly will pay Amylin the net present value of Lilly’s shareof any remaining costs of completing such Pen Product Capital Investmentswithin thirty (30) days of invoice provided by Amylin to Lilly for such amountand, upon receipt of such payment, Lilly will have no further obligation forany payment of costs of completing such Pen Product Capital Investments.

 

*****Confidential Treatment Requested**

 

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**Commission. Confidential Treatment Requested Under**

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(d)                                In addition,upon expiration of this Agreement or termination of this Agreement for anyreason (whether due to breach of this Agreement by either Party, Force Majeure,or otherwise), in the event Lilly has the right to, and intends to continue tocommercialize Pen Product:

 

#### 1.              Promptly following termination of thisAgreement, and as soon as practicable given Amylin’s continuing obligation tosupply Pen Product until the transfer described in this Section 11.4(d) iscomplete, to the extent permissible under its agreements with Alkermes, Amylinwill transfer to a Third Party manufacturer designated by Lilly and approved byAmylin, such approval not to be unreasonably withheld or delayed (the “SuccessorManufacturer”), such Amylin Rights, Amylin Information, manufacturing recordsand Pen Product-specific equipment and test or control procedures with respectto the Manufacture of Pen Product as is reasonably necessary to permit theSuccessor Manufacturer to Manufacture Pen Product meeting the Specifications onbehalf of the Parties or Lilly, and will provide Lilly with a copy (or accessto) such Amylin Rights, Amylin Information, manufacturing records, equipmentand test or control procedures for use by the Successor Manufacturer and Lillysolely in relation to Manufacture of Pen Product.  The Parties shall provide the SuccessorManufacturer with commercially reasonable technical and other assistance inconnection with the use of such Amylin Rights and Amylin Information for theManufacture of Pen Product and with the scale-up and validation to applicableregulatory standards of the Successor Manufacturer for the Manufacture of PenProduct in accordance with the Specifications. 

 

*****Confidential Treatment Requested**

 

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#### Each Party shall use its Commercially ReasonableEfforts to enable the Successor Manufacturer to Manufacture Pen Product inaccordance with the Specifications on a commercial scale sufficient to fulfillreasonable anticipated sales of Pen Product as soon as reasonablypracticable.  At Lilly’s request, Amylinwill introduce Lilly and the Successor Manufacturer to Amylin’s vendors of rawmaterials or components used in the Manufacture of Pen Product, and willprovide reasonable assistance to Lilly and/or the Successor Manufacturer, asapplicable, in its efforts to enter into supply relationships with suchvendors.  If any such vendor suppliesAmylin with any such raw materials or components on an exclusive basis, Amylinshall waive compliance with any such condition to allow such vendor to transactbusiness with Lilly and/or the Successor Manufacturer, as applicable solely inrelation to the Manufacture of Pen Product;

####  

#### 2.              The costs and expenses incurred by Amylinin effecting the technology transfer and providing the assistance described in Section 11.4(d)(1) (collectively,the “Technology Transfer”) will be borne solely by Amylin in the event of (i) terminationof this Agreement by Lilly for Amylin’s breach, or (ii) termination ofthis Agreement by Lilly in the event of termination of the CollaborationAgreement by Lilly for Amylin’s breach thereof In the event of termination of this Agreement by Amylin for Lilly’sbreach, or voluntary termination of this Agreement by Lilly pursuant to Section 11.2(a) ofthis Agreement, or termination of this Agreement by either Party in the eventof termination of the Collaboration Agreement by Amylin for Lilly’s breach thereof,Lilly will reimburse Amylin in full for Amylin’s reasonable and documentedcosts and expenses of performing the Technology Transfer within thirty (30)days of invoice by Amylin (such invoices to be delivered monthly).

 

*****Confidential Treatment Requested**

 

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**11.5****                       ****SupplyFollowing Termination.**  Inthe event this Agreement is terminated for any reason other than termination ofthis Agreement (i) by Amylin pursuant to Section 11.2(b) or (ii) byAmylin in the event of termination of the Collaboration Agreement for anyreason other than by Lilly for Amylin’s breach thereof, and Lilly intends tocontinue to commercialize Pen Product, Amylin shall, if Lilly so requests inwriting, continue to use its Commercially Reasonable Efforts to supply PenProduct to Lilly pursuant to this Agreement until such time as the SuccessorManufacturer is able to Manufacture Pen Product on a commercial scalesufficient to fulfill reasonable anticipated sales of Pen Product and obtain ormaintain required Marketing Approvals, except that in the case of terminationof this Agreement by either Party pursuant to Section 11.2(c) hereofAmylin shall supply Pen Product to Lilly for no longer than thirty-six  (36) months from termination of thisAgreement. Amylin will supply such Pen Product to Lilly, and Lilly shall obtainsuch Pen Product from Amylin, in accordance with the terms and conditions ofthis Agreement.

