20-F

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 20-F

(Mark One)
o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended: December 31, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission file number: 001-13896

Elan Corporation, plc

(Exact name of Registrant as specified in its charter)

Ireland
(Jurisdiction of
incorporation or organization) Treasury Building, Lower Grand Canal Street,
Dublin 2, Ireland
(Address of principal executive offices)

William Daniel, Secretary

Elan Corporation, plc

Treasury Building, Lower Grand Canal Street

Dublin 2, Ireland

011-353-1-709-4000

liam.daniel@elan.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on Which Registered
American Depositary Shares (ADSs), representing Ordinary Shares,	New York Stock Exchange
Par value €0.05 each (Ordinary Shares) Ordinary Shares	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 471,413,777 Ordinary Shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  Yes o     No þ

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  þ     Accelerated filer  o     Non-accelerated filer  o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP þ International Financial Reporting Standards as issued by the International Accounting Standards Board o     Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 o     Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes o     No þ

TABLE OF CONTENTS

			Page
General				3
Forward-Looking Statements				3
Part I
	Item 1.	Identity of Directors, Senior Management and Advisers		4
	Item 2.	Offer Statistics and Expected Timetable		4
	Item 3.	Key Information		4
	Item 4.	Information on the Company		13
	Item 4A.	Unresolved Staff Comments		30
	Item 5.	Operating and Financial Review and Prospects		30
	Item 6.	Directors, Senior Management and Employees		55
	Item 7.	Major Shareholders and Related Party Transactions		69
	Item 8.	Financial Information		71
	Item 9.	The Offer and Listing		71
	Item 10.	Additional Information		73
	Item 11.	Quantitative and Qualitative Disclosures about Market Risk		79
	Item 12.	Description of Securities Other than Equity Securities		80
Part II
	Item 13.	Defaults, Dividend Arrearages and Delinquencies		81
	Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		81
	Item 15.	Controls and Procedures		81
	Item 16.	Reserved		83
	Item 16A.	Audit Committee Financial Expert		83
	Item 16B.	Code of Ethics		83
	Item 16C.	Principal Accountant Fees and Services		83
	Item 16D.	Exemptions from the Listing Standards for Audit Committees		85
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		85
Part III
	Item 17.	Consolidated Financial Statements		85
	Item 18.	Consolidated Financial Statements		85
	Item 19.	Exhibits		148
Signatures				150
Financial Statement Schedule				151
EXHIBIT 4.(A)(3)
EXHIBIT 4.(B)(1)
EXHIBIT 4.(B)(2)
EXHIBIT 4.(C)(12)
EXHIBIT 4.(C)(18)
EXHIBIT 4.(C)(19)
EXHIBIT 4.(C)(20)
EXHIBIT 4.(C)(21)
EXHIBIT 4.(C)(22)
EXHIBIT 4.(C)(23)
EXHIBIT 8.1
EXHIBIT 12.1
EXHIBIT 12.2
EXHIBIT 13.1
EXHIBIT 13.2
EXHIBIT 15.1

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General

As used herein, “we”, “our”, “us”, “Elan” and the “Company” refer to Elan Corporation, plc (public limited company) and its consolidated subsidiaries, unless the context requires otherwise. All product names appearing in italics are trademarks of Elan. Non-italicized product names are trademarks of other companies.

Our Consolidated Financial Statements contained in this Form 20-F have been prepared on the basis of accounting principles generally accepted in the United States (U.S. GAAP). In addition to the Consolidated Financial Statements contained in this Form 20-F, we also prepare separate Consolidated Financial Statements, included in our Annual Report, in accordance with International Financial Reporting Standards (IFRS), which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

Unless otherwise indicated, our Consolidated Financial Statements and other financial data contained in this Form 20-F are presented in United States (U.S.) dollars ($). We prepare our Consolidated Financial Statements on the basis of a calendar fiscal year beginning on January 1 and ending on December 31. References to a fiscal year in this Form 20-F shall be references to the fiscal year ending on December 31 of that year. In this Form 20-F, financial results and operating statistics are, unless otherwise indicated, stated on the basis of such fiscal years.

Forward-Looking Statements

Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, our results could be materially affected.

This Form 20-F contains forward-looking statements about our financial condition, results of operations and estimates, business prospects and products and potential products that involve substantial risks and uncertainties. These statements can be identified by the fact that they use words such as “anticipate”, “estimate”, “project”, “intend”, “plan”, “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or events. Among the factors that could cause actual results to differ materially from those described or projected herein are the following: (1) the potential of Tysabri^® (natalizumab) and the incidence of serious adverse events associated with Tysabri (including cases of progressive multifocal leukoencephalopathy (PML)); (2) the success of our research and development (R&D) activities (including, in particular, whether the Phase 2 and 3 clinical trials for AAB-001 and the Phase 1 clinical trials for ACC-001 are successful) and the speed with which regulatory authorizations and product launches may be achieved; (3) our ability to maintain financial flexibility and sufficient cash, cash equivalents, and investments and other assets capable of being monetized to meet our liquidity requirements; (4) whether restrictive covenants in our debt obligations will adversely affect us; (5) competitive developments affecting our products, including the introduction of generic competition following the loss of patent protection or marketing exclusivity for our products (including, in particular, Maxipime^® (cefepime hydrochloride), which lost its basic U.S. patent protection in March 2007 and now faces generic competition, Azactam^® (aztreonam for injection, USP), which lost its basic U.S. patent protection in October 2005 and several of the products from which we derive manufacturing or royalty revenues, which are under patent challenge by potential generic competitors); (6) our ability to protect our patents and other intellectual property; (7) difficulties or delays in manufacturing our products (we are dependent on third parties for the manufacture of our products); (8) trade buying patterns; (9) pricing pressures and uncertainties regarding healthcare reimbursement and reform; (10) the failure to comply with anti-kickback and false claims laws in the United States (including, in particular, with respect to past marketing practices with respect to our former Zonegran^® product, which are being investigated by the U.S. Department of Justice and the U.S. Department of Health and Human Services. The resolution of the Zonegran matter could require us to pay substantial fines and to take other actions that could have a material adverse effect on us); (11) extensive government regulation; (12) risks from potential environmental liabilities; (13) failure to comply with our reporting and payment obligations under Medicaid or other government programs; (14) exposure to product liability risks; (15) an adverse effect that could result from the putative class action lawsuits initiated following the voluntary suspension of the commercialization and clinical dosing of Tysabri and the outcome of our other pending or future litigation; (16) the volatility of our stock price; and (17) some of our agreements that may discourage or prevent someone from acquiring us. We assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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Part I

Item 1.   Identity of Directors, Senior Management and Advisers.

Not applicable.

Item 2.   Offer Statistics and Expected Timetable.

Not applicable.

Item 3.   Key Information.

A.   Selected Financial Data

The selected financial data set forth below is derived from our Consolidated Financial Statements and should be read in conjunction with, and is qualified by reference to, Item 5. “Operating and Financial Review and Prospects” and our Consolidated Financial Statements and related notes thereto.

Years Ended December 31,	2007			2006			2005			2004			2003
	(In millions, except per share data)
Income Statement Data:
Total revenue	$	759.4		$	560.4		$	490.3		$	481.7		$	685.6
Operating loss	$	(265.3	)(1)	$	(166.4	)(2)	$	(198.5	)(3)	$	(302.1	)(4)	$	(360.5	)(5)
Net loss from continuing operations	$	(405.0	)	$	(267.3	)	$	(384.2	)	$	(413.7	)	$	(474.6	)
Net income/(loss) from discontinued operations		—			—			0.6			19.0			(31.5	)
Net loss	$	(405.0	)(6)	$	(267.3	)(2)	$	(383.6	)(7)	$	(394.7	)(4)	$	(506.1	)(8)
Basic and diluted loss per Ordinary Share:(9)
Net loss from continuing operations	$	(0.86	)	$	(0.62	)	$	(0.93	)	$	(1.06	)	$	(1.33	)
Net income/(loss) from discontinued operations (net of tax)		—			—			—			0.05			(0.09	)
Total basic and diluted loss per Ordinary Share	$	(0.86	)	$	(0.62	)	$	(0.93	)	$	(1.01	)	$	(1.42	)

At December 31,	2007			2006		2005		2004		2003
	(In millions)
Balance Sheet Data:
Cash and cash equivalents	$	423.5		$	1,510.6	$	1,080.7	$	1,347.6	$	778.2
Restricted cash	$	29.6		$	23.2	$	24.9	$	192.7	$	33.1
Investment securities — current	$	276.9		$	11.2	$	10.0	$	65.5	$	349.4
Total assets	$	1,781.4		$	2,746.3	$	2,340.9	$	2,975.9	$	3,029.8
Debt	$	1,765.0		$	2,378.2	$	2,017.2	$	2,260.0	$	1,500.0
Total shareholders’ equity/(deficit)	$	(234.7	)	$	85.1	$	16.9	$	205.0	$	617.9
Weighted-average number of shares outstanding — Basic and diluted		468.3			433.3		413.5		390.1		356.0

(1)	After other net charges of $84.6 million, primarily relating to a $52.2 million impairment of the Maxipime and Azactam intangible assets and net severance and restructuring costs of $32.4 million.
(2)	After other net gains of $20.3 million, primarily relating to an arbitration award of $49.8 million, offset by acquired in-process research and development costs of $22.0 million and severance, restructuring and other costs of $7.5 million; and after a $43.1 million net gain on sale of products and businesses.
(3)	After other net charges of $4.4 million, primarily relating to net severance, restructuring and other costs of $14.4 million, offset by a credit of $10.0 million primarily associated with a litigation settlement; and after a $103.4 million net gain on sale of businesses.
(4)	After other net charges of $59.8 million, primarily relating to the settlement of the U.S. Securities and Exchange Commission (SEC) investigation and the shareholder class action lawsuit of $56.0 million; and after a $44.2 million net gain on sale of businesses.

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(5)	After other net charges of $403.2 million, primarily relating to asset impairments of $32.6 million, severance, restructuring and other costs of $29.7 million, Elan Pharmaceuticals Investments II, Ltd. (EPIL II)/Elan Pharmaceuticals III, Ltd. waiver fee of $16.8 million, and the purchase of royalty rights of $297.6 million; and after a net gain of $267.8 million on the sale of businesses and repurchase of debt.
(6)	After other net charges of $84.6 million, primarily relating to a $52.2 million impairment of the Maxipime and Azactam intangible assets and net severance and restructuring costs of $32.4 million; and after an $18.8 million net charge on debt retirement.
(7)	After other net charges of $4.4 million, primarily relating to net severance, restructuring and other costs of $14.4 million, offset by a credit of $10.0 million primarily associated with a litigation settlement; a $103.4 million net gain on sale of businesses; and after a net charge of $51.8 million on the retirement of debt.
(8)	After other net charges of $403.2 million, primarily relating to asset impairments of $32.6 million, severance, restructuring and other costs of $29.7 million and the purchase of royalty rights of $297.6 million, offset by a net gain of $267.8 million on the sale of businesses and repurchase of debt; and after charges of $136.5 million, primarily relating to investments and the guarantee issued to the noteholders of EPIL II.
(9)	Earnings per share is based on the weighted-average number of outstanding Ordinary Shares and the effect of potential dilutive securities including stock options, Restricted Stock Units (RSUs), warrants and convertible debt securities, unless anti-dilutive.

B.   Capitalization and Indebtedness

Not applicable.

C.   Reasons for the Offer and Use of Proceeds

Not applicable.

D.   Risk Factors

You should carefully consider all of the information set forth in this Form 20-F, including the following risk factors, when investing in our securities. The risks described below are not the only ones that we face. Additional risks not currently known to us or that we presently deem immaterial may also impair our business operations. We could be materially adversely affected by any of these risks. This Form 20-F also contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by such forward-looking statements.

Our future success depends upon the continued successful commercialization of Tysabri and the successful development and commercialization of additional products. If Tysabri is not commercially successful, either because of the incidence of serious adverse events associated with Tysabri (including cases of PML) or for other reasons, or if our Phase 2 and 3 clinical trials for AAB-001 are not successful and we do not successfully develop and commercialize additional products, we will be materially and adversely affected.

While approximately 40% of our 2007 revenue was generated by our Elan Drug Technologies (EDT) business unit, we have only four marketed products and several potential products in clinical development. Our future success depends upon the continued successful commercialization of Tysabri and the development and the successful commercialization of additional products.

Uncertainty created by the serious adverse events that have occurred or may occur, with respect to Tysabri, and the restrictive labeling and distribution system for Tysabri mandated by regulatory agencies, may significantly impair the commercial potential for Tysabri. If there are more serious adverse events in patients treated with Tysabri (including cases of PML), then we may be seriously and adversely affected.

We commit substantial resources to our R&D activities, including collaborations with third parties such as Biogen Idec Inc. (Biogen Idec) with respect to Tysabri, and Wyeth and Transition Therapeutics, Inc. (Transition), with respect to parts of our Alzheimer’s disease (AD) programs. We have committed significant resources to the development and the commercialization of Tysabri and to the other potential products in our development pipeline (in particular, AAB-001). These investments may not be successful.

In the pharmaceutical industry, the R&D process is lengthy, expensive and involves a high degree of risk and uncertainty. This process is conducted in various stages and, during each stage, there is a substantial risk that potential products in our R&D pipeline, including product candidates from our Alzheimer’s disease research programs such as AAB-001, ELND005 and ACC-001, will experience difficulties, delays or failures. If our Phase 2 and 3 clinical trials for AAB-001 are not successfully completed, we will be materially and adversely affected.

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A number of factors could affect our ability to successfully develop and commercialize products, including our ability to:

•  Establish sufficient safety and efficacy of new drugs or biologics;

•  Obtain and protect necessary intellectual property for new technologies, products and processes;

•  Recruit patients in clinical trials;

•  Complete clinical trials on a timely basis;

•  Observe applicable regulatory requirements;

•  Receive and maintain required regulatory approvals;

•  Obtain competitive/favorable reimbursement coverage for developed products on a timely basis;

•  Manufacture or have manufactured sufficient commercial quantities of products at reasonable costs;

•  Effectively market developed products; and

•  Compete successfully against alternative products or therapies.

Even if we obtain positive results from preclinical or clinical trials, we may not achieve the same success in future trials. Earlier stage trials are generally based on a limited number of patients and may, upon review, be revised or negated by authorities or by later stage clinical results. The results from preclinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in initial clinical trials, but subsequently failed to establish sufficient safety and effectiveness data to obtain necessary regulatory approvals. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. Clinical trials may not demonstrate statistically sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates. In addition, as happened with Tysabri, unexpected serious adverse events can occur in patients taking a product after the product has been commercialized.

Our failure to successfully commercialize Tysabri and develop and commercialize other products (such as AAB-001) would materially adversely affect us.

We have substantial future cash needs and potential cash needs and we may not be successful in generating or otherwise obtaining the funds necessary to meet our other future and potential needs.

At December 31, 2007, we had $1,765.0 million of debt. At such date, we had cash and cash equivalents, current restricted cash and current investments of $720.5 million. Our substantial indebtedness could have important consequences to us. For example, it does or could:

•  Increase our vulnerability to general adverse economic and industry conditions;

•  Require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the availability of our cash flow to fund R&D, working capital, capital expenditures, acquisitions, investments and other general corporate purposes;

•  Limit our flexibility in planning for, or reacting to, changes in our businesses and the markets in which we operate;

•  Place us at a competitive disadvantage compared to our competitors that have less debt; and

•  Limit our ability to borrow additional funds.

We estimate that we have sufficient cash, liquid resources and current assets and investments to meet our liquidity requirements for at least the next 12 months. Although we expect to continue to incur operating losses in 2008, in making our liquidity estimates, we have also assumed a certain level of operating performance. Our future operating performance will be affected by general economic, financial, competitive, legislative, regulatory and business conditions and other factors, many of which are beyond our control. If our future operating performance does not meet our expectations, including our failure to continue to successfully commercialize Tysabri, then we

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could be required to obtain additional funds. If our estimates are incorrect or are not consistent with actual future developments and we are required to obtain additional funds, then we may not be able to obtain those funds on commercially reasonable terms, or at all, which would have a material adverse effect on our financial condition. In addition, if we are not able to generate sufficient liquidity from operations, we may be forced to curtail programs, sell assets or otherwise take steps to reduce expenses. Any of these steps may have a material adverse effect on our prospects.

Restrictive covenants in our debt instruments restrict or prohibit our ability to engage in or enter into a variety of transactions, which could adversely affect us.

The agreements governing our outstanding indebtedness contain various restrictive covenants that limit our financial and operating flexibility. The covenants do not require us to maintain or adhere to any specific financial ratio, but do restrict within limits our ability to, among other things:

•  Incur additional debt;

•  Create liens;

•  Enter into transactions with related parties;

•  Enter into some types of investment transactions;

•  Engage in some asset sales or sale and leaseback transactions;

•  Pay dividends or buy back our Ordinary Shares; and

•  Consolidate, merge with, or sell substantially all our assets to, another entity.

The breach of any of these covenants may result in a default under the applicable agreement, which could result in the indebtedness under the agreement becoming immediately due and payable. Any such acceleration would result in a default under our other indebtedness subject to cross-acceleration provisions. If this were to occur, we might not be able to pay our debts or obtain sufficient funds to refinance them on reasonable terms, or at all. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategies and compete against companies not subject to similar constraints.

Our industry and the markets for our products are highly competitive.

The pharmaceutical industry is highly competitive. Our principal pharmaceutical competitors consist of major international companies, many of which are larger and have greater financial resources, technical staff, manufacturing, R&D and marketing capabilities than Elan. We also compete with smaller research companies and generic drug manufacturers.

A drug may be subject to competition from alternative therapies during the period of patent protection or regulatory exclusivity and, thereafter, it may be subject to further competition from generic products. The price of pharmaceutical products typically declines as competition increases.

Our product Azactam lost its basic U.S. patent protection in October 2005. To date, no generic Azactam product has been approved.

In addition, the U.S. basic patent covering our product Maxipime expired in March 2007. Maxipime became subject to generic competition following the expiration of the basic patent, and that has materially and adversely affected our sales of Maxipime.

Generic competitors have challenged existing patent protection for several of the products from which we earn manufacturing or royalty revenue. If these challenges are successful, our manufacturing and royalty revenue will be materially and adversely affected.

Generic competitors do not have to bear the same level of R&D and other expenses associated with bringing a new branded product to market. As a result, they can charge much less for a competing version of our product. Managed care organizations typically favor generics over brand name drugs, and governments encourage, or under

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some circumstances mandate, the use of generic products, thereby reducing the sales of branded products that are no longer patent protected. Governmental and other pressures toward the dispensing of generic products may rapidly and significantly reduce, or slow the growth in, the sales and profitability of any of our products not protected by patents or regulatory exclusivity and may adversely affect our future results and financial condition. The launch of competitive products, including generic versions of our products, has had and will have a material and adverse affect on our revenues and results of operations.

Our competitive position depends, in part, upon our continuing ability to discover, acquire and develop innovative, cost-effective new products, as well as new indications and product improvements protected by patents and other intellectual property rights. We also compete on the basis of price and product differentiation and through our sales and marketing organization. If we fail to maintain our competitive position, then our revenues and results of operations may be materially adversely affected.

If we are unable to secure or enforce patent rights, trade secrets or other intellectual property, then our revenues and potential revenues may be materially reduced and we may be subject to substantial fines and judgments.

Because of the significant time and expense involved in developing new products and obtaining regulatory approvals, it is very important to obtain patent and intellectual property protection for new technologies, products and processes. Our success depends in large part on our continued ability to obtain patents for our products and technologies, maintain patent protection for both acquired and developed products, preserve our trade secrets, obtain and preserve other intellectual property such as trademarks and copyrights, and operate without infringing the proprietary rights of third parties.

The degree of patent protection that will be afforded to technologies, products and processes, including ours, in the United States and in other markets is dependent upon the scope of protection decided upon by patent offices, courts and legislatures in these countries. There is no certainty that our existing patents or, if obtained, future patents, will provide us substantial protection or commercial benefit. In addition, there is no assurance that our patent applications or patent applications licensed from third parties will ultimately be granted or that those patents that have been issued or are issued in the future will prevail in any court challenge. Our competitors may also develop products, including generic products, similar to ours using methods and technologies that are beyond the scope of our patent protection, which could adversely affect the sales of our products.

Although we believe that we make reasonable efforts to protect our intellectual property rights and to ensure that our proprietary technology does not infringe the rights of other parties, we cannot ascertain the existence of all potentially conflicting claims. Therefore, there is a risk that third parties may make claims of infringement against our products or technologies. In addition, third parties may be able to obtain patents that prevent the sale of our products or require us to obtain a license and pay significant fees or royalties in order to continue selling our products.

There has been, and we expect there will continue to be, significant litigation in the industry regarding patents and other intellectual property rights. Litigation and other proceedings concerning patents and other intellectual property rights in which we are involved have been and will continue to be protracted, expensive and could be distracting to our management. Our competitors may sue us as a means of delaying the introduction of our products. Any litigation, including any interference proceedings to determine priority of inventions, oppositions to patents or litigation against our licensors may be costly and time consuming and could adversely affect us. In addition, litigation has been and may be instituted to determine the validity, scope or non-infringement of patent rights claimed by third parties to be pertinent to the manufacturing, use or sale of our or their products. The outcome of any such litigation could adversely affect the validity and scope of our patents or other intellectual property rights, hinder, delay or prevent the marketing and sale of our products and cost us substantial sums of money.

If we experience significant delays in the manufacture of our products or in the supply of raw materials for our products, then sales of our products could be materially adversely affected.

We do not manufacture Tysabri, Prialt, Maxipime or Azactam. Our dependence upon collaborators and third parties for the manufacture of our products may result in unforeseen delays or other problems beyond our control.

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For example, if our third-party manufacturers are not in compliance with current good manufacturing practices (cGMP) or other applicable regulatory requirements, then the supply of our products could be materially adversely affected. If we are unable to retain or obtain replacements for our third-party manufacturers or if we experience delays or difficulties with our third-party manufacturers in producing our products (as we did with Maxipime in 2006 and prior years), then sales of these products could be materially and adversely affected. In this event, we may be unable to enter into alternative manufacturing arrangements on commercially reasonable terms, if at all.

Our manufacturers require supplies of raw materials for the manufacture of our products. We do not have dual sourcing of our required raw materials. The inability to obtain sufficient quantities of required raw materials could materially adversely affect the supply of our products.

Buying patterns of wholesalers and distributors may cause fluctuations in our periodic results.

Our product revenue may vary periodically due, in part, to buying patterns of our wholesalers and distributors. In the event that wholesalers and distributors determine, for any reason, to limit purchases of our products, sales of those products would be adversely affected. For example, wholesalers and distributors may order products in larger than normal quantities prior to anticipated price increases for those products. This excess purchasing in any period could cause sales of those products to be lower than expected in subsequent periods.

We are subject to pricing pressures and uncertainties regarding healthcare reimbursement and reform.

In the United States, many pharmaceutical products and biologics are subject to increasing pricing pressures, including pressures arising from recent Medicare reform. Our ability to commercialize products successfully depends, in part, upon the extent to which healthcare providers are reimbursed by third-party payers, such as governmental agencies, including the Centers for Medicare and Medicaid Services, private health insurers and other organizations, such as health maintenance organizations (HMOs), for the cost of such products and related treatments. In addition, if healthcare providers do not view current or future Medicare reimbursements for our products favorably, then they may not prescribe our products. Third-party payers are increasingly challenging the pricing of pharmaceutical products by, among other things, limiting the pharmaceutical products that are on their formulary lists. As a result, competition among pharmaceutical companies to place their products on these formulary lists has reduced product prices. If reasonable reimbursement for our products is unavailable or if significant downward pricing pressures in the industry occur, then we could be materially adversely affected.

Recent reforms in Medicare added a prescription drug reimbursement benefit for all Medicare beneficiaries. Although we cannot predict the full effects on our business of this legislation, it is possible that the new benefit, which is being managed by private health insurers, pharmacy benefit managers, and other managed care organizations, will result in decreased reimbursement for prescription drugs, which may further exacerbate industry-wide pressure to reduce the prices charged for prescription drugs. This could harm our ability to generate revenues. In addition, managed care organizations, HMOs, preferred provider organizations, institutions and other government agencies continue to seek price discounts. In addition, certain states have proposed and certain other states have adopted various programs to control prices for their seniors’ and low-income drug programs, including price or patient reimbursement constraints, restrictions on access to certain products, importation from other countries, such as Canada, and bulk purchasing of drugs.

We encounter similar regulatory and legislative issues in most other countries. In the European Union (EU) and some other international markets, the government provides health care at low direct cost to consumers and regulates pharmaceutical prices or patient reimbursement levels to control costs for the government-sponsored healthcare system. This price regulation leads to inconsistent prices and some third-party trade in our products from markets with lower prices. Such trade-exploiting price differences between countries could undermine our sales in markets with higher prices.

The pharmaceutical industry is subject to anti-kickback and false claims laws in the United States.

In addition to the U.S. Food and Drug Administration (FDA) restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict some marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes.

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The federal healthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one-hand, and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting some common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Additionally, another pharmaceutical company settled charges under the federal False Claims Act relating to off-label promotion. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines, and imprisonment.

In January 2006, Elan received a subpoena from the U.S. Department of Justice and the Department of Health and Human Services, Office of Inspector General, asking for documents and materials primarily related to our marketing practices for Zonegran. In April 2004, we completed the sale of our interests in Zonegran in North America and Europe to Eisai Co. Ltd. (Eisai). We are cooperating with the government in its investigation. The resolution of this matter could require Elan to pay substantial fines and to take other actions that could have a material adverse effect on Elan. In April 2006, Eisai delivered to Elan a notice making a contractual claim for indemnification in connection with a similar subpoena received by Eisai.

Because of the breadth of such federal and state laws and the narrowness of the safe harbors, it is possible that more of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our liquidity and our operations.

We are subject to extensive government regulation, which may adversely affect our ability to bring new products to market and may adversely affect our ability to manufacture and market our existing products.

The pharmaceutical industry is subject to significant regulation by state, local, national and international governmental regulatory authorities. In the United States, the FDA regulates the design, development, preclinical and clinical testing, manufacturing, labeling, storing, distribution, import, export, record keeping, reporting, marketing and promotion of our pharmaceutical products, which include drugs, biologics and medical devices. Failure to comply with regulatory requirements at any stage during the regulatory process could result in, among other things, delays in the approval of applications or supplements to approved applications, refusal of a regulatory authority to review pending market approval applications or supplements to approved applications, warning letters, fines, import or export restrictions, product recalls or seizures, injunctions, total or partial suspension of production, civil penalties, withdrawals of previously approved marketing applications or licenses, recommendations by the FDA or other regulatory authorities against governmental contracts, and criminal prosecutions.

We must obtain and maintain approval for our products from regulatory authorities before such products may be sold in a particular jurisdiction. The submission of an application to a regulatory authority with respect to a product does not guarantee that approval to market the product will be granted. Each authority generally imposes its own requirements and may delay or refuse to grant approval, even though a product has been approved in another country. In our principal markets, including the United States, the approval process for a new product is complex, lengthy, expensive and subject to unanticipated delays. We cannot be sure when or whether approvals from regulatory authorities will be received or that the terms of any approval will not impose significant limitations that

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could negatively impact the potential profitability of the approved product. Even after a product is approved, it may be subject to regulatory action based on newly discovered facts about the safety and efficacy of the product, on any activities that regulatory authorities consider to be improper or as a result of changes in regulatory policy. Regulatory action may have a material adverse effect on the marketing of a product, require changes in the product’s labeling or even lead to the withdrawal of the regulatory marketing approval of the product.

All facilities and manufacturing techniques used for the manufacture of products and devices for clinical use or for sale in the United States must be operated in conformity with cGMPs, the FDA’s regulations governing the production of pharmaceutical products. There are comparable regulations in other countries. Any finding by the FDA or other regulatory authority that we are not in substantial compliance with cGMP regulations or that we or our employees have engaged in activities in violation of these regulations could interfere with the continued manufacture and distribution of the affected products, up to the entire output of such products, and, in some cases, might also require the recall of previously distributed products. Any such finding by the FDA or other regulatory agency could also affect our ability to obtain new approvals until such issues are resolved. The FDA and other regulatory authorities conduct scheduled periodic regulatory inspections of our facilities to ensure compliance with cGMP regulations. Any determination by the FDA or other regulatory authority that we, or one of our suppliers, are not in substantial compliance with these regulations or are otherwise engaged in improper or illegal activities could result in substantial fines and other penalties and could cut off our supply of products.

Our business exposes us to risks of environmental liabilities.

We use hazardous materials, chemicals and toxic compounds that could expose people or property to accidental contamination, events of non-compliance with environmental laws, regulatory enforcement and claims related to personal injury and property damage. If an accident occurred or if we were to discover contamination caused by prior operations, then we could be liable for cleanup, damages or fines, which could have an adverse effect on us.

The environmental laws of many jurisdictions impose actual and potential obligations on us to remediate contaminated sites. These obligations may relate to sites that we currently own or lease, sites that we formerly owned or operated, or sites where waste from our operations was disposed. These environmental remediation obligations could significantly impact our operating results. Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to us, and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures, as well as other costs and liabilities, which could materially adversely affect us.

If we fail to comply with our reporting and payment obligations under the Medicaid rebate program or other governmental pricing programs, then we could be subject to material reimbursements, penalties, sanctions and fines.

As a condition of reimbursement under Medicaid, we participate in the U.S. federal Medicaid rebate program, as well as several state rebate programs. Under the federal and state Medicaid rebate programs, we pay a rebate to each state for our products that are reimbursed by those programs. The amount of the rebate for each unit of product is set by law, based on reported pricing data. The rebate amount may also include a penalty if our prices increase faster than the rate of inflation.

As a manufacturer of single-source, innovator and non-innovator multiple-source products, rebate calculations vary among products and programs. The calculations are complex and, in some respects, subject to interpretation by governmental or regulatory agencies, the courts and us. The Medicaid rebate amount is computed each quarter based on our pricing data submission to the Centers for Medicare and Medicaid Services at the U.S. Department of Health and Human Services. The terms of our participation in the program impose an obligation to correct the prices reported in previous quarters, as may be necessary. Any such corrections could result in an overage or shortfall in our rebate liability for past quarters (up to 12 past quarters), depending on the direction of the correction. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid.

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U.S. Federal law requires that any company that participates in the federal Medicaid rebate program extend comparable discounts to qualified purchasers under the Public Health Services pharmaceutical pricing program. This pricing program extends discounts comparable to the Medicaid net price to a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as outpatient utilization at hospitals that serve a disproportionate share of poor patients.

Additionally, each calendar quarter, we calculate and report an Average Sales Price (ASP) for all products covered by Medicare Part B (primarily injectable or infused products). We submit ASP information for each such product within 30 days of the end of each calendar quarter. This information is then used to set reimbursement levels to reimburse Part B providers for the drugs and biologicals dispensed to Medicare Part B participants.

Furthermore, pursuant to the Veterans Health Care Act, a Non-Federal Average Manufacturer Price is calculated each quarter and a Federal Ceiling Price is calculated each year for every Covered Drug marketed by us. These prices are used to set pricing for purchases by the military arm of the government.

These price reporting obligations are complicated and often involve decisions regarding issues for which there is no clear-cut guidance from the government. Failure to submit correct pricing data can subject us to material civil, administrative and criminal penalties.

We are subject to continuing potential product liability risks, which could cost us material amounts of money.

Risks relating to product liability claims are inherent in the development, manufacturing and marketing of our products. Any person who is injured while using one of our products, or products that we are responsible for, may have a product liability claim against us. Since we distribute and sell our products to a wide number of end users, the risk of such claims could be material. Persons who participate in clinical trials involving our products may also bring product liability claims.

Excluding any self-insured arrangements, we currently do not maintain product liability insurance for the first $25.0 million of aggregate claims, but do maintain coverage for the next $175.0 million with our insurers. Our insurance coverage may not be sufficient to cover fully all potential claims, nor can we guarantee the solvency of any of our insurers.

If our claims experience results in higher rates, or if product liability insurance otherwise becomes costlier because of general economic, market or industry conditions, then we may not be able to maintain product liability coverage on acceptable terms. If sales of our products increase materially, or if we add significant products to our portfolio, then we will require increased coverage and may not be able to secure such coverage at reasonable rates or terms.

We and some of our officers and directors have been named as defendants in putative class actions; an adverse outcome in the class actions could result in a substantial judgment against us.

We and some of our officers and directors have been named as defendants in putative class actions filed in 2005. The class action complaints allege claims under the U.S. federal securities laws and state laws. The complaints allege that we caused the release of materially false or misleading information regarding Tysabri. The complaints seek damages and other relief that the courts may deem just and proper. We believe that the claims in the lawsuits are without merit and intend to defend against them vigorously.

An adverse result in the lawsuits could have a material adverse effect on us.

Our stock price is volatile, which could result in substantial losses for investors purchasing shares.

The market prices for our shares and for securities of other companies engaged primarily in biotechnology and pharmaceutical development, manufacture and distribution are highly volatile. The market price of our shares likely will continue to fluctuate due to a variety of factors, including:

•  Material public announcements by us;

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•  Developments regarding Tysabri;

•  Results of clinical trials with respect to our products under development (in particular AAB-001) and those of our competitors;

•  The timing of new product launches by others and us;

•  Events related to our marketed products and those of our competitors;

•  Regulatory issues affecting us;

•  Availability and level of third-party reimbursement;

•  Developments relating to patents and other intellectual property rights;

•  Political developments and proposed legislation affecting the pharmaceutical industry;

•  Economic and other external factors;

•  Hedge or arbitrage activities by holders of our securities;

•  Period-to-period fluctuations in our financial results or results that do not meet or exceed market expectations; and

•  Market trends relating to or affecting stock prices across our industry, whether or not related to results or news regarding our competitors or us.

Certain provisions of agreements to which we are a party may discourage or prevent a third party from acquiring us and could prevent shareholders from receiving a premium for their shares.

We are a party to agreements that may discourage a takeover attempt that might be viewed as beneficial to shareholders who wish to receive a premium for their shares from a potential bidder. For example:

•  Our collaboration agreement with Biogen Idec provides Biogen Idec with an option to buy the rights to Tysabri in the event that we undergo a change of control, which may limit our attractiveness to potential acquirers;

•  Until June 20, 2010, Biogen Idec and its affiliates are, subject to limited exceptions, restricted from, among other things, seeking to acquire or acquiring control of us;

•  Under the terms of indentures governing much of our debt, any acquirer would be required to make an offer to repurchase the debt for cash in connection with some change of control events; and

•  If we or Wyeth undergo a change of control, our collaboration agreement with Wyeth permits an acquirer to assume the role of the acquired party in most circumstances. Our collaboration agreement with Wyeth restricts Wyeth and its subsidiaries from seeking to acquire us in some circumstances.

Item 4.   Information on the Company.

A.   History and Development of the Company

Elan, an Irish public limited company, is a neuroscience-based biotechnology company headquartered in Dublin, Ireland. We were incorporated as a private limited company in Ireland in December 1969 and became a public limited company in January 1984. Our principal executive offices are located at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland, and our telephone number is 353-1-709-4000. Our principal research and development, manufacturing and marketing facilities are located in Ireland and the United States.

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B.   Business Overview

Our operations are organized into two business units: Biopharmaceuticals and Elan Drug Technologies (EDT). Biopharmaceuticals engages in research, development and commercial activities primarily in the following areas:

•  Alzheimer’s disease — Our scientists have been leaders in Alzheimer’s disease research for more than two decades, and insights from their work have evolved the field’s fundamental view of the disease. Today, we are testing several compounds in clinical studies with the hope that they may result in therapies that may alter the underlying cause of the disease.

•  Parkinson’s disease — Our research effort in Parkinson’s disease is designed to improve our understanding of the condition and, as we have done with Alzheimer’s disease, to translate that understanding into potential new approaches to treatment.

•  Multiple sclerosis (MS) — Our researchers pioneered an approach to MS that led to the approval of Tysabri, the first new class of therapy approved for relapsing remitting MS in nearly a decade.

•  Crohn’s disease (CD) — We recently gained FDA approval of Tysabri for Crohn’s disease therapy and continue to make progress in our work on this and other related disorders.

•  Severe chronic pain — Our researchers synthesized the venom of a sea snail into Prialt, the first new intrathecal treatment for severe chronic pain in nearly 20 years.

EDT is an established, profitable and growing specialty pharmaceutical business unit of Elan. For nearly 40 years, EDT has been applying its skills and knowledge to enhance the performance of dozens of drugs that have been marketed worldwide. Today, products enabled by EDT technologies are used by millions of patients each day.

ALZHEIMER’S DISEASE

Alzheimer’s disease is a degenerative brain disorder that primarily affects older people. It can begin with simple forgetfulness, but rapidly progresses into more advanced symptoms, including confusion, language disturbances, personality and behavior changes, impaired judgment and profound dementia. As the disease advances, most patients will eventually need complete skilled nursing care, and in the absence of other illnesses, the progressive loss of brain function will likely cause death. It is estimated that more than 5 million Americans and more than 24 million people worldwide, at the age of 60 years or older, suffer from some form of dementia.

