<PAGE>

                                                                   Exhibit 10.13

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                SUPPLY AGREEMENT

      THIS SUPPLY AGREEMENT (the "AGREEMENT") is entered into as of July 16th,
2003 (the "EFFECTIVE DATE"), between PENINSULA PHARMACEUTICALS, INC., a Delaware
corporation with a principal place of business at 1701 Harbor Bay Parkway,
Alameda, California 94502 USA ("PENINSULA"), and SHIONOGI & CO., LTD., a
Japanese corporation with a principal place of business at 1-8 Doshomachi
3-chome, Chuo-ku, Osaka 541-0045, Japan ("SHIONOGI"). Shionogi and Peninsula may
be referred to individually as a "PARTY", and collectively as the "PARTIES".

                                    RECITALS

      WHEREAS, Peninsula and Shionogi have entered into a License Agreement
dated July 11, 2002, as amended effective as of September 30, 2002 by that
certain Memorandum concerning the License Agreement, and by the First Amendment
to the License Agreement of even date herewith (collectively, the "LICENSE
AGREEMENT"), pursuant to which Shionogi has granted to Peninsula exclusive
rights to develop and commercialize Licensed Products (as such term is defined
in the License Agreement) in the United States of America, Canada Mexico and
Puerto Rico;

      WHEREAS, Peninsula desires to obtain its requirements of Licensed Products
for commercial sale from Shionogi, and Shionogi is willing to supply such
requirements to Peninsula on the terms and conditions set forth herein.

      NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained in this Agreement, the Parties hereby agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

      The following terms, when capitalized, shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined) as used in this Agreement:

      1.1 "AFFILIATES" means any company or organization directly or indirectly
controlling, controlled by, or under common control with Peninsula or Shionogi,
as the case may be. For purposes of this Section 1.1, "control" shall mean the
power (whether or not normally exercised), to direct the management and affairs
of the subject corporation or entity, directly or indirectly, whether through
the ownership of voting securities, by contract, or otherwise. In case of a
corporation, the direct or indirect ownership of fifty percent (50%) or more of
its outstanding voting securities shall in any case be deemed to confer
"control" of such corporation.
<PAGE>
      1.2 "BATCH" means a specific quantity of the Compound or Licensed Product,
as applicable, that is intended to have uniform character and quality, within
specified limits, and is produced according to a single manufacturing order
during the same cycle of manufacture.

      1.3 "CALENDAR QUARTER" means the three-month period commencing on any
January 1, April 1, July 1, or October 1 (as applicable) during the term of this
Agreement.

      1.4 "CMC" means the Chemistry, Manufacturing and Controls portion of an
IND or NDA.

      1.5 "COMMERCIAL LAUNCH" means the first sale of a Licensed Product to a
Third Party purchaser following any required Registration Approval thereof in
the country of the Territory in which such product is sold.

      1.6 "COMPOUND" means a methylcarbapenem antibiotic compound with the
molecular formula of C15H24N4O6S2 and the chemical name of (+)-(4R,5S,6S)
-6-[(1R)-1-hydroxyethyl]-4-methyl-7-oxo-3-[[(3S,5S)-5-[(sulfamoylamino)methyl]-3
-pyrrolidinyl]thio]-1-azabicyclo[3.2.0.]hept-2-ene-2-carboxylic
acid, the chemical structure of which is shown in Exhibit A hereto. The
"Compound" may also be referred to as S-4661 or Doripenem (as designated in
International Nonproprietary Names for Pharmaceutical Substances; INN).

      1.7 "CONFIDENTIAL INFORMATION" means any confidential or proprietary
information relating to the Compound and/or the Licensed Product including,
without limitation, research, development, manufacturing, marketing, financial,
personnel, sales, and other business and technical information, compositions,
inventions, discoveries, processes, methods, formulae, procedures, protocols,
techniques, data, plans, Specifications, and Quality Control Procedures, whether
in oral, written, graphic, or electronic form.

      1.8 "CONTROLLED" means, with respect to any Intellectual Property Rights,
that the Party owns or has a license to such Intellectual Property Rights and
has the ability to grant to the other Party access, a license, or a sublicense
to such Intellectual Property Rights as provided for in the Agreement without
violating an agreement with or rights of a Third Party.

      1.9 "DEFECTIVE PRODUCTS" has the meaning set forth in Section 3.8(a).

      1.10 "DRUG MASTER FILE" or "DMF" means a Drug Master File maintained with
the FDA, or a filing with a Regulatory Authority outside the United States
serving a purpose equivalent to that of a Drug Master File in the United States,
such that manufacturing information may be filed by a manufacturer in such
country in a manner that remains confidential from the holder of the remaining
portions of the Registration Approval maintained with the FDA and the equivalent
thereof, if any, in jurisdictions outside the United States.

      1.11 "FDA" means the United States Food and Drug Administration or any
successor thereto having the administrative authority to regulate the
investigation, development, and marketing of human pharmaceutical products in
the United States.


                                       2.
<PAGE>
      1.12 "FD&C ACT" means the United States Food, Drug and Cosmetic Act, as
amended, and any regulations promulgated thereunder.

      1.13 "FIELD ALERT" has the meaning set forth in Section 4.9.

      1.14 "FILL AND FINISH WORK" means the packaging of bulk Compound
manufactured by Shionogi into Finished Packaging for supply to Peninsula.

      1.15 "FINISHED PACKAGING" means a glass vial with stopper and seal
containing 250 mg or 500 mg of the Compound, as applicable, fully labeled,
packaged, and ready for final sale, as set forth in the Specifications.

      1.16 "GMP" means the current good manufacturing practices required by the
FDA and set forth in the Food, Drug & Cosmetic Act, as amended, or FDA
regulations, policies or guidelines in effect at a particular time, for the
manufacturing and testing of pharmaceutical materials, and any other laws or
regulations applicable to the manufacturing and testing of pharmaceutical
materials in the Territory.

      1.17 "IND" means an Investigational New Drug Application as defined in the
FD&C Act and applicable regulations promulgated thereunder by the FDA, or the
equivalent application to the equivalent agency in any other regulatory
jurisdiction, the filing of which is necessary to commence clinical testing of a
pharmaceutical product in humans.

      1.18 "INTELLECTUAL PROPERTY RIGHTS" means intellectual property rights of
all kinds, including patents, patent applications, copyrights, know-how, trade
secrets, technical and commercial information, designs (whether registered or
not) and trademarks.

      1.19 "LICENSED PRODUCT" means any pharmaceutical product ready for final
sale and intended for use for the prevention and/or treatment of various
bacterial infectious diseases, or other appropriate uses, in humans that
contains the Compound as an active ingredient. As of the Effective Date, the
Licensed Product shall be considered to be vial-filled sterile Compound, where
each vial contains 250 mg or 500 mg of the Compound.

      1.20 "MATERIALS" means all raw materials, ingredients, and packaging
components (including labels and product inserts) required to produce the
Licensed Products in accordance with the Specifications, excluding the Compound.

      1.21 "NDA" means a New Drug Application, as defined in the FD&C Act, and
applicable regulations promulgated thereunder by the FDA, or the equivalent
application to the equivalent agency in any other regulatory jurisdiction, to
obtain approval or authorization to commence marketing and sales of a
pharmaceutical product.

      1.22 "PENINSULA CUSTOMERS" has the meaning set forth in Section 4.6(a).

      1.23 "QUALITY CONTROL PROCEDURES" has the meaning set forth in Section
3.6.


                                       3.
<PAGE>
      1.24 "QUALITY MEMORANDUM" has the meaning set forth in Section 3.1.

      1.25 "REGISTRATION APPROVAL" means, with respect to a country in the
Territory, all approvals, licenses, registrations, or authorizations by an
applicable Regulatory Authority (as hereinafter defined) necessary to import,
commercialize and market the Licensed Product in such country, including pricing
and reimbursement approval in such country.

      1.26 "REGULATORY AUTHORITY" means the FDA in the United States, and the
equivalent regulatory authority or governmental entity having the
responsibility, jurisdiction, and authority to approve the manufacture, use,
importation, packaging, labeling, marketing, and sale of pharmaceutical products
in any country or jurisdiction other than the United States.

      1.27 "SPECIFICATIONS" means the product characteristics, processing,
formulae, labeling, and packaging requirements and standards pertaining to the
manufacture or supply of Licensed Products in Finished Packaging that are
consistent with applicable Registration Approvals and that are set forth in
Exhibit B, as they may be amended or supplemented from time to time pursuant to
Section 3.3 or 3.4.

      1.28 "SUPPLY DISRUPTION" has the meaning set forth in Section 2.11(b).

      1.29 "TERRITORY" means the United States of America, Canada, Mexico and
Puerto Rico.

      1.30 "THIRD PARTY" means any entity or individual other than the Parties
and the Affiliates of any of the Parties.

      1.31 "THIRD PARTY MANUFACTURER" means any entity other than Shionogi that
is contracted by Shionogi in accordance with Section 2.9 to manufacture the
Compound and/or perform Fill and Finish Work.

                                   ARTICLE 2

                               PURCHASE AND SUPPLY

      2.1 PURCHASE AND SUPPLY. During the term of this Agreement and subject to
the terms and conditions hereof, Shionogi shall manufacture and supply to
Peninsula all of Peninsula's requirements of Licensed Products in Finished
Packaging for commercial sale in the Territory as set forth on purchase orders
submitted by Peninsula in accordance with the provisions of Section 2.3. All
Licensed Products and bulk Compound (if applicable) supplied to Peninsula by
Shionogi hereunder shall conform to the Specifications and shall have been
manufactured in compliance with GMP, all other requirements of Regulatory
Authorities, and all applicable laws and regulations. Any term or condition in
any purchase order, confirmation, or other document furnished by Peninsula or
Shionogi that is in any way inconsistent with the terms and conditions of this
Agreement is hereby expressly rejected. If both Parties agree to change the form
of supply to Peninsula hereunder to bulk Compound instead of, or in addition to,


                                       4.
<PAGE>
Licensed Products in Finished Packaging, the Parties shall meet and discuss in
good faith the terms and conditions for the supply by Shionogi of such bulk
Compound.

      2.2 FORECASTS. Peninsula shall provide Shionogi with forecasts of
Peninsula's estimated requirements of Licensed Products as set forth in this
Section 2.2 for Shionogi's manufacturing planning purposes.