 

**11.6****                       ****ContinuingObligations.**  Terminationof this Agreement for any reason will not relieve the Parties of any obligationaccruing prior thereto or any antecedent breach of the provisions of thisAgreement, and will be without prejudice to the rights and remedies of eitherParty with respect to any antecedent breach of the provisions of thisAgreement.  Without limiting thegenerality of the foregoing and in addition to the foregoing, no termination ofthis Agreement, whether by lapse of time or otherwise, will serve to terminatethe rights and obligations of the Parties hereto under Articles 1, 7, 8, 9, 10,11, 12, 13, 14, 15 and 16, and Sections 3.5, 3.9, 3.10, 3.11, 3.12, 4.3, 4.6,4.8, 5.8 and 5.9, or rights and obligations which otherwise expressly survivethe termination of this Agreement and Sections which are necessary to giveeffect to rights and obligations which expressly survive the expiration or terminationof this Agreement.

 

**11.7****                       ****Non-Exclusive****Remedies. **Theremedies set forth in this Article 11 or elsewhere in this Agreement willbe in addition to, and will not be to the exclusion of, any other remediesavailable to the Parties at law, in equity or under this Agreement.

 

**11.8****                       ****Mitigationof Damages. **In the event ofany breach of this Agreement by Amylin or Lilly, the other Party shall takereasonable actions to mitigate its damages.

 

**ARTICLE 12****DISPUTE RESOLUTION**

 

Disputes between the Parties concerningeither Party’s rights or obligations under this Agreement shall be resolved asset forth in the Collaboration Agreement.

 

*****Confidential Treatment Requested**

 

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**ARTICLE 13****CONFIDENTIALITY**

 

Confidentiality,nondisclosure and nonuse of information and publication relating to theactivities contemplated by this Agreement shall be governed by the provisionsof the Collaboration Agreement.

 

**ARTICLE 14****ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES**

 

**14.1****                       ****Compliancewith Law.**  Each of theParties will comply with all Applicable Laws relating to its obligationhereunder.

 

**14.2****                       ****CommerciallyReasonable Efforts.**  Except asotherwise provided in this Agreement or the Collaboration Agreement, Lilly andAmylin each hereby agree to use all Commercially Reasonable Efforts to take, orcause to be taken, all actions and to do, or cause to be done, all thingsreasonably necessary or proper to make effective the transactions contemplatedby this Agreement, including such actions as may be reasonably necessary to obtainapprovals and consents of any Regulatory Authority and other Persons; provided,however, that no Party will be required to (i) pay money (other than asexpressly required pursuant to this Agreement or the Collaboration Agreement oras implicitly required in order for a Party to carry out its obligations hereunder), or (ii) assume anyother material obligation not otherwise required to be assumed by thisAgreement or the Collaboration Agreement.

 

**14.3****                       ****FurtherAssurances.**  The Partiesintend that this Agreement contain all consents, licenses and authorizationsfrom one Party to the other necessary to enable each Party to perform itsobligations hereunder.  In the event anyfurther such consents, licenses or authorizations are necessary, each Partyagrees to take such further actions and execute such further agreements as maybe reasonably necessary to carry out the intent and purposes of this Agreement.

 

**ARTICLE 15****INDEMNIFICATION; LIMITATION OF LIABILITY;INSURANCE**

 

**15.1****                       ****Indemnification. **Indemnification obligationsof the Parties will be provided as set forth in the Collaboration Agreement,For purposes of determining each Party’s indemnification rights and obligationsunder Article 8 of the Collaboration Agreement, this Agreement and theVial Supply Agreement will be considered Related Agreements (as defined in theCollaboration Agreement).

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and FiledSeparately with the Securities and Exchange**

**Commission.  Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**15.2****                       ****Limitationof Liability.** NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENTWILL EITHER PARTY BE LIABLE FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL(INCLUDING LOST PROFITS) OR PUNITIVE DAMAGES, HOWEVER CAUSED OR UPON ANY THEORYOF LIABILITY (INCLUDING A PARTY’S OWN NEGLIGENCE, GROSS NEGLIGENCE OR WILLFULMISCONDUCT (OR THE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A PARTY’SEMPLOYEES, AGENTS CONTRACTORS OR SUBCONTRACTORS)).  NOTHING IN THIS SECTION IS INTENDED TOLIMIT OR RESTRICT INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY UNDERTHE INDEMNIFICATION PROVISIONS OF THIS AGREEMENT.