Elan’s Approach to Alzheimer’s Disease

A hallmark pathology of Alzheimer’s disease is the formation of plaques made of beta amyloid that are formed through a process known as the beta amyloid cascade. Beta amyloid is actually a small part of a larger protein called the amyloid precursor protein (APP). Beta amyloid is formed when enzymes called secretases “clip” (or cleave) APP. It is becoming increasingly clear that once beta amyloid is released, it exists in multiple physical forms with distinct functional activities. It is believed that the toxic effects of these forms are likely responsible for the complex mental disruption characteristic of Alzheimer’s disease.

Our scientific approach to treating Alzheimer’s disease focuses on the beta amyloid hypothesis, as it is believed that blocking the generation of beta amyloid in the brain or enhancing the clearance of beta amyloid from the brain will result in the successful treatment of Alzheimer’s disease patients. Our efforts are focused on three distinct aspects of the beta amyloid cascade:

•  Clearing existing beta amyloid from the brain (beta amyloid immunotherapies);

•  Preventing aggregation of beta amyloid in the brain (ELND005); and

•  Preventing production of beta amyloid in the brain (secretase inhibitors).

Our scientists are investigating three key therapeutic approaches that target the elimination and prevention of production or aggregation of beta amyloid. In collaboration with Wyeth, we are developing beta amyloid immunotherapies. Separately, we have research programs focused on small molecule inhibitors of beta secretase and gamma secretase, enzymes whose actions result in the over-production of beta amyloid in the brains of patients

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with Alzheimer’s disease. In collaboration with Transition, we are developing a small molecule therapeutic that acts by breaking down and preventing the aggregation of beta amyloid fibrils.

Beta Amyloid Immunotherapies

Beta amyloid immunotherapy pioneered by Elan involves the treatment of Alzheimer’s disease by inducing or enhancing the body’s immune response in order to clear toxic species of beta amyloid from the brain. In collaboration with Wyeth, our scientists have been developing a series of monoclonal antibodies and active immunization approaches that may have the ability to selectively clear a variety of beta amyloid species. These new approaches have the potential to deliver immunotherapies with robust and specific therapeutic activity.

The first candidate from the collaboration with Wyeth, AN-1792 (an immunoconjugate vaccine), showed great promise but was discontinued in 2002 when a small subset of patients (6%) developed a type of brain inflammation. The AN-1792 program played a major role in advancing the understanding of the relationship between beta amyloid and Alzheimer’s disease, and contributed to a growing body of scientific evidence pointing to the promise of immunotherapies as potential treatments for Alzheimer’s disease. Long-term follow-up data presented in 2007 evaluated participants from the AN-1792 Phase 2 clinical trial and found that 4.5 years after dosing had stopped, patients who had responded to treatment continued to show significantly slower decline, compared to placebo patients, on two key measures of patient function: the Disability Assessment for Dementia and the Dependence Scale.

Based upon the proof of principle established by work on AN-1792, four distinct new programs emerged that seek to build upon the promising efficacy signal, including bapineuzumab (AAB-001), which is generally viewed as one of the most advanced programs with disease-modifying potential in the field, and ACC-001.

Bapineuzumab (AAB-001) and AAB-002 with Wyeth

Bapineuzumab (AAB-001) is an experimental humanized monoclonal antibody delivered intravenously that is being studied as a potential treatment for mild to moderate Alzheimer’s disease. Bapineuzumab is thought to bind to and clear beta amyloid peptide in the brain. It is designed to provide antibodies to beta amyloid directly to the patient, rather than requiring patients to mount their own immune responses. Bapineuzumab has received fast-track designation from the FDA, which means that it may receive expedited approval in certain circumstances, in recognition of its potential to address the significant unmet needs of patients with Alzheimer’s disease.

In May 2007, Elan and Wyeth announced the decision to initiate a Phase 3 clinical program for bapineuzumab. The Phase 3 program encompasses studies in North America and the rest of the world (ROW). In December 2007, we announced that the first patient had been dosed in the studies taking place in North America. It is expected that the ROW studies will begin enrolling patients during the first half of 2008.

The Phase 3 program includes four randomized, double-blinded, placebo controlled studies across two subpopulations, which are designed to total approximately 4,000 patients with mild to moderate AD at approximately 350 sites. The treatment duration for each patient is 18 months with patients to be equally distributed between North America and the rest of the world. The studies stratify patients by ApoE4 genotype, and all studies have co-primary efficacy end points — one cognitive and one functional.

Two Phase 2 studies of bapineuzumab remain ongoing and are expected to be completed in 2008. Both studies are randomized, double-blind, placebo-controlled, multiple ascending dose studies with four dose cohorts. The main Phase 2 study enrolled approximately 240 patients, and the other enrolled approximately 30 patients and included a beta amyloid imaging component. Both studies are being conducted in patients with mild to moderate Alzheimer’s disease. The patients are being followed for 18 months. Data from the Phase 1 clinical study presented in 2006 showed a statistically significant improvement, compared to placebo, on a key measure of cognitive function: the Mini-Mental State Examination.

In addition to the intravenous formulation of bapineuzumab, a subcutaneous formulation of this antibody is in Phase 1 clinical trials, and AAB-002, a back-up compound to bapineuzumab, is in the preclinical phase.

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ACC-001 (Active Immunotherapeutic Conjugate) with Wyeth

ACC-001 is a novel beta amyloid immunoconjugate that leverages the innovative conjugate technology that Wyeth has used in some of its vaccine products. ACC-001 has also been granted fast track designation by the FDA and is in Phase 2 clinical trials. The ACC-001 approach is intended to induce a highly specific antibody response to beta amyloid. The goal is to clear beta amyloid while minimizing side effects such as inflammation of the central nervous system.

ELND005 with Transition

In 2006, we entered into an exclusive, worldwide collaboration with Transition for the joint development and commercialization of a novel therapeutic agent for Alzheimer’s disease.

The molecule, ELND005, is a beta-amyloid anti-aggregate that has been granted fast track designation by the FDA. Based upon preclinical data, by blocking the aggregation of beta amyloid, clearance of amyloid occurs and plaque build up is prevented. Daily oral treatment with this compound has been shown to prevent cognitive decline in a transgenic mouse model of Alzheimer’s disease, with reduced amyloid plaque load in the brain and increased survival rate of these animals.

In December 2007, Elan and Transition announced that the first patient had been dosed in a Phase 2 clinical study. This study is a randomized, double-blind, placebo-controlled, dose-ranging study which evaluates the safety and efficacy of ELND005 in approximately 340 patients with mild to moderate Alzheimer’s disease. The patients are being followed for 18 months.

In 2007, it was also announced that multiple Phase 1 clinical studies had been completed that further evaluated the safety, tolerability and pharmacokinetic profile of this compound. ELND005 was found to be safe and well-tolerated at all doses and dosing regimens examined. No severe or serious adverse events were observed. ELND005 was also shown to be orally bioavailable, cross the blood-brain barrier and achieve levels in the brain and cerebral spinal fluid shown to be effective in animal models of Alzheimer’s disease.

Secretase Inhibitors: Beta and Gamma

Beta and gamma secretases are proteases (enzymes that break down other proteins) that appear to clip the APP, resulting in the formation of beta amyloid. This is significant because if the clipping of APP could be prevented, the pathology of Alzheimer’s disease may be changed. We have been at the forefront of research in this area, publishing extensively since 1989, and have developed and are pursuing advanced discovery programs focused on molecule inhibitors of beta and gamma secretases.

Beta Secretase

Beta secretase is believed to initiate the first step in the formation of beta amyloid, the precursor to plaque development in the brain. Our findings concerning the role beta secretase plays in beta amyloid production, published in Nature in 1999, are considered a landmark discovery. Today, we continue to be at the center of understanding the complexities of beta secretase. Our ongoing preclinical drug discovery efforts in this area focus on inhibiting beta secretase and its role in the progression of Alzheimer’s disease pathology.

Gamma Secretase

Gamma secretase is an unusual multi-protein complex that is thought to play a significant role in the formation of beta amyloid. We have played a critical leadership role in the increased awareness of how gamma secretase may affect Alzheimer’s disease pathology. Our finding, published in the Journal of Neurochemistry in 2001, that functional gamma secretase inhibitors appear to reduce beta amyloid levels in the brain, was an important step in this area of Alzheimer’s disease research. We continue to progress our gamma secretase discovery program.

In addition to internal programs, we retain certain rights to an Eli Lilly and Company (Lilly) LY 450139 compound, which arose from a collaborative research between the two companies that began in 1988 and ended in 1998. In January 2008, Lilly announced that it has commenced preparatory work for Phase 3 trials for LY 450139

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for mild to moderate AD patients, with estimated enrollment of 1,500 patients. Each patient’s participation is expected to last approximately two years.

PARKINSON’S DISEASE

About Parkinson’s Disease

Parkinson’s disease is a progressive degenerative neurologic movement disorder that destroys nerve cells in the part of the brain responsible for muscle control and movement. This creates problems walking, maintaining balance and coordination in patients diagnosed with the disease. It is estimated that 1.5 million Americans currently have Parkinson’s disease, with 60,000 new cases diagnosed each year. The condition usually develops after the age of 65, but an estimated 15% of sufferers are diagnosed before the age of 50.

Elan’s Parkinson’s Research

Parkinson’s disease is believed to be a result of misfolded proteins in the brain. Parkinson’s disease is characterized by the accumulation of aggregated alpha-synuclein, or Lewy bodies, in degenerating neurons in particular regions of the brain.

Elan’s early discovery efforts in Parkinson’s disease were guided by our expertise and leadership in Alzheimer’s disease research. Our scientists have made significant scientific progress to date in identifying unusual modified forms of alpha-synuclein in human Parkinson’s disease brain tissue. These unique forms have led us to a series of therapeutic targets that will be a focus of our small and large molecule drug discovery efforts over the next few years.

Our scientists are also studying parkin, a protein found in the brain that has been genetically linked to Parkinson’s disease. Parkin may be involved in the elimination of misfolded proteins within neurons. Some familial forms of Parkinson’s disease have been linked to mutations in parkin, and we are actively studying the relationship between parkin activity and neurodegeneration. This research is in the drug discovery stage.

MULTIPLE SCLEROSIS

In autoimmune diseases such as MS and CD, the immune system mistakenly targets the cells, tissues and organs of a person’s body, generally causing inflammation. Inflammation is a response of body tissues to trauma, infection, chemical or physical injury, allergic reaction or other factors. It is usually characterized by a collection of cells and molecules at a target site. Different autoimmune diseases affect the body in different ways. For example, in MS, the autoimmune reaction is directed against the brain, and in Crohn’s disease, it is directed against the gastrointestinal tract. Autoimmune diseases are often chronic, affecting millions of people and requiring life-long care. Most autoimmune diseases cannot currently be reversed or cured.

Alpha 4 Integrin and Tysabri

Our therapeutic strategy for treating autoimmune diseases is to identify mechanisms common to autoimmune diseases and develop novel therapeutics that stop the underlying causes of disease. Alpha 4 integrin is a protein expressed by immune cells that allows those cells to leave the bloodstream and invade target tissues. Blocking alpha 4 integrin stops immune cells from entering tissues.

Tysabri is an alpha 4 integrin antagonist. Tysabri is designed to inhibit immune cells from leaving the bloodstream and to prevent these immune cells from migrating into chronically inflamed tissue where they may cause or maintain inflammation. Tysabri was developed and is now being commercialized by Elan in collaboration with Biogen Idec.

Tysabri for the Treatment of Multiple Sclerosis

In June 2006, the FDA approved the reintroduction of Tysabri as a monotherapy to treat relapsing forms of MS. Approval for the marketing of Tysabri in the European Union was also received in June 2006. The distribution of Tysabri in both the United States and European Union commenced in July 2006. Tysabri currently is approved in

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more than 30 countries worldwide, including the United States, the countries of the European Union, Switzerland, Canada, Australia, New Zealand and Israel.

In the United States, Europe and the ROW, provisions are in place to ensure patients are informed of the risks associated with Tysabri therapy, including PML, and to enhance collection of post-marketing data on the safety and utilization of Tysabri for MS. PML is an opportunistic viral infection of the brain that usually leads to death or severe disability. Three cases of PML were detected in clinical trials with Tysabri among patients who were also taking other therapies, leading to a temporary marketing suspension of the product in the United States in February 2005.

As of late December 2007, there were approximately 21,100 patients receiving Tysabri in either clinical or commercial settings, with 12,900 patients on Tysabri in the U.S. commercial setting, 7,500 on Tysabri outside of the United States in the commercial setting, and 700 patients in global clinical trials. The safety data to date continue to support a favorable benefit-risk profile for Tysabri. There have been no new reports of confirmed cases of PML since the U.S. reintroduction and EU launch in July 2006. Global in-market net sales of Tysabri totaled $342.9 million for 2007 (2006: $38.1 million), with global net revenue reported by Elan of $231.7 million for 2007 (2006: $17.5 million).

CROHN’S DISEASE AND OTHER AUTOIMMUNE DISEASES

About Crohn’s Disease

An estimated 500,000 people in the United States have Crohn’s disease, a chronic and progressive inflammatory disease of the gastrointestinal tract that commonly affects both men and women. Approximately 170,000 patients suffer from moderate to severe forms of the disease.

The disease usually causes diarrhea and crampy abdominal pain, often associated with fever and, at times, rectal bleeding. Loss of appetite and weight loss also may occur. Complications include narrowing of the intestine, obstruction, abscesses, fistulas (abnormal channels connecting the intestine and other organs, including the skin) and malnutrition. Most patients eventually require surgery, which has both risks and potential short- and long-term complications.

Crohn’s disease can have a devastating impact on the lifestyle of patients, many of whom are young and active. Currently, there is no medical or surgical cure for CD. Many patients fail to respond to current therapies, including biological therapies such as agents that inhibit tumor necrosis factor alpha (TNF-alpha). Due to this failure of current therapies in CD, therapies that have alternate biological targets provide patients and physicians with therapeutic options.

Tysabri for the Treatment of Crohn’s Disease

We evaluated Tysabri as a treatment for CD in collaboration with Biogen Idec. The safety and efficacy of Tysabri as both an induction and maintenance therapy were evaluated in 11 clinical studies, including three pivotal, randomized, double-blind, placebo-controlled, multi-center trials.

On January 14, 2008, the FDA approved the supplemental Biologics License Application (sBLA) for Tysabri, for inducing and maintaining clinical response and remission in adult patients with moderately to severely active CD, with evidence of inflammation, who have had an inadequate response to, or are unable to tolerate, conventional CD therapies and inhibitors of TNF-alpha.

In January 2008, we were notified by the European Commission that it had denied marketing authorization of Tysabri as a treatment of Crohn’s disease.

Other Indications for Tysabri

Elan and Biogen Idec continue to explore additional indications for Tysabri, including oncology and ulcerative colitis. An Investigational New Drug (IND) application was filed for Tysabri for multiple myeloma in 2007 and a proof of concept study is planned for the first half of 2008.

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Other Autoimmune Diseases Research & Development

Our ongoing research in autoimmune diseases is primarily based on cell trafficking and focuses on discovering disease-modifying approaches to treating a wide range of autoimmune diseases, including MS and CD. Tysabri emerged from this research program. In 2007, we continued our research exploring novel anti-inflammatory approaches through our collaboration with Archemix Corp. (Archemix) in addition to our core alpha 4 integrin programs.

Since first publishing the hypothesis concerning the therapeutic potential of blocking alpha 4 integrin in 1992, our scientists have been expanding and refining our understanding of how cells enter tissues. Through this deep understanding, we have developed small molecules that can selectively block particular alpha 4 integrin interactions. We have advanced two compounds in this area, with ELND002 currently in Phase 1 and ELND004 expected to enter Phase 1 in the first half of 2008.

SEVERE CHRONIC PAIN

Our commercial activities related to meeting the needs of pain specialists addressing severe chronic pain involve Prialt, a new type of therapy for patients that we launched in the United States in January 2005.

Prialt

On December 28, 2004, the FDA approved Prialt for the management of severe chronic pain in patients for whom intrathecal therapy (IT) is warranted, and who are intolerant of or refractory to other treatments, such as systemic analgesics, adjunctive therapies or intrathecal morphine. Prialt is approved for use only in the Medtronic SynchroMed^® EL, SynchroMed^® II Infusion System and CADD-Micro^® ambulatory infusion pump.

Prialt is administered through appropriate programmable microinfusion pumps that can be implanted or external and that release the drug into the fluid surrounding the spinal cord. Prialt is in a class of non-opioid analgesics known as N-type calcium channel blockers. It is a synthetic equivalent of a naturally occurring conopeptide found in a marine snail known as Conus magus. Research suggests that the novel mechanism of action of Prialt works by targeting and blocking N-type calcium channels on nerves that ordinarily transmit pain signals.

Prialt has been evaluated as an IT infusion in more than 1,200 patients participating in chronic pain trials. The longest treatment duration to date is more than eight years. This combined number of patients represents the largest IT analgesic safety database ever complied for any IT treatment. Prialt is used in a variety of severe chronic pain patients, including patients with failed back surgery, complex regional pain syndrome, cancer, AIDS and other non-malignant causes.

In January 2005, we launched Prialt in the United States. We believe Prialt represents an important therapeutic option addressing an unmet need and that it has the potential for significant patient impact in the area of severe neuropathic pain. In October 2007, the revised Polyanalgesic Consensus Guidelines were published and recommended Prialt as a first-line alternative to morphine and hydromorphone for the IT infusion treatment of severe chronic pain. Revenue from sales of Prialt totaled $12.3 million for 2007 (2006: $12.1 million).

In March 2006, we sold the Prialt European rights to Eisai.

MAXIPIME AND AZACTAM

Severe bacterial infections remain a major medical concern. We distribute two products that treat severe bacterial infections, each designed to address medical needs within the hospital environment.

Maxipime

We licensed the U.S. marketing rights to Maxipime from Bristol-Myers Squibb Company (Bristol-Myers) in January 1999. Maxipime is a fourth-generation injectable cephalosporin antibiotic used to treat patients with serious and/or life-threatening infections. Revenue from sales of Maxipime totaled $122.5 million for 2007 (2006: $159.9 million). The basic U.S. patent on Maxipime expired in March 2007. On June 18, 2007, the first generic formulation of cefepime hydrochloride was approved by the FDA. Generic cefepime hydrochloride has, and we

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expect it will continue to, materially and adversely affect our revenues from, and gross margin for, Maxipime. While Maxipime is available through distributors, we no longer promote this product.

Azactam

We licensed the U.S. marketing rights to this injectable antibiotic from Bristol-Myers in January 1999. Azactam is a monobactam and is principally used by surgeons, infectious disease specialists and internal medicine physicians to treat pneumonia, post-surgical infections and septicemia. Azactam is often used in these infections for patients who have a known or suspected penicillin allergy. Revenue from sales of Azactam totaled $86.3 million for 2007 (2006: $77.9 million). The basic U.S. patent on Azactam expired in October 2005. No generic Azactam product has been approved to date. While Azactam is available through distributors, we no longer promote this product.

Please refer to Item 5.A. “Operating Results” for additional information concerning our revenue by category for 2007, 2006 and 2005.

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ELAN DRUG TECHNOLOGIES

EDT is an established, profitable and growing specialty pharmaceutical business unit of Elan. For nearly 40 years, EDT has been applying its skills and knowledge to enhance the performance of dozens of drugs that have been marketed worldwide. Today, products enabled by EDT technologies are used by millions of patients each day.

EDT is focused on using its extensive experience, proprietary drug delivery technologies and licensing capabilities to develop innovative products that deliver clinically meaningful benefits to patients. EDT’s product development capabilities span formulation development, clinical trial management, analytical development, clinical trial material manufacturing, product scale-up, product registration and commercial manufacturing.

EDT has manufacturing and research facilities in the United States and Ireland.

EDT generated $295.5 million in revenue in 2007, and an operating profit of $85.2 million. EDT generates revenue from two sources: from royalties and manufacturing fees from licensed products, and from contract revenues relating to R&D services, license fees and milestones.

Typically, EDT receives royalties in the single digit range as well as manufacturing fees based on cost plus arrangements where appropriate. More recently, EDT has brought product concepts to a later stage of development before out-licensing and as a result has been able to retain an increasing proportion of the economics. There are currently 22 products marketed by EDT licensees, with eight of these having been launched since 2001. EDT has a broad pipeline, with 17 products in clinical development, including three filed, four in Phase 3, five in Phase 2 and five in Phase 1. These marketed and pipeline products and EDT’s technologies are protected by an extensive intellectual property portfolio, with approximately 1,700 patents and patent applications.

Marketed Products

22 products that incorporate EDT technologies are currently marketed by EDT licensees, and on which EDT receives royalties and in some cases manufacturing fees, including:

Licensee	Product	Indication
Abbott Laboratories	TriCor®	Cholesterol
Merck & Co., Inc.	Emend®	Nausea post chemo
Novartis AG	Focalin®/Ritalin®	ADHD(1)
Wyeth	Rapamune®	Anti-Rejection
Victory Pharma	Naprelan®	NSAID(2) — Pain
King Pharmaceuticals, Inc.	Avinza®	Chronic pain
Par Pharmaceutical Co., Inc.	Megace® ES	Cachexia
Acorda Therapeutics, Inc.	Zanaflex®	Muscle spasticity

(1)	Attention Deficit Hyperactivity Disorder
(2)	Non-Steroidal Anti-Inflammatory Drug

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Product Pipeline

EDT’s current pipeline spans a range of therapeutic classes, routes of administration and licensee profiles, as outlined below. In addition, EDT has a large number of projects at the preclinical or formulation development stage.

Technologies

NanoCrystal^® Technology

EDT’s proprietary NanoCrystal technology is a drug optimization technology applicable to many poorly water-soluble compounds. It is an enabling technology for evaluating new chemical entities exhibiting poor water-solubility and a tool for optimizing the performance of established drugs. NanoCrystal technology involves reducing crystalline drugs to particles under 400 nanometers in size. By reducing particle size, the exposed surface area of the drug is increased and then stabilized to maintain particle size. The drug in NanoCrystal form can be incorporated into common dosage forms, including tablets, capsules, inhalation devices, and sterile forms for injection, with the potential for substantial improvements to clinical performance.

The potential benefits of applying the NanoCrystal technology for existing and new products include:

•  Enhancing oral bioavailability;

•  Increased therapeutic effectiveness;

•  Reducing/eliminating fed/fasted variability;

•  Optimizing delivery; and

•  Increased absorption.

EDT’s NanoCrystal technology has now been incorporated into 4 commercialized products, with more than 30 other compounds at various stages of development.

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Oral Controlled-Release (OCR) Technologies

OCR technologies provide significant benefits in developing innovative products that provide meaningful clinical benefits to patients. EDT has developed a range of OCR technologies, which it applies to help overcome many of the technical difficulties that have been encountered in developing oral controlled-release products. Oral controlled-release products are often difficult to formulate, develop and manufacture. As a result, significant experience, expertise and know-how are required to successfully develop such products.

EDT’s OCR technologies are focused on using advanced drug delivery technology and its manufacturing expertise to formulate, develop and manufacture controlled-release, oral dosage form pharmaceutical products that improve the release characteristics and efficacy of active drug agents, and also provide improved patient convenience and compliance. The drug delivery technologies employed, coupled with its manufacturing expertise, enable EDT to cost-effectively develop value-added products and to enhance product positioning.

EDT’s suite of OCR technologies has been incorporated into many commercialized products. EDT’s OCR technology platform allows a range of release profiles and dosage forms to be engineered. Customized release profiles for oral dosage forms such as extended release, delayed release and pulsatile release have all been successfully developed and commercialized.

EDT’s Business Strategy

EDT’s business strategy is focused on profitably growing its business as a specialty pharmaceutical business unit of Elan, underpinned by its product development capabilities and drug delivery technologies. In the near to medium term, EDT will continue to drive growth through its existing approved licensed products and pipeline of 17 products in clinical development. In addition, EDT will seek to generate new pipeline opportunities by entering into further licensing arrangements with pharmaceutical companies, and identifying and developing proprietary products as EDT evolves its specialty pharmaceutical business model.

EDT’s strategy, based on its comprehensive product development and proprietary technology platforms, involves two complementary elements:

•  Selectively developing product candidates based on its proprietary technologies (Proprietary Product Candidates or PPCs) where EDT originates the product concept and ultimately develops the product to a later stage of development prior to out-licensing or making a decision to continue development itself, with a view to ultimately marketing the product by itself or in co-promotion with a marketing partner; and

•  Working with pharmaceutical companies to develop products through the application of EDT technologies to their pipeline and marketed products.

Development of PPCs involves lower risk, reduced costs and faster development timelines compared to traditional new chemical entity drug development. PPCs are based on existing drugs with known safety and efficacy profiles.

EDT intends to implement its strategies in the following manner:

1. Progress EDT’s existing pipeline to generate future revenues and value;

2. Continue to build and develop EDT’s product pipeline;

3.	Capture an increasing share of revenues on products being developed by EDT through the evolution of its specialty pharmaceutical business strategy;
4.	Continue to maintain EDT’s position as a leading provider of drug optimization solutions to pharmaceutical and biotechnology licensees; and

5. Enhance and expand its technologies, products and capabilities.

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ENVIRONMENT

The U.S. market is our most important market. Refer to Note 30 to the Consolidated Financial Statements for an analysis of revenue by geographic region. For this reason, the factors discussed below, such as “Government Regulation” and “Product Approval,” place emphasis on requirements in the United States.

Government Regulation

The pharmaceutical industry is subject to significant regulation by international, national, state and local governmental regulatory agencies. Pharmaceutical product registration is primarily concerned with the safety, efficacy and quality of new drugs and devices and, in some countries, their pricing. A product must generally undergo extensive clinical trials before it can be approved for marketing. The process of developing a new pharmaceutical product, from idea to commercialization, can take in excess of 10 years.

Governmental authorities, including the FDA and comparable regulatory authorities in other countries, regulate the design, development, testing, manufacturing and marketing of pharmaceutical products. Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product seizures, import restrictions, injunctive actions and criminal prosecutions. In addition, administrative remedies can involve requests to recall violative products; the refusal of the government to enter into supply contracts; or the refusal to approve pending product approval applications for drugs, biological products or medical devices until manufacturing or other alleged deficiencies are brought into compliance. The FDA also has the authority to cause the withdrawal of approval of a marketed product or to impose labeling restrictions.

In addition, the U.S. Centers for Disease Control and Prevention regulate select biologics and toxins. This includes registration and inspection of facilities involved in the transfer or receipt of select agents. Select agents are subject to specific regulations for packaging, labeling and transport. Non-compliance with applicable requirements could result in criminal penalties and the disallowance of research and manufacturing of clinical products. Exemptions are provided for select agents used for a legitimate medical purpose or for biomedical research, such as toxins for medical use and vaccines.

The pricing of pharmaceutical products is regulated in many countries and the mechanism of price regulation varies. In the United States, while there are limited indirect federal government price controls over private sector purchases of drugs, it is not possible to predict future regulatory action on the pricing of pharmaceutical products.

In June 2001, we received a letter from the Federal Trade Commission (FTC) stating that the FTC was conducting a non-public investigation to determine whether Brightstone Pharma, Inc. (Brightstone), Elan Corporation, plc or others may have engaged in an effort to restrain trade by entering into an agreement that may restrict the ability of Brightstone or others to market a bioequivalent or generic version of Naprelan. In October 2001, our counsel met informally with the FTC staff to discuss the matter. No further communication from the FTC was received until December 2002, when we were served with a subpoena duces tecum from the FTC for the production of documents related to Naprelan. We have voluntarily provided documents and witness testimony in response to the subpoena and continue to cooperate with the FTC relating to this investigation. We do not believe that it is feasible to predict or determine the outcome of the investigation and any possible effect on our business, or to reasonably estimate the amounts or potential range of loss, if any, with respect to the resolution of the investigation.

In January 2006, we received a subpoena from the U.S. Department of Justice and the Department of Health and Human Services, Office of Inspector General, asking for documents and materials primarily related to our marketing practices for Zonegran. In April 2004, we completed the sale of our interests in Zonegran in North America and Europe to Eisai. We are cooperating with the government in its investigation. The resolution of this Zonegran matter could require Elan to pay substantial fines and to take other actions that could have a material adverse effect on Elan. In April 2006, Eisai delivered to Elan a notice making a contractual claim for indemnification in connection with a similar subpoena received by Eisai.

Product Approval

Preclinical tests assess the potential safety and efficacy of a product candidate in animal models. The results of these studies must be submitted to the FDA as part of an IND before human testing may proceed.

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The clinical trial process can take three to 10 years or more to complete, and there can be no assurance that the data collected will demonstrate that the product is safe or effective, or, in the case of a biologic product, pure and potent, or will provide sufficient data to support FDA approval of the product. The FDA may place clinical trials on hold at any point in this process if, among other reasons, it concludes that clinical subjects are being exposed to an unacceptable health risk. Trials may also be terminated by institutional review boards, which must review and approve all research involving human subjects. Side effects or adverse events that are reported during clinical trials can delay, impede or prevent marketing authorization.

The results of the preclinical and clinical testing, along with information regarding the manufacturing of the product and proposed product labeling, are evaluated and, if determined appropriate, submitted to the FDA through a license application such as a New Drug Application (NDA) or a Biologics License Application (BLA). In certain cases an Abbreviated New Drug Application (ANDA) can be filed in lieu of filing an NDA.

There can be no marketing in the United States of any drug, biologic or device for which a marketing application is required until the application is approved by the FDA. Until an application is actually approved, there can be no assurance that the information requested and submitted will be considered adequate by the FDA. Additionally, any significant change in the approved product or in how it is manufactured, including changes in formulation or the site of manufacture, generally require prior FDA approval. The packaging and labeling of all products developed by us are also subject to FDA approval and ongoing regulation.

Whether or not FDA approval has been obtained, approval of a pharmaceutical product by comparable regulatory authorities in other countries outside the United States must be obtained prior to the marketing of the product in those countries. The approval procedure varies from country to country. It can involve additional testing and the time required can differ from that required for FDA approval. Although there are procedures for unified filings for EU countries, in general, most other countries have their own procedures and requirements.

Once a product has been approved, significant legal and regulatory requirements apply in order to market a product. In the United States these include, among other things, requirements related to adverse event and other reporting, product advertising and promotion, and ongoing adherence to cGMP requirements, as well as the need to submit appropriate new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.

The FDA also enforces the requirements of the Prescription Drug Marketing Act, which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. Sales, marketing and scientific/educational grant programs must comply with the Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended.

Manufacturing

Each manufacturing establishment, including any contract manufacturers, used to manufacture a product must be listed in the product application for such product. In the United States, this means that each manufacturing establishment must be listed in the drug, biologic, or device application, and must be registered with the FDA. The application will not be approved until the FDA conducts a manufacturing inspection, approves the applicable manufacturing process for the product, and determines that the facility is in compliance with cGMP requirements.

At December 31, 2007, we employed 547 people in our manufacturing and supply activities, over half of these in Athlone, Ireland. This facility is our primary location for the manufacture of oral solid dosage products, including instant, controlled-release and oral nano particulate products. Additional dosage capabilities may be added as required to support future product introductions. Our facility in Gainesville, Georgia, United States, provides additional oral controlled-release dosage product manufacturing capability and is registered with the U.S. Drug Enforcement Administration for the manufacture, packaging and distribution of Schedule II controlled drugs.

We may invest a significant amount into building a biologics manufacturing facility in Ireland.

All facilities and manufacturing techniques used for the manufacture of products and devices for clinical use or for sale in the United States must be operated in conformity with cGMP regulations. There are FDA regulations

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governing the production of pharmaceutical products. Our facilities are also subject to periodic regulatory inspections to ensure ongoing compliance with cGMP regulations.

Patents and Intellectual Property Rights

Our competitive position depends on our ability to obtain patents on our technologies and products, to defend our patents, to protect our trade secrets and to operate without infringing the valid patents or trade secrets of others. We own or license a number of patents in the United States and other countries.

These patents cover, for example:

•  Pharmaceutical active ingredients, products containing them and their uses;

•  Pharmaceutical formulations; and

•  Product manufacturing processes.

Tysabri is covered by a number of issued patents and pending patent applications in the United States and many other countries. We have a basic U.S. patent, which expires in 2017, for Tysabri covering the humanized antibody and its use to treat MS. Additional U.S. patents and patent applications of Elan and/or our collaborator, Biogen Idec, which cover: (i) the use of Tysabri to treat irritable bowel disease and a variety of other indications and (ii) methods of manufacturing Tysabri, generally expire between 2012 and 2020. Outside the United States, patents and patent applications on the product and methods of manufacturing the product generally expire between 2014 and 2020, and may be subject to additional patent protection until 2020 in the nature of Supplementary Protection Certificates. International patents and patent applications covering methods of treatment using Tysabri would generally expire between 2012 to 2020.

In addition to our Tysabri collaboration with Biogen Idec, we have entered into licenses covering intellectual property related to Tysabri. We will pay royalties under these licenses based upon the level of Tysabri sales. We may be required to enter into additional licenses related to Tysabri intellectual property. If these licenses are not available, or are not available on reasonable terms, we may be materially and adversely affected.

The fundamental U.S. patent covering the use of Prialt to produce analgesia expires in 2016. A further U.S. patent covering the stabilized formulation of Prialt expires in 2015.

The basic U.S. patent for Maxipime expired in March 2007. An ANDA for a generic version of cefepime hydrochloride was approved by the FDA on June 18, 2007 and marketing of the generic product began immediately thereafter. Following this introduction of generic cefepime to the market, our revenues from, and gross margin for, Maxipime were materially and adversely affected.

The basic U.S. patent for Azactam expired in October 2005. Azactam is expected to face generic competition, which is expected to have a substantial adverse effect on our revenues from, and gross margin for, this product.

The primary patents covering Elan’s NanoCrystal technology expire in the United States in 2011 and in some countries outside the United States in 2012. We also have numerous U.S. and international patents and patent applications that relate to our NanoCrystal drug optimization technology applicable to poorly water-soluble compounds.

In addition, we have a robust patent estate resulting from our Alzheimer’s disease research.

Competition

The pharmaceutical industry is highly competitive. Our principal pharmaceutical competitors consist of major international companies, many of which are larger and have greater financial resources, technical staff, manufacturing, R&D and marketing capabilities than we have. We also compete with smaller research companies and generic drug manufacturers.

Tysabri, a treatment for relapsing forms of MS, competes primarily with Avonex^® marketed by our collaborator Biogen Idec, Betaseron^® marketed by Berlex (an affiliate of Bayer Schering Pharma AG) in the United States and sold under the name Betaferon^® by Bayer Schering Pharma in Europe, Rebif^® marketed by Merck Serono and

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Pfizer Inc. (Pfizer) in the United States and by Merck Serono in Europe, and Copaxone^® marketed by Teva Neurosciences, Inc. (Teva) in the United States and co-promoted by Teva and Sanofi-Aventis in Europe. Many companies are working to develop new therapies or alternative formulations of products for MS, which if successfully developed would compete with Tysabri.

A drug may be subject to competition from alternative therapies during the period of patent protection or regulatory exclusivity and, thereafter, it may be subject to further competition from generic products. Our product Azactam lost its basic U.S. patent protection in October 2005, and the basic U.S. patent for Maxipime expired in March 2007.

Generic competitors have challenged existing patent protection for some of the products from which we earn manufacturing or royalty revenue. If these challenges are successful, our manufacturing and royalty revenue will be materially and adversely affected.

Governmental and other pressures toward the dispensing of generic products may rapidly and significantly reduce, slow or reverse the growth in, sales and profitability of any of our products not protected by patents or regulatory exclusivity, and may adversely affect our future results and financial condition. The launch of competitive products, including generic versions of our products, has had and may have a material adverse effect on our revenues and results of operations.

Our competitive position depends, in part, upon our continuing ability to discover, acquire and develop innovative, cost-effective new products, as well as new indications and product improvements protected by patents and other intellectual property rights. We also compete on the basis of price and product differentiation and through our sales and marketing organization that provides information to medical professionals and launches new products. If we fail to maintain our competitive position, our business, financial condition and results of operations may be materially adversely affected.

Distribution

We sell our pharmaceutical products primarily to drug wholesalers. Our revenue reflects the demand from these wholesalers to meet the in-market consumption of our products and to reflect the level of inventory that wholesalers of our products carry. Changes in the level of inventory can directly impact our revenue and could result in our revenue not reflecting in-market consumption of our products.

We often manufacture our drug delivery products for licensees and distributors but do not usually engage in any direct sales of drug delivery products.

Raw Materials and Product Supply

Raw materials and supplies are generally available in quantities adequate to meet the needs of our business. We are dependent on third-party manufacturers for the pharmaceutical products that we market. An inability to obtain raw materials or product supply could have a material adverse impact on our business, financial condition and results of operations.