            (A) [*] year prior to the date on which Peninsula anticipates filing
the first NDA to obtain Registration Approval, and for [*] consecutive years
after Commercial Launch, Peninsula shall provide to Shionogi a non-binding [*]
year forecast of its estimated requirements of Licensed Products.

            (B) [*] year prior to Peninsula's estimated date of Commercial
Launch, Peninsula shall provide to Shionogi a one-time, non-binding forecast of
its estimated requirements of Licensed Products for the first [*] Calendar
Quarters in which Peninsula will be purchasing Licensed Products from Shionogi
for commercial sale.

            (C) [*] months prior to Peninsula's estimated date of Commercial
Launch, Peninsula shall provide to Shionogi a rolling forecast of its estimated
requirements of Licensed Products for the first [*] Calendar Quarters in which
Peninsula will be purchasing Licensed Products from Shionogi for commercial
sale. The first Calendar Quarter of such forecast shall include Peninsula's
monthly requirements of Licensed Products for such Calendar Quarter. Thereafter,
at least [*] months prior to the beginning of each Calendar Quarter, Peninsula
shall provide Shionogi with updates of each [*] Calendar Quarter forecast. The
first [*] Calendar Quarters of each forecast provided by Peninsula to Shionogi
under this Section 2.2(c) shall constitute a binding commitment of Shionogi to
supply, and Peninsula to purchase, the quantity of Licensed Products forecasted
to be ordered for such quarters, except as set forth in Section 2.4. The
projections of Peninsula's requirements of Licensed Products for the [*] through
[*] Calendar Quarters in each forecast shall be made in good faith and shall
constitute Peninsula's best estimates of future orders of Licensed Products, but
shall not be binding on Peninsula. Each forecast shall specify the quantity of
each type of Licensed Product (i.e., whether such product contains 250 mg or 500
mg of Compound). If the quantity of Licensed Products forecast for the [*]
Calendar Quarter in a particular forecast exceeds [*] percent ([*]%) of the
quantity of Licensed Products forecast to be ordered for such Calendar Quarter
in the most recent prior forecast provided by Peninsula under this Section
2.2(c) (i.e., when such Calendar Quarter was the [*] Calendar Quarter of such
earlier forecast), and Shionogi expects that it will not be able to supply that
quantity of Licensed Products that exceeds [*] percent ([*]%) of the quantities
of Licensed Products set forth for such Calendar Quarter in such prior forecast
due to Shionogi's production schedule or the availability of labor, raw
materials, or facilities, Shionogi shall so inform Peninsula and the Parties
shall discuss in good faith an appropriate adjustment to the quantities or the
delivery date of Licensed Products set forth in the forecast.

      2.3 ORDERS. Subject to Section 2.4, Peninsula shall submit to Shionogi
monthly firm purchase orders for those quantities of Licensed Products set forth
for such month in the applicable binding [*] Calendar Quarter forecast no later
than [*] weeks prior to the


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                       5.
<PAGE>
commencement of the month for which such purchase orders pertain. The quantity
of Licensed Products ordered by Peninsula in accordance with this Section 2.3
shall be in denominations of Shionogi's Batches, with the smallest permissible
denomination being equivalent to that quantity of Licensed Products contained in
[*], the size of which shall be determined and mutually agreed to by the
Parties. Each such order shall specify the quantity of each type of Licensed
Product (i.e., whether such product contains 250 mg or 500 mg), the required
delivery date, shipping instructions, and delivery destination. Shionogi shall
supply the quantities of Licensed Product set forth in each monthly firm
purchase order by the delivery date specified in such order.

      2.4 CHANGES IN ORDERED QUANTITIES. Peninsula may increase the quantities
of Licensed Products ordered by Peninsula in a monthly purchase order from the
quantities set forth in the applicable binding forecast for such month by an
amount equal to [*] percent ([*]%) of the forecasted quantities, or may decrease
the quantities of Licensed Products ordered by Peninsula in a monthly purchase
order from the quantities set forth in the applicable binding forecast for such
month by an amount equal to [*] percent ([*]%) of the forecasted quantities. To
accommodate minor variations in Batch size, Shionogi may, on prior written
notice to Peninsula, either (a) increase the quantities of Licensed Product that
it supplies pursuant to a purchase order submitted by Peninsula by an amount
equal to [*] percent ([*]%) of the purchase order, or (b) decrease the
quantities of Licensed Products that it supplies pursuant to a purchase order
submitted by Peninsula by an amount equal to [*] percent ([*]%) of the purchase
order. If Peninsula requires quantities of Licensed Products in a particular
month that exceeds the amount of Licensed Products that Shionogi is obligated to
supply under this Section 2.4 for such month, Peninsula may notify Shionogi that
it is prepared to bear all reasonable additional costs that may be incurred by
Shionogi in supplying such extra quantities of Licensed Products. Shionogi will
notify Peninsula within ten (10) business days of its receipt of such a notice
from Peninsula hereunder whether Shionogi accepts such offer and whether it will
be able to supply such extra quantities of Licensed Products.

      2.5 MINIMUM PURCHASE QUANTITIES.

            (A) Peninsula shall be required to purchase annual minimum
quantities of Licensed Product (containing either 250 mg or 500 mg Compound)
and/or bulk Compound from Shionogi hereunder equivalent to at least the
following annual aggregate amounts of the Compound (potency) for commercial
and/or promotional use in the Territory:

<TABLE>
<CAPTION>
TIME PERIOD                                TOTAL AGGREGATE KILOGRAMS OF COMPOUND
-----------                                -------------------------------------
<S>                                        <C>
First year of purchase orders              [*] kg of Compound
Second year of purchase orders             [*] kg of Compound
Third year of purchase orders              [*] kg of Compound
Fourth year of purchase orders             [*] kg of Compound
</TABLE>


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                       6
<PAGE>
<TABLE>
<CAPTION>
TIME PERIOD                                       TOTAL AGGREGATE KILOGRAMS OF COMPOUND
-----------                                       -------------------------------------
<S>                                               <C>
Fifth year of purchase orders                     [*] kg of Compound
Sixth and subsequent years of purchase orders     [*] kg of Compound
</TABLE>

For purposes of this Section 2.5, the first year of purchase orders shall
commence on the month covered by the first purchase order submitted by Peninsula
under Section 2.3, and shall end twelve (12) months thereafter. [*]. In
addition, if an unforeseen event occurs that is beyond Peninsula's reasonable
control and such event negatively impacts the sale of Licensed Products in the
Territory (e.g., if Regulatory Authorities require Peninsula to change the
labeling for Licensed Products after commercial launch), the Parties shall meet
and discuss in good faith an adjustment of the minimum purchase quantities of
Compound set forth in this Section 2.5(a) as appropriate for the duration of the
impact of such event.

            (B) [*]


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                       7.
<PAGE>

      2.6 CONFIRMATION AND DELIVERY. Within ten (10) business days after its
receipt of a firm order placed pursuant to Section 2.3, Shionogi shall
acknowledge in writing its receipt and shall notify Peninsula of the quantities
of Licensed Products that it will supply under such order in accordance with
Section 2.4. Shionogi shall deliver to Peninsula, at the delivery destination
and by the delivery date specified in such order, the specified number of
Licensed Products, each of which conforms to the Specifications.

      2.7 SHIPPING, STORAGE, INSURANCE, TITLE AND RISK OF LOSS. The Licensed
Products ordered by Peninsula shall be delivered [*] (Incoterms 2000) [*] or, if
[*] is not available, [*]. At Peninsula's request, the Parties will discuss
having [*] to cover losses or damages to shipments of Licensed Products that
occur during transportation to Peninsula, with Peninsula [*]. Each shipment of
Licensed Products shall be accompanied by a certificate of analysis (a)
confirming that Shionogi followed the Quality Control Procedures (as defined in
Section 3.6) for the testing of such Licensed Products, (b) containing the
quality control test and quality assurance review results for the Licensed
Products in such shipment, (c) certifying that each Batch of Licensed Products
in such shipment was manufactured in accordance with GMP, and (d) confirming
that the Licensed Products in such shipment conform to the Specifications.
Shionogi agrees to store Licensed Products to be supplied to Peninsula in a
secure area and under appropriate product label storage conditions to ensure
that such products conform to the Specifications at the time of delivery to
Peninsula. Shionogi shall pack the Licensed Products for shipment in a
commercially reasonable manner that assures that such Licensed Product will meet
the Specifications upon delivery to Peninsula. Risk of loss of and title to all
Licensed Products shipped to Peninsula shall pass to Peninsula once the Licensed
Products have been delivered by Shionogi or a Third Party Manufacturer to [*]
or, if [*] is not available, [*]. Shionogi will be responsible for obtaining any
required export approvals or licenses and releasing Licensed Product for
shipment to Peninsula.

      2.8 COMPLIANCE WITH LAWS. Shionogi shall ensure that all Licensed Products
supplied to Peninsula hereunder shall be manufactured in compliance with GMP,
all other requirements of Regulatory Authorities, and applicable laws and
regulations, including, without limitation, all laws and regulations applicable
to the transportation, storage, use, handling and disposal of hazardous
materials used to manufacture Licensed Products. Shionogi shall obtain and
maintain, at its expense, for so long as Shionogi is supplying Licensed Products
to Peninsula hereunder, all facility licenses and government permits, including
without limitation health, safety, and environmental permits, necessary for the
conduct of the actions and procedures undertaken to manufacture and supply the
Licensed Products for importation and sale in the Territory. Shionogi shall
promptly notify Peninsula in writing if, during the term of this Agreement, it
receives any citations with respect to its manufacturing facilities, including,
without limitation, FDA Form 483s or warning letters, or if it becomes subject
to an FDA

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                       8.
<PAGE>
consent decree or other action of a Regulatory Authority impacting the
manufacture of Licensed Products by Shionogi under this Agreement.