 

**15.3****                       ****Insurance.**  The Parties will each, throughout the term ofthis Agreement, maintain at its own cost and expense from a qualified insurancecompany, comprehensive general liability insurance and product liabilityinsurance in an amount that is customary in the pharmaceutical and deviceindustries.

 

**ARTICLE 16****MISCELLANEOUS PROVISIONS**

 

**16.1****                       ****Successorsand Assigns.**  ThisAgreement will be binding upon and will inure to the benefit of the Partieshereto and their respective successors and assigns.  This Agreement may not be assigned or otherwisetransferred, nor, except as expressly provided hereunder, may any right orobligation hereunder be assigned or transferred by either Party without theprior written consent of the other Party; *provided, however*,that either Party may, without such consent, assign the Agreement and itsrights and obligations hereunder to an Affiliate or in connection with thetransfer or sale of all or substantially all of its assets or business to whichthis Agreement relates, or in the event of its merger or consolidation orchange in control or similar transaction. In the event of such transaction, however, intellectual property rightsof the acquiring party to such transaction (if other than one of the Parties tothis Agreement) shall not be included in any technology licensedhereunder.  The rights and obligations ofthe Parties under this Agreement shall be binding upon and inure to the benefitof the successors and permitted assigns of the Parties. Any attempted assignmentnot in accordance with this Section 16.1 will be void.

 

**16.2****                       ****Notices.**  Unless otherwise stated in this Agreement asto the method of delivery, all notices or other communications required orpermitted to be given hereunder will be as set forth in Section 14.6 ofthe Collaboration Agreement.

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and FiledSeparately with the Securities and Exchange**

**Commission.  Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**16.3****                       ****Waiver.**  Any term or provision of this Agreement maybe waived at any time by the Party entitled to the benefit thereof only by awritten instrument executed by such Party. Except as otherwise provided in this Agreement no delay on the part ofLilly or Amylin in exercising any right, power or privilege hereunder willoperate as a waiver thereof, nor will any waiver on the part of either Lilly orAmylin of any right, power or privilege hereunder operate as a waiver of anyother right, power or privilege hereunder nor will any single or partialexercise of any right, power or privilege hereunder preclude any other orfurther exercise thereof or the exercise of any other right, power or privilegehereunder

 

**16.4****                       ****EntireAgreement.**  ThisAgreement, the Vial Supply Agreement, the Collaboration Agreement and RelatedAgreements, each of their appendices, exhibits, schedules and certificates, andall documents and certificates delivered or contemplated in connection herewithand therewith constitute the entire agreement between the Parties with respectto the subject matter hereof and supersede all prior agreements orunderstandings of the Parties relating thereto.

 

**16.5****                       ****Amendment.**  This Agreement may be modified or amendedonly by written agreement of the Parties hereto signed by authorizedrepresentatives of the Parties.

 

**16.6****                       ****Counterparts.**  This Agreement may be executed in any numberof counterparts, each of which will be deemed an original but all of whichtogether will constitute a single instrument.

 

**16.7****                       ****GoverningLaw. **This Agreement will begoverned and construed in accordance with the laws of the State of New Yorkexcluding any choice of law rules that may direct the application of thelaw of another state.

 

**16.8****                       ****Headings.**  All section titles or headings contained inthis Agreement and in any exhibit, schedule or certificate referred to hereinor attached to this Agreement are for convenience only, will not be deemed apart of this Agreement and will not affect the meaning or interpretation ofthis Agreement.

 

**16.9****                       ****NoThird Person Rights.**  No provisionof this Agreement will be deemed or construed in any way to result in thecreation of any rights or obligations in any Person not a Party to thisAgreement.

 

**16.10****                ****Construction.**  This Agreement will be deemed to have beendrafted by both Lilly and Amylin and will not be construed against either Partyas the draftsperson hereof.  Wheneverthis Agreement refers to a number of days, such number shall refer to calendar daysunless business days are specified.

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and FiledSeparately with the Securities and Exchange**

**Commission.  Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**16.11****                ****Appendices,Exhibits, Schedules and Certificates.**  Each attachment and exhibit attached heretois incorporated herein by reference and made a part of this Agreement.

 

**16.12****                ****NoJoint Venture.**  Nothingcontained in this Agreement will be deemed to create any joint venture orpartnership between the Parties hereto, and, except as is expressly set forthherein, neither Party will have any right by virtue of this Agreement to bindthe other Party in any manner whatsoever.