Employees

On December 31, 2007, we had 1,610 employees worldwide, of whom 553 were engaged in R&D activities, 547 were engaged in manufacturing and supply activities, 211 were engaged in sales and marketing activities and the remainder worked in general and administrative areas.

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C.   Organizational Structure

At December 31, 2007, we had the following principal subsidiary undertakings:

		Group
		Share		Registered Office &
Company	Nature of Business	%		Country of Incorporation
Athena Neurosciences, Inc.	Holding company		100	800 Gateway Blvd. South San Francisco, CA, United States
Elan Drug Delivery, Inc.	R&D		100	3000 Horizon Drive King of Prussia, PA, United States
Elan Finance plc	Financial services company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Holdings, Inc.	Manufacture of pharmaceutical and medical device products		100	1300 Gould Drive Gainesville, GA, United States
Elan Holdings Ltd.	Holding company		100	Monksland, Athlone Co. Westmeath, Ireland
Elan International Services Ltd.	Financial services company		100	Clarendon House, 2 Church Street Hamilton, Bermuda
Elan Management Ltd.	Provision of management services		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Pharma International Ltd.	R&D, manufacture, sale and distribution of pharmaceutical products and financial services		100	Monksland, Athlone Co. Westmeath, Ireland
Elan Pharmaceuticals, Inc.	R&D and sale of pharmaceutical products		100	800 Gateway Blvd. South San Francisco, CA, United States
Monksland Holding BV	Financial services company		100	Claude Debussylaan 1082MD Amsterdam The Netherlands

D.   Property, Plant and Equipment

We consider that our properties are in good operating condition and that our machinery and equipment has been well maintained. Facilities for the manufacture of products are suitable for their intended purposes and have capacities adequate for current and projected needs.

For additional information, refer to Note 14 to the Consolidated Financial Statements, which discloses amounts invested in land and buildings and plant and equipment; Note 22 to the Consolidated Financial Statements, which discloses future minimum rental commitments; Note 26 to the Consolidated Financial Statements, which discloses capital commitments for the purchase of property, plant and equipment; and Item 5.B. “Liquidity and Capital Resources,” which discloses our capital expenditures.

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The following table lists the location, ownership interest, use and approximate size of our principal properties:

		Size
Location and Ownership Interest	Use	(Sq. Ft.)
Owned: Athlone, Ireland	R&D, manufacturing and administration		463,000
Owned: Gainesville, Georgia, United States	R&D, manufacturing and administration		89,000
Leased: South San Francisco, California, United States	R&D, sales and administration		257,000	(1)(2)
Leased: King of Prussia, Pennsylvania, United States	R&D, manufacturing, sales and administration		113,000
Leased: Dublin, Ireland	Corporate administration		20,000
Leased: New York City, New York, United States	Corporate administration		14,000

(1)

In June and December 2007, we entered into lease agreements for two additional buildings in South San Francisco, which are currently under construction. The square footage for the first building will be approximately 109,000 square feet and for the second building approximately 83,000 square feet, which are not included in the 257,000 square feet noted above. The lease term for the first building is expected to commence in the first quarter of 2009 and the second in the first quarter of 2010. The buildings will be utilized for our R&D, sales and administrative functions.

(2)

Approximately 43,000 square feet of the 257,000 square feet currently occupied are related to short-term leases that we expect to vacate once the two additional buildings are constructed.

Item 4A.   Unresolved Staff Comments.

Not applicable.

Item 5.   Operating and Financial Review and Prospects.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements, the accompanying notes thereto and other financial information, appearing in Item 18. “Consolidated Financial Statements.”

Our Consolidated Financial Statements contained in this Form 20-F have been prepared on the basis of U.S. GAAP. In addition to the Consolidated Financial Statements contained in this Form 20-F, we also prepare separate Consolidated Financial Statements, included in our Annual Report, in accordance with IFRS, which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

This financial review primarily discusses:

•  Current operations;

•  Critical accounting policies;

•  Recently issued accounting pronouncements;

•  Post balance sheet events;

•  Results of operations for the year ended December 31, 2007 compared to 2006 and 2005;

•  Segment analysis; and

•  Our financial position, including capitalization and liquidity.

Our operating results may be affected by a number of factors, including those described under Item 3.D. “Risk Factors.”

CURRENT OPERATIONS

Our business is organized into two business units: Biopharmaceuticals and EDT. Biopharmaceuticals engages in research, development and commercial activities primarily in Alzheimer’s disease, Parkinson’s disease, multiple sclerosis, Crohn’s disease, severe chronic pain and infectious diseases. EDT is an established, profitable and

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growing specialty pharmaceutical business unit of Elan. For nearly 40 years, EDT has been applying its skills and knowledge to enhance the performance of dozens of drugs that have been marketed worldwide. For additional information on our current operations, please refer to Item 4.B. “Business Overview.”

CRITICAL ACCOUNTING POLICIES

The Consolidated Financial Statements include certain estimates based on management’s best judgments. Estimates are used in determining items such as the carrying values of intangible assets and tangible fixed assets, the fair value of share-based compensation, revenue recognition, the accounting for contingencies and estimating sales rebates and discounts, among other items. Because of the uncertainties inherent in such estimates, actual results may differ materially from these estimates.

Goodwill, Other Intangible Assets, Tangible Fixed Assets and Impairment

Total goodwill and other intangible assets amounted to $457.6 million at December 31, 2007 (2006: $582.2 million). We account for goodwill and identifiable intangible assets in accordance with the Financial Accounting Standards Board’s (FASB) Statement No. 142, “Goodwill and Other Intangible Assets,” (SFAS 142). Pursuant to SFAS 142, goodwill and identifiable intangible assets with indefinite useful lives are no longer amortized, but instead are tested for impairment at least annually. At December 31, 2007, we had no other intangible assets with indefinite lives.

Intangible assets with estimable useful lives are amortized on a straight-line basis over their respective estimated useful lives to their estimated residual values and, as with other long-lived assets such as tangible fixed assets, are reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. We determine fair value using the income approach based on estimated discounted cash flows. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors. If we were to use different estimates, particularly with respect to the likelihood of R&D success, the likelihood and date of commencement of generic competition or the impact of any reorganization or change of business focus, then a material impairment charge could arise. We believe that we have used reasonable estimates in assessing the carrying values of our intangible assets. The results of certain impairment tests on intangible assets with estimable useful lives are discussed below.

We review our goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The goodwill impairment test is a two-step test and is performed at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” We have two reporting units: Biopharmaceuticals and EDT. Under the first step, we compare the fair value of each reporting unit with its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and step two does not need to be performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test would be performed to measure the amount of impairment charge, if any. The second step compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill, and any excess of the carrying amount over the implied fair value is recognized as an impairment charge. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination is determined, by allocating the fair value of a reporting unit to individual assets and liabilities. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. In evaluating goodwill for impairment, we determine the fair values of the reporting units using the income approach, based on estimated discounted future cash flows. The results of our goodwill impairment tests did not indicate any impairment in 2007, 2006 or 2005.

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In June 2007, we recorded an impairment charge of $52.2 million, within other net charges in the Consolidated Income Statement, relating to the Maxipime and Azactam intangible assets. As a direct result of the approval of a first generic formulation of cefepime hydrochloride in June 2007 and the anticipated approval for a generic form of Azactam, we revised the projected future cumulative undiscounted cash flows. The revised projected cumulative undiscounted cash flows were lower than the intangible assets’ carrying value, thus indicating the intangible assets were not recoverable. Consequently, the impairment charge was calculated as the excess of the carrying value over the discounted net present value. In conjunction with the impairment charge, we revised the estimated useful lives of the intangibles by nine months from September 2008 to December 2007. Accordingly, the remaining net intangible assets’ carrying value was amortized, on a straight-line basis, through December 31, 2007. There were no material impairment charges relating to intangible assets in either 2006 or 2005. For additional information on goodwill and other intangible assets, refer to Note 15 to the Consolidated Financial Statements.

In January 2005, we launched Prialt in the United States. Revenues from sales of Prialt totaled $12.3 million, $12.1 million and $6.3 million in 2007, 2006 and 2005, respectively. These revenues were lower than our initial forecast. Our estimates of the recoverable amount of this product, based on future net cash flows, are in excess of the asset’s carrying value of $58.1 million at December 31, 2007. We believe that we have used reasonable estimates in assessing the carrying value of this intangible. Nevertheless, should our future revenues from this product fail to meet our expectations, the carrying value of this asset may become impaired.

We have invested significant resources in our manufacturing facilities in Ireland to provide us with the capability to manufacture products from our product development pipeline. To the extent that we are not successful in developing these pipeline products or do not acquire products to be manufactured at our facilities, the carrying value of these facilities may become impaired. At December 31, 2007, our best estimates of the likely success of development and commercialization of our pipeline products support the carrying value of our manufacturing facilities.

Revenue Recognition

We recognize revenue from the sale of our products, royalties earned and contract arrangements in accordance with the SEC’s Staff Accounting Bulletin No. 104, “Revenue Recognition,” (SAB 104), which requires the deferral and amortization of up-front fees when there is a significant continuing involvement (such as an ongoing product manufacturing contract) by the seller after an asset disposal. We defer and amortize up-front license fees to the income statement over the “performance period.” The performance period is the period over which we expect to provide services to the licensee as determined by the contract provisions. Generally, milestone payments are recognized when earned and non-refundable, and when we have no future legal obligation pursuant to the payment. However, the actual accounting for milestones depends on the facts and circumstances of each contract. We apply the substantive milestone method in accounting for milestone payments. This method requires that substantive effort must have been applied to achieve the milestone prior to revenue recognition. If substantive effort has been applied, the milestone is recognized as revenue, subject to it being earned, non-refundable and not subject to future legal obligation. This requires an examination of the facts and circumstances of each contract. Substantive effort may be demonstrated by various factors, including the risks associated with achieving the milestone, the period of time over which effort was expended to achieve the milestone, the economic basis for the milestone payment and licensing arrangement and the costs and staffing to achieve the milestone. It is expected that the substantive milestone method will be appropriate for most contracts. If we determine the substantive milestone method is not appropriate, we apply the proportional performance method to the relevant contract. This method recognizes as revenue the percentage of cumulative non-refundable cash payments earned under the contract, based on the percentage of costs incurred to date compared to the total costs expected under the contract.

Share-Based Compensation

Beginning January 1, 2006, we account for share-based compensation in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment,” (SFAS 123R), which requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors based on estimated grant date fair values. These awards include employee stock options, RSUs and stock purchases related to our employee equity purchase plans. We elected to apply the modified prospective transition method, under which periods prior to 2006

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have not been restated to reflect, and do not include, the impact of SFAS 123R. The adoption of SFAS 123R has had a material effect on our reported financial results. Share-based compensation expense recognized under SFAS 123R for the years ended December 31, 2007 and 2006 was $45.1 million and $47.1 million, respectively. For additional information, refer to Note 25 to the Consolidated Financial Statements.

SFAS 123R requires companies to estimate the fair values of share-based awards on the date of grant using an option-pricing model. The value of awards expected to vest is recognized as an expense over the requisite service periods. Prior to the adoption of SFAS 123R, we had accounted for share-based awards to employees and directors using the intrinsic value method in accordance with the Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB 25) as allowed under SFAS 123. Under the intrinsic value method, no share-based compensation expense had been recognized in our Consolidated Statement of Operations, other than as related to modifications and compensatory employee equity purchase plans, because the exercise price of the stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant.

Estimating the fair value of share-based awards as of the date of grant using an option-pricing model, such as the binomial model, is affected by our stock price as well as assumptions regarding a number of complex variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, risk-free interest rates, and actual and projected employee exercise behaviors. If factors change and/or we employ different assumptions in the application of SFAS 123R in future periods, the compensation expense that we record under SFAS 123R for future grants may differ significantly from what we have recorded in the Consolidated Financial Statements. However, we believe we have used reasonable assumptions to estimate the fair value of our share-based awards.

In April 2007, we modified outstanding stock option grants and outstanding 2007 RSUs held by members of the Operating Committee of Elan (15 members at the modification date) to provide for the accelerated vesting of the awards upon involuntary termination, for any reason other than cause, together with the extension of the period to exercise outstanding stock options for a two-year period (previously 90 days) from the termination date. This resulted in the fair value of the outstanding options being remeasured at the modification date. The impact of the modification for all applicable outstanding awards amounted to additional share-based compensation expense of $0.8 million, which has been and will be taken into account over the remaining vesting terms of the awards from the modification date.

Contingencies Relating to Actual or Potential Administrative and Legal Proceedings

We are currently involved in legal and administrative proceedings, relating to securities matters, patent matters, antitrust matters and other matters, some of which are described in Note 27 to the Consolidated Financial Statements. In accordance with SFAS No. 5, “Accounting for Contingencies,” we assess the likelihood of any adverse outcomes to contingencies, including legal matters, as well as potential ranges of probable losses. We record accruals for such contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If an unfavorable outcome is probable, but the amount of the loss cannot be reasonably estimated, we estimate the range of probable loss and accrue the most probable loss within the range. If no amount within the range is deemed more probable, we accrue the minimum amount within the range. If neither a range of loss nor a minimum amount of loss is estimable, then appropriate disclosure is provided, but no amounts are accrued. As of December 31, 2007, we had accrued $1.7 million, representing our estimates of liability and costs for the resolution of these matters. We developed estimates in consultation with outside counsel handling our defense in these matters using the facts and circumstances known to us. The factors that we consider in developing our legal contingency accrual include the merits and jurisdiction of the litigation, the nature and number of other similar current and past litigation cases, the nature of the product and assessment of the science subject to the litigation, and the likelihood of settlement and state of settlement discussions, if any. We believe that the legal contingency accrual that we have established is appropriate based on current factors and circumstances. However, it is possible that other people applying reasonable judgment to the same facts and circumstances could develop a different liability amount. The nature of these matters is highly uncertain and subject to change. As a result, the amount of our liability for certain of these matters could exceed or be less than the amount of our estimates, depending on the outcome of these matters.

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Sales Discounts and Allowances

We recognize revenue on a gross revenue basis and make various deductions to arrive at net revenue as reported in the Consolidated Statements of Operations. These adjustments are referred to as sales discounts and allowances and are described in detail below. Sales discounts and allowances include charge-backs, managed health care and Medicaid rebates, cash discounts, sales returns and other adjustments. Estimating these sales discounts and allowances is complex and involves significant estimates and judgments, and we use information from both internal and external sources to generate reasonable and reliable estimates. We believe that we have used reasonable judgments in assessing our estimates, and this is borne out by our historical experience. At December 31, 2007, we had total provisions of $18.9 million for sales discounts and allowances, of which approximately 39.9%, 37.2% and 20.5% related to Azactam, Maxipime and Tysabri, respectively. We have more than nine years of experience in relation to Maxipime and Azactam and almost two years of experience for Tysabri. The sales discounts and allowances related to Tysabri are estimated based on historical data of a similar product and our experience to date with this product. We do not expect Tysabri sales returns to be material given the manner in which this product is prescribed and used.

We do not conduct our sales using the consignment model. All of our product sales transactions are based on normal and customary terms whereby title to the product and substantially all of the risks and rewards transfer to the customer upon either shipment or delivery. Furthermore, we do not have an incentive program that would compensate a wholesaler for the costs of holding inventory above normal inventory levels, thereby encouraging wholesalers to hold excess inventory.

We account for sales discounts, allowances and returns in accordance with the FASB’s Emerging Issues Task Force (EITF) Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” and SFAS No. 48, “Revenue Recognition When Right of Return Exists,” (SFAS 48) as applicable.

The table below summarizes our sales discounts and allowances to adjust gross revenue to net revenue for each significant category. An analysis of the separate components of our revenue is set out in Item 5.A. “Operating Results,” and in Note 3 to the Consolidated Financial Statements.

	Years Ended December 31,
	2007			2006			2005
Gross revenue subject to discounts and allowances	$	522.6		$	311.3		$	273.2
Manufacturing revenue and royalties		271.3			234.8			207.1
Contract revenue		30.8			27.5			32.2
Amortized revenue — Adalat®/Avinza®		4.5			30.7			34.0
Gross revenue	$	829.2		$	604.3		$	546.5
Sales discounts and allowances:
Charge-backs	$	(41.6	)	$	(28.6	)	$	(22.8	)
Managed health care rebates and other contract discounts		(2.9	)		(3.7	)		(2.9	)
Medicaid rebates		(3.5	)		(1.2	)		(1.6	)
Cash discounts		(11.5	)		(6.5	)		(5.5	)
Sales returns		(4.3	)		(0.6	)		(20.9	)
Other adjustments		(6.0	)		(3.3	)		(2.5	)
Total sales discounts and allowances	$	(69.8	)	$	(43.9	)	$	(56.2	)
Net revenue subject to discounts and allowances		452.8			267.4			217.0
Manufacturing revenue and royalties		271.3			234.8			207.1
Contract revenue		30.8			27.5			32.2
Amortized revenue — Adalat/Avinza		4.5			30.7			34.0
Net revenue	$	759.4		$	560.4		$	490.3

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Total sales discounts and allowances were 13.4% of gross revenue subject to discounts and allowances in 2007, 14.1% in 2006 and 20.6% in 2005, as detailed in the rollforward below and as further explained in the following paragraphs.

Charge-backs as a percentage of gross revenue subject to discounts and allowances were 8.0% in 2007, 9.2% in 2006 and 8.3% in 2005. The managed health care rebates and Medicaid rebates as a percentage of gross revenue subject to discounts and allowances were 0.6% and 0.7%, respectively, in 2007; 1.2% and 0.4%, respectively, in 2006; and 1.1% and 0.6%, respectively, in 2005. These changes are due primarily to changes in the product mix.

Cash discounts as a percentage of gross revenue subject to discounts and allowances remained fairly consistent at 2.2% in 2007, compared to 2.1% in 2006 and 2.0% in 2005. In the United States, we offer cash discounts, generally at 2% of the sales price, as an incentive for prompt payment by our customers.

Sales returns as a percentage of gross revenue subject to discounts and allowances were 0.8% in 2007, 0.2% in 2006 and 7.7% in 2005. The decrease in 2006 as compared to 2005 was principally due to the voluntary suspension of Tysabri in February 2005, which increased the provision for returns in 2005, and changes in the product mix.

The following table sets forth the activities and ending balances of each significant category of adjustments for the sales discounts and allowances (in millions):

				Managed
				Health Care
				Rebates and
	Charge-			Other Contract			Medicaid			Cash			Sales			Other
	Backs			Discounts			Rebates			Discounts			Returns			Adjustments			Total
Balance at December 31, 2005	$	6.7		$	1.4		$	1.1		$	0.9		$	6.6		$	0.5		$	17.2
Provision related to sales made in current period		28.6			3.7			1.2			6.5			2.3			3.3			45.6
Provision related to sales made in prior periods		—			—			—			—			(1.7	)		—			(1.7	)
Returns and payments		(28.6	)		(3.5	)		(1.4	)		(6.3	)		(2.0	)		(2.8	)		(44.6	)
Balance at December 31, 2006		6.7			1.6			0.9			1.1			5.2			1.0			16.5
Provision related to sales made in current period		41.6			2.9			3.5			11.5			3.9			6.0			69.4
Provision related to sales made in prior periods		—			—			—			—			0.4			—			0.4
Returns and payments		(42.9	)		(3.6	)		(1.4	)		(11.6	)		(1.9	)		(6.0	)		(67.4	)
Balance at December 31, 2007	$	5.4		$	0.9		$	3.0		$	1.0		$	7.6		$	1.0		$	18.9

(a) Charge-backs

In the United States, we participate in charge-back programs with a number of entities, principally the U.S. Department of Defense, the U.S. Department of Veterans Affairs, Group Purchasing Organizations and other parties whereby pricing on products is extended below wholesalers’ list prices to participating entities. These entities purchase products through wholesalers at the lower negotiated price, and the wholesalers charge the difference between these entities’ acquisition cost and the lower negotiated price back to us. We account for charge-backs by reducing accounts receivable in an amount equal to our estimate of charge-back claims attributable to a sale. We determine our estimate of the charge-backs primarily based on historical experience on a product-by-product and program basis, and current contract prices under the charge-back programs. We consider vendor payments, estimated levels of inventory in the wholesale distribution channel, and our claim processing time lag and adjust accounts receivable and revenue periodically throughout each year to reflect actual and future estimated experience.

As described above, there are a number of factors involved in estimating the accrual for charge-backs, but the principal factor relates to our estimate of the levels of inventory in the wholesale distribution channel. At December 31, 2007, Maxipime, Azactam and Tysabri represented approximately 73.6%, 15.6% and 10.3%, respectively, of the total charge-backs accrual balance of $5.4 million. If we were to increase/(decrease) our

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estimated level of inventory in the wholesale distribution channel by one month’s worth of demand for Maxipime, Azactam and Tysabri, the accrual for charge-backs would increase/(decrease) by approximately $0.8 million. We believe that our estimate of the levels of inventory for Maxipime, Azactam and Tysabri in the wholesale distribution channel is reasonable because it is based upon multiple sources of information, including data received from all of the major wholesalers with respect to their inventory levels and sell-through to customers, third-party market research data, and our internal information.

(b) Managed healthcare rebates and other contract discounts

We offer rebates and discounts to managed healthcare organizations in the United States. We account for managed healthcare rebates and other contract discounts by establishing an accrual equal to our estimate of the amount attributable to a sale. We determine our estimate of this accrual primarily based on historical experience on a product-by-product and program basis and current contract prices. We consider the sales performance of products subject to managed healthcare rebates and other contract discounts, processing claim lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

(c) Medicaid rebates

In the United States, we are required by law to participate in state government-managed Medicaid programs, as well as certain other qualifying federal and state government programs whereby discounts and rebates are provided to participating state and local government entities. Discounts and rebates provided through these other qualifying federal and state government programs are included in our Medicaid rebate accrual and are considered Medicaid rebates for the purposes of this discussion. We account for Medicaid rebates by establishing an accrual in an amount equal to our estimate of Medicaid rebate claims attributable to a sale. We determine our estimate of the Medicaid rebates accrual primarily based on historical experience regarding Medicaid rebates, legal interpretations of the applicable laws related to the Medicaid and qualifying federal and state government programs, and any new information regarding changes in the Medicaid programs’ regulations and guidelines that would impact the amount of the rebates on a product-by-product basis. We consider outstanding Medicaid claims, Medicaid payments, claims processing lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

(d) Cash discounts

In the United States, we offer cash discounts, generally at 2% of the sales price, as an incentive for prompt payment. We account for cash discounts by reducing accounts receivable by the full amount of the discounts. We consider payment performance of each customer and adjust the accrual and revenue periodically throughout each year to reflect actual experience and future estimates.

(e) Sales returns

We account for sales returns in accordance with SFAS 48 by establishing an accrual in an amount equal to our estimate of revenue recorded for which the related products are expected to be returned.

For returns of established products, our sales return accrual is estimated principally based on historical experience, the estimated shelf life of inventory in the distribution channel, price increases and our return goods policy (goods may only be returned six months prior to expiration date and for up to 12 months after expiration date). We also take into account product recalls and introductions of generic products. All of these factors are used to adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

In the event of a product recall, product discontinuance or introduction of a generic product, we consider a number of factors, including the estimated level of inventory in the distribution channel that could potentially be returned, historical experience, estimates of the severity of generic product impact, estimates of continuing demand and our return goods policy. We consider the reasons for, and impact of, such actions and adjust the sales returns accrual and revenue as appropriate.

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Returns from newly introduced products are significantly more difficult for us to assess. We determine our estimate of the sales return accrual primarily based on the historical sales returns experience of similar products, such as those within the same or similar therapeutic category. We also consider the shelf life of new products and determine whether we believe an adjustment to the sales return accrual is appropriate. The shelf life in connection with new products tends to be shorter than the shelf life for more established products because we may still be developing the optimal stability duration for the new product that would lengthen its shelf life, or an amount of launch quantities may have been manufactured in advance of the launch date to ensure sufficient supply exists to satisfy market demand. In those cases, we assess the reduced shelf life, together with estimated levels of inventory in the distribution channel and projected demand, and determine whether we believe an adjustment to the sales return accrual is appropriate. While it is inherently more difficult to assess returns from newly introduced products than from established products, nevertheless in all instances we believe we have been able to gather sufficient information in order to establish reasonable estimates.

As described above, there are a number of factors involved in estimating this accrual, but the principal factor relates to our estimate of the shelf life of inventory in the distribution channel. At December 31, 2007, Maxipime, Azactam and Tysabri represented approximately 21.1%, 69.4% and 7.4%, respectively, of the total sales returns accrual balance of $7.6 million. We believe, based upon both the estimated shelf life and also our historical sales returns experience, that the vast majority of this inventory will be sold prior to the expiration dates, and accordingly believe that our sales returns accrual is appropriate.

(f) Other adjustments

In addition to the sales discounts and allowances described above, we make other sales adjustments primarily related to estimated obligations for credits to be granted to wholesalers under wholesaler service agreements we have entered into with many of our pharmaceutical wholesale distributors in the United States. Under these agreements, the wholesale distributors have agreed, in return for certain fees, to comply with various contractually defined inventory management practices and to perform certain activities such as providing weekly information with respect to inventory levels of product on hand and the amount of out-movement of product. As a result, we, along with our wholesale distributors, are able to manage product flow and inventory levels in a way that more closely follows trends in prescriptions. We generally account for these other sales discounts and allowances by establishing an accrual in an amount equal to our estimate of the adjustments attributable to the sale. We generally determine our estimates of the accruals for these other adjustments primarily based on historical experience and other relevant factors, including estimated levels of inventory in the distribution channel in some cases, and adjust the accruals and revenue periodically throughout each year to reflect actual experience.

(g) Provisions related to sales made in prior periods

During 2007, we recorded $0.4 million of adjustments to increase the discounts and allowances related to sales made in prior periods, primarily due to the availability of additional information relating to our actual returns experience for Tysabri, Maxipime and Azactam.

(h) Use of information from external sources

We use information from external sources to estimate our significant sales discounts and allowances. Our estimates of inventory at the wholesalers are based on:

•  The actual and projected prescription demand-based sales for our products and historical inventory experience;

•  Our analysis of third-party information, including written and oral information obtained from all of the major wholesalers with respect to their inventory levels and sell-through to customers, and third-party market research data; and

•  Our internal information.

We also use information from external sources to identify prescription trends and patient demand. Since 2004, we have been receiving inventory pipeline data from the three major wholesalers (McKesson Corp., Cardinal

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Health, Inc. and AmerisourceBergen Corp.). The inventory information received from these wholesalers is a product of their record-keeping process and excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals. We receive information from IMS Health, a supplier of market research to the pharmaceutical industry, which we use to project the prescription demand-based sales for our pharmaceutical products. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information is itself in the form of estimates, and reflect other limitations, including lags between the date as of which third-party information is generated and the date on which we receive such information.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements,” (SFAS 157), which is effective for financial statements issued for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. On December 14, 2007, the FASB issued FASB Staff Position (FSP) FAS 157-b, which will delay the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. This proposed FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008. We do not expect that the adoption of SFAS 157 will have a material impact on our financial position or results from operations.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial and Financial Liabilities,” (SFAS 159), which is effective for fiscal years beginning after November 15, 2007. SFAS 159 provides companies with the option to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. We are currently evaluating the provisions of SFAS 159; however we do not expect that its adoption will have a material impact on our financial position or results of operations.

In June 2007, the FASB ratified EITF Issue No. 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,” (EITF 07-03). EITF 07-03 is effective prospectively for fiscal years beginning after December 15, 2007. EITF 07-03 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. We do not expect that the adoption of EITF 07-03 will have a material impact on our financial position or results from operations.

In November 2007, the FASB’s EITF reached consensus on Issue 07-01, “Accounting for Collaborative Arrangements,” (EITF 07-01), which is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. EITF 07-01 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. We do not expect that the adoption of EITF 07-01 will have a material impact on our financial position or results from operations.

In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations,” (SFAS 141R), which is effective for financial statements issued for fiscal years beginning after December 15, 2008, with early adoption not permitted. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements at full fair value the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. We are currently evaluating the potential impact, if any, of the adoption of SFAS 141R on our consolidated results of operations and financial position.

In December 2007, the FASB issued Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51,” (SFAS 160), which is effective for financial statements issued for fiscal years beginning after December 15, 2008, with early adoption not permitted. SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes

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to a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. We are currently evaluating the potential impact, if any, of the adoption of SFAS 160 on our consolidated results of operations and financial position.

POST BALANCE SHEET EVENTS

On January 14, 2008, the FDA approved Elan and Biogen Idec’s supplemental Biologics License Application for Tysabri for Crohn’s disease. Tysabri is now approved for inducing and maintaining clinical response and remission in adult patients with moderately to severely active CD with evidence of inflammation who have had an inadequate response to, or are unable to tolerate, conventional CD therapies and inhibitors of TNF-alpha.

A.   OPERATING RESULTS

2007 Compared to 2006 and 2005 (in millions, except share and per share amounts)

										% Increase/(Decrease)
	2007			2006			2005			2007/2006			2006/2005
Product revenue	$	728.6		$	532.9		$	458.1			37	%		16	%
Contract revenue		30.8			27.5			32.2			12	%		(15	)%
Total revenue		759.4			560.4			490.3			36	%		14	%
Operating expenses:
Cost of sales		337.9			210.3			196.1			61	%		7	%
Selling, general and administrative expenses		341.8			362.4			359.4			(6	)%		1	%
Research and development expenses		260.4			217.5			232.3			20	%		(6	)%
Net gain on divestment of products and businesses		—			(43.1	)		(103.4	)		(100	)%		(58	)%
Other net (gains)/charges		84.6			(20.3	)		4.4			517	%		(561	)%
Total operating expenses		1,024.7			726.8			688.8			41	%		6	%
Operating loss		(265.3	)		(166.4	)		(198.5	)		59	%		(16	)%
Net interest and investment (gains) and losses:
Net interest expense		113.1			111.5			125.7			1	%		(11	)%
Net investment (gains)/losses		0.9			(1.6	)		7.2			(156	)%		(122	)%
Net charge on debt retirements		18.8			—			51.8			—			(100	)%
Net interest and investment losses		132.8			109.9			184.7			21	%		(40	)%
Loss from continuing operations before income taxes		(398.1	)		(276.3	)		(383.2	)		44	%		(28	)%
Provision for/(benefit from) income taxes		6.9			(9.0	)		1.0			177	%		(1,000	)%
Net loss from continuing operations		(405.0	)		(267.3	)		(384.2	)		52	%		(30	)%
Income from discontinued operations, net of tax		—			—			0.6			—			(100	)%
Net loss	$	(405.0	)	$	(267.3	)	$	(383.6	)		52	%		(30	)%
Basic and diluted net loss per Ordinary Share:
Net loss from continuing operations	$	(0.86	)	$	(0.62	)	$	(0.93	)		39	%		(33	)%
Net income from discontinued operations (net of tax)		—			—			—			—			—
Net loss	$	(0.86	)	$	(0.62	)	$	(0.93	)		39	%		(33	)%

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Total revenue was $759.4 million in 2007, $560.4 million in 2006 and $490.3 million in 2005 as detailed in the schedule above and as further explained in the following paragraphs.

Product Revenue

Total product revenue was $728.6 million in 2007, $532.9 million in 2006 and $458.1 million in 2005. The increases in 2007 of 37%, compared to 2006, and in 2006 of 16%, compared to 2005, were primarily due to the continued strong growth of Tysabri within our Biopharmaceuticals business and continued growth across a number of products in our EDT portfolio, partially offset by decreases in amortized revenue and reduced revenue from Maxipime in 2007 compared to 2006 following the introduction of generic competition. The components of product revenue are set out below (in millions):

								% Increase/(Decrease)
	2007		2006			2005		2007/2006			2006/2005
(A) Biopharmaceuticals:
Tysabri- U.S.	$	217.4	$	28.2		$	11.0		671	%		156	%
Tysabri- ROW		14.3		(10.7	)		—		234	%		—
Total Tysabri		231.7		17.5			11.0		1,224	%		59	%
Maxipime		122.5		159.9			140.3		(23	)%		14	%
Azactam		86.3		77.9			57.7		11	%		35	%
Prialt		12.3		12.1			6.3		2	%		92	%
Royalties		1.8		2.4			4.3		(25	)%		(44	)%
Total product revenue from Biopharmaceuticals business		454.6		269.8			219.6		68	%		23	%
(B) EDT:
Manufacturing revenue and royalties		269.5		232.4			204.5		16	%		14	%
Amortized revenue — Adalat/Avinza		4.5		30.7			34.0		(85	)%		(10	)%
Total product revenue from EDT business		274.0		263.1			238.5		4	%		10	%
Total product revenue	$	728.6	$	532.9		$	458.1		37	%		16	%

(A)  Product revenue from our Biopharmaceuticals business

Total product revenue from our Biopharmaceuticals business increased 68% to $454.6 million in 2007 from $269.8 million in 2006. The increase primarily reflects higher sales of Tysabri and Azactam, partially offset by the decline in sales of Maxipime due to generic competition. In 2006, total Biopharmaceuticals product revenue increased 23% to $269.8 million from $219.6 million in 2005. The increase reflects higher sales of Tysabri, Maxipime, Azactam and Prialt as a result of strong demand.

The FDA initially granted approval of Tysabri in November 2004 for the treatment of relapsing forms of MS and our commercial distribution began shortly thereafter. The revenue from sales of Tysabri amounted to $11.0 million in 2005 prior to the voluntary suspension of the commercialization and clinical dosing of the product in February 2005 due to safety concerns. In June 2006, the FDA approved the reintroduction of Tysabri for the treatment of relapsing forms of MS. Approval for the marketing of Tysabri in the European Union was also received in June 2006 and has subsequently been received in a number of other countries. The distribution of Tysabri in both the United States and the ROW recommenced in July 2006.

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most of the development and commercialization costs for Tysabri. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec at a price that includes the cost of

40

manufacturing, plus Biogen Idec’s gross profit on Tysabri, and this cost, together with royalties payable to other third parties, is included in cost of sales.

Outside of the United States, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on these sales of Tysabri, plus our directly-incurred expenses on these sales.

Global in-market net sales of Tysabri can be analyzed as follows (in millions):

							% Increase/(Decrease)
	2007		2006		2005		2007/2006			2006/2005
United States	$	217.4	$	28.2	$	11.0		671	%		156	%
ROW		125.5		9.9		—		1,168	%		—
Total Tysabri in-market net sales	$	342.9	$	38.1	$	11.0		800	%		246	%

At the end of December 2007, approximately 21,100 patients were on therapy worldwide, comprising approximately 20,400 on commercial therapy and approximately 700 in MS clinical trials.

Tysabri-United States

In the U.S. market, we recorded net sales of $217.4 million (2006: $28.2 million; 2005: $11.0 million). As of the end of December 2007, more than 2,500 doctors have enrolled patients and approximately 12,900 patients were on commercial Tysabri therapy.

Tysabri-ROW

As previously mentioned, in the ROW market, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on ROW sales of Tysabri, plus our directly-incurred expenses on these sales. In 2007, Elan recorded ROW revenue of $14.3 million (2006: negative revenue of $10.7 million), which was calculated as follows (in millions):

							%Increase/
							(Decrease)
	2007			2006			2007/2006
ROW in-market sales by Biogen Idec	$	125.5		$	9.9			1,168	%
ROW operating expenses incurred by Elan and Biogen Idec		(138.1	)		(34.3	)		303	%
ROW operating loss incurred by Elan and Biogen Idec		(12.6	)		(24.4	)		48	%
Elan’s 50% share of Tysabri ROW collaboration operating loss		(6.3	)		(12.2	)		48	%
Elan’s directly-incurred costs		20.6			1.5			1,273	%
Net Tysabri ROW revenue	$	14.3		$	(10.7	)		234	%

As of the end of December 2007, approximately 7,500 patients, principally in the European Union, were on commercial Tysabri therapy.

Maxipime revenue decreased 23% to $122.5 million in 2007 from our 2006 sales level and increased 14% to $159.9 million in 2006 from our 2005 sales level. The decrease in 2007 was principally due to the introduction of generic competition. In June 2007, the first generic formulation of cefepime hydrochloride was approved by the FDA. Generic cefepime hydrochloride was launched shortly thereafter, and we expect it will continue to materially and adversely affect our revenues from, and gross margin for, Maxipime. The increase in Maxipime revenue in 2006 from our 2005 sales level reflected growth in the demand for the product and was partially offset by supply shortages in 2006.

Azactam revenue increased 11% to $86.3 million in 2007 from our 2006 sales level and increased 35% to $77.9 million in 2006 from our 2005 sales level. The increases in 2007 and 2006 were primarily due to increased demand. Azactam lost its patent exclusivity in October 2005, and its future sales are expected to be negatively impacted by generic competition, although to date no generic form of Azactam has been approved.