      2.9 USE OF THIRD PARTY MANUFACTURER. Shionogi may, at its sole option,
decide to contract with a Third Party Manufacturer to have such Third Party
Manufacturer manufacture the Compound and/or perform Fill and Finish Work,
either in whole or in part. Shionogi shall notify Peninsula that it has decided
to enter into an agreement with a Third Party Manufacturer prior to executing
such agreement, and shall discuss with Peninsula the manufacturing plans and
strategies regarding the establishment of such Third Party Manufacturer to the
extent that such plans or strategies impact the supply of Compound or Licensed
Products to Peninsula hereunder in an effort to minimize any possible
difficulties or delays arising from the use of a Third Party Manufacturer.
Shionogi shall not supply to Peninsula any Licensed Products that have been
manufactured by such Third Party Manufacturer, either in whole or in part, until
such time as Peninsula receives notification from the FDA or other applicable
Regulatory Authority that such Third Party Manufacturer has been approved to
manufacture the Compound and/or perform Fill and Finish Work for Licensed
Products to be distributed in the Territory. Shionogi shall continue to
manufacture the Licensed Products supplied to Peninsula until Peninsula receives
such notification. Any agreement entered into between Shionogi and such Third
Party Manufacturer shall be consistent with the terms of this Agreement, to the
extent applicable. Shionogi shall bear all expenses associated with having such
Third Party Manufacturer manufacture the Compound and/or perform Fill and Finish
Work for Licensed Products supplied to Peninsula, and Peninsula shall continue
to pay to Shionogi the price set forth in Section 5.1 for all Licensed Products
supplied to Peninsula hereunder. Shionogi guarantees the performance by a Third
Party Manufacturer contracted by it to manufacture Compound and/or perform Fill
and Finish Work for Licensed Products supplied to Peninsula, and shall cause
such Third Party Manufacturer to comply with the provisions of this Agreement in
connection with such performance. Any breach by such Third Party Manufacturer of
any of Shionogi's obligations under this Agreement shall be deemed a breach by
Shionogi, and Peninsula may proceed directly against Shionogi for such breach
without any obligation to first proceed against such Third Party Manufacturer.
If Shionogi decides to enter into an agreement with a Third Party Manufacturer
pursuant to this Section 2.9, the Parties will discuss in good faith appropriate
adjustments to the forecasting and ordering mechanisms set forth in Sections 2.2
and 2.3 to take into account the lead time that Shionogi must provide to such
Third Party Manufacturer.

      2.10 PRINTED MATERIALS. Shionogi will provide to Peninsula its packaging
and label specifications for the Compound manufactured by Shionogi for
distribution in Japan. Peninsula shall consult with Shionogi regarding the
design of Peninsula's specifications for the packaging and labels for Licensed
Products in Finished Packaging in the Territory, and will use its best efforts
to coordinate with Shionogi such that, to the extent possible, Shionogi will be
able to manufacture such packaging and labels using the same equipment that
Shionogi uses to manufacture packaging and labels for the Compound distributed
in Japan. Once Peninsula has designed the packaging and label specifications for
Licensed Products, the Specifications shall be updated to include the packaging
and label specifications. Peninsula, at its own expense, shall provide to
Shionogi all copy content and artwork in order for Shionogi to print those
materials necessary to supply to Peninsula Licensed Products in Finished
Packaging in accordance with


                                       9.
<PAGE>
the Specifications including, without limitation, all labels and package
inserts. Peninsula shall be responsible for ensuring that such materials to be
used in connection with the promotion, distribution, and/or sale of Licensed
Products in the Territory comply with applicable laws and regulations in the
Territory.

      2.11 INABILITY TO SUPPLY.

            (A) If Shionogi is unable, at any time, to supply Peninsula on a
timely basis with the quantity of Licensed Products ordered by Peninsula in
accordance with Sections 2.3 and 2.4 for any reason, including the occurrence of
a force majeure event under Section 10.5, Shionogi shall immediately notify
Peninsula of such inability to supply and the estimated extent of such inability
(including delay time and the quantity of Licensed Products involved), and shall
use good faith diligent efforts to cure the supply problem as soon as possible.
In such event, Shionogi shall [*] all quantities of the Compound or Licensed
Product to be supplied to [*] to cover the amount of the past due Licensed
Products to be supplied to Peninsula until such time as the supply shortage has
been cured. If the quantity of Licensed Products that Shionogi is unable to
supply to Peninsula exceeds [*] percent ([*]%) of the quantity of Licensed
Products ordered by Peninsula in accordance with Sections 2.3 and 2.4, Shionogi
and Peninsula shall promptly thereafter discuss the cause of the supply shortage
and appropriate resolutions. In such instance, the Parties shall work
cooperatively and diligently to find a resolution that cures the supply problem
and provides for adequate supplies of Licensed Product for worldwide sales,
including providing to Peninsula all ordered Licensed Products as it requires.
Shionogi agrees to discuss and consider in good faith all appropriate
resolutions to cure the supply problem, including, without limitation, [*] to
Peninsula [*] supply of the Compound or Licensed Product [*] to cover the amount
of the past due Licensed Products to be supplied to Peninsula and/or engaging a
Third Party manufacturer reasonably acceptable to Shionogi as a second source to
manufacture, on Shionogi's behalf, the Compound and/or Licensed Products to be
supplied to Peninsula, and shall implement such solutions as are reasonable to
resolve the problem.

            (B) If a supply problem occurs to the extent that, at any particular
time, Licensed Products that have been ordered by Peninsula pursuant to Sections
2.3 and 2.4 which are more than [*] weeks past due (according to their scheduled
delivery dates in the applicable orders), and such amount of past due Licensed
Products represents more than [*] percent ([*]%) of the amount of Licensed
Products forecasted to be ordered for the most recent month (a "SUPPLY
DISRUPTION"), then Peninsula and Shionogi will discuss the Supply Disruption and
seek all appropriate means of resolution, including, without limitation,
engaging a Third Party manufacturer reasonably acceptable to Shionogi as a
second source for manufacturing, on Shionogi's behalf, the Compound and/or
Licensed Products. For the duration of a Supply Disruption, Shionogi shall [*]
all quantities of the Compound or Licensed Product to be [*] to cover the amount
of the past due Licensed Products until such time as the Supply Disruption has
been resolved and the Parties agree to amend as appropriate the minimum purchase
quantities of the Compound and/or Licensed Products under Section 2.5(a) to
reflect the Supply Disruption. Shionogi will use best efforts to resolve the
Supply Disruption. If the Supply Disruption is not cured entirely (that is, all
past due Licensed Products on order are delivered to Peninsula and Shionogi is
current on all pending orders by Peninsula) within [*] days of the beginning of
the

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      10.
<PAGE>
Supply Disruption, then Peninsula shall have the right thereafter to establish
manufacturing resources to manufacture the Compound and/or conduct Fill and
Finish Work, either in whole or in part; provided, however, that Peninsula shall
resume purchasing an appropriate quantity of the Compound and/or Licensed
Products, which quantity shall be discussed in good faith and determined by the
Parties, after the Supply Disruption is cured to Peninsula's reasonable
satisfaction. If Peninsula elects to do so, Shionogi shall, at [*] sole expense,
promptly provide, at such times and locations as may reasonably be requested by
Peninsula, reasonable, diligent and good faith cooperation to enable Peninsula
to establish such manufacturing capability, including without limitation
transferring promptly any relevant technology to Peninsula relating to the
manufacture of Compound and/or conduct Fill and Finish Work, assisting in
qualifying such manufacturer to manufacture Compound and/or conduct Fill and
Finish Work, and assisting Peninsula to arrange for the procurement of all raw
materials and intermediates needed to manufacture Compound and/or conduct Fill
and Finish Work. Further, upon such election by Peninsula, Shionogi shall be
deemed to have automatically granted to Peninsula a non-exclusive license (with
the right to sublicense through multiple tiers of sublicensees) under all
Intellectual Property Rights owned or Controlled by Shionogi that are useful or
necessary to manufacture Compound and/or conduct Fill and Finish Work, to make
or have made Licensed Products for use and sale solely in the Territory. Such
license shall [*], which [*] shall be negotiated in good faith at the time that
such license is deemed to have been granted. If Peninsula elects only to conduct
Fill and Finish Work with regard to a quantity of Licensed Products beyond
Shionogi's reasonable capacity for such supply, Peninsula shall have the option
of ordering and obtaining from Shionogi bulk Compound necessary to manufacture
such quantity of Licensed Products at a supply price to be negotiated in good
faith by the Parties [*] of Peninsula having to undertake Fill and Finish Work
in order to produce, and under other agreed terms that are consistent with
provisions of this Agreement. Further, pursuant to the non-exclusive license
granted by Shionogi under this Section, Peninsula may have a Third Party
manufacturer reasonably acceptable to Shionogi manufacture the Compound and/or
perform Fill and Finish Work on Peninsula's behalf, either in whole or in part.
In such case, Shionogi shall provide such Third Party manufacturer with the same
reasonable, diligent and good faith cooperation and assistance that Shionogi is
obligated to provide to Peninsula under this Section 2.11(b).

Notwithstanding that Peninsula has so elected to obtain manufacturing rights,
and provided that Shionogi has the ability to supply the bulk Compound or
Licensed Products without having to [*] of the bulk Compound or Licensed
Products required by Shionogi for [*], Peninsula shall be able to order and
obtain from Shionogi supply of the bulk Compound or Licensed Products as
provided hereunder, up to Shionogi's reasonable capacity for supplying such bulk
Compound or Licensed Products on the terms hereof until such time as Peninsula
or a Third Party manufacturer selected by Peninsula that is reasonably
acceptable to Shionogi is validated as a manufacturer of Licensed Products and
is able to manufacture all of Peninsula's commercial requirements of Licensed
Products. If Shionogi supplies bulk Compound to Peninsula, the Parties shall
agree upon terms for such supply of bulk Compound that are consistent with the
provisions of this Agreement.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      11.
<PAGE>
            2.12 MATERIAL THIRD PARTY AGREEMENTS. The Parties hereby acknowledge
that Shionogi is obtaining its supply of [*] and [*], which are key raw
materials and/or intermediates needed to manufacture the Compound, pursuant to
agreements between Shionogi and certain Third Parties (the "MATERIAL THIRD PARTY
AGREEMENTS"). Shionogi covenants that it (a) will not amend any Material Third
Party Agreement in a manner that adversely affects the supply of Compound and/or
Licensed Product hereunder without the prior written consent of Peninsula, and
(b) will not terminate any Material Third Party Agreement without Peninsula's
prior written consent. Peninsula shall not unreasonably withhold such consents.
In addition, during the term of the Agreement, Shionogi may enter into an
agreement with a Third Party Manufacturer pursuant to which such Third Party
Manufacturer will manufacture the Compound and/or perform Fill and Finish Work
as permitted in Section 2.9 (such agreement, a "THIRD PARTY MANUFACTURER
AGREEMENT"). Shionogi covenants that, during the term of this Agreement, it
shall comply in all material respects with the terms of the Material Third Party
Agreements and any Third Party Manufacturer Agreement. Shionogi shall diligently
take all reasonable steps to exercise its rights under the Material Third Party
Agreements and any Third Party Manufacturer Agreement to ensure that Shionogi is
able to comply with its supply obligations to Peninsula hereunder. In addition,
Shionogi shall provide prompt written notice to Peninsula of any material
defaults by a Third Party under the Material Third Party Agreements, or by a
Third Party Manufacturer under a Third Party Manufacturer Agreement.