 

**16.13****                ****Severability.**  If any provision of this Agreement is held tobe illegal, invalid, or unenforceable under present or future laws effectivewhile this Agreement remains in effect, the legality, validity andenforceability of the remaining provisions will not be affected thereby.  In the event a part or provision of thisAgreement is held to be illegal, invalid or unenforceable, the Parties agree tonegotiate in good faith an amendment of such part or provision in a mannerconsistent with the intention of the Parties.

 

**16.14****                ****Force Majeure**.  If either Party is prevented from complying,either totally or in part, with any of the terms or provisions set forth hereinby reason of an event of Force Majeure, including, by way of example and not oflimitation, fire, flood, explosion, storm, strike, lockout or other labordispute, riot, war, rebellion, accidents, terrorist acts, acts of God, acts ofgovernmental agencies or instrumentalities, inability to obtain materials fromsuppliers, or any other similar or dissimilar cause, in each case to the extentbeyond its reasonable control (“Force Majeure”), such Party will providewritten notice of such event to the other Party.  Said notice will be provided within five (5) businessdays of the occurrence of such event and will identify the requirements of thisAgreement or such of its obligations as may be affected, and, to the extent soaffected, said obligations will be suspended during the period of suchdisability.  The Party prevented fromperforming hereunder will use Commercially Reasonably Efforts to remove suchdisability as promptly as possible and will continue performance whenever suchcauses are removed.  The Party soaffected will give to the other Party a good faith estimate of the continuing effectof the Force Majeure condition and the duration of the affected Party’snonperformance.  If the period of anyprevious actual nonperformance of a Party because of Force Majeure conditionsplus the anticipated future period of such Party’s nonperformance because ofsuch conditions will exceed an aggregate of one hundred twenty (120) dayswithin any one year period, the other Party may terminate this Agreement byprior written notice to the nonperforming Party.

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and FiledSeparately with the Securities and Exchange**

**Commission.  Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**16.15****                ****FundamentalPrinciple of Good Faith and Fair Dealing. **In entering into this Agreement, Lilly and Amylin each acknowledge andagree that all aspects of the business relationship and dealings between Lillyand Amylin contemplated by this Agreement shall be governed by the fundamentalprinciple of good faith and fair dealing.

 

**16.16****                ****Interpretation.**  In the event of any conflict between thisAgreement and the Collaboration Agreement, the terms of this Agreement shallcontrol.

 

[SIGNATUREPAGE FOLLOWS]

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and FiledSeparately with the Securities and Exchange**

**Commission.  Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

IN WITNESS WHEREOF, the Parties hereto have executedthis Agreement as of the date first above****written.

 
|   | **ELI LILLY AND COMPANY**        |
|--------|----------------------------------|
|   | ** **                       |
|   |                             |
|   | By:                              | /s/ John C. Lechleiter |
|   |                             |
|   | Printed Name:                    | John C. Lechleiter |
|   |                             |
|   | Title:                           | Chairmain, President and Chief Executive Officer |
|   |                             |
|   | ** **                       |
|   | **AMYLIN PHARMACEUTICALS, INC.** |
|   | ** **                       |
|   |                             |
|   | By:                              | /s/ Paul Marshall |
|   |                             |
|   | Printed Name:                    | Paul Marshal |
|   |                             |
|   | Title:                           | Sr. Vice President,  Operations |
|        |                                  |  |  |  |

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and Filed Separately with the Securities andExchange**

**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**EXHIBIT A**

 

**DEFINITION OF ALLOCATION OF SERVICE FOR**

**ACTUAL MANUFACTURING COST CALCULATION**

 

**“ActualManufacturing Cost”** will include Amylin’s costs for allocation ofservice, in addition to other cost elements. Calculation of the Actual Manufacturing Cost will be consistent with theusual methodology utilized by Amylin to calculate Amylin’s Cost of ProductsSold in accordance with U.S. GAAP.