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Prialt revenue increased 2% to $12.3 million in 2007 from our 2006 sales level and increased 92% to $12.1 million in 2006 from our 2005 sales level. The increases in both 2007 and 2006 were primarily due to increased demand. Prialt was launched in the U.S. market in the first quarter of 2005. In March 2006, we completed the sale of the European rights to Prialt to Eisai, while retaining the product rights in the United States. We had not made any commercial sales of Prialt in Europe prior to this divestment.

(B)  Product revenue from our EDT business

Manufacturing revenue and royalties

							% Increase/(Decrease)
	2007		2006		2005		2007/2006			2006/2005
TriCor	$	62.5	$	52.1	$	45.4		20	%		15	%
Skelaxin®		39.3		36.5		17.9		8	%		104	%
Verelan®		28.5		36.3		34.7		(21	)%		5	%
Focalin/Ritalin		28.4		22.5		17.8		26	%		26	%
Diltiazem		18.7		19.5		18.6		(4	)%		5	%
Other		92.1		65.5		70.1		41	%		(7	)%
Total	$	269.5	$	232.4	$	204.5		16	%		14	%

Manufacturing revenue and royalties from our EDT business comprise revenue earned from products we manufacture for third parties and royalties we earn principally on sales by third parties of products that incorporate our technologies.

Manufacturing revenue and royalties increased 16% to $269.5 million in 2007 from our 2006 sales level and increased 14% to $232.4 million in 2006 from $204.5 million in 2005. The increase in 2007 primarily reflects continued growth across a number of products in our EDT portfolio and increased manufacturing activity. The increase in 2006 from our 2005 sales level was principally due to increased royalties on sales by third parties, primarily TriCor and Skelaxin. In January 2006, our royalty on Skelaxin changed from 5% on all net sales of the product by King Pharmaceuticals, Inc. (King) in 2005, to 10% on net sales in excess of $50.0 million in each calendar year going forward.

Except as noted above, no other single product accounted for more than 10% of our manufacturing revenue and royalties in 2007, 2006 or 2005. In 2007, 47% of these revenues consisted of royalties received on products that we do not manufacture, compared to 44% in 2006 and 34% in 2005.

Potential generic competitors have challenged the existing patent protection for several of the products from which we earn manufacturing revenue and royalties. We and our clients defend our intellectual property rights vigorously. However, if these challenges are successful, our manufacturing revenue and royalties will be materially and adversely affected.

Amortized revenue — Adalat/Avinza

Amortized revenue was $4.5 million in 2007, compared to $30.7 million in 2006 and $34.0 million in 2005. The amortized revenue recorded in 2007 was related to the licensing to Watson Pharmaceuticals, Inc. (Watson) in 2002 of rights to our generic form of Adalat CC (2006: $9.0 million; 2005: $9.0 million). The deferred revenue relating to Adalat CC was fully amortized by June 30, 2007. In 2006, we also recorded $21.7 million (2005: $25.0 million) of amortized revenue relating to the restructuring of our Avinza license agreement with Ligand Pharmaceuticals, Inc (Ligand) in 2002. The deferred revenue relating to Avinza was fully amortized by December 2006.

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Contract Revenue

							% Increase/(Decrease)
	2007		2006		2005		2007/2006			2006/2005
	(In millions)
Biopharmaceuticals:
Amortized fees	$	2.0	$	8.5	$	12.1		(76	)%		(30	)%
Research revenues/milestones		7.3		—		—		—			—
Total Biopharmaceuticals contract revenue	$	9.3	$	8.5	$	12.1		9	%		(30	)%
EDT:
Amortized fees	$	4.3	$	4.2	$	4.3		2	%		(2	)%
Research revenues/milestones		17.2		14.8		15.8		16	%		(6	)%
Total EDT contract revenue	$	21.5	$	19.0	$	20.1		13	%		(5	)%
Total contract revenue	$	30.8	$	27.5	$	32.2		12	%		(15	)%

Contract revenue consists of research revenue and milestones arising from R&D activities we perform on behalf of third parties or technology licensing. The fluctuations between years in contract revenue within both of our Biopharmaceuticals and EDT businesses were primarily due to the timing of milestone receipts.

Cost of Sales

Cost of sales was $337.9 million in 2007 (including share-based compensation of $4.0 million), compared to $210.3 million in 2006 (including share-based compensation of $4.2 million) and $196.1 million in 2005 (including share-based compensation of $Nil). The cost of sales as a percentage of total revenue was 44% for 2007, 38% for 2006 and 40% for 2005, resulting in a gross profit margin of 56% in 2007, 62% in 2006 and 60% in 2005. The decrease in the gross profit margin in 2007 compared to 2006 was principally due to the change in the mix of product sales, including reduced amortized revenues, the impact of Tysabri and the reduced price of Maxipime as a result of the entry of a generic competitor. The Tysabri gross profit margin of 32% in 2007 (2006: 19%) is impacted by the profit sharing and operational arrangements in place with Biogen Idec and reflects Elan’s gross margin on sales of the product in the United States of 36% in 2007 (2006: 34%), offset by the inclusion in cost of sales of royalties payable by Elan on sales of Tysabri outside of the United States. These royalties are payable by Elan but reimbursed by the collaboration. The improvement in gross profit margin in 2006 compared to 2005 was primarily due to the change in the mix of product sales and the inclusion in 2005 of costs related to the voluntary suspension of Tysabri in the United States.

Selling, General and Administrative (SG&A) Expenses

SG&A expense was $341.8 million in 2007, $362.4 million in 2006 and $359.4 million in 2005. Total SG&A expense for 2007 included $78.4 million (2006: $75.0 million; 2005: $84.7 million) in relation to Tysabri. The decrease of 6% in total SG&A expense in 2007 compared to 2006 primarily reflects the restructuring of our commercial infrastructure related to the approval of a generic form of Maxipime in June 2007 and the anticipated approval of a generic form of Azactam, along with reduced amortization expense following the impairment of our Maxipime and Azactam intangible asset, which resulted in the reduction of related selling and administrative costs. In addition, share-based compensation expense related to SG&A decreased to $23.9 million in 2007, compared to $28.8 million in 2006. The increase in SG&A expense related to Tysabri reflects the relaunch of Tysabri in the United States in 2006. The SG&A expense related to the Tysabri ROW sales are reflected in the Tysabri ROW revenue as previously described.

The increase of 1% in total SG&A expense in 2006 compared to 2005 reflected the expensing of share-based compensation of $28.8 million in 2006 (2005: $Nil), offset by decreased expenses in relation to Tysabri and also due to ongoing financial discipline. The decrease in SG&A expense related to Tysabri in 2006 compared to 2005 reflected the impact of the temporary suspension of Tysabri in 2005 and the relaunch of Tysabri in the United States in 2006, partially offset by the expensing of share-based compensation of $2.5 million (2005: $Nil).

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Research and Development Expenses

R&D expenses were $260.4 million in 2007, $217.5 million in 2006 and $232.3 million in 2005. The increase of 20% in 2007 compared to 2006 was primarily due to increased expenses associated with the progression of our Alzheimer’s disease programs, particularly the move of AAB-001 into Phase 3 clinical trials and the move of ELND005 into Phase 2 clinical trials during 2007. R&D expenses for 2007 included $39.3 million (2006: $31.5 million; 2005: $66.9 million) in relation to Tysabri.

The reduction in total R&D expense of 6% in 2006 compared to 2005 reflected the completion of the safety evaluation related to Tysabri in 2005, partially offset by increased spending relating to the progression of key Alzheimer’s disease programs, particularly AAB-001, the initiation of new collaborations in the areas of autoimmune diseases and neurodegeneration with Archemix and Transition, respectively, and by the cost of expensing share-based compensation of $14.1 million in 2006 (2005: $Nil).

Net Gain on Divestment of Products and Businesses

	2006			2005
	(In millions)
Prialt European rights	$	(43.3	)	$	—
Zonegran		—			(85.6	)
European business		0.2			(17.1	)
Other		—			(0.7	)
Total	$	(43.1	)	$	(103.4	)

There were no product or business divestments in 2007.

In March 2006, we sold the Prialt European rights to Eisai and received $50.0 million at closing and are entitled to receive an additional $10.0 million on the earlier of two years from closing or launches of Prialt in key European markets. We recorded a gain of $43.3 million on this sale. We may also receive an additional $40.0 million contingent on Prialt achieving revenue-related milestones in Europe. As of December 31, 2007, we had received $8.0 million of the $10.0 million related to the launches of Prialt in key European markets.

In April 2004, we sold our interests in Zonegran in North America and Europe to Eisai for initial net consideration of $113.5 million at closing. We were also entitled to receive additional consideration of up to $110.0 million from Eisai if no generic form of Zonegran was approved by certain dates up through January 1, 2006. We received $85.0 million of this contingent consideration prior to the approval of a generic form of Zonegran in December 2005. Consequently, the total net proceeds received from the sale of Zonegran amounted to $198.5 million and resulted in a cumulative net gain of $128.5 million, of which $85.6 million was recognized in 2005 and $42.9 million in 2004.

In February 2004, we sold our European sales and marketing business to Zeneus Pharma Ltd. for initial net cash proceeds of $93.2 million, resulting in a loss of $2.9 million in 2004. We received an additional $6.0 million in February 2005, which was accrued at December 31, 2004, and $15.0 million of contingent consideration in December 2005, which resulted in a net gain of $17.1 million in 2005 after the release of contingent liabilities of $2.1 million, which were not ultimately required. We will not receive any further consideration in respect of this disposal.

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Other Net (Gains)/Charges

The principal items classified as other charges/(gains) include the impairment of our Maxipime and Azactam assets, severance, restructuring and other costs, legal settlements and awards, and acquired in-process research and development costs. These items have been treated consistently from period to period. We believe that disclosure of significant other (gains)/charges is meaningful because it provides additional information in relation to analyzing certain items.

	2007		2006			2005
	(In millions)
(A) Maxipime and Azactam asset impairment	$	52.2	$	—		$	—
(B) Severance, restructuring and other costs, net		32.4		7.5			11.8
(C) Legal settlements and awards		—		(49.8	)		(7.4	)
(D) Acquired in-process research and development costs		—		22.0			—
Total other net (gains)/charges	$	84.6	$	(20.3	)	$	4.4

(A) Maxipime and Azactam asset impairment

The Maxipime and Azactam asset impairment charge of $52.2 million is related to the launch of a generic formulation of Maxipime (cefepime hydrochloride) in June 2007 and the anticipated approval of a generic form of Azactam. As a direct result of the approval of a first generic formulation of cefepime hydrochloride in June 2007 and the anticipated approval for a generic form of Azactam, we revised the projected future cumulative undiscounted cash flows. The revised projected cumulative undiscounted cash flows were lower than the intangible assets’ carrying value thus indicating the intangible assets were not recoverable. Consequently, the impairment charge was calculated as the excess of the carrying value over the discounted net present value. The remaining net intangible assets’ carrying value was amortized, on a straight-line basis, through December 31, 2007.

(B) Severance, restructuring and other costs

During 2007, we incurred severance, restructuring and other costs of $32.4 million arising principally from the restructuring of our commercial infrastructure and consolidation of our U.S. West Coast locations, which resulted in the closure of the San Diego facility and the expansion of our operations in South San Francisco. The restructuring of our commercial infrastructure was primarily a result of the approval of a generic form of Maxipime and the anticipated approval of a generic form of Azactam.

During 2006, the net severance, restructuring and other costs of $7.5 million (2005: $11.8 million) were related to the realignment of our resources to meet our current business structure. The restructuring and severance charges in 2006 were primarily related to the consolidation of our Biopharmaceuticals R&D activities into our South San Francisco facility. These charges arose from termination of certain operating leases, reduction of headcount and relocation of employees, and they included the reversal of a $9.4 million charge for future lease payments on an unutilized facility in South San Francisco. As a part of the restructuring of our Biopharmaceutical R&D activities, this facility was brought back into use.

(C) Legal settlements and awards

In December 2006, we were awarded $49.8 million following the conclusion of binding arbitration proceedings that were initiated against King with respect to an agreement to reformulate Sonata^®. This award was recognized as a gain in 2006 and was received in January 2007.

During 2005, we recorded a net gain of $7.4 million related primarily to the Pfizer litigation settlement in which we received a payment of $7.0 million. The settlement arose from a claim concerning intellectual property rights and the development of target compounds arising from a collaboration with Pfizer.

45

(D) Acquired in-process research and development costs

In July 2006, Elan and Archemix entered into a multi-year, multi-product alliance focused on the discovery, development and commercialization of aptamer therapeutics to treat autoimmune diseases. As a result of the alliance, Elan paid Archemix an upfront payment of $7.0 million. In addition, in September 2006, Elan and Transition announced an exclusive, worldwide collaboration agreement for the joint development and commercialization of ELND005, for the treatment of Alzheimer’s disease. Elan incurred a charge related to the license fee of $15.0 million, of which $7.5 million was paid to Transition in 2006 and the rest in 2007. For additional information, please refer to Item 4.B. “Business Overview,” which describes our R&D programs in detail.

Net Interest Expense

Net interest expense was $113.1 million in 2007, $111.5 million in 2006 and $125.7 million in 2005. The increase of 1% in 2007 as compared to 2006 primarily reflects less interest income earned as a result of lower cash balances.

At December 31, 2007, all of Elan’s liquid investments were invested in bank deposits and funds. In December 2007, due to the dislocations in the capital markets, one of these funds was closed. As a result, at December 31, 2007, the amount invested in this fund of $274.8 million was no longer included in cash and cash equivalents and was presented as an investment. Since December 31, 2007, Elan has reduced the amount invested in this fund to approximately $100 million and has moved approximately $175 million into bank deposits and United States treasury funds. Included within net interest expense for 2007 is net interest income of $42.3 million, which includes a charge of $3.8 million incurred in relation to this fund. There were no equivalent charges in 2006 or 2005.

The decrease in net interest expense of 11% in 2006 as compared to 2005 primarily reflected the decrease in interest expense associated with the early retirement of $36.8 million of the 7.25% senior notes (Athena Notes) due in 2008, the early conversion of $206.0 million in aggregate principal amount of 6.5% Convertible Notes in the second quarter of 2005, and increased interest income associated with higher cash balances and interest rates, partially offset by interest expense related to the 8.875% senior notes due in 2013 (8.875% Notes) and senior floating rate notes due in 2013 (Floating Rate Notes due 2013), both of which were issued in November 2006.

Net Investment (Gains)/Losses

Net investment losses were $0.9 million in 2007, compared to a gain of $1.6 million in 2006 and a loss of $7.2 million in 2005. The net investment losses in 2007 were primarily comprised of $6.6 million gains on the sale of investment securities (2006: $8.3 million; 2005: $17.5 million) and an impairment charge of $6.1 million (2006: $7.3 million; 2005: $24.0 million).

In 2007, we raised $31.3 million in net cash proceeds from the disposal of investment securities. The $6.6 million in gains on the sale of investment securities in 2007 includes gains on sale of securities of Adnexus Therapeutics, Inc. of $3.0 million and Women’s First Healthcare, Inc. of $1.3 million.

In 2006, we raised $14.1 million in net cash proceeds from the disposal of investment securities. The $8.3 million in gains on the sale of investment securities in 2006 includes gains on sale of securities of Salu, Inc. of $3.0 million, Nobex Corporation of $2.5 million and Women’s First Healthcare, Inc. of $1.0 million.

In 2005, we raised $62.7 million in net cash proceeds from the disposal of investment securities. The $17.5 million in gains on the sale of investment securities in 2005 includes gains on sale of securities of Allergy Therapeutics plc of $10.0 million, Iomai Corporation of $3.2 million and Emisphere Technologies, Inc. of $1.8 million.

In 2007, we recorded an impairment of $5.0 million related to an investment of $11.4 million in auction rate securities. The remaining impairment charges of $1.1 million (2006: $7.3 million; 2005: $24.0 million) related to various investments in emerging pharmaceutical and biotechnology companies.

Provision for/(Benefit from) Income Taxes

We had a net tax provision of $6.9 million for 2007, compared to a net tax benefit of $9.0 million in 2006 and a net tax provision of $1.0 million for 2005.

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The overall tax provision for 2007 was $5.1 million. Of this amount, $1.8 million has been credited to shareholders’ equity to reflect utilization of stock option deductions. The remaining $6.9 million provision is allocated to ordinary activities. The tax provision reflected the availability of tax losses, tax at standard rates in the jurisdictions in which we operate, income derived from Irish patents and foreign withholding tax. Our Irish patent-derived income was exempt from tax pursuant to Irish legislation, which exempts from Irish tax income derived from qualifying patents. From January 1, 2008, the amount of income that can qualify for the patent exemption will be capped at €5 million per year. This cap will not have a material effect on Elan’s tax position. For additional information regarding tax, refer to Note 21 to the Consolidated Financial Statements.

The overall tax benefit for 2006 was $11.0 million. Of this amount, $2.0 million has been credited to shareholders’ equity to reflect utilization of stock option deductions. The remaining $9.0 million benefit is allocated to ordinary activities. The tax benefit reflected the availability of tax losses, tax at standard rates in the jurisdictions in which we operate, income derived from Irish patents and foreign withholding tax. Our Irish patent-derived income was exempt from tax pursuant to Irish legislation, which exempts from Irish tax income derived from qualifying patents.

The overall tax provision for 2005 was $0.4 million. Of this amount, $0.6 million has been credited to shareholders’ equity to reflect utilization of stock option deductions. The remaining $1.0 million provision is allocated to ordinary activities. The tax provision reflected tax at standard rates in the jurisdictions in which we operate, income derived from Irish patents, foreign withholding tax and the availability of tax losses. Our Irish patent-derived income was exempt from tax pursuant to Irish legislation, which exempts from Irish tax income derived from qualifying patents.

SEGMENT ANALYSIS

Our business is organized into two business units: Biopharmaceuticals and EDT. Biopharmaceuticals engages in research, development and commercial activities primarily in Alzheimer’s disease, Parkinson’s disease, multiple sclerosis, Crohn’s disease, severe chronic pain and infectious diseases. EDT is an established, profitable and growing specialty pharmaceutical business unit of Elan. For nearly 40 years, EDT has been applying its skills and knowledge to enhance the performance of dozens of drugs that have been marketed worldwide. For additional information on our current operations, please refer to Item 4.B. “Business Overview.”

Analysis of Results of Operations by Segment

Biopharmaceuticals (in millions)

										% Increase/(Decrease)
	2007			2006			2005			2007/2006			2006/2005
Product revenue	$	454.6		$	269.8		$	219.6			68	%		23	%
Contract revenue		9.3			8.5			12.1			9	%		(30	)%
Total revenue		463.9			278.3			231.7			67	%		20	%
Operating expenses:
Cost of sales		224.2			87.4			84.0			157	%		4	%
Selling, general and administrative expenses		297.4			323.1			331.3			(8	)%		(2	)%
Research and development expenses		212.0			170.1			192.8			25	%		(12	)%
Net gain on divestment of products and businesses		—			(43.1	)		(103.1	)		(100	)%		(58	)%
Other net charges		80.8			26.3			4.4			207	%		498	%
Total operating expenses		814.4			563.8			509.4			44	%		11	%
Operating loss	$	(350.5	)	$	(285.5	)	$	(277.7	)		23	%		3	%

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Total Revenue

Total revenue for our Biopharmaceuticals segment was $463.9 million in 2007, $278.3 million in 2006 and $231.7 million in 2005, and is analyzed further below between product revenue and contract revenue.

Biopharmaceuticals product revenue was $454.6 million in 2007, $269.8 million in 2006 and $219.6 million in 2005. Refer to page 40 for additional discussion on product revenue from our Biopharmaceuticals business.

Contract revenue of $9.3 million in 2007 (2006: $8.5 million; 2005: $12.1 million) consists of milestones arising from R&D activities we perform on behalf of third parties. The fluctuations between years in contract revenue within our Biopharmaceuticals business were primarily due to the timing of milestone receipts.

Cost of Sales

Cost of sales was $224.2 million in 2007, compared to $87.4 million in 2006 and $84.0 million in 2005. The cost of sales as a percentage of revenue was 48% for 2007, 31% for 2006 and 36% for 2005, resulting in a gross profit margin of 52% in 2007, 69% in 2006 and 64% in 2005. The decrease in the gross profit margin in 2007 as compared to 2006 was principally due to the change in the mix of product sales, the impact of Tysabri and the reduced selling price of Maxipime as a result of the entry of a generic competitor. The Tysabri gross profit margin of 32% in 2007 (2006: 19%) is impacted by the profit sharing and operational arrangements in place with Biogen Idec and reflects Elan’s gross margin on sales of the product in the United States of 36% in 2007 (2006: 34%), partially offset by the inclusion in cost of sales of royalties payable by Elan on sales of Tysabri outside of the United States. These royalties are payable by Elan but reimbursed by the collaboration. The improvement in gross profit margin in 2006 as compared to 2005 was primarily due to the change in the mix of product sales and the inclusion in 2005 of costs related to the voluntary suspension of Tysabri in the United States.

Selling, General and Administrative Expenses

SG&A expense was $297.4 million in 2007, $323.1 million in 2006 and $331.3 million in 2005. Total SG&A expense for 2007 includes $78.4 million (2006: $75.0 million; 2005: $84.7 million) in relation to Tysabri. The decrease of 8% in total SG&A expense in 2007 compared to 2006 primarily reflects the restructuring of our commercial infrastructure related to the approval of a generic form of Maxipime in June 2007 and the anticipated approval of a generic form of Azactam, along with reduced amortization expense following the impairment of our Maxipime and Azactam intangible asset, which resulted in the reduction of related selling and administrative costs. The increase in SG&A expenses related to Tysabri reflects the relaunch of Tysabri in the United States in 2006. The SG&A expense related to the Tysabri ROW sales are reflected in the Tysabri ROW revenue as previously described.

The decrease of 2% in total SG&A expense in 2006 compared to 2005 reflected decreased expenses in relation to Tysabri and ongoing financial discipline, offset by the expensing of share-based compensation of $24.9 million in 2006 (2005: $Nil). The decrease in SG&A expense related to Tysabri in 2006 compared to 2005 reflected the impact of the temporary suspension of Tysabri in 2005 and the relaunch of Tysabri in the United States in 2006, partially offset by the expensing of shared-based compensation of $2.5 million in 2006 (2005: $Nil).

Research and Development Expenses

R&D expenses were $212.0 million in 2007, $170.1 million in 2006 and $192.8 million in 2005. The increase of 25% in 2007 compared to 2006 was primarily due to increased expenses associated with the progression of our Alzheimer’s disease programs and particularly the advance of AAB-001 into Phase 3 clinical trials and the advance of ELND005 into Phase 2 clinical trials during 2007. R&D expenses for 2007 included $39.3 million (2006: $31.5 million; 2005: $66.9 million) in relation to Tysabri.

The reduction in total R&D expense of 12% in 2006 compared to 2005 reflected the completion of the safety evaluation related to Tysabri in 2005, partially offset by increased spending relating to the progression of key Alzheimer’s disease programs, particularly AAB-001, the initiation of new collaborations in the areas of autoimmune diseases and neurodegeneration with Archemix and Transition, respectively, and by the cost of expensing share-based compensation of $12.6 million in 2006 (2005: $Nil).

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Net Gain on Divestment of Products and Businesses

	2006			2005
	(In millions)
Prialt European rights	$	(43.3	)	$	—
Zonegran		—			(85.6	)
European business		0.2			(17.1	)
Other		—			(0.4	)
Total	$	(43.1	)	$	(103.1	)

There were no product or business divestments in 2007. Refer to page 44 for additional discussion on the net gain on divestment of products and business for 2006 and 2005.

Other Net Charges

The principal items classified as other charges include the impairment of our Maxipime and Azactam assets, severance, restructuring and other costs and acquired in-process research and development. These items have been treated consistently from period to period. We believe that disclosure of other net charges is meaningful because it provides additional information in relation to these material items.

	2007		2006		2005
	(In millions)
Maxipime and Azactam asset impairment	$	52.2	$	—	$	—
Severance, restructuring and other costs, net		28.6		4.3		11.8
Acquired in-process research and development costs		—		22.0		—
Legal settlements and awards		—		—		(7.4	)
Total other net charges	$	80.8	$	26.3	$	4.4

Refer to page 45 for additional discussion on other net charges from our Biopharmaceuticals business.

EDT (in millions)

									% Increase/(Decrease)
	2007		2006			2005			2007/2006			2006/2005
Product revenue	$	274.0	$	263.1		$	238.5			4	%		10	%
Contract revenue		21.5		19.0			20.1			13	%		(5	)%
Total revenue		295.5		282.1			258.6			5	%		9	%
Operating expenses:
Cost of sales		113.7		122.9			112.1			(7	)%		10	%
Selling, general and administrative expenses		44.4		39.3			28.1			13	%		40	%
Research and development expenses		48.4		47.4			39.5			2	%		20	%
Net gain on divestment of products and businesses		—		—			(0.3	)		—			(100	)%
Other net (gains)/charges		3.8		(46.6	)		—			(108	)%		—
Total operating expenses		210.3		163.0			179.4			29	%		(9	)%
Operating income	$	85.2	$	119.1		$	79.2			(28	)%		50	%

Total Revenue

Total revenue for EDT was $295.5 million in 2007, $282.1 million in 2006 and $258.6 million in 2005, and is analyzed below between product revenue and contract revenue.

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EDT product revenue is comprised of manufacturing revenue and royalties of $269.5 million (2006: $232.4 million; 2005: $204.5 million) and amortized revenue related to Adalat/Avinza of $4.5 million (2006: $30.7 million; 2005: $34.0 million). Refer to page 42 for additional discussion on EDT product revenue.

EDT contract revenue, which consists of research revenue and milestones from R&D activities performed on behalf of third parties, totaled $21.5 million in 2007, $19.0 million in 2006 and $20.1 million in 2005. The fluctuations between years were primarily due to the timing of milestone receipts.

Cost of Sales

Cost of sales was $113.7 million in 2007, compared to $122.9 million in 2006 and $112.1 million in 2005. The cost of sales as a percentage of revenue was 38% for 2007, 44% for 2006 and 43% for 2005, resulting in a gross profit margin of 62% in 2007, 56% in 2006 and 57% in 2005. The fluctuation in the gross profit margin in 2007 as compared to 2006 and 2005 was principally a result of changes in product mix. Royalties continue to grow as a percentage of total manufacturing revenue and royalties. In 2007, our royalties were 47% of total manufacturing revenue and royalties (2006: 44%; 2005: 34%).

Selling, General and Administrative Expenses

SG&A expense was $44.4 million in 2007, $39.3 million in 2006 and $28.1 million in 2005. The increase of 13% in 2007 from 2006 primarily reflects higher legal costs related to the protection of our intellectual property, which is partially offset by lower amortization charges as some EDT intangible assets were fully amortized in 2006. The increase of 40% in 2006 from 2005 primarily reflects the impact of the expensing of share-based compensation of $3.9 million in 2006 (2005: $Nil), and higher legal costs related to the protection of our intellectual property and contractual rights.

Research and Development

R&D expenses were $48.4 million in 2007, $47.4 million in 2006 and $39.5 million in 2005. The increase of 2% in 2007 compared to 2006 and of 20% in 2006 compared to 2005 primarily reflects increased spend on proprietary programs and on identifying suitable collaborative products for the NanoCrystal technology.

Other Net Charges/(Gains)

	2007		2006
	(In millions)
Severance, restructuring and other costs, net	$	3.8	$	3.2
Gain on arbitration award		—		(49.8	)
Total other net charges/(gains)	$	3.8	$	(46.6	)

During 2007 and 2006, we incurred severance, restructuring and other costs of $3.8 million and $3.2 million, respectively, arising from the realignment of our resources to meet our current business structure.

In December 2006, we were awarded $49.8 million following the conclusion of binding arbitration proceedings that were initiated against King with respect to an agreement to reformulate Sonata. This award was recognized as a gain in 2006 and was received in January 2007.

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B.   Liquidity and Capital Resources

Cash and Cash Equivalents, Liquid and Capital Resources

Our liquid and capital resources at December 31 were as follows (in millions):

						Increase/
	2007			2006		(Decrease)
Cash and cash equivalents	$	423.5		$	1,510.6		(72	)%
Restricted cash — current		20.1			23.2		(13	)%
Investment securities — current		276.9			11.2		2,372	%
Shareholders’ equity/(deficit)		(234.7	)		85.1		(376	)%

We have historically financed our operating and capital resource requirements through cash flows from operations, sales of investment securities and borrowings. We consider all highly liquid deposits with an original maturity of three months or less to be cash equivalents. Our primary sources of funds as of December 31, 2007 consisted of cash and cash equivalents of $423.5 million, which excludes restricted cash of $20.1 million, and current investment securities of $276.9 million.

At December 31, 2007, our shareholders’ deficit was $234.7 million, compared to shareholders’ equity of $85.1 million at December 31, 2006. The decrease is primarily due to the net loss incurred during the year. Our debt covenants do not require us to maintain or adhere to any specific financial ratios. Consequently, the shareholders’ deficit has no impact on our ability to comply with our debt covenants.

Cash Flows Summary

	2007			2006			2005
	(In millions)
Net cash used in operating activities	$	(167.5	)	$	(241.5	)	$	(451.5	)
Net cash provided by/(used in) investing activities		(318.1	)		37.5			288.9
Net cash provided by/(used in) financing activities		(599.7	)		629.3			(99.7	)
Effect of exchange rate changes on cash		(1.8	)		4.6			(4.6	)
Net increase/(decrease) in cash and cash equivalents		(1,087.1	)		429.9			(266.9	)
Cash and cash equivalents at beginning of year		1,510.6			1,080.7			1,347.6
Cash and cash equivalents at end of year	$	423.5		$	1,510.6		$	1,080.7

The results of our cash flow activities for 2007 and 2006 are described below.

2007

Net cash used in operating activities was $167.5 million in 2007. The primary components of cash used in operating activities were the net loss (adjusted to exclude non-cash charges and benefits) and changes in working capital accounts. Changes in working capital accounts provided a net cash inflow of $15.5 million and include the increase in accounts receivable of $30.1 million, the decrease in prepaid and other assets of $60.3 million (principally related to the $49.8 million arbitration award, which was paid by King in January 2007), the increase in inventory of $7.4 million, and the net decrease of $7.3 million in accounts payable and accrued and other liabilities.

Net cash used in investing activities was $318.1 million in 2007. At December 31, 2007, all of Elan’s liquid investments were invested in bank deposits and funds. In December 2007, due to dislocations in the capital markets, one of these funds was closed. As a result, the amount invested in this fund on the closure date of $305.9 million (December 31, 2007: $274.8 million) no longer qualified as cash and cash equivalents and was reclassified as an investment. Since December 31, 2007, Elan has reduced the amount invested in this fund to approximately $100 million and has moved approximately $175 million into bank deposits and United States treasury funds. Net cash used in investing activities in 2007 also includes $12.3 million related to the purchase of investment securities and $26.1 million related to the purchase of property, plant and equipment, offset by net proceeds of $31.3 million

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from the sale of investment securities. As of December 31, 2007, we did not have any significant commitments to purchase property, plant and equipment, except for committed additional capital expenditures of $12.7 million.

Net cash used in financing activities totaled $599.7 million in 2007, primarily reflecting the repayment of loans and capital lease obligations of $629.6 million (principally the redemption of the $613.2 million of the Athena Notes), offset by $28.2 million of net proceeds from employee stock issuances.

We believe that our current liquid asset position will be sufficient to meet our needs for at least the next 12 months. For additional information, See Item 11. “Quantitative and Qualitative Disclosures about Market Risk.”

2006

Net cash used in operating activities was $241.5 million in 2006. The primary components of cash used in operating activities were the net loss (adjusted to exclude non-cash charges and benefits) and changes in working capital accounts. The changes in working capital accounts include the net increase in trade receivables and prepaid and other assets of $82.0 million (principally $49.8 million arbitration award entered in our favor and against King in December 2006, which was paid by King in January 2007), the increase in inventory of $7.1 million, and the net increase of $15.2 million in accounts payable and accrued and other liabilities.

Net cash provided by investing activities was $37.5 million in 2006. The major component of cash generated from investing activities includes net proceeds of $14.1 million from the sale of investment securities and $54.2 million from the sale of the European rights to Prialt (net of transaction costs), partially offset by $29.9 million for capital expenditures.

Net cash provided by financing activities totaled $629.3 million in 2006, primarily reflecting the net proceeds of $602.8 million from the issuances of $465.0 million of the 8.875% Notes and $150.0 million of the Floating Rate Notes due 2013, and $29.8 million of net proceeds from employee stock issuances, offset by $5.7 million related to the repayment of loans and capital lease obligations.

Debt Facilities

At December 31, 2007, we had outstanding debt of $1,765.0 million, which consisted of the following (in millions):

7.75% Notes due 2011	$	850.0
Floating Rate Notes due 2011		300.0
8.875% Notes due 2013		465.0
Floating Rate Notes due 2013		150.0
	$	1,765.0

During 2007, as of December 31, 2007, and, as of the date of filing of this Form 20-F, we were not in violation of any of our debt covenants. Our debt covenants do not require us to maintain or adhere to any specific financial ratios. Consequently, the shareholders’ deficit of $234.7 million at December 31, 2007 has no impact on our ability to comply with our debt covenants. For additional information regarding our outstanding debt, refer to Note 18 to the Consolidated Financial Statements.

Commitments and Contingencies

For information regarding commitments and contingencies, please refer to Notes 26 and 27 to the Consolidated Financial Statements.

Capital Expenditures

We believe that our current and planned manufacturing, research, product development and corporate facilities will adequately meet our current and projected needs. In June and December 2007, we entered into lease agreements for two additional buildings in South San Francisco, which are currently under construction. The lease term for the first building is expected to commence in the first quarter of 2009 and the second in the first quarter of 2010. The buildings will be

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utilized for our R&D, sales and administrative functions. We may invest a significant amount of our cash and resources into building a biologics manufacturing facility for AAB-001. We will use our resources to make capital expenditures as necessary from time to time and also to make investments in the purchase or licensing of products and technologies and in marketing and other alliances with third parties to support our long-term strategic objectives.

C.   Research and Development, Patents and Licenses, etc.

See Item 4.B. “Business Overview” for information on our R&D, patents and licenses, etc.

D.   Trend Information

See Item 4.B. “Business Overview” and Item 5.A. “Operating Results” for trend information.

E.   Off-Balance Sheet Arrangements

As of December 31, 2007, we have no unconsolidated special purpose financing or partnership entities or other off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, that are material to investors.

F.   Tabular Disclosure of Contractual Obligations

The following table sets out, at December 31, 2007, our main contractual obligations due by period for debt principal and interest repayments and capital and operating leases. These represent the major contractual, future payments that may be made by Elan. The table does not include items such as expected capital expenditures on plant and equipment, future investments in financial assets or future milestones we may elect to pay Biogen Idec. As of December 31, 2007, the directors had authorized capital expenditures, which had been contracted for, of $12.7 million (2006: $5.6 million). As of December 31, 2007, the directors had authorized capital expenditures, which had not been contracted for, of $1.8 million (2006: $7.3 million).

			Less Than		1-3			3-5		More Than
	Total		1 Year		Years			Years		5 Years
	(in millions)
7.75% Notes due 2011	$	850.0	$	—	$	—		$	850.0	$	—
Floating Rate Notes due 2011		300.0		—		—			300.0		—
8.875% Notes due 2013		465.0		—		—			—		465.0
Floating Rate Notes due 2013		150.0		—		—			—		150.0
Total debt principal obligations		1,765.0		—		—			1,150.0		615.0
Debt interest payments(1)		685.5		147.7		295.5			191.3		51.0
Operating lease obligations		275.8		17.1		42.0	(2)		57.6		159.1
Total contractual obligations	$	2,726.3	$	164.8	$	337.5		$	1,398.9	$	825.1

(1)	The Floating Rate Notes due 2011 and Floating Rate Notes due 2013 bear interest at a rate, adjusted quarterly, equal to three-month London Interbank Offer Rate (LIBOR) plus 4.0%. and 4.125%, respectively. To calculate our interest payment obligation, we used the LIBOR at December 31, 2007.
(2)	Net of estimated incentives for tenant leasehold improvements of $10.0 million and $2.8 million in 2009 and 2010, respectively.

At December 31, 2007, we had liabilities related to unrecognized tax benefits of $5.8 million. It is not possible to accurately assess the timing of or the amount of any settlement in relation to these liabilities.

At December 31, 2007, we had commitments to invest $1.8 million (2006: $2.4 million) in healthcare managed funds.

Under our collaboration agreement with Biogen Idec, if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $125 million per calendar quarter, then we may elect to make a milestone payment to Biogen Idec of $75 million in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $700 million. Additionally, if we have made this

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first milestone payment, then we may elect to pay a further $50 million milestone to Biogen Idec if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $200 million per calendar quarter, in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $1.1 billion. Should we elect not to make the first milestone payment of $75 million, then our percentage share of Tysabri will be reduced to approximately 35% for annual global in-market net sales of Tysabri exceeding $700 million. If we elect to make the first milestone payment, but not the second milestone payment, then our percentage share of Tysabri will be reduced to approximately 35% for annual global net sales of Tysabri exceeding $1.1 billion.