                                   ARTICLE 3

                   TESTING; QUALITY ASSURANCE; SPECIFICATIONS;

                            ACCEPTANCE AND REJECTION

      3.1 QUALITY MEMORANDUM. The Parties shall discuss and agree, where
appropriate, on specific procedures and guidelines for Batch release, quality
control testing and quality assurance review, acceptance testing, and other
roles and responsibilities related to the Compound and the Licensed Product,
which procedures and guidelines shall be set forth in a written quality
memorandum (the "QUALITY MEMORANDUM"). The Quality Memorandum shall also set
forth the Parties' respective responsibilities and detailed procedures for
handling regulatory matters including, without limitation, specific procedures
for recalls, market withdrawals, corrections, and Field Alert reporting of
Licensed Products, and handling customer questions and complaints related to
Licensed Products. The Parties acknowledge and agree that the Quality Memorandum
will need to be updated on an ongoing basis as appropriate.

      3.2 PRODUCTION OF LICENSED PRODUCTS. Shionogi shall manufacture, package,
and label each Batch of Licensed Product supplied to Peninsula hereunder in
compliance with the Specifications.

      3.3 SPECIFICATIONS. The current Specifications have been jointly
established by the Parties and are attached hereto as Exhibit B. Such
Specifications may only be modified or supplemented as set forth in Section 3.4.
The Parties acknowledge that the Specifications may vary slightly for each
country in the Territory according to the applicable Registration Approval

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      12.
<PAGE>
for the Licensed Product in such country. In such event, Peninsula shall specify
in all purchase orders it submits under Section 2.3 the particular
Specifications applicable to each quantity of Licensed Products ordered in such
order.

      3.4 MODIFICATION OF SPECIFICATIONS. If modifications to the Specifications
are recommended or required by a Regulatory Authority in the Territory,
Peninsula shall notify Shionogi and the Parties shall discuss in good faith and
agree upon the best way to implement such modifications. Shionogi shall
implement such modifications at [*] expense. The Quality Memorandum entered into
by the Parties pursuant to Section 3.1 shall set forth what changes to the
Specifications, if any, may be made by Shionogi upon written notice to
Peninsula. Except as may otherwise be agreed to by the Parties and set forth in
the Quality Memorandum, Shionogi shall not change the Specifications without
Peninsula's prior written approval. If Peninsula desires to modify the
Specifications and such modification is not recommended or required by a
Regulatory Authority in the Territory, the Parties shall discuss in good faith
whether to make such modification. If the Parties agree to make such
modification to the Specifications, [*] shall bear the cost of implementing such
modification.

      3.5 CHANGE IN MANUFACTURING PROCESS. Shionogi will obtain Peninsula's
prior written approval before it implements any change in the equipment,
process, or procedures used to manufacture Licensed Products, or in the Batch
size, manufacturing site, source of raw materials, or source of packaging
components with respect to Licensed Products that would require notification of
or approval by any Regulatory Authorities and/or amendments or modifications to
existing Registration Approvals or pending applications therefor. Shionogi shall
not implement any such change until such time as Peninsula has received approval
for such change from Regulatory Authorities. Shionogi shall disclose to
Peninsula all proposed changes in such manufacturing materials, equipment,
processes, or procedures such that Peninsula is able to describe such changes in
filings required to be submitted to Regulatory Authorities regarding such
changes.

      3.6 QUALITY CONTROL. Shionogi shall maintain a quality control and testing
program consistent with GMP to ensure that the Licensed Products supplied to
Peninsula conform to the Specifications (the "QUALITY CONTROL PROCEDURES").
Shionogi shall follow such Quality Control Procedures and perform quality
control testing and quality assurance review, approval, and Batch release prior
to shipping each shipment of Licensed Products to Peninsula to ensure that the
Licensed Products delivered to Peninsula comply with the Specifications, GMP,
all other applicable requirements of Regulatory Authorities, and all applicable
laws and regulations.

      3.7 GMP COMPLIANCE AND QUALITY ASSURANCE AUDITS. During the term of the
Agreement, Peninsula may, upon reasonable notice and during normal business
hours, periodically review such quality control program documentation, and shall
have the right, at Peninsula's expense, to audit, survey, or verify the
adherence of Shionogi or any other Third Party Manufacturer, as applicable, to
the Quality Control Procedures. In addition, upon written request to Shionogi,
Peninsula shall have the right, at Peninsula's expense, to have representatives
or Regulatory Authorities visit the manufacturing facilities of Shionogi or any
other Third Party Manufacturer, as applicable, during normal business hours to
review such

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      13.
<PAGE>
manufacturer's manufacturing operations, to assess compliance with GMP and the
Quality Control Procedures, and to discuss any related issues with such
manufacturer's manufacturing and management personnel. If the Parties agree that
the Quality Control Procedures need to be modified in order to comply with GMP,
the Parties shall discuss and agree upon appropriate changes thereto. At
reasonable times during the term of this Agreement and upon reasonable prior
written notice, Shionogi shall have the right, at Shionogi's expense, to inspect
Peninsula's premises during normal business hours and shall have access to all
documents related to the storage and distribution of Licensed Products at
Peninsula's facilities.

      3.8 INSPECTION AND REJECTION.

            (A) INSPECTION; REJECTION; ACCEPTANCE. Within thirty (30) days after
the delivery by Shionogi of Licensed Products to Peninsula, Peninsula shall
conduct acceptance tests with respect to quality and quantity as set forth in
the Quality Memorandum. Peninsula may reject Licensed Products that are (i)
adulterated or misbranded within the meaning of the FD&C Act, (ii) not prepared
in compliance with GMP or other applicable laws or regulations, (iii) not in
conformance with the Specifications, or (iv) are damaged or broken ("DEFECTIVE
PRODUCTS"), or may notify Shionogi of any shortage of Licensed Products with
respect to the quantity delivered, by giving written notice to Shionogi within
thirty (30) days after delivery of the Licensed Products to the delivery
destination set forth in the applicable firm order, which notice shall identify
in reasonable detail the nature of the defect or shortage. If Peninsula fails to
give such notice to Shionogi within the said time period, Peninsula will be
deemed to have accepted the Licensed Products and to have released Shionogi from
any claim with respect to such Defective Products, subject to Section 3.8(b),
and except for claims for indemnification pursuant to Section 7.1(a).

            (B) REVOCATION OF ACCEPTANCE. If, after acceptance as provided in
subsection (a) above, Peninsula discovers that any of such Licensed Products are
Defective Products and that the nature of such defect could not have been
discovered by performing the acceptance tests of the Licensed Products with
respect to quality as set forth in the Quality Memorandum within thirty (30)
days after delivery of the Licensed Products, Peninsula may revoke its
acceptance of such Defective Products by providing written notice to Shionogi of
such revocation. Such notice shall identify in reasonable detail the nature of
the defect and shall be provided within [*] months after the delivery of the
applicable Licensed Products to Peninsula. If Peninsula fails to give such
notice to Shionogi within said [*] month time period, Peninsula will be deemed
to have accepted the Licensed Products and to have released Shionogi from any
claim with respect to such Defective Products except for claims for
indemnification pursuant to Section 7.1(a) or claims under Section 4.6(b).

            (C) REPLACEMENTS. At Shionogi's sole option, Peninsula shall either
return Defective Products to Shionogi at Shionogi's expense or shall destroy
such Defective Products and certify to Shionogi that such destruction is
complete. The costs of destruction and subsequent disposal shall be at
Shionogi's expense. Shionogi shall make up the shortage in quantities of
Licensed Products or replace Defective Products, as applicable, as quickly as
possible at its own expense.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      14.
<PAGE>
            (D) RESOLUTION OF DISPUTES. Upon Shionogi's request and at
Shionogi's expense, Peninsula shall send a portion of such Defective Products to
Shionogi so that Shionogi may confirm that the Licensed Products at issue are
Defective Products. If Shionogi disagrees with Peninsula's claim that certain
Licensed Products are Defective Products, the Parties will first use good faith
efforts to settle such dispute within thirty (30) days of Peninsula's notice of
such defects; if they are unable to do so within such time period, the dispute
will be resolved by a mutually acceptable independent Third Party tester after
analysis of the relevant Licensed Products. Such Third Party tester shall
determine whether such Licensed Products are defective, and the Parties agree
that such tester's determination shall be final, binding, and determinative as
to whether such Licensed Products are Defective Products. The Party against whom
the Third Party tester rules shall bear all costs of the Third Party testing.

      3.9 SHIONOGI NOTICE OF DEFECTIVE PRODUCTS. Shionogi shall promptly notify
Peninsula if it discovers that any Licensed Products manufactured by Shionogi
are defective or do not conform to the Specifications. Such notice shall
identify in reasonable detail the nature of the defect, the lot or Batch of such
defective products, and the basis for Shionogi's determination as to the nature
of the defect.

                                   ARTICLE 4

                    RECORDS, REPORTS, AND REGULATORY MATTERS

      4.1 DRUG MASTER FILE. Shionogi may, at its sole discretion, prepare, file,
and maintain DMFs covering the manufacture of the Compound and/or the Licensed
Product. If Shionogi elects to file such DMFs, Shionogi shall maintain such
DMFs, including, without limitation, amending and updating such DMFs, as
required by applicable Regulatory Authorities. During the term of this
Agreement, Shionogi grants to Peninsula and its sublicensees a right of
reference to such DMFs for the purpose of preparing, filing, or maintaining
INDs, NDAs, and other regulatory filings relating to the Licensed Product in the
Territory. Peninsula may inspect (but not copy) such Shionogi-prepared DMFs as
necessary or appropriate. Should Shionogi elect to file any DMFs covering the
manufacture of the Compound and/or the Licensed Product, the Parties shall meet
and agree regarding the manner in which communications received by either Party
from Regulatory Authorities regarding such DMFs will be shared and regarding the
possible modifications of related provisions of this Agreement reflecting such
changes.