 

Allocationof services****is the cost of the indirectmaterials, indirect labor and all other expenses incurred in the support ofproduction and for the acquisition of materials related to production of thePen Product.  The labor related chargesincluded in the Allocation of Services would be calculated using the actual FTERate.  To the extent the costs above arenot directly traceable to production of the Pen Product, Amylin in good faithwill apply reasonable allocation methods to such costs.  Examples of items that are incorporated aspart of the Allocation of Services include:

 
| (1) | repair  and maintenance;                                                                                                                                                                                                                                                |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | on-going  qualification/validation/in process testing/ stability testing and  investigations;                                                                                                                                                                           |
| (3) | manufacturing  equipment and manufacturing support equipment calibration costs;                                                                                                                                                                                         |
| (4) | utilities;                                                                                                                                                                                                                                                              |
| (5) | depreciation  and amortization;                                                                                                                                                                                                                                         |
| (6) | material  testing;                                                                                                                                                                                                                                                      |
| (7) | pre-inspection  approval costs (including validation costs), which consists of Amylin’s  internal labor and any out-of-pocket costs on an actual dollar for dollar  basis;                                                                                         |
| (8) | Prorated  costs for manufacturing administration such as complaint handling, customer  service, technical stewardship, logistics, production planning, regulatory  support, training and development, procedure coordination, procurement,  finance and IT support, and |
| (9) | Other costs that are  required to support the manufacture of Pen Product in accordance with U.S.  GAAP                                                                                                                                                                  |

 

Thecosts of general corporate expenses that are not related to the Manufacture ofPen Product, are not included in the Allocation of Services.

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and Filed Separately with the Securities andExchange**

**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**Exhibit B**

 

**PenProduct Estimated Initial Capital Investment**

 
| **Description** | ** ** | **Current Estimate  ($M)** | ** ** |
|-----------------|------------|----------------------------|------------|
| [***]           |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [[***]          |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***] (1)       |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***] (2)       |       | $                          | [***]      |   |
| [***] (3)       |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***]           |       | $                          | [***]      |   |
| [***]           | ** ** | **$**                      | [***]      |   |
| [***]           |       | $                          | [***]      |   |
|            |       |                       |       |
| **Total**       | ** ** | **$**                      | **216**    | ** ** |

 

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(1)          Approximately $[***]estimated for [***] and $[***]  for [***]

(2)          Will be located at [***]

(3)          Will be located at [***]

        Does not includecapitalized interest

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and Filed Separately with the Securities andExchange**

**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**Exhibit C**

 

**Reimbursement of Previously Incurred Capital Spending**

 
| **Month** | ** ** | **Monthly  Spend** | ** ** | **Lilly Share** | ** ** | **Interest** | ** ** | **Total Owed  to Amylin** | ** ** |
|-----------|------------|--------------------|------------|-----------------|------------|--------------|------------|---------------------------|------------|
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |
| [***]     |       | [***]              |       | [***]           |       | [***]        |       | [***]                     |       |

 

Lillyshare based on a [***]% allocation

Interestcalculation utilizes rates based on June 12, 2006 Letter Agreement

 

*****Confidential Treatment Requested**

 

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*****Text Omitted and Filed Separately with the Securities andExchange**

**Commission. Confidential Treatment Requested Under**

**17 C.F.R. Sections 200.80(b)(4) and240.24b-2**

 

**Exhibit D**

 

**Estimate of Actual Manufacturing Cost Template**

 

**Actual Manufacturing Cost**

**Q1 2XXX**

 
| ** **                                         | ** ** | **US**     | ** ** | **OUS**    | ** ** |
|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Headcount**                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Contractors**                                    |       |       |       |       |       |
|                                               |       |       |       |       |       |
| Compensation & Benefits                   |       |       |       |       |       |
| Depreciation                                       |       |       |       |       |       |
| Maintenance/Repair/Utilities                       |       |       |       |       |       |
| Purchased Services/Professional/Contractors        |       |       |       |       |       |
| Supplies & Materials                      |       |       |       |       |       |
| Other Site Expenses                                |       |       |       |       |       |
| San Diego QC Lab & Depr of sites in Exh X |       |       |       |       |       |
| Other San Diego Allocations In                     |       |       |       |       |       |
| Packaging Depr & Other Related Exp        |       |       |       |       |       |
| Factory & Inventory Losses                |       |       |       |       |       |
| Other Variances/PPV/Use Yield                      |       |       |       |       |       |
| Royalty Expense                                    |       |       |       |       |       |
| **Total Expense**                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Production Volumes**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Per Unit COPS:**                                 |       |       |       |       |       |
| Raw Materials Excluding Delivery Device            |       |       |       |       |       |
| Device Delivery                                    |       |       |       |       |       |
| Packaging Materials & Expense             |       |       |       |       |       |
| Labor                                              |       |       |       |       |       |
| Depreciation                                       |       |       |       |       |       |
| Overhead                                           |       |       |       |       |       |
| **Total Pen Cost**                                 | ** ** | ** ** | ** ** | ** ** | ** ** |

 

*****Confidential Treatment Requested**

 

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**Exhibit E**

 

**Pen Agreement Capital True-up**

 

[***]

 

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