In disposing of assets or businesses, we often provide customary representations, warranties and indemnities (if any) to cover various risks. We do not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. However, we have no reason to believe that these uncertainties would have a material adverse effect on our financial condition or results of operations.

The two major rating agencies covering our debt rate it as sub-investment grade debt. None of our debt has a rating trigger that would accelerate the repayment date upon a change in rating.

Our debt ratings as of December 31, 2007 were as follows:

			Moody’s
	Standard		Investors
	& Poor’s		Service
7.75% Notes		B		B3
Floating Rate Notes due 2011		B		B3
8.875% Notes		B		B3
Floating Rate Notes due 2013		B		B3

We believe that we have sufficient current cash, liquid resources, realizable assets and investments to meet our liquidity requirements for at least the next 12 months. Longer-term liquidity requirements and debt repayments will need to be met out of available cash resources, future operating cash flows, financial and other asset realizations and future financing. However, events, including a material deterioration in our operating performance as a result of our inability to sell significant amounts of Tysabri, material adverse legal judgments, fines, penalties or settlements arising from litigation or governmental investigations, failure to successfully develop and receive marketing approval for products under development (in particular, AAB-001) or the occurrence of other circumstances or events described under “Risk Factors,” could materially adversely affect our ability to meet our longer-term liquidity requirements.

We commit substantial resources to our R&D activities, including collaborations with third parties such as Biogen Idec for the development of Tysabri and Wyeth for Alzheimer’s disease. We expect to commit significant cash resources to the development and commercialization of products in our development pipeline.

We continually evaluate our liquidity requirements, capital needs and availability of resources in view of, among other things, alternative uses of capital, debt service requirements, the cost of debt and equity capital and estimated future operating cash flow. We may raise additional capital, restructure or refinance outstanding debt, repurchase material amounts of outstanding debt (including the 7.75% Notes and the Floating Rate Notes due 2011 and the 8.875% Notes and the Floating Rate Notes due 2013), consider the sale of interests in subsidiaries, investment securities or other assets or the rationalization of products, or take a combination of such steps or other steps to increase or manage our liquidity and capital resources. Any such actions or steps, including any repurchase of outstanding debt, could be material. In the normal course of business, we may investigate, evaluate, discuss and engage in future company or product acquisitions, capital expenditures, investments and other business opportunities. In the event of any future acquisitions, capital expenditures, investments or other business opportunities, we may consider using available cash or raising additional capital, including the issuance of additional debt.

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Item 6.   Directors, Senior Management and Employees.

A.   Directors and Senior Management

Directors

Kyran McLaughlin (63)
Non-Executive Chairman, Member of the Nominating Committee

Mr. McLaughlin was appointed a director of Elan in January 1998 and was appointed chairman of Elan in January 2005. He is deputy chairman at Davy Stockbrokers, Ireland’s largest stockbroker firm. He is also a director of Ryanair Holdings, plc and is a director of a number of private companies.

Floyd Bloom, MD (71)
Non-Executive Director, Member of the Science and Technology Committee

Dr. Bloom was appointed a director of Elan in July 2007. He is the retired chairman of the Scripps Research Department of Neuropharmacology and was the previous editor-in-chief of Science. He also served as president of the American Association for the Advancement of Science (2002-2003) and was chairman of its board of directors (2003-2004). A professor at Scripps Research since 1983, Dr. Bloom serves as chairman of the Department of Neuropharmacology (1989-2000; 2002 to present). A member of the National Academy of Science since 1977, Dr. Bloom is the recipient of numerous prizes for his contributions to science.

Shane Cooke (45)
Executive Director, Chief Financial Officer and Head of Elan Drug Technologies

Mr. Cooke was appointed a director of Elan in May 2005. He joined the company as executive vice president and chief financial officer (CFO) in July 2001, and was additionally appointed head of EDT in May 2007. Prior to joining Elan, Mr. Cooke was chief executive of Pembroke Capital Limited, an aviation leasing company, and prior to that held a number of senior positions in finance in the banking and aviation industries. Mr. Cooke is a chartered accountant and a graduate of University College Dublin.

Laurence G. Crowley (70)
Non-Executive Director, Member of the Leadership Development and Compensation Committee, Member of the Audit Committee

Mr. Crowley was appointed a director of Elan in March 1996. He was governor of the Bank of Ireland until his retirement in July 2005. He is presently chairman of Ecocem Ltd. and Realex Payments and is a director of a number of private companies and not-for-profit organizations. Mr. Crowley is a chartered accountant.

Lars Ekman, MD, PhD (58)
Non-Executive Director, Chairman of the Science and Technology Committee

Dr. Ekman was appointed a director of Elan in May 2005 and joined Elan as executive vice president and president, global R&D, in 2001. He retired from his executive position in Elan on December 31, 2007. Prior to joining Elan, he was executive vice president, R&D, at Schwarz Pharma AG since 1997. From 1984 to 1997, Dr. Ekman was employed in a variety of senior scientific and clinical functions at Pharmacia (now Pfizer). Dr. Ekman is a board certified surgeon with a PhD in experimental biology and has held several clinical and academic positions in both the United States and Europe. He obtained his PhD and MD from the University of Gothenburg, Sweden.

Jonas Frick (50)
Non-Executive Director, Member of the Science and Technology Committee

Mr. Frick was appointed a director of Elan in September 2007. He is the former chief executive officer (CEO) of Scandinavian Life Science Ventures (SLS Ventures). He was the chief executive officer and president of Medivir AB and served in senior executive positions in Pharmacia’s international businesses in the central nervous system and autoimmune areas across Italy, Sweden and Japan. He is a founding member of the Swedish Biotechnology Industry Organization.

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Ann Maynard Gray (62)
Non-Executive Director, Member of the Nominating Committee

Ms. Gray was appointed a director of Elan in February 2001. She was formerly president of Diversified Publishing Group of Capital Cities/ABC, Inc. Ms. Gray is also a director of Duke Energy Corporation and The Phoenix Companies, Inc.

Gary Kennedy (50)
Non-Executive Director, Chairman of the Audit Committee

Mr. Kennedy was appointed a director of Elan in May 2005. From May 1997 to December 2005, he was group director, finance & enterprise technology, at Allied Irish Banks, plc (AIB) and a member of the main board of AIB and was also on the board of M&T, AIB’s associate in the United States. Prior to that, Mr. Kennedy was group vice president at Nortel Networks Europe after starting his management career at Deloitte & Touche. He served on the board of the Industrial Development Authority of Ireland for 10 years until he retired in December 2005. He is a director of Finance Ireland plc, the NUI Galway Development Board and a number of private companies. Mr. Kennedy is a chartered accountant.

Giles Kerr (48)
Non-Executive Director, Member of the Audit Committee

Mr. Kerr was appointed a director of Elan in September 2007. He is currently the director of finance with the University of Oxford, England, and a fellow of Keble College. He is also a director and chairman of the audit committee of Victrex plc and a director of BTG plc, Isis Innovation Ltd and a number of private companies. Previously, he was the group finance director and chief financial officer of Amersham plc, and prior to that, he was a partner with Arthur Andersen in the United Kingdom.

G. Kelly Martin (49)
Executive Director, President and CEO

Mr. Martin was appointed a director of Elan in February 2003 following his appointment as president and chief executive officer. He was formerly president of the International Private Client Group and a member of the executive management and operating committee of Merrill Lynch & Co., Inc. He spent over 20 years at Merrill Lynch & Co., Inc. in a broad array of operating and executive responsibilities on a global basis.

Kieran McGowan (64)
Non-Executive Director, Lead Independent Director, Chairman of the Nominating Committee

Mr. McGowan was appointed a director of Elan in December 1998. From 1990 until his retirement in December 1998, he was chief executive of the Industrial Development Authority of Ireland. He is chairman of the governing authority of University College Dublin and CRH, plc, and a director of Irish Life and Permanent, plc, United Drug, plc, Enterprise Ireland, and a number of private companies.

William Rohn (64)
Non-Executive Director, Member of the Leadership, Development and Compensation Committee

Mr. Rohn was appointed a director of Elan in May 2006. He is currently vice chairman of Raven Biotechnologies, Inc., and a director of Metabasis Therapeutics, Inc., Cerus Corp and Pharmacyclics, Inc. Previously, he was chief operating officer of Biogen Idec until January 2005 and prior thereto president and chief operating officer of Idec Pharmaceutical Corporation from 1993.

Dennis J. Selkoe, MD (64)
Non-Executive Director, Chairman of the Leadership Development and Compensation Committee, Member of the Science and Technology Committee

Dr. Selkoe was appointed a director of Elan in July 1996, following our acquisition of Athena Neurosciences, where he served as a director since July 1995. Dr. Selkoe was a founder of Athena Neurosciences. Dr. Selkoe, a neurologist, is a professor of neurology and neuroscience at Harvard Medical School. He also serves as co-director of the Center for Neurologic Diseases at The Brigham and Women’s Hospital.

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Jeffrey Shames (52)
Non-Executive Director, Member of the Audit Committee

Mr. Shames was appointed a director of Elan in July 2007. He is the retired chairman and chief executive officer of MFS Investment Management. Mr. Shames is currently an executive in residence at the Massachusetts Institute of Technology (MIT) and has served on both the visiting committee and the Dean’s Advisory Board of the Sloan School at MIT. He is the chairman of the Board of Trustees of Berklee College of Music; a member of the Board of Trustees of City Year (a youth service organization); co-founder and member of the Board of Hurricane Voices, a not-for profit breast cancer foundation; and trustee of the XPrize Foundation.

Senior Management

Menghis Bairu, MD (47)
Senior Vice President, Head of International

Dr. Bairu was appointed senior vice president and head of international for all of Elan’s biopharmaceutical activities outside the United States in May 2007. He joined Elan in 2004 and had served as vice president and head of global medical affairs and as senior director in charge of the regional medical scientists. Prior to joining Elan, Dr. Bairu worked at Genentech, Inc. in various commercial, clinical and managed care roles. He received his undergraduate degree in business administration from Instituto VII Tecnico Commerciale in Milan, Italy, and attended the Universita Statale, Facoltà di Medicina e Chirurgia (Faculty of Medicine and Surgery) in Milan, where he received his Medical Degree.

James Callaway, PhD (51)
Senior Vice President, Head of Immunotherapy AD Clinical Programs

Dr. Callaway was appointed senior vice president, head of immunotherapy Alzheimer’s disease clinical programs, in March 2004. Since joining Elan in 1995, Dr. Callaway has held several senior positions, including interim head of global development and vice president of biopharmaceutical development services. Prior to joining Elan, he worked at Bayer Pharmaceuticals. Dr. Callaway received his PhD in biological chemistry from University of California, Los Angeles, and a Bachelor of Science in chemistry from California State University, Chico.

Nigel Clerkin (34)
Senior Vice President, Finance and Group Controller

Mr. Clerkin was appointed senior vice president, finance and group controller in January 2004, having previously held a number of financial and strategic planning positions since joining Elan in January 1998. He is also our principal accounting officer. Mr. Clerkin is a chartered accountant and a graduate of Queen’s University Belfast.

Richard Collier (54)
Executive Vice President and General Counsel

Mr. Collier joined Elan as executive vice president and general counsel in November 2004. Prior to joining Elan, Mr. Collier was senior counsel at Morgan, Lewis & Bockius LLP. Prior to joining Morgan Lewis, he was senior vice president and general counsel at Pharmacia (now Pfizer), after serving in that position at Pharmacia & Upjohn. Prior to his experience at Pharmacia, Mr. Collier spent 11 years at Rhone-Poulenc Rorer, Inc. Previously, he was in private practice after having served with the U.S. Federal Trade Commission and U.S. Department of Justice. Mr. Collier is a graduate of Temple University and earned his Juris Doctor at Temple University.

William F. Daniel (55)
Executive Vice President and Company Secretary

Mr. Daniel was appointed a director of Elan in February 2003 and served until July 2007. He has served as the company secretary since December 2001, having joined Elan in March 1994 as group financial controller. In July 1996, he was appointed group vice president, finance, group controller and principal accounting officer. From 1990 to 1992, Mr. Daniel was financial director of Xtravision, plc. Mr. Daniel is a chartered accountant and a graduate of University College Dublin.

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David W. Feigal, Jr, MD (58)
Senior Vice President, Head of Global Regulatory and Global Safety Surveillance

Dr. Feigal joined Elan as senior vice president, head of global regulatory and global safety surveillance in November 2006. Prior to joining Elan, he served most recently as a principal with NDA Partners, and prior thereto spent 12 years with the FDA. Before joining the FDA, Dr. Feigal worked for 10 years within the academic and hospital settings of the University of California in San Diego, San Francisco and Davis. Dr. Feigal holds an BA from University of Minnesota, an MD from Stanford University and a Master of Public Health from the University of California, Berkeley.

Allison Hulme, PhD (44)
Executive Vice President, Global Development

Dr. Hulme was appointed executive vice president, head of global development, in May 2007. From 2005 to 2007, Dr. Hulme was executive vice president, autoimmune, Tysabri, global development. Previously, Dr. Hulme held the positions of executive vice president, Tysabri business enterprise, and senior vice president, head of global development. Prior to joining Elan in October 1995, Dr. Hulme held several positions in clinical research at Glaxo Wellcome Pharmaceuticals (United Kingdom) and served as a lecturer at Luton University. She holds a degree in science from Luton University and earned her PhD from Cranfield Institute of Technology.

Karen S. Kim (45)
Executive Vice President, Corporate Strategy & Alliances, Communications, Branding and Specialty Business Group

Ms. Kim was appointed executive vice president, corporate strategy & alliances, communications, branding and specialty business group, in January 2005. She joined Elan in September 2003 as senior vice president, head of global corporate strategy and strategic alliances. Prior to joining Elan, Ms. Kim held senior management positions at Merrill Lynch & Co., which she joined in 1998, and where she was most recently head of client development in the International Private Client Group. Previously she held senior management positions at the Cambridge Group and The MAC Group/Gemini Consulting. She is a graduate of Wellesley College and earned her MBA from the Harvard Graduate School of Business Administration.

Ivan Lieberburg, MD, PhD (58)
Executive Vice President and Chief Medical Officer

Dr. Lieberburg is executive vice president and chief medical officer of Elan, where he has held a number of senior positions, most recently senior vice president of research. Prior to joining Athena Neurosciences in 1987, Dr. Lieberburg held faculty positions at the Albert Einstein College of Medicine and Mt. Sinai School of Medicine in New York. He received an AB from Cornell University and earned his PhD in Neurobiology from The Rockefeller University. Dr. Lieberburg was a postdoctoral fellow in Neurobiology at Rockefeller University. He earned his MD from the University of Miami. Dr. Lieberburg was a research endocrine fellow at the University of California, San Francisco.

Kathleen Martorano (46)
Executive Vice President, Strategic Human Resources

Ms. Martorano was appointed executive vice president, strategic human resources, and a member of the office of the chief executive officer, in January 2005. She joined Elan in May 2003 as senior vice president, corporate marketing and communications. Prior to joining Elan, Ms. Martorano held senior management positions at Merrill Lynch & Co., which she joined in 1996, and where she was most recently first vice president of marketing and communications for the International Private Client Group. Previously, she held senior management positions with Salomon Brothers. Ms. Martorano holds a Bachelor of Science degree from Villanova University.

Johannes Roebers, PhD (47)
Senior Vice President, Head of Biologic Strategy, Planning and Operations

Dr. Roebers joined Elan as senior vice president, head of biologic strategy, planning and operations, in July 2007. Prior to joining Elan, Dr. Roebers worked at Genentech. He joined Genentech when it acquired the Oceanside manufacturing facility from Biogen Idec in 2005, as he had been Biogen Idec’s project leader for design,

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construction and start-up of the facility since 2001. Before joining Biogen Idec, Dr. Roebers spent 11 years with Bayer Corporation. He received his Diplom-Ingenieur in mechanical engineering from RWTH Aachen in Aachen, Germany, and his PhD in chemical engineering from Clemson University.

Dale Schenk, PhD (50)
Executive Vice President and Chief Scientific Officer

Dr. Schenk was appointed Elan’s executive vice president and chief scientific officer in September 2007. From 2003 to 2007, Dr. Schenk was senior vice president and Elan’s chief scientific officer. From 1999 to 2003, Dr. Schenk was senior vice president of discovery research at Elan and, from 1998 to 1999, he was the company’s vice president of neurobiology. Previously, Dr. Schenk was director of neurobiology for Athena Neurosciences from 1994 to 1998. Earlier at Athena, from 1987 to 1994, Dr. Schenk served as the leader of several research programs. Dr. Schenk earned his bachelor’s degree in biology and a PhD in physiology and pharmacology from the University of California, San Diego.

Ted Yednock, PhD (50)
Executive Vice President, Head of Global Research

Dr. Yednock was appointed executive vice president, head of global research, in September 2007. Dr. Yednock joined Athena Neurosciences in 1990 to initiate work on MS. He has contributed to a number of research efforts since that time in the areas of both autoimmune and neurodegeneration, and has held a number of scientific and management positions within the organization, including senior vice president, head of global research, and vice president, biology. He earned his bachelor’s degree in biology and chemistry from the University of Illinois and his PhD in immunology from the University of California, San Francisco.

B.   Compensation

Executive Officers and Directors’ Remuneration

For the year ended December 31, 2007, all executive officers and outside directors as a group (19 persons) received total compensation of $13.2 million.

We reimburse officers and outside directors for their actual business-related expenses. For the year ended December 31, 2007, an aggregate of $0.2 million was accrued to provide pension, retirement and other similar benefits for directors and officers. We also maintain certain health and medical benefit plans for our employees in which our officers participate.

Officers serve at the discretion of the board of directors. No director or officer has a family relationship with any other director or officer.

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Directors’ Remuneration

	Year Ended December 31
				2007					2007
	2007			Annual			2007		Benefit			2007		2006
	Salary/Fees			Bonus			Pension		in Kind			Total		Total
Executive Directors:
G. Kelly Martin	$	805,677		$	1,040,000	(1)	$	6,750	$	107,263		$	1,959,690	$	1,796,533	(2)
Shane Cooke		594,922			721,000			—		—			1,315,922		1,234,147
William F. Daniel(3)		217,583			252,000			25,621		11,768			506,972		626,486
Lars Ekman, MD, PhD(4)		516,701			—			10,380		3,105,021	(5)		3,632,102		984,800
Total		2,134,883			2,013,000			42,751		3,224,052			7,414,686		4,641,966
Non-Executive Directors:
Kyran McLaughlin		300,000			—			—		—			300,000		300,000
Floyd Bloom, MD(6)		31,481			—			—		—			31,481		—
Laurence G. Crowley		75,908			—			—		—			75,908		67,500
Jonas Frick(7)		16,462			—			—		—			16,462		—
Alan R. Gillespie, CBE, PhD(8)		29,846			—			—		—			29,846		75,000
Ann Maynard Gray		67,500			—			—		—			67,500		67,500
Gary Kennedy		73,711			—			—		—			73,711		67,500
Giles Kerr(7)		16,462			—			—		—			16,462		—
Kieran McGowan		88,356			—			—		—			88,356		87,500
William R. Rohn		67,500			—			—		—			67,500		38,101
Dennis J. Selkoe, MD		137,500	(9)		—			—		—			137,500		128,878
Jeffrey Shames(6)		34,606			—			—		—			34,606		—
Total	$	3,074,215		$	2,013,000		$	42,751	$	3,224,052		$	8,354,018	$	5,473,945

(1)	On February 14, 2008, Mr. Martin waived his 2007 performance cash bonus, which would have been paid in 2008, in exchange for the grant of a stock option exercisable for 73,874 Ordinary Shares with an exercise price of $25.01 per share. The stock option was granted with a fair value of $1,040,000. Mr. Martin also received an annual stock option grant exercisable for 255,716 Ordinary Shares on the same date. The options will vest at a rate of 25% per year for 4 years and will expire 10 years from the date of grant.
(2)	On February 21, 2007, Mr. Martin waived his 2006 performance cash bonus, which would have been paid in 2007, in exchange for the grant of a stock option exercisable for 101,746 Ordinary Shares with an exercise price of $13.95 per share. The stock option was granted with a fair value of $880,000. Mr. Martin also received an annual stock option grant exercisable for 393,109 Ordinary Shares on the same date. The options will vest at a rate of 25% per year for 4 years and will expire 10 years from the date of grant.
(3)	Retired as director on July 1, 2007; remuneration was pro-rated for the period from January 1, 2007 to July 1, 2007.
(4)	Retired as executive vice president on December 31, 2007 and will continue to serve as director.
(5)	Incorporates a severance payment of $2,500,000 and a cash payment made in respect of RSUs forfeited. See Item 7.B. “Related Party Transactions” for additional information.
(6)	Appointed as directors on July 1, 2007.
(7)	Appointed as directors on September 13, 2007.
(8)	Retired as director on May 24, 2007.
(9)	Includes fees of $50,000 in 2007 and $50,000 in 2006 under a consultancy agreement. See Item 7.B. “Related Party Transactions” for additional information.

Payments to a former director

On July 1, 2003, we entered into a pension agreement with Mr. John Groom, a former director of Elan Corporation, plc, whereby we shall pay him a pension of $200,000 per annum, monthly in arrears, until May 16, 2008 in respect of his former senior executive roles.

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C.   Board Practices

The Board

The roles of the chairman and CEO are separated. The chairman of the board is responsible for the leadership and management of the board. Our CEO is responsible for the operation of the business of the Company. Other significant commitments of the chairman are set out in Item 6.A. “Directors and Senior Management.” These commitments did not change during 2007.

The board regularly reviews its responsibilities and those of its committees and management. The board meets regularly throughout the year, and all of the directors have full and timely access to the information necessary to enable them to discharge their duties.

Directors are provided with extensive induction materials on appointment and meet with key executives with a particular focus on ensuring non-executive directors are fully informed on issues of relevance to Elan and its operations. All directors are encouraged to update and refresh their skills and knowledge, for example, through attending courses on technical areas or external briefings for non-executive directors.

All directors have access to the advice and services of the company secretary. The company secretary supports the chairman in ensuring the board functions effectively and fulfills its role. He is secretary to the Audit Committee, Leadership Development and Compensation Committee (LDCC), Nominating and Governance Committee (NGC) and Science and Technology Committee and ensures compliance with applicable rules and regulations, as well as providing advice on a range of issues to commercial colleagues.

The board has reserved certain matters to its exclusive jurisdiction, thereby maintaining control of the Company and its future direction. All directors are appointed by the board, as nominated by its NGC, and subsequently elected by shareholders. Procedures are in place whereby directors and committees, in furtherance of their duties, may take independent professional advice, if necessary, at our expense. The board held eight scheduled meetings during 2007.

Our guidelines require that the board will conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively. An evaluation of the performance of the board, the board committees and individual directors was conducted during the year by the lead independent director through meetings with each member of the board. The results were presented to the nominating and governance committee and to the board. The board concluded that it and its committees had operated satisfactorily during the past year.

The board has delegated authority over certain areas of our activities to four standing committees, as more fully described below.

For additional information, see Items 7.B. “Related Party Transactions” and 10.B. “Memorandum and Articles of Association.”

Independence of Directors

Under our guidelines, two-thirds of the board are required to be independent. At the year-end, the board included 11 independent, non-executive directors who constitute in excess of two-thirds of the board. We adopted a definition of independence based on the rules of the New York Stock Exchange (NYSE), the exchange on which the majority of our shares are traded. For a director to be considered independent, the board must affirmatively determine that he or she has no material relationship with the Company. The specific criteria that affect independence are set out in the Company’s corporate governance guidelines and include former employment with the Company, former employment with the Company’s independent auditors, receipt of compensation other than directors’ fees, material business relationships and interlocking directorships.

In December 2007, the board considered the independence of each non-executive director and considers that all the then non-executive directors were independent in character and judgment and there are no relationships or circumstances that are likely to affect their independent judgment.

In reaching this conclusion, the board gave due consideration to participation by board members in our equity compensation plans. The board also considered the positions of Mr. McLaughlin, Chairman, Mr. Crowley and

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Dr. Selkoe, who have served as non-executive directors for in excess of nine years. Additionally, Dr. Selkoe has an ongoing consultancy agreement with the company, which is set out in detail in Item 7.B. “Related Party Transactions.” It is the board’s view that each of these non-executive directors discharges his duties in a thoroughly independent manner and constructively and appropriately challenges the executive directors and the board. For this reason, the board considers that they are independent.

Audit Committee

The Audit Committee, composed entirely of independent non-executive directors, helps the board in its general oversight of the Company’s accounting and financial reporting practices, internal controls and audit functions, and is directly responsible for the appointment, compensation and oversight of the work of our independent auditors. The members of the committee are Mr. Kennedy, Chairman, Mr. Crowley, Mr. Kerr (appointed January 31, 2008) and Mr. Shames. Mr. McGowan resigned from the Audit Committee on January 31, 2008. Mr. Kennedy qualifies as an audit committee financial expert. The Audit Committee held nine meetings during 2007. For additional information on the Audit Committee, please refer to Item 16.A. “Audit Committee Financial Expert” and Item 16.C. “Report of the Audit Committee.”

Leadership Development and Compensation Committee

The LDCC, composed entirely of independent non-executive directors, reviews our compensation philosophy and policies with respect to executive compensation, fringe benefits and other compensation matters. The committee determines the compensation of the chief executive officer and other executive directors and reviews the compensation of the other members of the executive management. The members of the committee are Dr. Selkoe, Chairman, Mr. Crowley and Mr. Rohn. The committee held four meetings during 2007. Further information about the work of the LDCC is set out in the Report of the Leadership Development and Compensation Committee on page 64.

Nominating and Governance Committee

The NGC, composed entirely of independent non-executive directors, reviews on an ongoing basis the membership of the board of directors and of the board committees and the performance of the directors. It recommends new appointments to fill any vacancy that is anticipated or arises on the board of directors. The committee reviews and recommends changes in the functions of the various committees of the board. The guidelines and the charter of the committee set out the manner in which the performance evaluation of the board, its committees and the directors is to be performed and by whom. In December 2007, it received a report from the lead independent director on his evaluation of the performance of the board, the board committees and individual directors, which he conducted through meetings with each member of the board. The members of the committee are Mr. McGowan, Chairman, Ms. Gray and Mr. McLaughlin. The committee held five meetings during 2007.

Science and Technology Committee

The Science and Technology Committee advises the board in its oversight of matters pertaining to our research and technology strategy and provides a perspective on those activities to the board. It does so by reviewing the discovery approaches within our internal research effort and external innovation network and by reviewing internal and external technology capabilities against long-term trends and advancements. The members of the committee are Dr. Ekman, Chairman, Dr. Bloom, Mr. Frick (appointed January 31, 2008) and Dr. Selkoe. The committee held two meetings during 2007.

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Board and Board Committee Meetings

The number of scheduled board and board committee meetings held and attended by each director during the year was as follows:

									Nominating &			Science &
			Audit						Governance			Technology
	Board		Committee			LDCC			Committee			Committee
Kyran McLaughlin		8/8		—			—			5/5			—
Floyd Bloom, MD(1)		2/3		—			—			—			1/2
Shane Cooke		8/8		—			—			—			—
Laurence G. Crowley		7/8		3/4			3/4			—			—
William F. Daniel(2)		8/8		9/9	(3)		4/4	(3)		5/5	(3)		0/2	(3)
Lars Ekman, MD, PhD		7/8		—			—			—			2/2
Jonas Frick(4)		1/1		—			—			—			—
Alan R. Gillespie, CBE, PhD(5)		4/4		5/5			—			—			—
Ann Maynard Gray		8/8		—			—			5/5			—
Gary Kennedy		7/8		8/9			—			—			—
Giles Kerr(4)		1/1		—			—			—			—
G. Kelly Martin		8/8		—			—			—			—
Kieran McGowan		8/8		8/9			—			5/5			—
William R. Rohn		7/8		—			4/4			—			—
Dennis J. Selkoe, MD		8/8		—			4/4			—			2/2
Jeffrey Shames(1)		2/3		3/4			—			—			—

(1)	Appointed as directors on July 1, 2007.
(2)	Retired as director on July 1, 2007.
(3)	William F. Daniel was secretary of these committees for the full-year 2007.
(4)	Appointed as directors on September 13, 2007.
(5)	Retired as director on May 24, 2007.

Relations with Shareholders

We communicate regularly with our shareholders throughout the year, specifically following the release of quarterly and annual results, and after major developments. Our Annual General Meetings, quarterly conference calls and presentations at healthcare investor conferences are webcast and are available on our website (www.elan.com). The board periodically receives presentations on investor perceptions.

The principal forum for discussion with shareholders is the Annual General Meeting and shareholder participation is encouraged. Formal notification, together with an explanation of each proposed resolution, is sent to shareholders at least 21 calendar days in advance of the Annual General Meeting. At the meeting, the CEO provides a summary of the period’s events after which the board and senior management are available to answer questions from shareholders. All directors normally attend the Annual General Meeting and shareholders are invited to ask questions during the meeting and to meet with directors after the formal proceedings have ended.

In accordance with the Combined Code recommendations, the Company counts all proxy votes. On each resolution that is voted on with a show of hands, the Company indicates the level of proxies lodged, the number of votes for and against each resolution and the number of votes withheld.

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Going Concern

The directors, having made inquiries, believe that we have adequate resources to continue in operational existence for at least the next 12 months and that it is appropriate to continue to adopt the going concern basis in preparing our Consolidated Financial Statements.

Internal Control

The board of directors has overall responsibility for our system of internal control and for monitoring its effectiveness. The system of internal control is designed to provide reasonable, but not absolute, assurance against material misstatement or loss. The key procedures that have been established to provide effective internal control include:

•  A clear focus on business objectives is set by the board having considered the risk profile of Elan;

•  A formalized risk reporting system, with significant business risks addressed at each board meeting;

•  A clearly defined organizational structure under the day-to-day direction of our chief executive officer. Defined lines of responsibility and delegation of authority have been established within which our activities can be planned, executed, controlled and monitored to achieve the strategic objectives which the board has adopted for us;

•  A comprehensive system for reporting financial results to the board, including a budgeting system with an annual budget approved by the board;

•  A system of management and financial reporting, treasury management and project appraisal — the system of reporting covers trading activities, operational issues, financial performance, working capital, cash flow and asset management; and

•  To support our system of internal control, we have separate Corporate Compliance, Internal Audit and Internal Control Departments. Each of these departments reports periodically to the Audit Committee. The Internal Control function is primarily responsible for the Company’s compliance with Section 404 of the Sarbanes-Oxley Act 2002.

The directors reviewed our system of internal control and also examined the full range of risks affecting us and the appropriateness of the internal control structures to manage and monitor these risks. This process involved a confirmation that appropriate systems of internal control were in place throughout the financial year and up to the date of signing of these financial statements. It also involved an assessment of the ongoing process for the identification, management and control of the individual risks and of the role of the various risk management functions and the extent to which areas of significant challenges facing us are understood and are being addressed. No material unaddressed issues emerged from this assessment.

Please refer to Item 15. “Controls and Procedures,” for management’s annual report on internal control over financial reporting.

Report of the Leadership Development and Compensation Committee

The terms of reference for the committee are to determine the compensation, terms and conditions of employment of the chief executive officer and other executive directors and to review the recommendations of the chief executive officer with respect to the remuneration and terms and conditions of employment of our senior management. The committee also exercises all the powers of the board of directors to issue Ordinary Shares on the exercise of share options and vesting of RSUs and to generally administer our equity award plans.

Each member of the committee is nominated to serve for a three-year term subject to a maximum of two terms of continuous service.

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Remuneration Policy

Our policy on executive directors’ remuneration is to set remuneration levels that are appropriate for our senior executives having regard to their substantial responsibilities, their individual performance and our performance as a whole. The committee sets remuneration levels after reviewing remuneration packages of executives in the pharmaceutical and biotech industries. The committee takes external advice from independent benefit consultants and considers Section B of the Code of Best Practice of The Combined Code as issued by the London and Irish Stock Exchanges.

The typical elements of the remuneration package for executive directors include basic salary and benefits, annual cash incentive bonus, pensions and participation in equity award plans. Non-executive directors are compensated with fee payments and equity awards (with additional payments where directors are members of board committees) and are reimbursed for travel expenses to and from board meetings.

The committee grants equity awards to encourage identification with shareholders’ interests.

Executive Directors’ Basic Salary

The basic salaries of executive directors are reviewed annually having regard to personal performance, company performance and market practice.

Annual Cash Incentive Bonus

Annual cash incentive bonuses, which are not pensionable, are paid to executive directors based on the recommendation of the committee. Bonus determination is not based on specific financial or operational targets, but on individual and company performance.

Long Term Incentive Plan

On May 25, 2006, our shareholders approved the Elan Corporation, plc 2006 Long Term Incentive Plan (2006 LTIP). It is the committee’s policy, in common with other companies operating in the pharmaceutical and biotech industries, to award share options and RSUs to management and employees, taking into account the best interests of the Company. The equity awards generally vest between one and four years and do not contain any performance conditions other than service.

Employee Equity Purchase Plans

In June 2004, our shareholders approved a qualified Employee Equity Purchase Plan (U.S. Purchase Plan), under Sections 421 and 423 of the Internal Revenue Code (IRC), which became effective on January 1, 2005 for eligible employees based in the United States. The plan allows eligible employees to purchase common stock at 85% of the lower of the fair market value at the start of the offering period or the fair market value on the last trading day of the offering period. Purchases are limited to $25,000 (fair market value) per calendar year, 1,000 shares per offering period, and subject to certain IRC restrictions.

The board of directors approved the Irish Sharesave Option Scheme 2004 and UK Sharesave Option Plan 2004, effective January 1, 2005, for employees based in Ireland and the United Kingdom, respectively (the Irish and UK Sharesave Plans). The Irish and UK Sharesave Plans allow eligible employees to purchase Ordinary Shares at no lower than 85% of the fair market value at the start of the 36 month saving period. Eligible employees could save up to €320 per month under the Irish Scheme or £250 under the U.K. Plan, which entitles them to an option to buy common stock at $22.29 for a period of six months from February 1, 2008.

In May 2006, our shareholders approved an increase of 1,500,000 shares in the number of shares available to employees to purchase in accordance with the terms of the U.S. Purchase Plan. In total, 3,000,000 shares have been reserved for issuance under the Irish and U.K. Sharesave Plans and U.S. Purchase Plan combined. In 2007, 272,931 shares (2006: 394,533 shares) were issued under the U.S. Purchase Plan and as of December 31, 2007, 1,723,993 shares (2006: 2,006,966 shares) were reserved for future issuance under the U.S. Purchase Plan and Irish and U.K. Sharesave Plans.

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Approved Profit Sharing Scheme

Elan also operates an Irish Revenue Commissioners approved profit sharing scheme, which permits employees and executive directors who meet the criteria laid down in the scheme to allocate a portion of their annual bonus to purchase shares. Participants may elect to take their bonus in cash subject to normal income tax deductions or may elect to have the bonus amount (subject to certain limits) paid to the independent trustees of the scheme who use the funds to acquire shares. In addition, participants may voluntarily apply a certain percentage (subject to certain limits) of their gross basic salary towards the purchase of shares in a similar manner. The shares must be held by the trustees for a minimum of two years after which participants may dispose of the shares but will be subject to normal income taxes until the shares have been held for a minimum of three years.

D.   Employees

See Item 4.B. “Business Overview — Employees” for information on our employees.

E.   Share Ownership

Directors’ and Secretary’s Ordinary Shares

The beneficial interests of those persons who were directors and the secretary of Elan Corporation, plc at December 31, 2007, including their spouses and children under 18 years of age, were as follows:

	Ordinary Shares;
	Par Value €5
	Cents Each
Directors	2007(4)		2006(4)
Kyran McLaughlin		190,000		190,000
Floyd Bloom, MD(1)		—		—
Shane Cooke		183,144		250,000
Laurence G. Crowley		12,000		12,000
Lars Ekman, MD, PhD		33,496		30,100
Jonas Frick(2)		—		—
Ann Maynard Gray		3,500		3,500
Gary Kennedy		2,800		2,800
Giles Kerr(2)		—		—
G. Kelly Martin		183,150		246,500
Kieran McGowan		1,200		1,200
William Rohn		13,000		3,000
Dennis J. Selkoe, MD		163,175		163,175
Jeffrey Shames(1)		—		—
Secretary
William Daniel(3)		53,108		50,000

(1)	Appointed as directors on July 1, 2007.
(2)	Appointed as directors on September 13, 2007.
(3)	Retired as director on July 1, 2007.
(4)	Individually less than one percent of total Ordinary Shares outstanding.