      4.2 PREPARATION OF REGULATORY FILINGS. Peninsula shall be responsible for
any and all regulatory filings covering Licensed Products in the Territory.
Shionogi shall, at Peninsula's reasonable request, cooperate in the preparation
and maintenance of such filings, including preparing all sections of regulatory
filings covering Licensed Products related to Shionogi's manufacturing
activities such as drafting CMC sections of the IND and NDA for Licensed
Products and the Compound. In addition, at Peninsula's request, Shionogi shall
make appropriate personnel reasonably available for meetings with Regulatory
Authorities related to the manufacture of the Compound and/or Licensed Products.
Upon Peninsula's consent, which consent shall not be unreasonably withheld,
Shionogi may have representatives attend any of Peninsula's scheduled meetings
with Regulatory Authorities related to the Licensed Product at


                                      15.
<PAGE>
Shionogi's expense. Peninsula shall provide to Shionogi copies of all
communications from Regulatory Authorities relating to the Specifications and/or
the manufacturing process for the Compound and/or Licensed Product.

      4.3 REGULATORY MATTERS. During the term of the Agreement, the Parties
shall discuss as appropriate the requirements of Regulatory Authorities in the
Territory related to the Compound and/or Licensed Products, including labeling
requirements. If a Regulatory Authority in the Territory requires or requests
any documents related to the manufacture of the Compound and/or Licensed
Products, Peninsula shall notify Shionogi and Shionogi shall promptly provide
such documents to Peninsula so that Peninsula may comply with such request.

      4.4 RECORDS. Shionogi shall maintain complete, accurate, and authentic
accounts, notes, data, and records pertaining to its manufacture, processing,
testing, Quality Control Procedures test results, packaging, labeling, storage,
and distribution of the Compound and Licensed Products including, without
limitation, master production and control records, batch production and control
records, and Licensed Product complaint files, in accordance with applicable
laws and regulations. Shionogi shall retain such records for the period of time
set forth in the Quality Memorandum agreed to by the Parties, which period of
time shall be in accordance with applicable laws and regulations.

      4.5 SAMPLE RETENTION. Shionogi shall retain samples of each Batch of
Compound used to produce Licensed Products and each Batch of finally formulated
Licensed Products supplied to Peninsula pursuant to this Agreement as described
in the Quality Memorandum.

      4.6 PRODUCT RECALLS, MARKET WITHDRAWALS, OR CORRECTIONS.

            (A) Each Party shall maintain records as may be necessary to permit
a recall or a field correction of any of the Licensed Products delivered to
Peninsula or to customers of Peninsula or its Affiliates or sublicensees
("PENINSULA CUSTOMERS") in the Territory that is effected either voluntarily or
under a threat of, or a directive by, any governmental agency. Each Party shall
notify the other Party immediately in person or by telephone, facsimile, or
email (to be confirmed in writing within the reasonable period to be agreed in
the Quality Memorandum) upon discovery that any Licensed Product is the subject
of a recall, market withdrawal, or correction. The decision to initiate a recall
or to take some other corrective action, if any, shall be made and implemented
solely by Peninsula. Shionogi will cooperate as reasonably required by Peninsula
in accordance with all applicable laws and regulations, including assisting with
the development of a recall plan. Subject to Section 4.6(b), Peninsula shall
bear the cost and expense of all recalls, market withdrawals, or corrections of
Licensed Products.

            (B) To the extent that a recall, market withdrawal, or correction
results from, or arises out of, Shionogi's failure to comply with GMP or other
applicable laws or regulations or to manufacture Licensed Products that conform
to the Specifications, or defects in the Licensed Products arising out of the
manufacture of such Licensed Products by Shionogi or a Third Party Manufacturer,
then (i) such action shall be made at Shionogi's cost and expense, and (ii)
Shionogi shall, at Peninsula's option, either refund Peninsula for the Transfer
Price paid by Peninsula for such Licensed Products, credit an amount equal to
the Transfer Price paid by


                                      16.
<PAGE>
Peninsula for such Licensed Products against future orders of Licensed Products
submitted by Peninsula hereunder, or replace the affected Licensed Products with
replacement Licensed Products manufactured in compliance with GMP and other
applicable laws and regulations and that conform to the Specifications, free of
charge, as soon as practicable after the date that Peninsula notifies Shionogi
regarding such event with respect to Licensed Products. Peninsula agrees to use
all reasonable efforts to minimize the costs and expenses of carrying out a
recall, market withdrawal, or correction, including, without limitation, using
both internal and external resources where appropriate to conduct the activities
required to carry out a recall, market withdrawal, or correction.

      4.7 PRODUCT RETURNS. Peninsula shall be solely responsible for handling
customer returns of Licensed Products in the Territory. Shionogi shall provide
Peninsula with such assistance as Peninsula may reasonably require to handle
such returns.

      4.8 CUSTOMER QUESTIONS AND COMPLAINTS. Peninsula shall have the sole
responsibility for responding to questions and complaints relating to Licensed
Products from Peninsula Customers. Questions or complaints received by Shionogi
from Peninsula Customers relating to Licensed Products shall be promptly
referred to Peninsula. Shionogi shall provide Peninsula reasonable technical
assistance and cooperate as reasonably required to allow Peninsula to determine
the cause of and resolve any customer questions and complaints. Such assistance
shall include follow-up investigations, including testing. In addition, within
the reasonable period to be agreed in the Quality Memorandum from the date of
Peninsula's request, Shionogi shall provide Peninsula with all necessary
information in its possession that will enable Peninsula to respond properly to
questions or complaints related to the Licensed Products. The Quality Memorandum
agreed to by the Parties shall include detailed procedures for responding to
questions and complaints relating to Licensed Products. Unless it is determined
that the cause of any customer complaint resulted from Shionogi's failure to
manufacture the Licensed Products in compliance with GMP or other applicable
laws or regulations or in conformance with the Specifications, all costs arising
out of handling Peninsula Customer questions and complaints shall be borne by
Peninsula.

      4.9 FIELD ALERT REPORTING. If either Party receives any information with
respect to Licensed Products (a) concerning any incident that causes the
Licensed Product or its labeling to be mistaken for, or applied to another
article, or (b) concerning any bacteriological contamination, or any significant
chemical, physical, or other change or deterioration in a distributed Licensed
Product, or any failure of one or more distributed Batches to meet the
Specifications (a "FIELD ALERT"), such Party shall notify the other Party
immediately in person or by telephone, facsimile, or email (to be confirmed in
writing within the reasonable period to be agreed in the Quality Memorandum).
Peninsula shall be responsible for receiving, investigating, and documenting all
such information relating to such Field Alerts. Peninsula will be solely
responsible for filing all post-marketing Field Alert reports required by
Regulatory Authorities, or as required by applicable laws or regulations in the
Territory. Shionogi will cooperate as reasonably required by Peninsula with the
investigation of such incidents in the Territory. If the Field Alert arises out
of Shionogi's failure to manufacture the Licensed Products in compliance with
GMP or other applicable laws or regulations or in conformance with the
Specifications,


                                      17.
<PAGE>
Shionogi shall bear Peninsula's out-of-pocket costs of investigating and
responding to such field alert, and shall replace the affected Licensed Products
with replacement Licensed Products that have been manufactured in compliance
with GMP and other applicable laws and regulations and that conform to the
Specifications as soon as practicable after Shionogi becomes aware of such Field
Alert. The Quality Memorandum agreed to by the Parties shall include detailed
procedures for responding to Field Alerts.

      4.10 GOVERNMENTAL INSPECTIONS. Shionogi shall promptly advise Peninsula of
any notice or request that it or any Third Party Manufacturer receives from a
governmental agency or Regulatory Authority in the Territory regarding
inspection of its facilities relating to its manufacture of or the Fill and
Finish Work for the Licensed Products, and shall permit (to the extent
reasonably practicable) Peninsula or its designated representative to attend
such inspection. In addition, if a governmental agency or Regulatory Authority
in the Territory requests that it be permitted to inspect Shionogi's facilities
or the facilities of any Third Party Manufacturer relating to the manufacture of
the Compound or Licensed Products, Shionogi shall permit such inspection, and
shall require a Third Party Manufacturer to permit such inspection, and shall
allow Peninsula or its designated representative to attend such inspection.
Shionogi shall provide to Peninsula all correspondence and reports that it
receives or is forwarded by a Third Party Manufacturer from a governmental
agency or Regulatory Authority in connection with the manufacture of or Fill and
Finish Work for Licensed Products supplied to Peninsula or for any other
Shionogi product that may reasonably affect the supply of Licensed Products to
Peninsula hereunder such that Shionogi and Peninsula may discuss such
correspondence or reports and cooperate in responding to Regulatory Authorities
as appropriate. Shionogi shall, in a timely manner, rectify or procure the
rectification of any deficiencies identified during the course of any audit
pursuant to Section 3.7 or any inspection by a Regulatory Authority pursuant to
this Section 4.10.

                                   ARTICLE 5

                                PRICE AND PAYMENT

      5.1 PRICE. Peninsula shall pay Shionogi a transfer price (the "TRANSFER
PRICE") for Licensed Products supplied by Shionogi for commercial sale
hereunder, which price is based upon the total kilograms (potency) of Compound
in the Licensed Products purchased by Peninsula on an annual basis, in
accordance with the following table:

<TABLE>
<CAPTION>
         TOTAL KILOGRAMS                         PRICE PER 250 MG VIAL OF    PRICE PER 500 MG VIAL OF
         PURCHASED DURING YEAR                   LICENSED PRODUCT            LICENSED PRODUCT
<S>                                              <C>                         <C>
         less than [*] kg                                 [*]                         [*]
         [*] kg or more, but less than [*] kg             [*]                         [*]
</TABLE>

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      18.
<PAGE>
<TABLE>
<CAPTION>
         TOTAL KILOGRAMS                         PRICE PER 250 MG VIAL OF    PRICE PER 500 MG VIAL OF
         PURCHASED DURING YEAR                   LICENSED PRODUCT            LICENSED PRODUCT
<S>                                              <C>                         <C>
         [*] kg or more, but less than [*] kg             [*]                         [*]
         [*] kg or more, but less than [*] kg             [*]                         [*]
         [*] kg or more                                   [*]                         [*]
</TABLE>

The prices per 250 mg and 500 mg vials of Licensed Product that appear in the
same row in the above table as the total kilograms of Compound purchased by
Peninsula during the applicable calendar year are the prices applicable to all
quantities of 250 mg and 500 mg vials of Licensed Product purchased by Peninsula
during such calendar year. All payments for the supply of Licensed Products
hereunder shall be made in accordance with this Article 5.