Directors’ and Secretary’s Options and Restricted Stock Units

									Exercised		Market
			At						or Vested/		Price at		At		Earliest
			December 31,		Exercise		Granted		Cancelled		Exercise		December 31,		Exercisable
	Date of Grant		2006		Price		2007		2007		Date		2007		Date		Expiry Date
Kyran McLaughlin		April 30, 1999		10,000	$	25.81		—		10,000	$	—		—		April 30, 2002		April 29, 2007
		March 2, 2001		5,000		54.85		—		—		—		5,000		March 2, 2002		March 1, 2011
		March 10, 2004		40,000		16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500		7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				72,500				10,000		10,000				72,500
Floyd Bloom, MD(1)		September 6, 2007		—	$	20.37		20,000		—	$	—		20,000		September 6, 2008		September 5, 2017
				—				20,000		—				20,000

66

									Exercised		Market
			At						or Vested/		Price at		At		Earliest
			December 31,		Exercise		Granted		Cancelled		Exercise		December 31,		Exercisable
	Date of Grant		2006		Price		2007		2007		Date		2007		Date		Expiry Date
Shane Cooke		March 10, 2005		60,000	$	7.47		—		—	$	—		60,000		January 1, 2006		March 9, 2015
		May 25, 2005		150,000		7.21		—		—		—		150,000		January 1, 2006		May 24, 2015
		February 1, 2006		63,899		15.90		—		—		—		63,899		January 1, 2007		January 31, 2016
		February 1, 2006		12,579		RSU		—		3,144		—		9,435		February 1, 2007		February 1, 2010
		February 21, 2007		—		13.95		115,620		—		—		115,620		February 21, 2008		February 20, 2017
		February 21, 2007		—		RSU		17,921		—		—		17,921		February 21, 2008		February 21, 2011
				286,478				133,541		3,144				416,875
Laurence G. Crowley		April 30, 1999		10,000	$	25.81		—		10,000	$	—		—		April 30, 2002		April 29, 2007
		March 2, 2001		5,000		54.85		—		—		—		5,000		March 2, 2002		March 1, 2011
		March 10, 2004		40,000		16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500		7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				72,500				10,000		10,000				72,500
Lars Ekman, MD, PhD(2)		December 7, 2000		125,000	$	53.25		—		—	$	—		125,000		December 7, 2002		December 31, 2009
		March 1, 2002		40,000		14.07		—		—		—		40,000		January 1, 2003		December 31, 2009
		August 20, 2002		355,000		2.11		—		70,000		15.00		215,000		February 20, 2003		December 31, 2009
				—		—		—		30,000		18.30		—
				—		—		—		40,000		23.59		—
		April 2, 2003		15,000		2.79		—		—		—		15,000		January 1, 2004		December 31, 2009
		March 10, 2004		40,000		16.27		—		—		—		40,000		January 1, 2005		December 31, 2009
		March 10, 2005		60,000		7.47		—		—		—		60,000		January 1, 2006		December 31, 2009
		February 1, 2006		127,799		15.90		—		—		—		127,799		January 1, 2007		December 31, 2009
		February 1, 2006		25,157		RSU		—		6,289		—		—		February 1, 2007		December 31, 2007
				—		—		—		18,868		—		—
		February 21, 2007		—		13.95		106,371		—		—		106,371		February 21, 2008		December 31, 2009
		February 21, 2007		—		RSU		16,487		—		—		16,487		February 14, 2008		February 14, 2008
				787,956				122,858		165,157				745,657
Jonas Frick(3)		September 13, 2007		—	$	19.51		20,000		—	$	—		20,000		September 13, 2008		September 12, 2017
				—				20,000		—				20,000
Ann Maynard Gray		March 2, 2001		5,000	$	54.85		—		—	$	—		5,000		February 1, 2003		March 1, 2011
		March 10, 2004		40,000		16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500		7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				62,500				10,000		—				72,500
Gary Kennedy		May 26, 2005		15,000	$	8.05		—		—	$	—		15,000		May 26, 2007		May 25, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				25,000				10,000		—				35,000
Giles Kerr(3)		September 13, 2007		—	$	19.51		20,000		—	$	—		20,000		September 13, 2008		September 12, 2017
				—				20,000		—				20,000
G. Kelly Martin		February 6, 2003		1,000,000	$	3.85		—		—	$	—		1,000,000		December 31, 2003		February 5, 2013
		November 13, 2003		1,000,000		5.28		—		—		—		1,000,000		December 31, 2003		November 12, 2013
		March 10, 2004		60,000		16.27		—		—		—		60,000		January 1, 2005		March 9, 2014
		March 10, 2005		280,000		7.47		—		—		—		280,000		January 1, 2006		March 9, 2015
		December 7, 2005		750,000		12.03		—		—		—		750,000		December 31, 2006		December 6, 2015
		February 21, 2007		—		13.95		494,855		—		—		494,855		February 21, 2008		February 20, 2017
				3,090,000				494,855		—				3,584,855
Kieran McGowan		April 30, 1999		10,000	$	25.81		—		10,000	$	—		—		April 30, 2002		April 29, 2007
		March 2, 2001		5,000		54.85		—		—		—		5,000		March 2, 2002		March 1, 2011
		March 10, 2004		40,000		16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500		7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				72,500				10,000		10,000				72,500
William R. Rohn		May 25, 2006		20,000	$	18.13		—		—	$	—		20,000		May 25, 2007		May 24, 2016
		February 21, 2007		—		13.95		10,000		—		—		10,000		February 21, 2009		February 20, 2017
				20,000				10,000		—				30,000
Dennis J. Selkoe, MD		April 30, 1999		10,000	$	25.81		—		10,000	$	—		—		April 30, 2002		April 29, 2007
		March 2, 2001		5,000		54.85		—		—		—		5,000		March 2, 2002		March 1, 2011
		March 10, 2004		40,000		16.27		—		—		—		40,000		March 10, 2005		March 9, 2014
		March 10, 2005		7,500		7.47		—		—		—		7,500		January 1, 2006		March 9, 2015
		February 1, 2006		10,000		15.90		—		—		—		10,000		February 1, 2008		January 31, 2016
		February 21, 2007		—		13.95		10,000		—				10,000		February 21, 2009		February 20, 2017
				72,500				10,000		10,000				72,500

67

									Exercised		Market
			At						or Vested/		Price at		At		Earliest
			December 31,		Exercise		Granted		Cancelled		Exercise		December 31,		Exercisable
	Date of Grant		2006		Price		2007		2007		Date		2007		Date		Expiry Date
Jeffrey Shames(1)		September 6, 2007		—	$	20.37		20,000		—	$	—		20,000		September 6, 2008		September 5, 2017
				—				20,000		—				20,000
Secretary
William F. Daniel		December 4, 1998		40,000	$	32.69		—		—	$	—		40,000		December 4, 2001		December 3, 2008
		November 8, 1999		40,000		24.00		—		—		—		40,000		November 8, 2001		November 7, 2009
		February 24, 2000		35,000		37.19		—		—		—		35,000		January 1, 2002		February 23, 2010
		March 2, 2001		25,000		54.85		—		—		—		25,000		January 1, 2002		March 1, 2011
		March 1, 2002		30,000		14.07		—		—		—		30,000		January 1, 2003		February 29, 2012
		August 20, 2002		100,000		2.11		—		70,000		23.26		30,000		February 20, 2003		August 19, 2012
		May 1, 2003		6,000		3.84		—		—		—		6,000		January 1, 2004		April 30, 2013
		March 10, 2004		30,000		16.27		—		—		—		30,000		January 1, 2005		March 9, 2014
		December 23, 2004		705		22.29		—		—		—		705		February 1, 2008		August 1, 2008
		March 10, 2005		50,000		7.47		—		—		—		50,000		January 1, 2006		March 9, 2015
		February 1, 2006		47,925		15.90		—		—		—		47,925		January 1, 2007		January 31, 2016
		February 1, 2006		9,434		RSU		—		2,358		—		7,076		February 1, 2007		February 1, 2010
		February 21, 2007		—		13.95		69,372		—		—		69,372		February 21, 2008		February 20, 2017
		February 21, 2007		—		RSU		10,753		—		—		10,753		February 21, 2008		February 21, 2011
				414,064				80,125		72,358				421,831

(1)	Appointed as directors on July 1, 2007.
(2)	Following Dr. Ekman’s retirement from his executive vice president position in the Company on December 31, 2007, the vesting schedules and expiry dates of his options and RSUs were amended as set out in Item 7.B. “Related Party Transactions.”
(3)	Appointed as directors on September 13, 2007.

Options outstanding at December 31, 2007 are exercisable at various dates between January 2008 and September 2017. During the year ended December 31, 2007, the closing market price ranged from $11.98 to $24.52 per ADS. The closing market price at February 15, 2008, on the NYSE, of our ADSs was $24.97.

The following changes in directors’ and secretary’s interests occurred between December 31, 2007 and February 15, 2008:

			Exercise		No. of		No. of
Directors	Grant Date		Price		Options		RSUs
Kyran McLaughlin		February 14, 2008		—		—		10,000
Floyd Bloom, MD		February 14, 2008		—		—		10,000
Shane Cooke		February 14, 2008	$	25.01		39,068		21,991
Laurence G. Crowley		February 14, 2008		—		—		10,000
Lars Ekman, MD, PhD		February 14, 2008		—		—		10,000
Jonas Frick		February 14, 2008		—		—		10,000
Alan R. Gillespie, CBE, PhD		February 14, 2008		—		—		10,000
Ann Maynard Gray		February 14, 2008		—		—		10,000
Gary Kennedy		February 14, 2008		—		—		10,000
Giles Kerr		February 14, 2008		—		—		10,000
G. Kelly Martin		February 14, 2008	$	25.01		329,590		—
Kieran McGowan		February 14, 2008		—		—		10,000
William R. Rohn		February 14, 2008		—		—		10,000
Dennis J. Selkoe, MD		February 14, 2008		—		—		10,000
Jeffrey Shames		February 14, 2008		—		—		10,000
Secretary
William F. Daniel		February 14, 2008	$	25.01		17,758		9,996

			RSUs		Options		ADRs
	Date		Vested		Exercised		Sold
G. Kelly Martin		February 4, 2008		—		23,000		23,000
Shane Cooke		February 14, 2008		3,145		—		—
William F. Daniel		February 14, 2008		2,359		—		—
Lars Ekman, MD, PhD		February 14, 2008		16,487		—		—

68

Executive Directors’ Pension Arrangements

Pensions for executive directors are calculated on basic salary only (no incentive or benefit elements are included).

Mr. Daniel participates in a defined benefit plan designed to provide two-thirds of basic salary at retirement at age 60 for full service. Mr. Cooke was a member of this plan from July 2001 until December 2004. The following table relating to the directors’ participation in the defined benefit plan is denominated in Euros:

					Transfer Value
	Increase in				Equivalent of
	Accrued				Increase in				Total Accumulated
	Annual Benefit				Accrued Annual Benefit				Accrued Annual Benefit
	2007		2006		2007		2006		2007		2006
Shane Cooke		—		—		—		—	€	13,393	€	12,878
William F. Daniel	€	1,570	€	2,189	€	36,542	€	51,549	€	39,263	€	36,243

Mr. Martin participates and Dr. Ekman participated in a defined contribution plan (401(k) plan) for U.S.-based employees. Non-executive directors do not receive pensions.

For additional information on pension benefits for our employees, refer to Note 25 to the Consolidated Financial Statements.

Item 7.   Major Shareholders and Related Party Transactions.

A.   Major Shareholders

The following table sets forth certain information regarding the beneficial ownership of Ordinary Shares or American Depository Shares at February 15, 2008 by major shareholders and all of our directors and officers as a group (either directly or by virtue of ownership of our ADSs):

	No. of					Percent of
Name of Owner or Identity of Group	Shares			Date of Disclosure(1)		Class(2)
Fidelity Management and Research Company		70,634,618			February 7, 2008		14.83	%
Wellington Management		32,938,705			February 8, 2008		6.92	%
Westfield Capital Management Co. LLC		22,355,062			February 15, 2008		4.69	%
Jennison Associates LLC		14,396,339			February 15, 2008		3.02	%
Capital Research & Management		14,288,407			December 24, 2007		3.00	%
All directors and officers as a group (18 persons)		5,793,672	(3)		—		1.22	%

(1)	Since the date of disclosure, the interest of any person listed above in our Ordinary Shares may have increased or decreased. No requirement to notify us of any change would have arisen unless the holding moved up or down through a whole number percentage level.
(2)	Based on 471.4 million Ordinary Shares outstanding on February 15, 2008 and 4.9 million Ordinary Shares issuable upon the exercise of currently exercisable options held by directors and officers as a group as of February 15, 2008.
(3)	Includes 4.9 million Ordinary Shares issuable upon exercise of currently exercisable options held by directors and officers as a group as of February 15, 2008.

Except for these interests, we have not been notified at February 15, 2008 of any interest of 3% or more of our issued share capital. Neither Fidelity Management and Research Company, Wellington Management, Westfield Capital Management Co. LLC, Jennison Associates LLC nor Capital Research & Management has voting rights different from other shareholders.

We, to our knowledge, are not directly or indirectly owned or controlled by another entity or by any government. We do not know of any arrangements, the operation of which might result in a change of control of us.

A total of 471,413,777 Ordinary Shares of Elan were issued and outstanding at February 15, 2008, of which 3,963 Ordinary Shares were held by holders of record in the United States, excluding shares held in the form of American Depository Receipts (ADRs). 413,258,026 Ordinary Shares were represented by our ADSs, evidenced by ADRs, issued by The Bank of New York, as depositary, pursuant to a deposit agreement. At February 15, 2008, the

69

number of holders of record of Ordinary Shares was 8,795, which includes 12 holders of record in the United States, and the number of registered holders of ADRs was 3,275. Because certain of these Ordinary Shares and ADRs were held by brokers or other nominees, the number of holders of record or registered holders in the United States is not representative of the number of beneficial holders or of the residence of beneficial holders.

B.   Related Party Transactions

There were no significant transactions with related parties during the year ended December 31, 2007 other than as outlined in Note 28 to the Consolidated Financial Statements.

Transactions with Directors and Executive Officers

Except as set out below, there are no service contracts in existence between any of the directors and Elan:

Mr. Martin

•  On January 7, 2003, we and Elan Pharmaceuticals, Inc. (EPI) entered into an agreement with Mr. G. Kelly Martin such that Mr. Martin was appointed president and chief executive officer effective February 3, 2003.

Effective December 7, 2005, we and EPI entered into a new employment agreement with Mr. Martin, under which Mr. Martin continues to serve as our president and chief executive officer with an initial base annual salary of $798,000. Mr. Martin is eligible to participate in our annual bonus plan, performance-based stock awards and merit award plans. Under the new agreement, Mr. Martin was granted an option to purchase 750,000 Ordinary Shares with an exercise price per share of $12.03, vesting in three equal annual installments (the 2005 Options).

The agreement continues until Mr. Martin resigns, is involuntarily terminated, is terminated for cause or dies, or is disabled. In general, if Mr. Martin’s employment is involuntarily terminated (other than for cause, death or disability) or Mr. Martin leaves for good reason, we will pay Mr. Martin a lump sum equal to two (three, in the event of a change in control) times his salary and target bonus and his 2005 options will vest and be exercisable for the following two years (three, in the event of a change in control).

In the event of such an involuntary termination (other than as the result of a change in control), Mr. Martin will, for a period of two years (three years in the event of a change in control), or until Mr. Martin obtains other employment, continue to participate in our health and medical plans or we shall pay him a lump sum equal to the present value of the cost of such coverage and we shall pay Mr. Martin a lump sum of $50,000 to cover other costs and expenses. Mr. Martin will also be entitled to career transition assistance and the use of an office and the services of a full-time secretary for a reasonable period of time not to exceed two years (three years in the event of a change in control).

In addition, if it is determined that any payment or distribution to Mr. Martin would be subject to excise tax under Section 4999 of the U.S. Internal Revenue Code, or any interest or penalties are incurred by Mr. Martin with respect to such excise tax, then Mr. Martin shall be entitled to an additional payment in an amount such that after payment by Mr. Martin of all taxes on such additional payment, Mr. Martin retains an amount of such additional payment equal to such excise tax amount.

The agreement also obligates us to indemnify Mr. Martin if he is sued or threatened with suit as the result of serving as our officer or director. We will be obligated to pay Mr. Martin’s attorney’s fees if he has to bring an action to enforce any of his rights under the employment agreement.

Mr. Martin is eligible to participate in the retirement, medical, disability and life insurance plans applicable to senior executives in accordance with the terms of those plans. He may also receive financial planning and tax support and advice from the provider of his choice at a reasonable and customary annual cost.

No other executive director has an employment contract extending beyond 12 months.

70

Dr. Ekman

•  On August 9, 2007, we announced that Dr. Lars Ekman would, with effect from December 31, 2007, transition from his operational role as president of research and development and that Dr. Ekman would continue as a member of the board of directors of Elan.

Under the agreement reached with Dr. Ekman, we agreed by reference to Dr. Ekman’s contractual entitlements and in accordance with our severance plan to (a) make a lump-sum payment of $2,500,000; (b) make milestone payments to Dr. Ekman, subject to a maximum amount of $1,000,000, if we achieve certain milestones in respect of our Alzheimer’s disease program; (c) accelerate the vesting of, and grant a two-year exercise period, in respect of certain of his equity awards, with a cash payment being made in respect of one grant of RSUs (which did not permit accelerated vesting); and (d) continue to make annual pension payments in the amount of $60,000 per annum, provide the cost of continued health coverage and provide career transition services to Dr. Ekman for a period of up to two years. A total severance charge of $3.6 million was expensed in 2007 for Dr. Ekman, excluding potential future success milestone payments related to our Alzheimer’s disease program.

Dr. Selkoe

•  On July 1, 2006, EPI entered into a consultancy agreement with Dr. Dennis Selkoe whereby Dr. Selkoe agreed to provide consultant services with respect to the treatment and/or prevention of neurodegenerative and autoimmune diseases. We will pay Dr. Selkoe a fee of $12,500 per quarter. The agreement is effective for three years unless terminated by either party upon 30 days written notice and supersedes all prior consulting agreements between Dr. Selkoe and Elan. Prior thereto, Dr. Selkoe was party to various consultancy agreements with EPI and Athena Neurosciences, Inc. Under the various consultancy agreements, Dr. Selkoe received $50,000 in 2007 and $50,000 in 2006.

Arrangements with Former Directors

•  On July 1, 2003, we entered into a pension agreement with Mr. John Groom, a former director of Elan Corporation, plc, whereby we shall pay him a pension of $200,000 per annum, monthly in arrears, until May 16, 2008 in respect of his former senior executive roles.

External Appointments and Retention of Fees

Executive directors may accept external appointments as non-executive directors of other companies and retain any related fees paid to them. Dr. Ekman was appointed as a non-executive director of InterMune, Inc. on September 18, 2006. In respect of such position, he retained the fees paid to him for such services. In 2007, this amounted to $61,500 (2006: $12,500).

C.   Interest of Experts and Counsel

Not applicable.

Item 8.   Financial Information.

A.   Consolidated Statements and Other Financial Information

See item 18.

B.   Significant Changes

None.

Item 9.   The Offer and Listing.

A.   Offer and Listing Details

See item 9C.

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B.   Plan of Distribution

Not applicable.

C.   Markets

The principal trading markets for our Ordinary Shares are the Irish Stock Exchange and the London Stock Exchange. Our ADSs, each representing one Ordinary Share and evidenced by ADRs, are traded on the NYSE under the symbol “ELN.” The ADR depositary is The Bank of New York.

Our corporate governance practices do not differ in any significant way from those required of domestic companies under NYSE listing standards. A comparison of NYSE and Elan corporate governance standards is available on our website at www.elan.com.

In accordance with Section 303A.12(a) of the NYSE Listed Company Manual, the chief executive officer of the Company submits annual certifications to the NYSE stating that he is not aware of any violations by the Company of the NYSE corporate governance listing standards, qualifying the certification to the extent necessary. The last such annual certification was submitted on March 12, 2007.

The following table sets forth the high and low sales prices of the Ordinary Shares during the periods indicated, based upon mid-market prices at close of business on the Irish Stock Exchange and the high and low sales prices of the ADSs, as reported in published financial sources:

	€0.05				American
	Ordinary Shares				Depository Shares(1)
	High		Low		High		Low
	(€)				($)
Year ended December 31
2003		7.25		2.33		9.02		2.25
2004		23.80		5.40		30.09		7.06
2005		22.25		2.42		29.00		3.24
2006		14.90		10.27		19.21		12.50
2007		16.89		9.04		24.52		11.98
Calendar Year
2006
Quarter 1		13.49		10.27		16.78		12.50
Quarter 2		14.90		11.27		19.21		14.13
Quarter 3		13.24		10.60		16.74		13.31
Quarter 4		12.50		10.48		15.88		13.95
2007
Quarter 1		11.20		9.04		14.82		11.98
Quarter 2		16.24		9.90		22.05		13.36
Quarter 3		16.24		12.30		22.56		17.20
Quarter 4		16.89		14.71		24.52		21.28
Month Ended
August 2007		14.60		12.70		19.91		17.20
September 2007		14.94		13.13		21.04		18.55
October 2007		16.85		14.71		24.17		21.28
November 2007		16.58		14.92		23.60		21.73
December 2007		16.89		14.79		24.52		21.41
January 2008		17.12		15.07		25.36		22.09

⁽¹⁾ An ADS represents one Ordinary Share, par value €0.05.

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D.   Selling Shareholders

Not applicable.

E.   Dilution

Not applicable.

F.   Expenses of the Issue

Not applicable.

Item 10.   Additional Information.

A.   Share Capital

Not applicable.

B.   Memorandum and Articles of Association

Objects

Our objects, which are detailed in our Memorandum of Association include, but are not limited to, manufacturing, buying, selling and distributing pharmaceutical products.

Directors

Subject to certain limited exceptions, directors may not vote on matters in which they have a material interest. In the absence of an independent quorum, the directors may not vote compensation to themselves or any member of the board of directors. Directors are entitled to remuneration as shall, from time to time, be voted to them by ordinary resolution of the shareholders and to be paid such expenses as may be incurred by them in the course of the performance of their duties as directors. Directors who take on additional committee assignments or otherwise perform additional services for us, outside the scope of their ordinary duties as directors, shall be entitled to receive such additional remuneration as the board may determine. The directors may exercise all of the powers of Elan to borrow money. These powers may be amended by special resolution of the shareholders. There is no requirement for a director to hold shares.

The names of the directors are shown in Item 6.A. “Directors and Senior Management.” Dr. Bloom and Mr. Shames were appointed as directors on July 1, 2007 and Mr. Frick and Mr. Kerr were appointed as directors on September 13, 2007. They will seek election at the forthcoming Annual General Meeting. Dr. Gillespie retired as a director on May 24, 2007. Under the terms of our Articles of Association, directors serve for a term of three years expiring at the Annual General Meeting in the third year following their appointment or as the case may be, their re-appointment at the Annual General Meeting. Additionally, in line with the provisions of the Combined Code, non-executive directors who have served on the board for in excess of nine years are subject to annual re-election by shareholders. Directors are not required to retire at any set age and may, if recommended by the board of directors, offer themselves for re-election at any Annual General Meeting where they are deemed to have retired by rotation.

Meetings

The Annual General Meeting shall be held in such place and at such time as shall be determined by the board, but no more than 15 months shall pass between the dates of consecutive Annual General Meetings. Directors may call Extraordinary General Meetings at any time. The members, in accordance with our Articles of Association and Irish company law, may also requisition Extraordinary General Meetings. Notice of an Annual General Meeting (or any special resolution) must be given at least 21 clear days prior to the scheduled date and, in the case of any other general meeting, with not less than 14 clear days notice.

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Rights, Preferences and Dividends Attaching to Shares

All unclaimed dividends may be invested or otherwise made use of by the directors for the benefit of Elan until claimed. All shareholders entitled to attend and vote at the Annual General Meeting are likewise entitled to vote on the re-election of directors. We are permitted under our Memorandum and Articles of Association to issue redeemable shares on such terms and in such manner as the shareholders may determine by special resolution. The liability of the shareholders to further capital calls is limited to the amounts remaining unpaid on shares.

Liquidation Rights

In the event of the Company being wound up, the liquidator may, with the authority of a special resolution, divide among the holders of Ordinary Shares the whole or any part of the net assets of the company (after the return of capital on the non-voting Executive shares), and may set such value as is deemed fair upon each kind of property to be so divided and determine how such division will be carried out.

Actions Necessary to Change the Rights of Shareholders

The rights attaching to the different classes of shares may be varied by special resolution passed at a class meeting of that class of shareholders. The additional issuance of further shares ranking pari passu with, or subordinate to, an existing class shall not, unless specified by the Articles or the conditions of issue of that class of shares, be deemed to be a variation of the special rights attaching to that class of shares.

Limitations on the Right to Own Shares

There are no limitations on the right to own shares in the Memorandum and Articles of Association. However, there are some restrictions on financial transfers between Ireland and other specified countries, more particularly described in the section on “Exchange Controls and Other Limitations Affecting Security Holders.”

Other Provisions of the Memorandum and Articles of Association

There are no provisions in the Memorandum and Articles of Association:

•  Delaying or prohibiting a change in control of Elan that operate only with respect to a merger, acquisition or corporate restructuring;

•  Discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares; or

•  Governing changes in capital, where such provisions are more stringent than those required by law.

We incorporate by reference all other information concerning our Memorandum and Articles of Association from the section entitled “Description of Ordinary Shares” in the Registration Statement on Form 8-A/A3 (SEC File No. 001-13896) we filed with the SEC on December 6, 2004 and our Memorandum and Articles of Association filed as Exhibit 4.1 of our Registration Statement on Form S-8 (SEC File No. 333-135185) filed with the SEC on June 21, 2006.

C.   Material Contracts

Indenture

Indentures governing the 7.75% Notes, 8.875% Notes, the Floating Rate Notes due 2011 and the Floating Rate Notes due 2013 contain covenants that restrict or prohibit our ability to engage in or enter into a variety of transactions. These restrictions and prohibitions could have a material and adverse effect on us. For additional information with respect to the restrictive covenants contained in our indentures, refer to Note 18 to the Consolidated Financial Statements.

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Development and Marketing Collaboration Agreement with Biogen Idec

In August 2000, we entered into a development and marketing collaboration agreement with Biogen Idec, successor to Biogen, Inc., to collaborate in the development and commercialization of Tysabri for MS and CD, with Biogen Idec acting as the lead party for MS and Elan acting as the lead party for CD.

In November 2004, Tysabri received regulatory approval in the United States for the treatment of relapsing forms of MS. In February 2005, Elan and Biogen Idec voluntarily suspended the commercialization and dosing in clinical trials of Tysabri. This decision was based on reports of two serious adverse events, one of which was fatal, in patients treated with Tysabri in combination with Avonex in clinical trials. These events involved two cases of PML, a rare and potentially fatal, demyelinating disease of the central nervous system. Both patients received more than two years of Tysabri therapy in combination with Avonex. In March 2005, the companies announced that their ongoing safety evaluation of Tysabri led to a previously diagnosed case of malignant astrocytoma being reassessed as PML, in a patient in an open label CD clinical trial. The patient had received eight doses of Tysabri over an 18-month period. The patient died in December 2003.

A comprehensive safety evaluation was performed of more than 3,000 Tysabri patients in collaboration with leading experts in PML and neurology. The results of the safety evaluation yielded no new confirmed cases of PML beyond the three previously reported.

In September 2005, Elan and Biogen Idec submitted to the FDA a sBLA for Tysabri, which the FDA subsequently designated for Priority Review. On March 7-8, 2006, the Peripheral Central Nervous System Drug Advisory Committee reviewed and voted unanimously to recommend that Tysabri be reintroduced as a treatment for relapsing forms of MS.

In June 2006, the FDA approved the reintroduction of Tysabri for the treatment of relapsing forms of MS. Approval for the marketing of Tysabri in the European Union was also received in June 2006 and has subsequently been received in a number of other countries. The distribution of Tysabri in both the United States and the ROW commenced in July 2006. Global in-market net sales of Tysabri in 2007 were $342.9 million (2006: $38.1 million; 2005: $11.0 million), consisting of $217.4 million (2006: $28.2 million; 2005: $11.0 million) in the United States and $125.5 million (2006: $9.9 million; 2005: $Nil) in the ROW.

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most development and commercialization costs. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec as required at a price, which includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri and this cost, together with royalties payable to other third parties, is included in cost of sales.

In the ROW market, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on ROW sales of Tysabri, plus our directly-incurred expenses on these sales. In 2007, we recorded revenue of $14.3 million (2006: negative $10.7 million; 2005: $Nil).

At December 31, 2007, we owed Biogen Idec $25.0 million (2006: $42.9 million).

Under our collaboration agreement with Biogen Idec, if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $125 million per calendar quarter, then we may elect to make a milestone payment to Biogen Idec of $75 million in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $700 million. Additionally, if we have made this first milestone payment, then we may elect to pay a further $50 million milestone to Biogen Idec if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $200 million per calendar quarter, in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $1.1 billion. Should we elect not to make the first milestone payment of $75 million, then our percentage share of Tysabri will be reduced to approximately 35% for annual global in-market net sales of Tysabri exceeding $700 million. If we elect to make the first milestone payment, but not the second milestone

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payment, then our percentage share of Tysabri will be reduced to approximately 35% for annual global in-market net sales of Tysabri exceeding $1.1 billion.

Wyeth Collaboration Agreement

Under our collaboration agreement with Wyeth, we are developing amyloid immunotherapies to attempt to treat Alzheimer’s disease. See Item 4.B. “Business Overview” for additional information regarding our Wyeth collaboration.

D.   Exchange Controls

Irish exchange control regulations ceased to apply from and after December 31, 1992. Except as indicated below, there are no restrictions on non-residents of Ireland dealing in domestic securities, which includes shares or depositary receipts of Irish companies such as us. Except as indicated below, dividends and redemption proceeds also continue to be freely transferable to non-resident holders of such securities. The Financial Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make provision for the restriction of financial transfers between Ireland and other countries and persons. Financial transfers are broadly defined and include all transfers that would be movements of capital or payments within the meaning of the treaties governing the member states of the EU. The acquisition or disposal of ADSs or ADRs representing shares issued by an Irish incorporated company and associated payments falls within this definition. In addition, dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish incorporated company would fall within this definition. At present the Financial Transfers Act, 1992 prohibits financial transfers involving the late Slobodan Milosevic and associated persons, Burma/Myanmar, Belarus, certain persons indicted by the International Criminal Tribunal for the former Yugoslavia, Usama bin Laden, Al-Qaida, the Taliban of Afghanistan, Democratic Republic of Congo, Democratic People’s Republic of Korea, Iran, Iraq, Côte d’Ivoire, Lebanon, Liberia, Zimbabwe, Uzbekistan, Sudan, Somalia, certain known terrorists and terrorist groups, and countries that harbor certain terrorist groups, without the prior permission of the Central Bank of Ireland.

Any transfer of, or payment in respect of, an ADS involving the government of any country that is currently the subject of United Nations sanctions, any person or body controlled by any of the foregoing, or by any person acting on behalf of the foregoing, may be subject to restrictions pursuant to such sanctions as implemented into Irish law. We do not anticipate that orders under the Financial Transfers Act, 1992 or United Nations sanctions implemented into Irish law will have a material effect on our business.

E.   Taxation

The following is a general description of Irish taxation inclusive of certain Irish tax consequences to U.S. Holders (as defined below) of the purchase, ownership and disposition of ADSs or Ordinary Shares. As used herein, references to the Ordinary Shares include ADSs representing such Ordinary Shares, unless the tax treatment of the ADSs and Ordinary Shares has been specifically differentiated. This description is for general information purposes only and does not purport to be a comprehensive description of all the Irish tax considerations that may be relevant in a U.S. Holder’s decision to purchase, hold or dispose of our Ordinary Shares. It is based on the various Irish Taxation Acts, all as in effect on February 15, 2008 and all of which are subject to change (possibly on a retroactive basis). The Irish tax treatment of a U.S. Holder of Ordinary Shares may vary depending upon such holder’s particular situation, and holders or prospective purchasers of Ordinary Shares are advised to consult their own tax advisors as to the Irish or other tax consequences of the purchase, ownership and disposition of Ordinary Shares.

For the purposes of this tax description, a “U.S. Holder” is a holder of Ordinary Shares that is: (i) a citizen or resident of the United States; (ii) a corporation or partnership created or organized in or under the laws of the United States or of any political subdivision thereof; (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source; or (iv) a trust, if a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

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Taxation of Corporate Income

We are a public limited company incorporated and resident for tax purposes in Ireland. Under current Irish legislation, a company is regarded as resident for tax purposes in Ireland if it is centrally managed and controlled in Ireland, or, in certain circumstances, if it is incorporated in Ireland. The Taxes Consolidation Act, 1997 provides that a company that is resident in Ireland and is not resident elsewhere shall be entitled to have certain income from a qualifying patent disregarded for tax purposes. The legislation does not provide a termination date for this relief, although with effect from January 1, 2008, the amount of this income that is disregarded for tax purposes is capped at €5 million per year per group. A qualifying patent means a patent in relation to which the research, planning, processing, experimenting, testing, devising, designing, developing or similar activities leading to the invention that is the subject of the patent were carried out in an European Economic Area state. Income from a qualifying patent means any royalty or other sum paid in respect of the use of the invention to which the qualifying patent relates, including any sum paid for the grant of a license to exercise rights under such patent, where that royalty or other sum is paid, for the purpose of activities that would be regarded under Irish law as the manufacture of goods (to the extent that the payment does not exceed an arms-length rate), or by a person who is not connected with us. Accordingly, our income from such qualifying patents is disregarded for tax purposes in Ireland. Any Irish manufacturing income of Elan and its subsidiaries is taxable at the rate of 10% in Ireland until December 31, 2010. Any trading income that does not qualify for the patent exemption or the 10% rate of tax is taxable at the Irish corporation tax rate of 12.5% in respect of trading income for the years 2003 and thereafter. Non-trading income is taxable at 25%.

Taxation of Capital Gains and Dividends

A person who is neither resident nor ordinarily resident in Ireland and who does not carry on a trade in Ireland through a branch or agency will not be subject to Irish capital gains tax on the disposal of Ordinary Shares. Unless exempted, all dividends paid by us other than dividends paid out of exempt patent income, will be subject to Irish withholding tax at the standard rate of income tax in force at the time the dividend is paid, currently 20%. An individual shareholder resident in a country with which Ireland has a double tax treaty, which includes the United States, or in a member state of the European Union, other than Ireland (together, a Relevant Territory), will be exempt from withholding tax provided he or she makes the requisite declaration.

Corporate shareholders who: (i) are ultimately controlled by residents of a Relevant Territory; (ii) are resident in a Relevant Territory and are not controlled by Irish residents; (iii) have the principal class of their shares, or of a 75% parent, traded on a stock exchange in a Relevant Territory; or (iv) are wholly owned by two or more companies, each of whose principal class of shares is substantially and regularly traded on one or more recognized stock exchanges in a Relevant Territory or Territories, will be exempt from withholding tax on the production of the appropriate certificates and declarations.

Holders of our ADSs will be exempt from withholding tax if they are beneficially entitled to the dividend and their address on the register of depositary shares maintained by the depositary is in the United States, provided that the depositary has been authorized by the Irish Revenue Commissioners as a qualifying intermediary and provided the appropriate declaration is made by the holders of the ADSs. Where such withholding is made, it will satisfy the liability to Irish tax of the shareholder except in certain circumstances where an individual shareholder may have an additional liability. A charge to Irish social security taxes and other levies can arise for individuals. However, under the Social Welfare Agreement between Ireland and the United States, an individual who is liable for U.S. social security contributions can normally claim exemption from these taxes and levies.

Irish Capital Acquisitions Tax

A gift or inheritance of Ordinary Shares will be and, in the case of our warrants or American Depository Warrant Shares (ADWSs) representing such warrants, may be, within the charge to Irish capital acquisitions tax, notwithstanding that the person from whom the gift or inheritance is received is domiciled or resident outside Ireland. Capital acquisitions tax is charged at the rate of 20% above a tax-free threshold. This tax-free threshold is determined by the relationship between the donor and the successor or donee. It is also affected by the amount of the current benefit and previous benefits taken since December 5, 1991 from persons within the same capital

77

acquisitions tax relationship category. Gifts and inheritances between spouses are not subject to capital acquisitions tax.

The Estate Tax Convention between Ireland and the United States generally provides for Irish capital acquisitions tax paid on inheritances in Ireland to be credited against tax payable in the United States and for tax paid in the United States to be credited against tax payable in Ireland, based on priority rules set forth in the Estate Tax Convention, in a case where warrants, ADWSs, ADSs or Ordinary Shares are subject to both Irish capital acquisitions tax with respect to inheritance and U.S. Federal estate tax. The Estate Tax Convention does not apply to Irish capital acquisitions tax paid on gifts.