      5.2 PAYMENT OF TRANSFER PRICE.

            (A) PRICE ESTIMATE. For Licensed Products shipped to Peninsula by
Shionogi hereunder during a calendar year, Peninsula shall pay Shionogi, in
accordance with clause (b) below, an estimate of the Transfer Price for such
Licensed Products as follows:

                  (i) During the first calendar year in which Peninsula is
purchasing Licensed Products for commercial sale hereunder, the estimated
Transfer Price will equal the sum of the number of 250 mg vials of Licensed
Product supplied to Peninsula in the particular shipment multiplied by [*], plus
the number of 500 mg vials of Licensed Product supplied to Peninsula in the
particular shipment multiplied by [*].

                  (ii) In each subsequent calendar year, the estimated Transfer
Price will equal the number of vials of Licensed Product supplied to Peninsula
in the particular shipment, multiplied by the Actual Price (as defined below) of
such Licensed Product for the prior calendar year.

            (B) PAYMENT OF ESTIMATE. For a particular shipment of Licensed
Products, Shionogi shall notify Peninsula when such shipment is ready for
delivery, and shall notify Peninsula of the estimated Transfer Price for such
shipment, determined as provided in clause (a) above. Peninsula shall promptly
pay any such estimated Transfer Price in [*] by remitting such payment by bank
wire transfer in immediately available funds to an account designated by
Shionogi. Shionogi shall also provide Peninsula a written invoice for such
estimated Transfer Price for such shipment.

            (C) RECONCILIATION. Promptly after the end of a particular calendar
year, Peninsula shall determine the total kilograms of Compound in Licensed
Products paid for by Peninsula during such calendar year, and shall determine,
based on the schedule in Section 5.1, the actual total Transfer Price payable
for such Licensed Products pursuant to Section 5.1. If the estimated Transfer
Price payments paid to Shionogi for such Licensed Products supplied in such

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      19.
<PAGE>
particular calendar year is less than the actual Transfer Price amount owed by
Peninsula to Shionogi under Section 5.1 (the "ACTUAL PRICE"), Peninsula shall
pay to Shionogi the difference between such amounts. Conversely, if the
estimated Transfer Price payments paid to Shionogi for such Licensed Products
supplied in such calendar year exceeds the Actual Price for such year, Shionogi
shall pay to Peninsula the difference between such amounts. The Parties shall
determine the amounts due, if any, under this Section 5.2(c) within thirty (30)
days after the end of the applicable calendar year. If Peninsula is required to
make a reconciling payment to Shionogi, Peninsula shall pay such amount in [*]
at the time that it makes its next estimated Transfer Price payment to Shionogi
under Section 5.2(b). If Shionogi is required to make a reconciling payment to
Peninsula, Shionogi shall credit the amount of such payment against subsequent
payments due by Peninsula under Section 5.2(b) until such time as the amount of
the reconciling payment has been fully credited to Peninsula. Notwithstanding
the foregoing, if a Party owes a reconciling payment to the other Party under
this Section 5.2(c) and there are no future payments due by Peninsula against
which the amount of such payment may be credited, if applicable, or if Peninsula
will not be making any future payments to Shionogi under Section 5.2(b), the
Party owing a reconciling payment hereunder shall make such payment to the other
Party by wire transfer in [*] no later than thirty (30) days after the end of
the applicable calendar year.

      5.3 EXCHANGE RATE FLUCTUATIONS. If the average exchange ratio of Japanese
Yen to U.S. dollars during any consecutive twelve (12) month period during the
term of this Agreement (the "PAYMENT RATE") varies by more than [*] percent
([*]%) from the average exchange ratio of Japanese Yen per U.S. dollars during
the [*] months immediately prior to the Effective Date (the "BASE LINE RATE"),
then the profit or loss resulting from that portion of the Payment Rate that
varies from the Base Line Rate by more than [*] percent ([*]%) shall be shared
equally by Shionogi and Peninsula. If a drastic change in the economic
circumstances (including a large fluctuation in Japanese Yen/U.S. dollar) occurs
such that the price adjustment system above no longer sufficiently benefits
either of the Parties, Shionogi and Peninsula shall amicably discuss at that
time how to rectify the situation. For the purpose of this Section 5.3, the
exchange ratio shall be deemed to be the exchange rate calculated by Sumitomo
Mitsui Banking Corporation on the date of the applicable payment.

      5.4 TAXES. Shionogi shall pay any and all taxes levied on account of
payments it receives under this Agreement. All amounts due hereunder shall be
without deduction of exchange, collection or other charges, provided that if
Peninsula is required to withhold and pay on behalf of Shionogi any income or
other similar tax with respect to the amounts payable under this Agreement,
Peninsula shall deduct such tax payments from and offset against said payments
prior to remittance to Shionogi; and further provided that in regard to any tax
so deducted, Peninsula shall give or cause to be given to Shionogi such
assistance as may reasonably be necessary to enable Shionogi to claim exemption
therefrom or credit therefor, and in each case shall furnish Shionogi proper
evidence of the taxes paid on its behalf.

                                   ARTICLE 6

                         REPRESENTATIONS AND WARRANTIES

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      20.
<PAGE>

      6.1   MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party represents and
warrants the following:

            (A) CORPORATE POWER. Such Party is duly organized and validly
existing under the laws of the state and/or nation of its organization and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.

            (B) DUE AUTHORIZATION. Such Party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder. The person
executing this Agreement on such Party's behalf has been duly authorized to do
so by all requisite corporate action.

            (C) BINDING AGREEMENT. This Agreement is a legal and valid
obligation binding upon the Parties and enforceable in accordance with its
terms. The execution, delivery and performance of this Agreement by each Party
does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which it may be bound, nor, to the
Parties' knowledge, does it violate any material law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.

      6.2   WARRANTIES OF SHIONOGI. Shionogi warrants that:

            (A) all of the Licensed Products supplied to Peninsula under this
Agreement shall conform to the Specifications at the time of delivery to
Peninsula and shall be manufactured in accordance with GMP and all other
applicable laws and regulations;

            (B) all of the Licensed Products supplied to Peninsula shall have
free and clear title;

            (C) the Licensed Products, at the time of delivery to Peninsula,
shall not be adulterated or misbranded within the meaning of the FD&C Act, and
shall not be articles that may not, under the provisions of Sections 404 and 505
of the FD&C Act, be introduced into interstate commerce;

            (D) as of the Effective Date, Shionogi has not received any
citations with respect to its manufacturing facilities, including without
limitation FDA Form 483s or warning letters, and is not currently subject to an
FDA consent decree or other action of a Regulatory Authority impacting the
manufacture of the Licensed Products by Shionogi under this Agreement; and

            (E) as of the Effective Date and to the best of Shionogi's
knowledge, the manufacturing activities of the Compound and/or Licensed Products
hereunder and the related importation by Peninsula of the Compound and/or
Licensed Products into the Territory will not infringe any Intellectual Property
Rights of any Third Party.

      6.3   SAVE AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATION OR
WARRANTY WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PURPOSE, IS MADE OR GIVEN BY
OR ON BEHALF OF


                                      21.
<PAGE>
PENINSULA OR SHIONOGI. ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY
OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

                                    ARTICLE 7

                                 INDEMNIFICATION

      7.1   INDEMNITY.

            (A) BY SHIONOGI. Shionogi shall indemnify, defend, and hold harmless
Peninsula and Peninsula's directors, officers, employees, agents, and Peninsula
Customers (the "PENINSULA INDEMNITEES") from and against any and all third party
liabilities, claims, suits, losses, costs, and expenses (including reasonable
attorneys' fees and expenses for litigation) (collectively "CLAIMS") resulting
from or arising out of (i) the manufacture and/or supply of Licensed Product by
Shionogi or a Third Party Manufacturer contracted by Shionogi, (ii) the
negligence or willful misconduct of Shionogi or its officers, directors,
employees, or agents; or (iii) Shionogi's breach of its obligations,
representations, or warranties under this Agreement. Such indemnity shall not
apply to the extent that a Claim arises out of or results from the negligence or
willful misconduct of any of the Peninsula Indemnitees or a breach of
Peninsula's obligations, representations, or warranties under this Agreement, or
if Peninsula fails to comply with the indemnification procedures set forth in
Section 7.1(c).

            (B) BY PENINSULA. Peninsula shall indemnify, defend, and hold
harmless Shionogi and its Affiliates, including Shionogi's and its Affiliates'
directors, officers, employees, and agents (the "SHIONOGI INDEMNITEES") from and
against any and all Claims resulting from or arising out of (i) the storage,
distribution, marketing, promotion, and use of the Licensed Products supplied to
Peninsula hereunder (except to the extent that the harm was caused by the
storage or distribution of Licensed Products by Shionogi or the Shionogi
Indemnitees), (ii) the negligence or willful misconduct of Peninsula or the
Peninsula Indemnitees, or (iii) Peninsula's breach of its obligations,
representations, or warranties under this Agreement. Such indemnity shall not
apply if Shionogi fails to comply with the indemnification procedures set forth
in Section 7.1(c) or to the extent that a Claim arises out of or results from
(A) the negligence or willful misconduct of any of the Shionogi Indemnitees, or
(B) a breach of Shionogi's obligations, representations, or warranties. For
clarity, Shionogi's or a Third Party Manufacturer's infringement of a Third
Party's Intellectual Property Rights outside the Territory are not subject to
the foregoing indemnification. In addition, defense and resolution of Claims
relating to manufacturing processes shall be governed by Section 7.1(d) below
and not this subsection(b).

            (C) INDEMNIFICATION PROCEDURES. If either Party is entitled to
indemnification under this Article 7 (the "INDEMNIFIED PARTY"), it shall give
written notice to the Party providing indemnification (the "INDEMNIFYING PARTY")
of any Claim that may be subject to indemnification promptly after learning of
such Claim, and the Indemnifying Party shall assume the defense of such Claim
with counsel reasonably satisfactory to the Indemnified Party. If such defense
is assumed by the Indemnifying Party with counsel so selected, the Indemnifying
Party


                                      22.
<PAGE>
will not be subject to any liability for any settlement of such Claim made by
the Indemnified Party without the Indemnifying Party's consent (but such consent
will not be unreasonably withheld or delayed), and will not be obligated to pay
the fees and expenses of any separate counsel retained by the Indemnified Party
with respect to such Claim.

            (D) INFRINGEMENT OF THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS.
Notwithstanding and without application of the foregoing, in the event that a
Party becomes aware of any Claim of infringement of a Third Party's Intellectual
Property Rights in the Territory with respect to the manufacturing activities by
Shionogi or a Third Party Manufacturer hereunder or the related importation by
Peninsula of the resulting Compound and/or Licensed Products into the Territory
(except to the extent that such Claim arises out of the infringement of a patent
claiming the composition of matter of the Compound and/or Licensed Products),
the Parties shall meet and discuss diligently to find a resolution to such
Claim, including without limitation, acquiring a license from such Third Party
or developing new processes to avoid such infringement. In such case, if the
Parties determine that it is likely that the Third Party will prevail in such
Claim, then Shionogi has no obligation to continue to supply Peninsula with the
Compound and/or Licensed Product, which is considered to be infringing, so long
as such infringement exists, but provided that Shionogi uses best efforts to
find a solution to the infringement (such as by changing the manufacturing
process so as to avoid such infringement or acquiring a license under such Third
Party Intellectual Property Rights). In the case that such a Claim is asserted
against either Peninsula or Shionogi in the Territory, Peninsula shall defend
and, if appropriate, settle such Claim, in consultation with Shionogi, and
Shionogi shall give Peninsula any and all available information in its
possession or control and shall assist Peninsula in defending or otherwise
dealing with such Claim. Any damages, royalties, settlement fees or legal costs
and expenses (the "Defense Costs") incurred by Peninsula as a result of
Peninsula's activity to defend against and/or settle such Claim shall be [*] by
the Parties; provided, however, that Shionogi shall not be obligated, based on
[*], to reimburse or pay, as of a particular time, any share of such Defense
Costs to the extent that the aggregate amount of such Defense Costs that has
been paid or reimbursed by Shionogi would exceed [*] percent ([*]%) of the
aggregate Actual Price set forth in Subsection 5.2(c) that has been paid by
Peninsula to Shionogi since the Effective Date. Peninsula shall provide to
Shionogi written invoices setting forth Shionogi's [*] percent ([*]%) share of
the Defense Costs. Peninsula shall consult with Shionogi and obtain its written
consent prior to making any settlement or agreement with the Third Party
asserting such Claim, such consent not to be unreasonably withheld or delayed.

      7.2   LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES
INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS AND LOSS OF USE, ARISING FROM OR
RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS
SECTION 7.2 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR
OBLIGATIONS OF ANY PARTY UNDER SECTION 7.1, OR DAMAGES AVAILABLE FOR BREACHES OF
CONFIDENTIALITY OBLIGATIONS IN ARTICLE 8.

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      23.
<PAGE>
                                    ARTICLE 8

                                 CONFIDENTIALITY

      8.1   CONFIDENTIALITY. Except to the extent expressly authorized by this
Agreement or otherwise agreed to in writing by the Parties, each Party agrees
that, for the term of this Agreement and for five (5) years thereafter, it shall
keep confidential and shall not publish or otherwise disclose and shall not use
for any purpose other than as provided for in this Agreement any Confidential
Information furnished to it by the other Party pursuant to this Agreement,
except that the foregoing shall not apply to any information for which the
receiving Party can demonstrate, by competent proof, that it:

            (A) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;

            (B) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;

            (C) later became part of the public domain through no act or
omission of the receiving Party;

            (D) was disclosed to the receiving Party, other than under an
obligation of confidentiality to a third Party, by a third Party who had no
obligation to the disclosing Party not to disclose such information to others;
or

            (E) was independently developed by employees of either Party who
were unaware of and did not have access to Confidential Information disclosed by
either Party.

      8.2   AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information disclosed to it by the other Party to the extent such disclosure is
reasonably necessary for the following reasons:

            (A) regulatory filings, including filings with the U.S. Securities
Exchange Commission and Regulatory Authorities and filings with Regulatory
Authorities;

            (B) prosecuting or defending litigation;

            (C) complying with applicable governmental regulations and legal
requirements; and

            (D) disclosure to Affiliates, sublicensees, advisors, consultants,
potential investors, and potential subcontractors or sublicensees that may
manufacture, sell, and/or distribute Licensed Products who agree in writing to
be bound by terms of confidentiality and limitation-on-use obligations that are
similar to those set forth in Section 8.1 hereof.

                                      24.
<PAGE>
      Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to this
Section 8.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and use best efforts to secure
confidential treatment of such information. In any event, the Parties agree to
take all reasonable actions to avoid any unauthorized use or disclosure of
Confidential Information hereunder.

      8.3   EMPLOYEES; AGENTS. Each Party shall ensure that each employee,
consultant, or other agent of it, or of its Affiliates or sublicensees, or other
person or entity who has access to Confidential Information is bound to
obligations of confidentiality and non-use at least equivalent in scope to those
set forth in Sections 8.1 and 8.2.

      8.4   INJUNCTIVE RELIEF. The Parties expressly acknowledge and agree that
any breach or threatened breach of this Article 8 may cause immediate and
irreparable harm to the disclosing Party which may not be adequately compensated
by damages. Each Party therefore agrees that in the event of such breach or
threatened breach and in addition to any remedies available at law, the
disclosing Party shall have the right to secure equitable and injunctive relief,
without bond, in connection with such a breach or threatened breach.

                                    ARTICLE 9

                              TERM AND TERMINATION

      9.1   AGREEMENT TERM. This Agreement shall commence on the Effective Date
and shall continue in effect until the earlier of (a) the date on which the
License Agreement expires or terminates under Article 17 of the License
Agreement, and (b) the date on which this Agreement is terminated under this
Article 9.

      9.2   MATERIAL BREACH BY SHIONOGI. Peninsula shall have the right to
terminate this Agreement upon written notice to Shionogi if, after receiving
written notice of a material breach of this Agreement, Shionogi fails to cure
such breach within [*] days from the date of such notice.

            (A) THIRD PARTY MANUFACTURER. If Peninsula terminates the Agreement
under Section 9.2 and, on the effective date of such termination, an agreement
between Shionogi and a Third Party Manufacturer is in effect for such Third
Party Manufacturer to perform Fill and Finish Work and/or to manufacture the
Compound or Licensed Products, then at Peninsula's request, Shionogi shall use
diligent efforts to assign such agreement to Peninsula as soon as possible.

            (B) MANUFACTURING LICENSE. Shionogi shall be deemed to have
automatically granted to Peninsula a non-exclusive, license (with the right to
sublicense through multiple tiers of sublicensees) under all Intellectual
Property Rights owned or Controlled by Shionogi that are useful or necessary to
manufacture Licensed Products, to make or have made Licensed Products for use
and sale solely in the Territory on the date that is [*] days after Peninsula
has provided notice of material breach to Shionogi. Such license shall [*],

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      25.
<PAGE>
which [*] shall be negotiated in good faith at the time that the license is
deemed to have been granted by Shionogi.

            (C) TECHNOLOGY TRANSFER. At Peninsula's request, and at [*] cost and
expense, Shionogi shall provide to Peninsula or its designee any and all
technical assistance and training as Peninsula may reasonably require to enable
Peninsula or its designee to manufacture or have manufactured Licensed Products.

            (D) WIND-DOWN PERIOD. Peninsula shall retain the right to order and
obtain from Shionogi supply of Licensed Products, up to Shionogi's reasonable
capacity for such supply, on the terms hereof. Shionogi shall continue to supply
Licensed Products to Peninsula on the terms set forth in this Agreement, for a
period of up to [*] months after the effective date of termination (such period,
the "WIND-DOWN PERIOD"). The pricing provisions set forth in Article 5 shall
apply to the supply of Licensed Products to Peninsula during the Wind-Down
Period. At Peninsula's option, Shionogi shall supply bulk Compound, up to
Shionogi's reasonable capacity for such supply, to Peninsula during the
Wind-Down Period at a supply price to be negotiated by the Parties in good
faith.

            (E) RAW MATERIALS. Shionogi shall notify Peninsula of the identity
of the suppliers of raw materials and intermediates used to manufacture Licensed
Products and shall use its best efforts to assist Peninsula to procure all raw
materials necessary to manufacture Licensed Products from such suppliers.

      9.3   MATERIAL BREACH BY PENINSULA.

            (A) If Peninsula materially breaches this Agreement by failing to
pay when due any amounts owed by it hereunder (a "Non-Payment Material Breach")
and does not cure such breach within [*] days from the date on which Shionogi
provides written notice to Peninsula identifying such breach, Shionogi shall
have the right, upon written notice to Peninsula, to suspend its supply
obligations to Peninsula until such time as Peninsula has cured such breach. If
Peninsula does not cure such breach within [*] months after receiving written
notice of such breach from Shionogi, Shionogi shall have the right to terminate
this Agreement immediately.

            (B) If Peninsula materially breaches this Agreement and such breach
is not a Non-Payment Material Breach, Shionogi shall have the right to terminate
this Agreement if Peninsula does not cure such breach within [*] from the date
on which Shionogi provides written notice to Peninsula identifying such breach.

      9.4   ACCRUED RIGHTS; SURVIVING OBLIGATIONS. Termination of this Agreement
shall not affect any accrued rights of either Party. The terms of Sections 4.4
(Records), 4.5 (Sample Retention), 4.6 (Product Recalls, Market Withdrawals, or
Corrections), 4.7 (Product Returns), 4.8 (Customer Questions and Complaints),
4.9 (Field Alert Reporting), 5.2(c) (Reconciliation), 9.2 (Material Breach by
Shionogi), 9.4 (Accrued Rights; Surviving Obligations); 10.1 (Governing Law),
10.2 (Dispute Resolution), 10.9 (Severability), 10.11 (No Waiver), and 10.12

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                      26.
<PAGE>
(Further Actions), and Articles 7 (Indemnification), and 8 (Confidentiality) of
this Agreement shall survive termination or expiration of this Agreement.

                                   ARTICLE 10

                            MISCELLANEOUS PROVISIONS

      10.1  GOVERNING LAW. This Agreement shall be interpreted and construed in
accordance with the laws of the State of New York, without reference to the
principles of conflict of laws. This Agreement was prepared in the English
language, which language shall govern the interpretation of and any dispute
regarding the terms of the Agreement.

      10.2  DISPUTE RESOLUTION.

            (A) Any controversies, disputes, or claims arising between the
Parties in connection with this Agreement that the Parties are unable otherwise
to resolve shall be referred to the President of Peninsula and the [*] of
Shionogi or other appropriate officer of Shionogi appointed by Shionogi, who
shall promptly meet and use good faith, diligent efforts to seek to resolve the
matter. If such officers are unable to resolve a matter presented to them under
the preceding sentence within thirty (30) days of referral, and if such dispute
relates to scientific or technical issues, the Parties shall mutually agree upon
an independent Third Party with an appropriate scientific or technical
background to resolve such dispute. Such independent Third Party's decision
shall be binding on the Parties. All other disputes that the officers are unable
to resolve shall be referred to arbitration in accordance with Section 10.2(b).