Irish Stamp Duty

Under current Irish law, no stamp duty, currently at the rate and on the amount referred to below, will be payable by U.S. Holders on the issue of ADSs, Ordinary Shares or ADWSs of Elan. Under current Irish law, no stamp duty will be payable on the acquisition of ADWSs or ADSs by persons purchasing such ADWSs or ADSs, or on any subsequent transfer of an ADWS or ADS of Elan. A transfer of Ordinary Shares, whether on sale, in contemplation of a sale or by way of gift will attract duty at the rate of 1% on the consideration given or, where the purchase price is inadequate or unascertainable, on the market value of the shares. Similarly, any such transfer of a warrant may attract duty at the rate of 1%. Transfers of Ordinary Shares that are not liable to duty at the rate of 1% are exempt unless the transfer is by way of security, in which event there is a potential maximum charge of €630. The person accountable for payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for a consideration less than the market value, all parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the transfer. Late or inadequate payment of stamp duty will result in a liability to pay interest penalties and fines.

F.   Dividends and Paying Agents

Not applicable.

G.   Statement by Experts

Not applicable.

H.   Documents on Display

The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act). In accordance with these requirements, the Company files Annual Reports on Form 20-F with, and furnishes Reports of Foreign Issuer on Form 6-K to, the SEC. These materials, including our Annual Report on Form 20-F for the fiscal year ended December 31, 2007 and the exhibits thereto, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington D.C. 20549. Copies of the materials may be obtained from the Public Reference Room of the SEC at 100 F Street, NE, Room 1580, Washington, D.C. at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. As a foreign private issuer, all documents that were filed or submitted after November 4, 2002 on the SEC’s EDGAR system are available for retrieval on the website maintained by the SEC at http://www.sec.gov. These filings and submissions are also available from commercial document retrieval services.

Copies of our Memorandum and Articles of Association may be obtained at no cost by writing or telephoning the Company at our principal executive offices. Our Memorandum and Articles of Association are filed with the SEC as Exhibit 4.1 of our Registration Statement on Form S-8 (SEC File No. 333-135185) filed with the SEC on June 21, 2006. You may also inspect or obtain a copy of our Memorandum and Articles of Association using the procedures prescribed above.

I.   Subsidiary Information

Not applicable.

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Item 11.   Quantitative and Qualitative Disclosures about Market Risk.

Market risk is the risk of loss from adverse changes in market prices, interest rates and foreign exchange rates. Our future earnings and cash flows are dependent upon prevailing market rates. Accordingly, we manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows for debt service, capital expenditures and other cash requirements. The majority of our outstanding debt has fixed interest rates, which minimizes the risk of fluctuating interest rates. Our exposure to market risk includes interest rate fluctuations in connection with our variable rate borrowings and our ability to incur more debt, thereby increasing our debt service obligations, which could adversely affect our cash flows.

Inflation Risk

Inflation had no material impact on our operations during the year.

Exchange Risk

We are a multinational business operating in a number of countries, and the U.S. dollar is the primary currency in which we conduct business. The U.S. dollar is used for planning and budgetary purposes and as the presentation currency for financial reporting. We do, however, have revenues, costs, assets and liabilities denominated in currencies other than U.S. dollars. Consequently, we enter into derivative financial instruments to manage our non-U.S. dollar foreign exchange risk. We use derivative financial instruments primarily to reduce exposures to market fluctuations in foreign exchange rates. We do not enter into derivative financial instruments for trading or speculative purposes. All derivative contracts entered into are in liquid markets with credit-approved parties. The treasury function operates within strict terms of reference that have been approved by our board of directors.

The U.S. dollar is the base currency against which all identified transactional foreign exchange exposures are managed and hedged. The principal risks to which we are exposed are movements in the exchange rates of the U.S. dollar against the Euro, Sterling and Japanese Yen. The main exposures are net costs in Euro arising from a manufacturing and research presence in Ireland and the sourcing of raw materials in European markets.

We had entered into a number of Euro forward foreign exchange contracts at various rates of exchange that required us to sell U.S. dollars for Euro on various dates. The forward contracts expired on various dates throughout 2007. There were no forward or swap contracts outstanding at December 31, 2007.

During 2007, average exchange rates were $1.37 = €1.00. We sell U.S. dollars to buy Euro for costs incurred in Euro.

Interest Rate Risk on Debt

Our debt is primarily at fixed rates, except for the $300.0 million of Floating Rate Notes due 2011 and $150.0 million of Floating Rate Notes due 2013 issued in November 2004 and November 2006, respectively. Interest rate changes affect the amount of interest on our variable rate debt.

The table below summarizes the market risks associated with our fixed and variable rate debt outstanding at December 31, 2007 (in millions):

	2011			2012		Thereafter			Total
Fixed rate debt(1)	$	850.0		$	—	$	465.0		$	1,315.0
Average interest rate		7.75	%		—		8.875	%		8.15	%
Variable rate debt(2)(3)	$	300.0		$	—	$	150.0		$	450.0
Average interest rate		9.48	%		—		9.67	%		9.54	%
Total	$	1,150.0		$	—	$	615.0		$	1,765.0
Average interest rate		8.20	%		—		9.07	%		8.50	%

(1)	Represents 74.5% of all outstanding debt.
(2)	Represents 25.5% of all outstanding debt.
(3)	Variable interest rates are based on LIBOR.

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If market rates of interest on our variable rate debt increased by 10%, then the increase in interest expense on the variable rate debt would be $4.1 million annually. As of December 31, 2007, the fair value of our debt was $1,680.6 million. For additional information on the fair values of debt instruments, refer to Note 19 to the Consolidated Financial Statements.

Interest Rate Risk on Investments

Our liquid funds are invested primarily in U.S. dollars, except for the working capital balances of subsidiaries operating outside of the United States. Interest rate changes affect the returns on our investment funds. Our exposure to interest rate risk on liquid funds is actively monitored and managed with an average duration of less than three months. By calculating an overall exposure to interest rate risk rather than a series of individual instrument cash flow exposures, we can more readily monitor and hedge these risks. Duration analysis recognizes the time value of money and, in particular, prevailing interest rates by discounting future cash flows.

The interest rate risk profile of our investments at December 31, 2007 was as follows (in millions):

	Fixed		Floating		No Interest		Total
Cash and cash equivalents	$	—	$	423.5	$	—	$	423.5
Restricted cash (current)	$	—	$	20.1	$	—	$	20.1
Restricted cash (non-current)	$	—	$	9.5	$	—	$	9.5
Investment securities (current)	$	—	$	268.1	$	8.8	$	276.9
Investment securities (non-current)	$	—	$	13.0	$	9.5	$	22.5

Variable interest rates on cash and liquid resources are generally based on the appropriate Euro Interbank Offered Rate, LIBOR or bank rates dependent on principal amounts on deposit.

Credit Risk

Our treasury function transacts business with counterparties that are considered to be low investment risks. Credit limits are established commensurate with the credit rating of the financial institution that business is being transacted with. We only enter into contracts with parties that have at least investment grade credit rating. The counterparties to these contracts are major financial institutions. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet. We believe that the risk of any net loss from counterparty risk is remote.

For customers, we have a credit policy in place that involves credit evaluation and ongoing account monitoring.

We do not currently transact significant business in countries that are subject to major political and economic uncertainty. As a result, we are not materially exposed to any sovereign risk or payment difficulties.

At the balance sheet date, we have a significant concentration of credit risk given that our main customers, AmerisourceBergen and Fournier Pharma Corp. account for 53% of our gross accounts receivable balance at December 31, 2007. However, we do not believe our credit risk in relation with these two customers is significant, as they each have an investment grade credit rating.

Equity Price Risk

We are exposed to equity price risks primarily on our equity investments in publicly-quoted emerging pharmaceutical and biotechnology companies. At December 31, 2007, these investment securities had a fair value of $8.8 million and a cost of $5.0 million. An adverse change in equity prices could result in a material impact in the fair value of our investments in equity securities.

Item 12.   Description of Securities Other than Equity Securities.

Not applicable.

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Part II

Item 13.   Defaults, Dividend Arrearages and Delinquencies.

None.

Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds.

None.

Item 15.   Controls and Procedures.

Disclosure Controls and Procedures

We conducted an evaluation as of December 31, 2007 under the supervision and with the participation of management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation conducted, our management, including our CEO and CFO, concluded that as December 31, 2007 such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements for external purposes in accordance with U.S. GAAP. All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the internal control system are met.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal controls over financial reporting, based on the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation conducted, our management, including our CEO and CFO, concluded that as of December 31, 2007, internal control over financial reporting was effective.

Our independent registered public accounting firm, KPMG, has issued an auditors’ report on our internal control over financial reporting as of December 31, 2007, which is included on the following page.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

81

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Elan Corporation, plc:

We have audited Elan Corporation, plc’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Elan Corporation, plc’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, appearing under Item 15 in this Annual Report on Form 20-F. Our responsibility is to express an opinion on Elan Corporation, plc’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Elan Corporation, plc maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Elan Corporation, plc and subsidiaries, as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity/(deficit) and other comprehensive income/(loss) and cash flows for each of the years in the three-year period ended December 31, 2007, and the related financial statement schedule, and our report dated February 28, 2008 expressed an unqualified opinion on those consolidated financial statements.

/s/  KPMG

Dublin, Ireland

February 28, 2008

82

Item 16.   Reserved.

Item 16A.   Audit Committee Financial Expert.

The board of directors of Elan has determined that Mr. Gary Kennedy qualifies as an Audit Committee financial expert and as an independent director within the meaning of the NYSE listing standards.

Item 16B.   Code of Ethics.

Our board of directors adopted a code of conduct that applies to our directors, officers and employees. There have been no material modifications to, or waivers from, the provisions of such code. This code is available on our website at the following address: http://elan.com/governance/code of conduct.

Item 16C.   Principal Accountant Fees and Services.

Our principal accountants are KPMG. The table below summarizes the fees for professional services rendered by KPMG for the audit of our Consolidated Financial Statements and fees billed for other services rendered by KPMG (in millions):

	2007		2006
Auditors’ remuneration:
Audit fees(1)	$	3.0	$	3.2
Audit related fees(2)		0.5		—
Total audit and audit-related fees	$	3.5	$	3.2
Tax fees(3)		0.9		0.7
All other fees		—		—
Total auditors’ remuneration	$	4.4	$	3.9

(1)	Audit services include audit of our Consolidated Financial Statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting or reporting standards.
(2)	Audit related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.
(3)	Tax fees consist of fees for professional services for tax compliance, tax advice and tax planning. This category includes fees related to the preparation and review of tax returns.

Report of the Audit Committee

The current members of the Audit Committee (the Committee) are Mr. Gary Kennedy, Chairman, Mr. Laurence Crowley, Mr. Giles Kerr and Mr. Jeffrey Shames. They are all non-executive directors of the Company. The board considers each member to be independent under the Combined Code and under the criteria of the NYSE corporate governance listing standards concerning the composition of audit committees. In March 2007, the Company submitted the required annual written affirmation to the NYSE confirming its full compliance with those standards.

The board is satisfied that at least one member of the Committee has recent and relevant financial experience. The Committee has determined that Mr. Kennedy is an Audit Committee financial expert for the purposes of the Sarbanes-Oxley Act of 2002.

The core responsibilities of the Committee include reviewing and reporting to the board on:

•  Matters relating to the periodic financial reporting prepared by the Company;

•  The independent auditors qualifications and independence;

•  The performance of the internal auditor and the corporate compliance functions;

•  Compliance with legal and regulatory requirements including the operation of the Company’s Securities Trading Policy and Code of Conduct;

83

•  The Company’s overall framework for internal control over financial reporting and other internal controls and processes; and

•  The Company’s overall framework for risk management.

The Committee oversees the maintenance and review of the Company’s Code of Conduct. It has established procedures for the receipt and handling of complaints concerning accounting or audit matters.

It appoints and agrees the compensation for the independent external auditors subject, in each case, to the approval of the Company’s shareholders at general meeting. The Committee maintains policies and procedures for the pre-approval of all audit services and permitted non-audit services undertaken by the independent external auditor. The principal purpose of these policies and procedures is to ensure that the independence of the independent external auditor is not impaired. The policies and procedures cover three categories of work: audit services, audit related services and non-audit services. The pre-approval procedures permit certain audit, audit related and non-audit services to be performed by the independent external auditor during the year subject to fee limits agreed with the Audit Committee in advance. Authority to approve, between Committee meetings, work in excess of the pre-agreed fee limits is delegated to members of the Committee if required. Regular reports to the full Committee are also provided for and, in practice, are a standing agenda item at Committee meetings.

The Committee held a number of private meetings without management present with both the Company’s head of internal audit and with the engagement partner from the Company’s independent external auditors. The purpose of these meetings was to facilitate free and open discussions between the Committee members and those individuals separate from the main sessions of the Committee, which were attended by the chief financial officer, the group controller and the Company’s general counsel.

At each regularly scheduled board meeting, the chairman of the Committee reported to the board on the principal matters covered at the preceding Committee meetings. The minutes of all Committee meetings were also circulated to all board members.

The Committee met on nine occasions in 2007. The Committee is scheduled to meet nine times during 2008.

During 2007, the business considered and discussed by the Committee included the matters referred to below.

•  The Company’s financial reports and financial guidance were reviewed and various accounting matters and policies were considered.

•  Reports were received from the independent external auditors concerning its audit strategy and planning and the results of its audit of the financial statements and from management, the internal audit function and independent external auditor on the effectiveness of the company’s system of internal controls and in particular its internal control over financial reporting.

•  The Committee reviewed the operations of the Company’s code of conduct, the employee helpline and email system. No material issues were reported through this route during the year. No waivers to the Code of Conduct were made in 2007.

•  The Committee reviewed the progress on the implementation of a comprehensive enterprise-wide risk management process in the Company.

•  Matters concerning the internal audit function, corporate compliance function and financial functions were reviewed. The Company’s continuing work to comply with the applicable provisions of the Sarbanes Oxley Act of 2002 was monitored by the Committee.

•  The Committee charter and the operation of the Committee were reviewed during 2007. No changes were recommended.

84

•  The amount of audit and non-audit fees of the independent auditor was monitored throughout 2007. The Committee was satisfied throughout the year that the objectivity and independence of the independent external auditor were not in any way impaired by either the nature of the non-audit work undertaken, the level of non-audit fees charged for such work or any other facts or circumstances.

On behalf of the Audit Committee,

Gary Kennedy

Chairman of the Audit Committee and
Non-Executive Director

February 28, 2008

Item 16D.   Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E.   Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

Not applicable.

Part III

Item 17.   Consolidated Financial Statements.

Not applicable.

Item 18.   Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements of Elan Corporation, plc and subsidiaries

Notes to the Consolidated Financial Statements

85

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Elan Corporation, plc:

We have audited the accompanying consolidated balance sheets of Elan Corporation, plc and subsidiaries (the Company) as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity/(deficit) and other comprehensive income/(loss) and cash flows for each of the years in the three-year period ended December 31, 2007. We have also audited the accompanying financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Elan Corporation, plc and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, and effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Elan Corporation plc’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2008 expressed an unqualified opinion on the effective operation of internal control over financial reporting.

/s/  KPMG

Dublin, Ireland

February 28, 2008

86

Elan Corporation, plc

Consolidated Statements of Operations

For the Years Ended December 31, 2007, 2006 and 2005

	Notes		2007			2006			2005
	(In millions, except per share data)
Product revenue			$	728.6		$	532.9		$	458.1
Contract revenue				30.8			27.5			32.2
Total revenue		3		759.4			560.4			490.3
Operating expenses:
Cost of sales				337.9			210.3			196.1
Selling, general and administrative expenses				341.8			362.4			359.4
Research and development expenses				260.4			217.5			232.3
Net gain on sale of products and businesses		4		—			(43.1	)		(103.4	)
Other net (gains)/charges		5		84.6			(20.3	)		4.4
Total operating expenses				1,024.7			726.8			688.8
Operating loss				(265.3	)		(166.4	)		(198.5	)
Net interest and investment (gains)/losses:
Net interest expense		6		113.1			111.5			125.7
Net investment (gains)/losses		11		0.9			(1.6	)		7.2
Net charge on debt retirements		7		18.8			—			51.8
Net interest and investment losses				132.8			109.9			184.7
Loss from continuing operations before income taxes				(398.1	)		(276.3	)		(383.2	)
Provision for/(benefit from) income taxes		21		6.9			(9.0	)		1.0
Net loss from continuing operations				(405.0	)		(267.3	)		(384.2	)
Income from discontinued operations, net of tax		4		—			—			0.6
Net loss			$	(405.0	)	$	(267.3	)	$	(383.6	)
Basic and diluted loss per Ordinary Share:
Net loss from continuing operations		8	$	(0.86	)	$	(0.62	)	$	(0.93	)
Net income from discontinued operations (net of tax)		8		—			—			—
Net loss			$	(0.86	)	$	(0.62	)	$	(0.93	)
Weighted-average number of Ordinary Shares outstanding				468.3			433.3			413.5

The accompanying notes are an integral part of these Consolidated Financial Statements.

87

Elan Corporation, plc

Consolidated Balance Sheets
As of December 31, 2007 and 2006

	Notes		2007			2006
	(In millions, except shares
	and par values)
ASSETS
Current Assets:
Cash and cash equivalents			$	423.5		$	1,510.6
Restricted cash — current		9		20.1			23.2
Accounts receivable, net		10		137.4			107.4
Investment securities — current		11		276.9			11.2
Inventory		12		36.7			29.2
Prepaid and other current assets		13		21.8			74.7
Total current assets				916.4			1,756.3
Property, plant and equipment, net		14		328.9			342.0
Goodwill and other intangible assets, net		15		457.6			582.2
Investment securities — non-current		11		22.5			9.2
Restricted cash — non-current		9		9.5			—
Other assets		16		46.5			56.6
Total assets			$	1,781.4		$	2,746.3
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable				27.3			46.1
Accrued and other current liabilities		17		180.3			179.8
Current portion of long term debt		18		—			613.2
Deferred revenue		20		3.2			12.4
Total current liabilities				210.8			851.5
Long-term debt		18		1,765.0			1,765.0
Deferred revenue		20		1.5			3.7
Other liabilities		17		38.8			41.0
Total liabilities				2,016.1			2,661.2
Shareholders’ Equity/(Deficit):
Ordinary shares, €0.05 par value, 670,000,000 shares authorized, 470,195,498 and 466,619,156 shares issued and outstanding at December 31, 2007 and 2006, respectively		23		27.4			27.2
Executive shares, €1.25 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at December 31, 2007 and 2006		23		—			—
“B” Executive shares, €0.05 par value, 25,000 shares authorized, 21,375 shares issued and outstanding at December 31, 2007 and 2006		23		—			—
Additional paid-in capital				5,421.1			5,352.7
Treasury stock		23		—			(17.4	)
Accumulated deficit				(5,671.5	)		(5,255.6	)
Accumulated other comprehensive loss		24		(11.7	)		(21.8	)
Shareholders’ equity/(deficit)				(234.7	)		85.1
Total liabilities and shareholders’ equity/(deficit)			$	1,781.4		$	2,746.3

The accompanying notes are an integral part of these Consolidated Financial Statements.

88

Elan Corporation, plc

Consolidated Statements of Shareholders’ Equity/(Deficit) and Other Comprehensive Income/(Loss)

For the Years Ended December 31, 2007, 2006 and 2005

																Accumulated
							Additional									Other			Total
	Number of			Share			Paid-in			Treasury			Accumulated			Comprehensive			Shareholders’
	Shares			Capital			Capital			Stock			Deficit			Income/(Loss)			Equity/(Deficit)
	(In millions)
Balance at December 31, 2004		395.1		$	22.6		$	4,796.4		$	(17.4	)	$	(4,604.7	)	$	8.1		$	205.0
Comprehensive loss:
Net loss		—			—			—			—			(383.6	)		—			(383.6	)
Unrealized loss on investment securities		—			—			—			—			—			(24.9	)		(24.9	)
Reclassification adjustment for net losses included in net loss		—			—			—			—			—			3.6			3.6
Minimum pension liability adjustment		—			—			—			—			—			(10.7	)		(10.7	)
Currency translation adjustments		—			—			—			—			—			(2.7	)		(2.7	)
Total comprehensive loss																				(418.3	)
Conversion of convertible debt		27.8			1.7			204.3			—			—			—			206.0
Tax benefit of stock option deductions		—			—			0.6			—			—			—			0.6
Stock issued, net of issuance costs		5.9			0.4			23.2			—			—			—			23.6
Balance at December 31, 2005		428.8			24.7			5,024.5			(17.4	)		(4,988.3	)		(26.6	)		16.9
Comprehensive loss:
Net loss		—			—			—			—			(267.3	)		—			(267.3	)
Unrealized gain on investment securities		—			—			—			—			—			5.0			5.0
Minimum pension liability adjustment		—			—			—			—			—			10.7			10.7
Currency translation adjustments		—			—			—			—			—			3.9			3.9
Total comprehensive loss																				(247.7	)
Adjustment on initial application of SFAS 158		—			—			—			—			—			(14.8	)		(14.8	)
Conversion of convertible debt		34.2			2.3			249.5			—			—			—			251.8
Tax benefit of stock option deductions		—			—			2.0			—			—			—			2.0
Stock issued, net of issuance costs		3.6			0.2			29.6			—			—			—			29.8
Share-based compensation expense		—			—			47.1			—			—			—			47.1
Balance at December 31, 2006		466.6			27.2			5,352.7			(17.4	)		(5,255.6	)		(21.8	)		85.1
Comprehensive loss:
Net loss		—			—			—			—			(405.0	)		—			(405.0	)
Unrealized loss on investment securities		—			—			—			—			—			(0.9	)		(0.9	)
Defined benefit pension adjustment		—			—			—			—			—			10.3			10.3
Currency translation adjustments		—			—			—			—			—			0.7			0.7
Total comprehensive loss																				(394.9	)
Treasury stock retirement		(0.9	)		(0.1	)		(6.4	)		17.4			(10.9	)		—			—
Tax benefit of stock option deductions		—			—			1.8			—			—			—			1.8
Stock issued, net of issuance costs		4.5			0.3			27.9			—			—			—			28.2
Share-based compensation expense		—			—			45.1			—			—			—			45.1
Balance at December 31, 2007		470.2		$	27.4		$	5,421.1		$	—		$	(5,671.5	)	$	(11.7	)	$	(234.7	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

89

Elan Corporation, plc

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006			2005
	(In millions)
Cash flows from operating activities:
Net loss	$	(405.0	)	$	(267.3	)	$	(383.6	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred revenue		(11.4	)		(44.0	)		(57.8	)
Amortization of financing costs		4.8			6.9			7.4
Depreciation and amortization		118.3			135.6			130.7
Gains on sale of investment securities		(6.6	)		(8.3	)		(17.5	)
Impairment of intangible assets		52.2			—			—
Impairment of investments		6.1			7.3			24.0
Disposals/write-down of other assets		0.5			0.1			3.1
Gain on sale of products and businesses		—			(43.1	)		(103.9	)
Share-based compensation		45.1			47.1			—
Excess tax benefit from share-based compensation		(1.8	)		(2.0	)		—
Net charge on debt retirements		18.8			—			51.8
Derivative fair value (gain)/loss		(0.4	)		(4.9	)		3.3
Other		(3.6	)		5.0			7.9
Net changes in assets and liabilities:
Increase in accounts receivable		(30.1	)		(25.6	)		(38.9	)
Decrease/(increase) in prepaid and other assets		60.3			(56.4	)		30.3
Decrease/(increase) in inventory		(7.4	)		(7.1	)		3.5
Increase/(decrease) in accounts payable and accruals and other liabilities		(7.3	)		15.2			(111.8	)
Net cash used in operating activities		(167.5	)		(241.5	)		(451.5	)
Cash flows from investing activities:
Decrease/(increase) in restricted cash		(6.8	)		2.8			168.0
Proceeds from disposal of property, plant and equipment		0.2			0.6			0.6
Purchase of property, plant and equipment		(26.1	)		(29.9	)		(43.7	)
Purchase of investment securities		(12.3	)		(0.2	)		(0.4	)
Transfer of fund to investment securities		(305.9	)		—			—
Sale of non-current investment securities		3.4			13.2			45.6
Sale of current investment securities		27.9			0.9			17.1
Purchase of intangible assets		(2.5	)		(4.1	)		(7.1	)
Proceeds from product and business disposals		4.0			54.2			108.8
Net cash provided by/(used in) investing activities		(318.1	)		37.5			288.9
Cash flows from financing activities:
Proceeds from employee stock issuances		28.2			29.8			23.8
Repayment of loans and capital lease obligations		(629.6	)		(5.7	)		(126.8	)
Net proceeds from debt issuances		(0.1	)		602.8			(0.7	)
Excess tax benefit from share-based compensation		1.8			2.0			—
Proceeds from government grants		—			0.4			4.0
Net cash provided by/(used in) financing activities		(599.7	)		629.3			(99.7	)
Effect of exchange rate changes on cash		(1.8	)		4.6			(4.6	)
Net increase/(decrease) in cash and cash equivalents		(1,087.1	)		429.9			(266.9	)
Cash and cash equivalents at beginning of year		1,510.6			1,080.7			1,347.6
Cash and cash equivalents at end of year	$	423.5		$	1,510.6		$	1,080.7
Supplemental cash flow information:
Cash paid during the year for:
Interest	$	(169.2	)	$	(154.0	)	$	(157.9	)
Income taxes	$	(5.2	)	$	(4.6	)	$	(1.5	)
Non-cash financing activities:
Issuance of stock for debt conversion	$	—		$	251.8		$	206.0

The accompanying notes are an integral part of these Consolidated Financial Statements.

90

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.   Description of Business

Elan Corporation, plc, an Irish public limited company (also referred to hereafter as we, our, us, Elan or the Company), is a neuroscience-based biotechnology company headquartered in Dublin, Ireland. We were incorporated as a private limited company in Ireland in December 1969 and became a public limited company in January 1984. Our principal executive offices are located at Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland and our telephone number is 353-1-709-4000. Our principal research and development (R&D), manufacturing and marketing facilities are located in Ireland and the United States (U.S.).

Our business is organized into two business units: Biopharmaceuticals and Elan Drug Technologies (EDT). Biopharmaceuticals engages in research, development and commercial activities primarily in Alzheimer’s disease, Parkinson’s disease, multiple sclerosis (MS), Crohn’s disease (CD), severe chronic pain and infectious diseases. EDT is an established specialty pharmaceutical business unit of Elan.

2.   Significant Accounting Policies

The following accounting policies have been applied in the preparation of our Consolidated Financial Statements.

(a) Basis of consolidation and presentation of financial information

The accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). In addition to this Form 20-F, we also prepared separate Consolidated Financial Statements, included in our Annual Report, in accordance with International Financial Reporting Standards (IFRS), which differ in certain significant respects from U.S. GAAP. The Annual Report under IFRS is a separate document from this Form 20-F.

Unless otherwise indicated, our financial statements and other financial data contained in this Form 20-F are presented in U.S. dollars ($). The accompanying Consolidated Financial Statements include our financial position, results of operations and cash flows and those of our subsidiaries, all of which are wholly owned. All significant intercompany amounts have been eliminated.

We have incurred significant losses during the last three fiscal years and anticipate to continue to incur operating losses in 2008. However, our directors believe that we have adequate resources to continue in operational existence for at least the next 12 months and that it is appropriate to continue to prepare our Consolidated Financial Statements on a going concern basis.

(b) Use of estimates

The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates.

(c) Reclassifications

Certain items in the Consolidated Financial Statements for prior periods have been reclassified to conform to current classifications. In particular, within our Consolidated Statements of Cash Flows, cash flows related to restricted cash balances have been reclassified from operating activities to investing activities and presented as a separate line item. Consequently, in 2006 and 2005, this reclassification results in an increase in net cash used in operating activities and an equal offsetting increase in net cash provided by investing activities.

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(d) Cash and cash equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

(e) Investment securities and impairment

Marketable equity securities and debt securities are classified into one of three categories in accordance with the Financial Accounting Standards Board’s (FASB) Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” (SFAS 115): including trading, held-to-maturity, or available-for-sale.

•  Marketable equity and debt securities are considered trading when purchased principally for the purpose of selling in the near term. These securities are recorded as short-term investments and are carried at fair value. Unrealized holding gains and losses on trading securities are included in other income. We did not hold any trading securities at December 31, 2007 and 2006.

•  Marketable debt securities are considered held-to-maturity when we have the positive intent and ability to hold the securities to maturity. These securities are carried at amortized cost, less any impairment. We did not hold any held-to-maturity securities at December 31, 2007 and 2006.

•  Marketable equity and debt securities not classified as trading or held-to-maturity are considered available-for-sale. These securities are recorded as either short-term or long-term investments and are carried at fair value, with unrealized gains and losses included in accumulated other comprehensive income/(loss) in shareholders’ equity/(deficit). The assessment for impairment of marketable securities classified as available-for-sale is based on established financial methodologies, including quoted market prices for publicly traded equity and debt securities.

Non-marketable equity securities are carried at cost, less write-down-for-impairments, and are adjusted for impairment based on methodologies, including the Black-Scholes option-pricing model, the valuation achieved in the most recent private placement by an investee, an assessment of the impact of general private equity market conditions, and discounted projected future cash flows.

The factors affecting the assessment of impairments include both general financial market conditions and factors specific to a particular company. In the case of equity classified as available-for-sale, a significant and prolonged decline in the fair value of the security below its carrying value is considered in determining whether the security is impaired. If any such evidence exists, an impairment loss is recognized.

(f) Inventory

Inventory is valued at the lower of cost or market value. In the case of raw materials and supplies, cost is calculated on a first-in, first-out basis and includes the purchase price, including import duties, transport and handling costs and any other directly attributable costs, less trade discounts. In the case of work-in-progress and finished goods, costs include direct labor, material costs and attributable overheads, based on normal operating capacity.

(g) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is computed using the straight-line method based on estimated useful lives as follows:

Buildings	15-40 years
Plant and equipment	3-10 years
Leasehold improvements	Shorter of expected useful life or lease term

Land is not depreciated as it is deemed to have an indefinite useful life.

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Where events or circumstances indicate that the carrying amount of a tangible asset may not be recoverable, we compare the carrying amount of the asset to its fair value. The carrying amount of the asset is not deemed recoverable if its carrying value exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of that asset. In such event, an impairment loss is recognized for the excess of the carrying amount over the asset’s fair value.

(h) Leasing

Property, plant and equipment acquired under a lease that transfers substantially all of the risks and rewards of ownership to us (a capital lease) are capitalized. Amounts payable under such leases, net of finance charges, are shown as current or long-term liabilities as appropriate. An asset acquired through capital lease is stated at an amount equal to the lower of its fair value or the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses, and is included in property, plant and equipment. Finance charges on capital leases are expensed over the term of the lease to give a constant periodic rate of interest charge in proportion to the capital balances outstanding. All other leases which are not capital leases are considered operating leases. Rentals on operating leases are charged to expense on a straight-line basis.

(i) Goodwill, other intangible assets and impairment

We account for goodwill and identifiable intangible assets in accordance with FASB Statement No. 142, “Goodwill and Other Intangible Assets,” (SFAS 142). Pursuant to SFAS 142, goodwill and identifiable intangible assets with indefinite useful lives are no longer amortized, but instead are tested for impairment at least annually. At December 31, 2007, we had no other intangible assets with indefinite lives.

Intangible assets with estimable useful lives are amortized on a straight-line basis over their respective estimated useful lives to their estimated residual values and, as with other long-lived assets such as tangible fixed assets, are reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. We determine fair value using the income approach based on estimated discounted cash flows. Our cash flow assumptions consider historical and forecasted revenue and operating costs and other relevant factors.

We review our goodwill for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The goodwill impairment test is a two-step test and is performed at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment as defined by SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” We have two reporting units: Biopharmaceuticals and EDT. Under the first step, we compare the fair value of each reporting unit with its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and step two does not need to be performed. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test would be performed to measure the amount of impairment charge, if any. The second step compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill, and any excess of the carrying amount over the implied fair value is recognized as an impairment charge. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination is determined, by allocating the fair value of a reporting unit to individual assets and liabilities. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. In evaluating goodwill for impairment, we determine the fair values of the reporting units using the income approach, based on estimated

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discounted future cash flows. The results of our goodwill impairment tests did not indicate any impairment in 2007, 2006 or 2005.

(j) Financing costs

Debt financing costs comprise of transaction costs on borrowings. Debt financing costs are allocated to financial reporting periods over the term of the related debt using the effective interest rate method.

(k) Derivative financial instruments

We enter into transactions in the normal course of business using various financial instruments in order to hedge against exposures to fluctuating exchange and interest rates. We use derivative financial instruments to reduce exposure to fluctuations in foreign exchange rates and interest rates. A derivative is a financial instrument or other contract whose value changes in response to some underlying variable, that has an initial net investment smaller than would be required for other instruments that have a similar response to the variable and that will be settled at a future date. We do not enter into derivative financial instruments for trading or speculative purposes.

Gains and losses on derivative financial instruments that qualify as fair value hedges under SFAS No. 133, “Accounting for Derivative Instruments in Hedging Activities,” (SFAS 133), are recognized as an offset to the related income or expense of the underlying hedged transaction. The carrying value of derivative financial instruments is reported within current assets or other current liabilities. We did not hold any interest rate swap contracts or forward currency contracts at December 31, 2007. Interest rate swaps held during the years ended December 31, 2006 and 2005, qualified for hedge accounting under SFAS 133. Forward currency contracts held during the years ended December 31, 2007, 2006 and 2005, did not qualify for hedge accounting under SFAS 133, and were marked to market at each balance sheet date, with the resulting gains and losses recognized in income.

We record at fair value certain freestanding warrants. Changes in their fair value are recorded in the income statement and their carrying value is recorded within current assets or current liabilities.

(l) Revenue

We recognize revenue from the sale of our products, royalties earned and contract arrangements. Our revenues are classified into two categories: product revenue and contract revenue.

Product Revenue — Product revenue includes:  (i) the sale of our products, (ii) royalties and (iii) manufacturing fees. We recognize revenue from product sales when there is persuasive evidence that an arrangement exists, title passes, the price is fixed or determinable, and collectability is reasonably assured. Revenue is recorded net of applicable sales tax and sales discounts and allowances, which are described below.

i. The sale of our products consists of the sale of pharmaceutical drugs, primarily to wholesalers and physicians.

ii. We earn royalties on licensees’ sales of our products or third-party products that incorporate our technologies. Royalties are recognized as earned in accordance with the contract terms when royalties can be reliably measured and collectability is reasonably assured.

iii. We receive manufacturing fees for products that we manufacture on behalf of other third-party customers.

Tysabri^® (natalizumab) was developed and is now being marketed in collaboration with Biogen Idec Inc. (Biogen Idec). In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most development and commercialization costs. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec as required at a price, which includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri and this cost, together with

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royalties payable to other third parties, is included in cost of sales. In the European Union (EU) market, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on EU sales of Tysabri, plus our directly-incurred expenses on these sales.

Contract Revenue — Contract revenue arises from contracts to perform R&D services on behalf of clients or technology licensing. Contract revenue is recognized when earned and non-refundable, and when we have no future obligation with respect to the revenue, in accordance with the terms prescribed in the applicable contract. Contract research revenue consists of payments or milestones arising from R&D activities we perform on behalf of third parties. Our revenue arrangements with multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered items. The consideration we receive is allocated among the separate units based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.

The U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin No. 104, “Revenue Recognition,” (SAB 104), provides guidance on revenue recognition. SAB 104 requires the deferral and amortization of up-front fees when there is a significant continuing involvement (such as an ongoing product manufacturing contract or joint development activities) by the seller after an asset disposal. We defer and amortize up-front license fees to income over the “performance period” as applicable. The performance period is the period over which we expect to provide services to the licensee as determined by the contract provisions.

Accounting for milestone payments depends on the facts and circumstances of each contract. We apply the substantive milestone method in accounting for milestone payments. This method requires that substantive effort must have been applied to achieve the milestone prior to revenue recognition. If substantive effort has been applied, the milestone is recognized as revenue, subject to it being earned, non-refundable and not subject to future legal obligation. This requires an examination of the facts and circumstances of each contract. Substantive effort may be demonstrated by various factors, including the risks associated with achieving the milestone, the period of time over which effort was expended to achieve the milestone, the economic basis for the milestone payment and licensing arrangement and the costs and staffing necessary to achieve the milestone. It is expected that the substantive milestone method will be appropriate for most contracts. If we determine the substantive milestone method is not appropriate, then we apply the proportional performance method to the relevant contracts. This method recognizes as revenue the percentage of cumulative non-refundable cash payments earned under the contract, based on the percentage of costs incurred to date compared to the total costs expected under the contract.

(m) Sales discounts and allowances

We recognize revenue on a gross revenue basis (except for Tysabri revenue outside of the United States) and make various deductions to arrive at net revenue as reported in our Consolidated Statements of Operations. These adjustments are referred to as sales discounts and allowances and are described in detail below. Sales discounts and allowances include charge-backs, managed healthcare and Medicaid rebates, cash discounts, sales returns and other adjustments. Estimating these sales discounts and allowances is complex and involves significant estimates and judgments, and we use information from both internal and external sources to generate reasonable and reliable estimates. We believe that we have used reasonable judgments in assessing our estimates, and this is borne out by our historical experience.