            (B) Any controversy or disputes or claims arising between the
Parties in connection with this Agreement which are not scientific or technical
and have not been settled by the officers of the Parties under Section 10.2(a)
shall be finally settled under the Rules of Arbitration of the International
Chamber of Commerce in Paris, France, by one or more arbitrators appointed in
accordance with said Rules. The arbitration shall be held in San Francisco (the
United States) if requested by Shionogi, or in Osaka (Japan) if requested by
Peninsula. The arbitrator shall be authorized to grant any temporary,
preliminary, or permanent equitable remedy or relief he or she deems just and
equitable and within the scope of this Agreement, including, without limitation,
an injunction or order for specific performance. In addition, the arbitrator
shall be authorized to award compensatory damages. Any award or decision made in
such arbitration shall be final and binding upon the Parties.

      10.3  ENTIRE AGREEMENT. This Agreement and the License Agreement
constitute the entire, final and complete agreement and understanding between
the Parties, and replaces and supersedes all prior discussions and agreements
between them, with respect to the subject matter hereof. No amendment,
modification or waiver of any terms or conditions hereof shall be effective
unless made in writing and signed by a duly authorized officer of each Party.

      10.4  SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of each of the Parties, their successors and permitted
assigns. Neither Party shall be entitled to assign any rights hereunder to any
Party without the prior written consent of the other


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      27.
<PAGE>
Party, except that a Party may assign this Agreement to its successor in
interest pursuant to a merger, acquisition, reorganization, consolidation or
sale of all or substantially all of the assets of the business to which this
Agreement relates without the other Party's consent provided that the License
Agreement is also concurrently assigned to such successor in interest. Any
attempted assignment that does not comply with the requirements of this Section
10.4 shall be null and void.

      10.5  FORCE MAJEURE. Each Party shall be excused from the performance of
its obligations under this Agreement to the extent that such performance is
prevented by force majeure, i.e., any events beyond the reasonable control of
the Party which shall include, but not be restricted to, fire, flood,
earthquake, explosion, riot, strike, lockout, war and regulations of any
governmental authority. The affected Party shall promptly provide notice of such
force majeure to the other Party. Such excuse of performance shall continue for
so long as the condition constituting force majeure continues and solely to the
extent the inability to perform is caused by such condition, and provided that
the affected Party takes reasonable efforts to avoid the effects of such
condition and to perform if possible. Notwithstanding the foregoing, a force
majeure condition shall not excuse Peninsula from making any payments owed
hereunder, unless such force majeure event actually prevents Peninsula's ability
to make such payment. Either Party shall notify the other Party promptly in the
event of any indications of any force majeure conditions occurring and shall
discuss the effect of such conditions on this Agreement and the measures to be
taken. Each Party shall use its best efforts to reasonably avoid or restrict any
detrimental effects in connection with such incidents.

      10.6  NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing, in English, shall specifically refer to this
Agreement, and shall be addressed to the appropriate Party at the address
specified in this Section 10.6 or such other address as may be specified by such
Party in writing in accordance with this Section 10.6, and shall be deemed to
have been sufficiently given for all purposes (a) when received, if
hand-delivered, sent by a reputable overnight delivery service, or by facsimile
(provided that such facsimile is later confirmed in writing), or (b) five (5)
business days after mailing, if mailed by first class certified or registered
mail, postage prepaid, return receipt requested.

      For Shionogi:      Shionogi & Co., Ltd.
                         1-8, Doshomachi 3-chome, Chuo-ku
                         Osaka  541-0045, Japan
                         Attn:  General Manager, International Business Division
                         Fax:  +81-6-6202-0886

      With copy to:      Shionogi & Co., Ltd.
                         1-8, Doshomachi 3-chome, Chuo-ku
                         Osaka  541-0045, Japan
                         Attn:  General Manager, Legal Affairs Dept.
                         Fax:  +81-6-6202-0886

                                      28.
<PAGE>
      For Peninsula:     Peninsula Pharmaceuticals, Inc.
                         1701 Harbor Bay Parkway
                         Alameda, CA  94502
                         Attn: Office of the President
                         Fax:  +1-(510) 747-3940

      With a copy to:    Cooley Godward LLP
                         Five Palo Alto Square
                         3000 El Camino Real
                         Palo Alto, CA  94306
                         Attention:  Barclay James Kamb, Esq.
                         Fax:  +1-(650) 849-7400

      10.7  NO STRICT CONSTRUCTION. This Agreement has been prepared jointly and
shall not be strictly construed against either Party. Ambiguities, if any, in
this Agreement shall not be construed against any Party, irrespective of which
Party may be deemed to have authored the ambiguous provision.

      10.8  COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.

      10.9  SEVERABILITY. If any one or more of the provisions of this Agreement
is held to be invalid, illegal, or unenforceable by any court of competent
jurisdiction from which no appeal can be or is taken, the provision shall be
considered severed from this Agreement and shall not serve to invalidate any
remaining provisions hereof. The Parties shall make a good faith effort to
replace any invalid or unenforceable provision with a valid and enforceable one
such that the objectives contemplated by the Parties when entering this
Agreement may be realized.

      10.10 HEADINGS. The headings contained in this Agreement have been added
for convenience only and shall not affect the construction, meaning or
interpretation of this Agreement or any of its terms and conditions.

      10.11 NO WAIVER. Any delay in enforcing a Party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party's rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

      10.12 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

      10.13 RELATIONSHIP OF THE PARTIES. This Agreement shall not constitute any
Party the legal representative or agent of the other, nor shall any Party have
the right or authority to assume, create, or incur any third-party liability or
obligation of any kind, either express or implied, against, in the name of, or
on behalf of the other except as expressly set forth in this Agreement.

                                      29.
<PAGE>
      10.14 EXPORT CONTROL. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States of America or other countries which may be imposed upon or related to
Shionogi or Peninsula from time to time. Each Party agrees that it will not
export, directly or indirectly, any technical information acquired from the
other Party under this Agreement or any products using such technical
information to a location or in a manner that at the time of export requires an
export license or other governmental approval, without first obtaining the
written consent to do so from the appropriate agency or other governmental
entity.

      IN WITNESS WHEREOF, the Parties have executed this Agreement on the
Effective Date.

SHIONOGI & CO., LTD.                         PENINSULA PHARMACEUTICALS, INC.

By:      / s / Masaharu Mori                 By:       / s / Paul. F. Truex
   ---------------------------------            --------------------------------
Name:  Masaharu Mori                         Name:  Paul F. Truex
Title: General Manager,                      Title: President
       International Business Division       Place: Alameda, CA
Place: Osaka                                 Date:  July 16, 2003
Date:  July 11, 2003


                                      30.
<PAGE>
                                    EXHIBIT A

                                    COMPOUND

[Chemical structure of the Compound]


                  (CHEMICAL STRUCTURE OF THE COMPOUND GRAPHIC)



                                      31.
<PAGE>
                                    EXHIBIT B

                                 SPECIFICATIONS

SPECIFICATIONS FOR THE DRUG SUBSTANCE, DORIPENEM MONOHYDRATE

<TABLE>
<CAPTION>
                TEST             ACCEPTANCE LIMITS
                ----             -----------------
<S>                              <C>
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
                [*]                    [*]
</TABLE>

* [*]


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      32.
<PAGE>
TENTATIVE SPECIFICATIONS FOR DORIPENEM FOR INJECTION, 250 MG/VIAL

<TABLE>
<CAPTION>
                TEST             ACCEPTANCE LIMITS
                ----             -----------------
<S>                              <C>
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
</TABLE>

* [*]


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      33.
<PAGE>
TENTATIVE SPECIFICATIONS FOR DORIPENEM FOR INJECTION, 500 MG/VIAL

<TABLE>
<CAPTION>
                TEST             ACCEPTANCE LIMITS
                ----             -----------------
<S>                              <C>
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
                [*]                  [*]
</TABLE>

* [*]


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      34.
<PAGE>
MASTER FORMULA AND METHOD OF INVESTIGATIONAL DRUG FOR DORIPENEM FOR INJECTION,
250 MG/VIAL (10 VIALS) (ABSTRACT)

A.  Packaging materials and specifications

<TABLE>
<CAPTION>
        Materials       Specifications     Number per box      Registration No.
        ---------       --------------     --------------      ----------------
<S>     <C>          <C>                   <C>                 <C>
[*]        [*]       [*]                        [*]                  [*]
[*]        [*]       [*]                        [*]                  [*]
           [*]       [*]                        [*]                  [*]
[*]        [*]       [*]                        [*]                  [*]
           [*]       [*]                        [*]                  [*]
           [*]       [*]                        [*]                  [*]
</TABLE>

B.  Specifications

1. [*]
   (1) [*]
   (2) [*]
   (3) [*]

2. [*]
   (1) [*]
       [*]
       [*]
       [*]
   (2) [*]
       [*]
       [*]
       [*]
       [*]
       [*]
   (3) [*]
       [*]

3. [*]
   (1) [*]
   (2) [*]
   (3) [*]
   (4) [*]
   (5) [*]

4. [*]
   (1) [*]
   (2) [*]


[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      35.
<PAGE>
MASTER FORMULA AND METHOD OF INVESTIGATIONAL DRUG FOR DORIPENEM FOR INJECTION,
500 MG/VIAL (10 VIALS) (ABSTRACT)

A.  Packaging materials and specifications


<TABLE>
<CAPTION>
        Materials       Specifications     Number per box      Registration No.
        ---------       --------------     --------------      ----------------
<S>     <C>          <C>                   <C>                 <C>
[*]        [*]       [*]                        [*]                  [*]
[*]        [*]       [*]                        [*]                  [*]
[*]        [*]       [*]                        [*]                  [*]
           [*]       [*]                        [*]                  [*]
</TABLE>

B.  Specifications

1. [*]
   (1) [*]
   (2) [*]
   (3) [*]

2. [*]
   (1) [*]
       [*]
       [*]
   (2) [*]
       [*]
       [*]
       [*]
       [*]
   (3) [*]
       [*]

3. [*]
   (1) [*]
   (2) [*]
   (3) [*]

4. [*]
   (1) [*]
   (2) [*]

[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.


                                      36.