We do not conduct our sales using the consignment model. All of our product sales transactions are based on normal and customary terms whereby title to the product and substantially all of the risks and rewards transfer to the customer upon either shipment or delivery. Furthermore, we do not have an incentive program that would compensate a wholesaler for the costs of holding inventory above normal inventory levels thereby encouraging wholesalers to hold excess inventory.

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We account for sales discounts, allowances and returns in accordance with the FASB’s Emerging Issues Task Force (EITF) Issue No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” and SFAS No. 48, “Revenue Recognition When Right of Return Exists,” (SFAS 48) as applicable.

Charge-backs

In the United States, we participate in charge-back programs with a number of entities, principally the U.S. Department of Defense, the U.S. Department of Veterans Affairs, Group Purchasing Organizations and other parties whereby pricing on products is extended below wholesalers’ list prices to participating entities. These entities purchase products through wholesalers at the lower negotiated price, and the wholesalers charge the difference between these entities’ acquisition cost and the lower negotiated price back to us. We account for charge-backs by reducing accounts receivable in an amount equal to our estimate of charge-back claims attributable to a sale. We determine our estimate of the charge-backs primarily based on historical experience on a product-by-product and program basis, and current contract prices under the charge-back programs. We consider vendor payments, estimated levels of inventory in the wholesale distribution channel, and our claim processing time lag and adjust accounts receivable and revenue periodically throughout each year to reflect actual and future estimated experience.

Managed healthcare rebates and other contract discounts

We offer rebates and discounts to managed healthcare organizations in the United States. We account for managed healthcare rebates and other contract discounts by establishing an accrual equal to our estimate of the amount attributable to a sale. We determine our estimate of this accrual primarily based on historical experience on a product-by-product and program basis and current contract prices. We consider the sales performance of products subject to managed healthcare rebates and other contract discounts, processing claim lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Medicaid rebates

In the United States, we are required by law to participate in state government-managed Medicaid programs as well as certain other qualifying federal and state government programs whereby discounts and rebates are provided to participating state and local government entities. Discounts and rebates provided through these other qualifying federal and state government programs are included in our Medicaid rebate accrual and are considered Medicaid rebates for the purposes of this discussion. We account for Medicaid rebates by establishing an accrual in an amount equal to our estimate of Medicaid rebate claims attributable to a sale. We determine our estimate of the Medicaid rebates accrual primarily based on historical experience regarding Medicaid rebates, legal interpretations of the applicable laws related to the Medicaid and qualifying federal and state government programs, and any new information regarding changes in the Medicaid programs’ regulations and guidelines that would impact the amount of the rebates on a product-by-product basis. We consider outstanding Medicaid claims, Medicaid payments, claims processing lag time and estimated levels of inventory in the distribution channel and adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

Cash discounts

In the United States, we offer cash discounts, generally at 2% of the sales price, as an incentive for prompt payment. We account for cash discounts by reducing accounts receivable by the full amount of the discounts. We consider payment performance of each customer and adjust the accrual and revenue periodically throughout each year to reflect actual experience and future estimates.

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Sales returns

We account for sales returns in accordance with SFAS 48 by establishing an accrual in an amount equal to our estimate of revenue recorded for which the related products are expected to be returned.

For returns of established products, our sales return accrual is estimated principally based on historical experience, the estimated shelf life of inventory in the distribution channel, price increases, and our return goods policy (goods may only be returned six months prior to expiration date and for up to 12 months after expiration date). We also take into account product recalls and introductions of generic products. All of these factors are used to adjust the accrual and revenue periodically throughout each year to reflect actual and future estimated experience.

In the event of a product recall, product discontinuance or introduction of a generic product, we consider a number of factors, including the estimated level of inventory in the distribution channel that could potentially be returned, historical experience, estimates of the severity of generic product impact, estimates of continuing demand and our return goods policy. We consider the reasons for and impact of such actions and adjust the sales returns accrual and revenue as appropriate.

Returns from newly introduced products are significantly more difficult for us to assess. We determine our estimate of the sales return accrual primarily based on the historical sales returns experience of similar products, such as those within the same or similar therapeutic category. We also consider the shelf life of new products and determine whether we believe an adjustment to the sales return accrual is appropriate. The shelf life in connection with new products tends to be shorter than the shelf life for more established products because we may still be developing the optimal stability duration for the new product that would lengthen its shelf life, or an amount of launch quantities may have been manufactured in advance of the launch date to ensure sufficient supply exists to satisfy market demand. In those cases, we assess the reduced shelf life, together with estimated levels of inventory in the distribution channel and projected demand, and determine whether we believe an adjustment to the sales return accrual is appropriate. While it is inherently more difficult to assess returns from newly introduced products than from established products, nevertheless in all instances we believe we have been able to gather sufficient information in order to establish reasonable estimates.

Other adjustments

In addition to the sales discounts and allowances described above, we make other sales adjustments primarily related to estimated obligations for credits to be granted to wholesalers under wholesaler service agreements we have entered into with many of our pharmaceutical wholesale distributors in the United States. Under these agreements, the wholesale distributors have agreed, in return for certain fees, to comply with various contractually defined inventory management practices and to perform certain activities such as providing weekly information with respect to inventory levels of product on hand and the amount of out-movement of product. As a result, we, along with our wholesale distributors, are able to manage product flow and inventory levels in a way that more closely follows trends in prescriptions. We generally account for these other sales discounts and allowances by establishing an accrual in an amount equal to our estimate of the adjustments attributable to the sale. We generally determine our estimates of the accruals for these other adjustments primarily based on historical experience and other relevant factors, including estimated levels of inventory in the distribution channel in some cases, and adjust the accruals and revenue periodically throughout each year to reflect actual experience.

Use of information from external sources

We use information from external sources to estimate our significant sales discounts and allowances. Our estimates of inventory at the wholesalers are based on:

•  The actual and projected prescription demand-based sales for our products and historical inventory experience;

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•  Our analysis of third-party information, including written and oral information obtained from all of the major wholesalers with respect to their inventory levels and sell-through to customers, and third-party market research data; and

•  Our internal information.

We also use information from external sources to identify prescription trends and patient demand. Since 2004, we have been receiving inventory pipeline data from the three major wholesalers (McKesson Corp., Cardinal Health, Inc. and AmerisourceBergen Corp.). The inventory information received from these wholesalers is a product of their record-keeping process and excludes inventory held by intermediaries to whom they sell, such as retailers and hospitals. We receive information from IMS Health, a supplier of market research to the pharmaceutical industry, which we use to project the prescription demand-based sales for our pharmaceutical products. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information is itself in the form of estimates, and reflect other limitations including lags between the date as of which third-party information is generated and the date on which we receive such information.

(n) Advertising expenses

We expense the costs of advertising as incurred. Advertising expenses were $5.1 million in 2007 (2006: $4.9 million; 2005: $3.9 million).

(o) Research and development

R&D costs are expensed as incurred. Acquired in-process research and development is expensed as incurred. Costs to acquire intellectual property, product rights and other similar intangible assets are capitalized and amortized on a straight-line basis over the estimated useful life of the asset. The method of amortization chosen best reflects the manner in which individual intangible assets are consumed.

(p) Taxation

We account for income tax expense based on income before taxes, and it is computed using the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using tax rates projected to be in effect for the year in which the differences are expected to reverse. Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on management’s interpretations of jurisdiction-specific tax laws or regulations and the likelihood of settlement related to tax audit issues. Various internal and external factors may have favorable or unfavorable effects on our future effective income tax rate. These factors include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, changes in estimates of prior years’ items, past and future levels of R&D spending, likelihood of settlement and changes in overall levels of income before taxes.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We do not record a provision for income tax on undistributed earnings of foreign subsidiaries that we do not expect to repatriate in the foreseeable future.

Effective January 1, 2007, we adopted the provisions of FASB Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB No. 109,” (FIN 48), under which we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The impact of adopting FIN 48 is disclosed in Note 21.

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(q) Discontinued operations, sales of businesses, and assets and liabilities held for sale

In accordance with SFAS 144, the results and gains or losses arising from discontinued operations are aggregated and included within one line in the income statement, “Net income/(loss) from discontinued operations.” A discontinued operation is a component of an entity whose operations and cash flows can be clearly distinguished and have been or will be eliminated from the ongoing operations of the entity within 12 months from the disposal date and with respect to which the entity will not receive significant cash flows from continuation of activities, and the entity will not have significant continuing involvement in the operations of the component after its disposal, such as ongoing supply arrangements or formulation activities.

Sales of businesses that do not constitute discontinued operations as defined above, are recorded separately on the face of the income statement. The reported gain is equal to proceeds received net of the carrying values of the business assets and liabilities being disposed of, transaction costs and the allocation of goodwill based on the relative fair value of the business to its reporting unit.

We categorize assets and liabilities as held for sale when all of the following conditions are met:

•  Management, having the authority to approve the action, commits to a plan to sell the asset;

•  The asset is available for immediate sale in its present condition, subject only to customary terms;

•  An active program to locate a buyer and other necessary actions required to complete the plan to sell the asset have been initiated;

•  The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year;

•  The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

•  Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

(r) Accumulated other comprehensive income/(loss)

Comprehensive income/(loss) is comprised of our net income or loss and other comprehensive income/(loss) (OCI). OCI includes certain changes in shareholders’ equity/(deficit) that are excluded from net income. Specifically, we include in OCI changes in the fair value of unrealized gains and losses on our investment securities, foreign currency translation adjustments, and adjustments relating to our defined benefit pension plans. Comprehensive loss for the years ended December 31, 2007, 2006 and 2005 has been reflected in the Consolidated Statements of Shareholders’ Equity/(Deficit) and Other Comprehensive Income/(Loss).

(s) Foreign operations

Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into U.S. dollars at exchange rates prevailing at subsequent balance sheet dates, and the resulting gains and losses are recognized in the Consolidated Statement of Operations and, where material, separately disclosed.

The functional currency of Elan and most of our subsidiaries is U.S. dollars. For those subsidiaries with non-U.S. dollar functional currency, their assets and liabilities are translated using year-end rates and income and expenses are translated at average rates. The cumulative effect of exchange differences arising on consolidation of the net investment in overseas subsidiaries are recognized as other comprehensive income/(loss) in the Consolidated Statement of Shareholders’ Equity/(Deficit) and Other Comprehensive Income/(Loss).

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    (t)  Share-based compensation

Beginning January 1, 2006, we account for share-based compensation in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment,” (SFAS 123R), which requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors based on estimated grant date fair values. These awards include employee stock options, Restricted Stock Units (RSUs) and stock purchases related to our employee equity purchase plans. We elected to apply the modified prospective transition method, under which periods prior to 2006 have not been restated to reflect, and do not include, the impact of SFAS 123R. The adoption of SFAS 123R has had a material effect on our reported financial results. Share-based compensation expense recognized under SFAS 123R for the years ended December 31, 2007 and 2006 was $45.1 million and $47.1 million, respectively. For additional information, refer to Note 25.

SFAS 123R requires companies to estimate the fair values of share-based awards on the date of grant using an option-pricing model. The value of awards expected to vest is recognized as an expense over the requisite service periods. Prior to the adoption of SFAS 123R, we had accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with the Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB 25) as allowed under SFAS 123.

Under the intrinsic value method, no share-based compensation expense had been recognized in our Consolidated Statement of Operations, other than as related to modifications and compensatory employee equity purchase plans, because the exercise price of the stock options granted to employees and directors equaled the fair market value of the underlying stock at the date of grant. Estimating the fair value of share-based awards as of the date of grant using an option-pricing model, such as the binomial model, is affected by our stock price as well as assumptions regarding a number of complex variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, risk-free interest rates, and actual and projected employee exercise behaviors.

    (u)  Pensions and other employee benefit plans

We have two defined benefit pension plans covering our employees based in Ireland. We account for pension benefit obligations and related costs in accordance with SFAS No. 87, “Employer’s Accounting for Pensions,” (SFAS 87) as amended by SFAS No. 158, “Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Nos. 87, 88, 106 and 132R,” (SFAS 158) and our disclosures are in accordance with SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” (SFAS 132R), as amended by SFAS 158. These plans are managed externally and the related pension costs and liabilities are assessed annually in accordance with the advice of a qualified professional actuary. Two significant assumptions, the discount rate and the expected rate of return on plan assets, are important elements of expense and/or liability measurement. We evaluate these assumptions annually, with the assistance of an actuary. Other assumptions involve employee demographic factors such as retirement patterns, mortality, turnover and the rate of compensation increase. We use a December 31 measurement date. All plan assets and liabilities are reported as of that date. The cost or benefit of plan changes, which increase or decrease benefits for prior employee service, is included in expense on a straight-line basis over the period the employee is expected to receive the benefits.

We recognize actuarial gains and losses using the corridor method. Under the corridor method, to the extent that any cumulative unrecognized net actuarial gain or loss exceeds 10 percent of the greater of the present value of the defined benefit obligation and the fair value of the plan assets, that portion is recognized over the expected average remaining working lives of the plan participants. Otherwise, the net actuarial gain or loss is not recognized.

In accordance with SFAS 158, we recognize the funded status of benefit plans in our Consolidated Balance Sheet beginning December 31, 2006. In addition, we recognize as a component of other comprehensive income the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic pension cost of the period pursuant to SFAS 87.

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We also have a number of other defined contribution benefit plans, primarily for employees outside of Ireland. The cost of providing these plans is expensed as incurred. For additional information on our pension and other employee benefit plans, refer to Note 25.

    (v)  Contingencies

In accordance with SFAS No. 5, “Accounting for Contingencies,” we assess the likelihood of any adverse outcomes to contingencies, including legal matters, as well as the potential range of probable losses. We record accruals for such contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. If an unfavorable outcome is probable, but the amount of the loss cannot be reasonably estimated, we estimate the range of probable loss and accrue the most probable loss within the range. If no amount within the range is deemed more probable, we accrue the minimum amount within the range. If neither a range of loss nor a minimum amount of loss is estimable, then appropriate disclosure is provided, but no amounts are accrued. For additional information relating to our commitments and contingencies, refer to Notes 26 and 27.

3.   Revenue

The composition of revenue for the years ended December 31, was as follows (in millions):

	2007		2006		2005
Product revenue	$	728.6	$	532.9	$	458.1
Contract revenue		30.8		27.5		32.2
Total revenue	$	759.4	$	560.4	$	490.3

Product revenue can be further analyzed as follows (in millions):

	2007		2006			2005
Biopharmaceuticals:
Tysabri — U.S.	$	217.4	$	28.2		$	11.0
Tysabri — ROW		14.3		(10.7	)		—
Total Tysabri		231.7		17.5			11.0
Maxipime		122.5		159.9			140.3
Azactam		86.3		77.9			57.7
Prialt		12.3		12.1			6.3
Royalties		1.8		2.4			4.3
Total product revenue from Biopharmaceuticals business		454.6		269.8			219.6
EDT:
Manufacturing revenue and royalties		269.5		232.4			204.5
Amortized revenue — Adalat®/Avinza®		4.5		30.7			34.0
Total product revenue from EDT business		274.0		263.1			238.5
Total product revenue	$	728.6	$	532.9		$	458.1

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Global in-market net sales of Tysabri were as follows (in millions):

	2007		2006		2005
United States	$	217.4	$	28.2	$	11.0
ROW		125.5		9.9		—
Total Tysabri in-market net sales	$	342.9	$	38.1	$	11.0

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most of the development and commercialization costs for Tysabri. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec at a price that includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri, and this cost, together with royalties payable to other third parties, is included in cost of sales.

Outside of the United States, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on these sales of Tysabri, plus our directly-incurred expenses on these sales. In 2007, Elan recorded rest of world (ROW) revenue of $14.3 million (2006: negative revenue of $10.7 million), which was calculated as follows (in millions):

	2007			2006
ROW in-market sales by Biogen Idec	$	125.5		$	9.9
ROW operating expenses incurred by Elan and Biogen Idec		(138.1	)		(34.3	)
ROW operating loss incurred by Elan and Biogen Idec		(12.6	)		(24.4	)
Elan’s 50% share of Tysabri ROW collaboration operating loss		(6.3	)		(12.2	)
Elan’s directly-incurred costs		20.6			1.5
Net Tysabri ROW revenue	$	14.3		$	(10.7	)

Contract revenue can be further analyzed as follows (in millions):

	2007		2006		2005
	(In millions)
Biopharmaceuticals:
Amortized fees	$	2.0	$	8.5	$	12.1
Research revenues/milestones		7.3		—		—
Total Biopharmaceuticals contract revenue	$	9.3	$	8.5	$	12.1
EDT:
Amortized fees	$	4.3	$	4.2	$	4.3
Research revenues/milestones		17.2		14.8		15.8
Total EDT contract revenue	$	21.5	$	19.0	$	20.1
Total contract revenue	$	30.8	$	27.5	$	32.2

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Elan Corporation, plc

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4.   Sales of Products and Businesses and Discontinued Operations

Discontinued operations

A discontinued operation is a component of an entity whose operations and cash flows have been or will be eliminated from the ongoing operations of the entity, and with respect to which the entity will not have any significant continuing involvement in the operations of the component after its disposal.

There were no components of discontinued operations in 2007 and 2006. The components of the net income from discontinued operations of $0.6 million in 2005 were not material.

Sale of Products and Businesses — Continuing Operations

We have previously sold a number of products and businesses, which are not included in discontinued operations because we have a significant continuing involvement in the operations of these businesses, for example, through ongoing supply arrangements or formulation activities.

We did not dispose of any products or businesses in 2007. For the years ended December 31, 2006 and 2005, the net gain from the disposal of products and businesses is presented below (in millions):

	2006			2005
Prialt European rights	$	(43.3	)	$	—
Zonegran®		—			(85.6	)
European business		0.2			(17.1	)
Other		—			(0.7	)
Net gain on sale of products and businesses	$	(43.1	)	$	(103.4	)

In March 2006, we sold the Prialt^® (ziconotide intrathecal infusion) European rights to Eisai Co. Ltd. (Eisai) and received $50.0 million at closing and are entitled to receive an additional $10.0 million on the earlier of two years from closing or launches of Prialt in key European markets. We recorded a gain of $43.3 million on this sale. We may also receive an additional $40.0 million contingent on Prialt achieving revenue-related milestones in Europe. As of December 31, 2007, we had received $8.0 million of the $10.0 million related to the launches of Prialt in key European markets.

We did not dispose of any products or businesses in 2005. The net gain recognized in 2005 resulted from receipts of deferred contingent consideration related to prior year disposals, as described below.

In April 2004, we completed the sale of our interests in Zonegran in North America and Europe to Eisai for a net total consideration of $113.5 million at closing. We were also entitled to receive additional consideration of up to $110.0 million from Eisai if no generic form of Zonegran was approved by certain dates up through January 1, 2006. We received $85.0 million of this contingent consideration prior to the approval of a generic form of Zonegran in December 2005. Consequently, the total net proceeds received from the sale of Zonegran amounted to $198.5 million and resulted in a cumulative net gain of $128.5 million, of which $85.6 million was recognized in 2005 and $42.9 million in 2004.

In February 2004, we sold our European sales and marketing business to Zeneus Pharma Ltd. for net cash proceeds of $93.2 million, resulting in a loss of $2.9 million. We received an additional $6.0 million in February 2005, which was accrued at December 31, 2004, and $15.0 million in December 2005 of contingent consideration, which resulted in a net gain of $17.1 million in 2005 after the release of contingent liabilities of $2.1 million, which were not ultimately required. We will not receive any further consideration in respect of this disposal.

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5.   Other Net (Gains)/Charges

The principal items classified as other net (gains)/charges include a Maxipime^® (cefepime hydrochloride) and Azactam^® (aztreonam for injection, USP) impairment charge, severance, restructuring and other costs, legal settlements and awards and acquired in-process research and development costs.

Other net (gains)/charges for the years ended December 31 consisted of (in millions):

	2007		2006			2005
(A) Maxipime and Azactam asset impairment	$	52.2	$	—		$	—
(B) Severance, restructuring and other costs		32.4		7.5			11.8
(C) Legal settlements and awards		—		(49.8	)		(7.4	)
(D) Acquired in-process research and development costs		—		22.0			—
Total other net (gains)/charges	$	84.6	$	(20.3	)	$	4.4

(A) Maxipime and Azactam asset impairment

The Maxipime and Azactam asset impairment charge of $52.2 million is related to the approval of a first generic formulation of Maxipime (cefepime hydrochloride) in June 2007 and the anticipated approval of a generic form of Azactam. For additional information, refer to Note 15.

(B) Severance, restructuring and other costs

During 2007, we incurred severance, restructuring and other costs of $32.4 million arising principally from the restructuring of our commercial infrastructure and consolidation of our U.S. West Coast locations, which resulted in the closure of the San Diego facility and the expansion of our operations in South San Francisco. The restructuring of our commercial infrastructure was primarily a result of the approval of a generic form of Maxipime and the anticipated approval of a generic form of Azactam. For additional information regarding the activity related to the severance and restructuring accruals, refer to Note 17.

During 2006, the net severance, restructuring and other costs of $7.5 million were related to the realignment of our resources to meet our current business structure. The restructuring and severance charges in 2006 were primarily related to the consolidation of our Biopharmaceuticals R&D activities into our South San Francisco facility. These charges arose from termination of certain operating leases, reduction of headcount and relocation of employees, and they include the reversal of a $9.4 million charge for future lease payments on an unutilized facility in South San Francisco. As a part of the restructuring of our Biopharmaceutical R&D activities, this facility was brought back into use.

During 2005, the severance, restructuring and other costs of $11.8 million were due to the realignment of our resources to meet our current business structure. These expenses arose from termination of certain operating leases and a reduction in employee headcount.

(C) Legal settlements and awards

In December 2006, we were awarded $49.8 million following the conclusion of binding arbitration proceedings that were initiated against King with respect to an agreement to reformulate Sonata^®. This award was recognized as a gain in 2006 and was received in January 2007.

During 2005, we recorded a net gain of $7.4 million relating primarily to the Pfizer Inc. (Pfizer) litigation settlement in which we received a payment of $7.0 million. The settlement arose from a claim concerning intellectual property rights and the development of target compounds arising from a collaboration with Pfizer.

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(D) Acquired in-process research and development costs

In July 2006, Elan and Archemix Corp. (Archemix) entered into a multi-year, multi-product alliance focused on the discovery, development and commercialization of aptamer therapeutics to treat autoimmune diseases. As a result of the alliance, Elan paid Archemix an upfront payment of $7.0 million. In addition, in September 2006, Elan and Transition Therapeutics, Inc. (Transition) announced an exclusive, worldwide collaboration agreement for the joint development and commercialization of ELND005, for the treatment of Alzheimer’s disease. Elan incurred a charge related to the license fee of $15.0 million, of which $7.5 million was paid to Transition in 2006 and the rest in 2007.

6.   Net Interest Expense

The net interest expense for the years ended December 31, 2007, 2006 and 2005 is as follows (in millions):

	2007			2006			2005
Interest expense:
Interest on 7.75% Notes	$	65.9		$	65.9		$	65.5
Interest on Floating Rate Notes due 2011		28.4			27.5			22.0
Interest on 8.875% Notes		41.3			4.4			—
Interest on Floating Rate Notes due 2013		14.5			1.5			—
Interest on Athena Notes		1.6			44.5			45.4
Interest on 6.5% Convertible Notes		—			15.9			22.0
Amortization of deferred financing costs		4.8			6.9			7.4
Foreign exchange (gain)/loss		0.3			(4.2	)		2.2
Swap interest expense/(income)		0.4			3.4			(2.1	)
Other		(1.8	)		(0.4	)		1.4
Interest expense	$	155.4		$	165.4		$	163.8
Interest income:
Cash and cash equivalents interest	$	(42.1	)	$	(53.8	)	$	(37.5	)
Investment interest		(0.2	)		(0.1	)		(0.6	)
Interest income	$	(42.3	)	$	(53.9	)	$	(38.1	)
Net interest expense	$	113.1		$	111.5		$	125.7

For additional information on our debts, refer to Note 18.

7.   Net Charge on Debt Retirements

In December 2006, we issued an early redemption notice for the 7.25% senior notes (Athena Notes). In January 2007, the remaining aggregate principle amount of $613.2 million of the Athena Notes was redeemed and the related $300.0 million of interest rate swaps were cancelled. As a result, we incurred a net charge on debt retirement of $18.8 million.

In June 2005, we incurred a net charge of $51.8 million associated with the early retirement of $36.8 million of the Athena Notes and the early conversion of $206.0 million in aggregate principal amount of the 6.5% Convertible Notes.

For additional information related to our debts, refer to Note 18.

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8.   Earnings Per Share

Basic income/(loss) per share is computed by dividing the net income/(loss) for the period available to ordinary shareholders by the sum of the weighted-average number of Ordinary Shares outstanding during the period. Diluted net income/(loss) per share is computed by dividing the net income/(loss) for the period by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all dilutive potential Ordinary Shares, including stock options, RSUs, warrants, and convertible debt securities on an as-if-converted basis.

The following table sets forth the computation for basic and diluted net income/(loss) per share:

	2007			2006			2005
Basic and diluted net loss per Ordinary Share:
Basic and diluted net loss per share from continuing operations	$	(0.86	)	$	(0.62	)	$	(0.93	)
Basic and diluted net income per share from discontinued operations		—			—			—
Basic and diluted net loss per Ordinary Share	$	(0.86	)	$	(0.62	)	$	(0.93	)

The weighted-average number of Ordinary Shares outstanding at December 31, 2007 was 468.3 million (2006: 433.3 million; 2005: 413.5 million). As of December 31, 2007, there were stock options and RSUs outstanding of 24.2 million shares (2006: 26.1 million shares including warrants; 2005: 63.2 million shares including warrants and convertible debt securities), which could potentially have a dilutive impact in the future, but which were anti-dilutive in 2007, 2006 and 2005.

9.   Restricted Cash

We had total restricted cash (current and non-current) of $29.6 million at December 31, 2007 (2006: $23.2 million), which has been pledged to secure certain letters of credit.

10.   Accounts Receivable, Net

Our accounts receivable at December 31 of each year end consisted of the following (in millions):

	2007		2006
Trade receivables	$	137.4	$	108.1
Less amounts provided for doubtful accounts		—		(0.7	)
Trade receivables, net	$	137.4	$	107.4

The following customers account for more than 10% of our trade receivables at December 31, 2007 and 2006:

	2007			2006
AmerisourceBergen		28	%		39	%
Fournier Pharma Corp.		25	%		—

No other customer accounted for more than 10% of our trade receivable balance at either December 31, 2007 or 2006.

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11.   Investment Securities

Current investment securities

The following information on current investment securities is presented in accordance with the requirements of SFAS 115 at December 31, 2007 and 2006 (in millions):

	2007			2006
Debt securities — current	$	268.1		$	—
Equity securities — current, at cost		5.0			6.5
Unrealized gain on equity securities		4.4			4.9
Unrealized losses on equity securities		(0.6	)		(0.2	)
Total investment securities — current	$	276.9		$	11.2

Debt securities — current

At December 31, 2007, all of Elan’s liquid investments were invested in bank deposits and funds. In December 2007, due to dislocations in the capital markets, one of these funds was closed. As a result, the total carrying value of our holding in the fund of $274.8 million (current: $268.1 million; non-current: $6.7 million) at December 31, 2007 no longer qualified as cash equivalents. The balance has been reclassified to current and non-current debt securities based on the expected liquidation of investments in the fund. Since December 31, 2007, Elan has reduced the amount invested in this fund to approximately $100 million and has moved approximately $175 million into bank deposits and United States treasury funds. In conjunction with the closure of the fund, a charge of $3.8 million was incurred and has been classified within net interest expense for 2007. There were no equivalent charges in 2006 or 2005.

Equity securities — current

At December 31, 2007, marketable equity securities primarily consisted of investments in emerging pharmaceutical and biotechnology companies. The fair market value of these securities was $8.8 million at December 31, 2007 (2006: $11.2 million).

Non-current investment securities

Non-current investment securities at December 31, 2007 and 2006 are as follows (in millions):

	2007		2006
Debt securities — non-current	$	13.0	$	—
Equity securities — non-current, at cost		9.5		9.2
Total investment securities — current	$	22.5	$	9.2

The balance of non-current debt securities at December 31, 2007 includes the $6.7 million investment described above and a $6.3 million investment in auction rate securities.

Non-current equity investments are comprised of investments held in privately held biotech companies recorded at cost.

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Net Investment (Gains)/Losses

	2007			2006			2005
Net gains on sale of current investment securities	$	—		$	(0.4	)	$	(2.6	)
Net gains on sale of non-current investment securities		(6.6	)		(7.9	)		(14.9	)
Derivative fair value (gains)/losses		1.4			(0.6	)		0.7
Impairment charges		6.1			7.3			24.0
Net investment (gains)/losses	$	0.9		$	(1.6	)	$	7.2

The above impairment charges include all other-than-temporary impairments. There are investments with a fair value of $2.4 million with unrealized losses of $0.6 million at December 31, 2007. These unrealized losses are considered to be temporary.

The cash inflows arising from the sale of current investment securities were $27.9 million, $0.9 million and $17.1 million in 2007, 2006 and 2005, respectively. There were no cash outflows arising from the purchase of current investment securities in 2007, 2006 or 2005.

The cash inflows arising from the sale of non-current investment securities were $3.4 million, $13.2 million and $45.6 million in 2007, 2006 and 2005, respectively. The cash used for the purchase of non-current investment securities were $12.3 million, $0.2 million and $0.4 million for 2007, 2006 and 2005, respectively.

In 2007, we recorded an impairment of $5.0 million related to the investment in auction rate securities. The remaining impairment charges of $1.1 million (2006: $7.3 million; 2005: $24.0 million) related to various investments in emerging pharmaceutical and biotechnology companies.

12.   Inventory

Product inventories at December 31 of each year consisted of the following (in millions):

	2007		2006
Raw materials	$	8.9	$	5.4
Work-in-process		5.8		7.9
Finished goods		22.0		15.9
Total inventory	$	36.7	$	29.2

13.   Prepaid and Other Current Assets

Prepaid and other current assets at December 31 of each year consisted of the following (in millions):

	2007		2006
Prepayments	$	9.4	$	8.8
Deferred tax asset		4.6		3.3
Arbitration award receivable		—		49.8
Fair value of derivatives		—		3.4
Other current asset		7.8		9.4
Total prepaid and other current assets	$	21.8	$	74.7

In December 2006, we were awarded $49.8 million following the conclusion of binding arbitration proceedings that were initiated against King with respect to an agreement to reformulate Sonata. This award was recognized as a gain in 2006 and was received in January 2007.

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14.   Property, Plant and Equipment

	Land &			Plant &
	Buildings			Equipment			Total
	(In millions)
Cost:
At January 1, 2006	$	287.3		$	293.2		$	580.5
Additions		9.8			23.5			33.3
Disposals		(6.8	)		(32.9	)		(39.7	)
At December 31, 2006	$	290.3		$	283.8		$	574.1
Additions		5.4			17.2			22.6
Disposals		(3.0	)		(10.7	)		(13.7	)
At December 31, 2007	$	292.7		$	290.3		$	583.0
Accumulated depreciation:
At January 1, 2006	$	(60.9	)	$	(174.9	)	$	(235.8	)
Charged in year		(9.8	)		(24.9	)		(34.7	)
Disposals		4.2			34.2			38.4
At December 31, 2006	$	(66.5	)	$	(165.6	)	$	(232.1	)
Charged in year		(9.4	)		(23.8	)		(33.2	)
Disposals		1.5			9.7			11.2
At December 31, 2007	$	(74.4	)	$	(179.7	)	$	(254.1	)
Net book value: December 31, 2007	$	218.3		$	110.6		$	328.9
Net book value: December 31, 2006	$	223.8		$	118.2		$	342.0

Property and equipment disposals during 2007 primarily relate to the consolidation of our U.S. West Coast locations, which resulted in the closure of the San Diego facility and the expansion of our operations in South San Francisco. The disposals during 2006 primarily relate to plant and equipment that were disposed as a result of the restructuring related to our R&D activities.

Included in the net book value of property, plant and equipment is $229.1 million (2006: $238.1 million) relating to our manufacturing and fill-finish facilities in Athlone, Ireland.

The net book value of assets held under capital leases at December 31, 2007 amounted to $7.0 million (2006: $12.6 million), which includes $66.0 million of accumulated depreciation (2006: $70.6 million). Depreciation expense for the period amounted to $3.0 million (2006: $4.5 million; 2005: $5.8 million).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15.   Goodwill and Other Intangible Assets

			Other
			Intangible
	Goodwill		Assets			Total
	(In millions)
Cost:
At January 1, 2006	$	268.0	$	808.6		$	1,076.6
Additions		—		4.0			4.0
Disposals		—		(38.8	)		(38.8	)
At December 31, 2006	$	268.0	$	773.8		$	1,041.8
Additions		—		6.0			6.0
Disposals		—		(0.3	)		(0.3	)
At December 31, 2007	$	268.0	$	779.5		$	1,047.5
Accumulated amortization:
At January 1, 2006	$	—	$	(402.2	)	$	(402.2	)
Charged in year		—		(95.5	)		(95.5	)
Disposals		—		38.1			38.1
At December 31, 2006	$	—	$	(459.6	)	$	(459.6	)
Charged in year		—		(80.9	)		(80.9	)
Impairment		—		(49.4	)		(49.4	)
At December 31, 2007	$	—	$	(589.9	)	$	(589.9	)
Net book value: December 31, 2007	$	268.0	$	189.6		$	457.6
Net book value: December 31, 2006	$	268.0	$	314.2		$	582.2

Other intangible assets consist primarily of patents, licenses and intellectual property as follows:

	2007		2006
Alzheimer’s disease	$	70.1	$	78.1
Prialt		58.1		64.5
Verelan		32.2		42.9
Tysabri		15.2		17.5
Maxipime and Azactam		—		94.8
Other intangible assets		14.0		16.4
Total other intangible assets	$	189.6	$	314.2

In June 2007, we recorded an impairment charge of $52.2 million (comprised of $49.4 million relating to intangible assets and $2.8 million relating to other non-current assets), within other net charges in the Consolidated Income Statement, relating to the Maxipime and Azactam intangible assets. As a direct result of the approval of a first generic formulation of cefepime hydrochloride in June 2007 and the anticipated approval for a generic form of Azactam, we revised the projected future cumulative undiscounted cash flows. The revised projected cumulative undiscounted cash flows were lower than the intangible assets’ carrying value, thus indicating the intangible assets were not recoverable. Consequently, the impairment charge was calculated as the excess of the carrying value over the discounted net present value. In conjunction with the impairment charge, we revised the estimated useful lives of

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the intangibles by nine months from September 2008 to December 2007. Accordingly, the remaining net intangible assets’ carrying value was amortized, on a straight-line basis, through December 31, 2007.

The weighted-average remaining useful life for other intangible assets at December 31, 2007 was 8.9 years.

Amortization expense for the year ended December 31, 2007 amounted to $80.9 million (2006: $95.5 million; 2005: $93.2 million) and is recorded as cost of sales, selling, general and administrative expenses and R&D expenses in the Consolidated Statements of Operations, as it relates to the respective functions.

As of December 31, 2007, our expected future amortization expense of current other intangible assets is as follows (in millions):

Year ending December 31, 2008	$	31.1
2009		28.5
2010		26.8
2011		14.3
2012		13.4
2013 and thereafter		75.5
Total	$	189.6

16.   Other Assets

Non-current other assets at December 31 of each year consisted of the following (in millions):

	2007		2006
Deferred financing costs	$	26.6	$	32.4
Overfunded pension plan asset		8.8		—
Prepayment for supply arrangement		—		7.0
Other		11.1		17.2
Total other assets	$	46.5	$	56.6

The overfunded pension plan asset relates to two defined benefit pension plans. For additional information, refer to Note 25.

The prepayment for supply arrangement asset represented a $20.0 million payment made in March 2004 in exchange for increased future supply commitments from the manufacturer of Maxipime. As a result of the generic competition to Maxipime, an impairment charge of $2.8 million was recorded in 2007. Amortization expense for the year ended December 31, 2007 amounted to $4.2 million (2006: $5.4 million; 2005: $4.4 million). For additional information, refer to Note 15.

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17.   Accrued and Other Current Liabilities, and Other Long-Term Liabilities

Accrued and other current liabilities at December 31 consisted of the following (in millions):

	2007		2006
Payroll and related taxes	$	46.2	$	42.9
Accrued royalties payable		23.4		4.8
Sales and marketing accruals		23.3		23.3
Accrued interest		16.0		33.5
Clinical trial accruals		15.0		9.1
Restructuring and other accruals		10.6		6.8
Accrued income tax payable		6.8		5.7
Litigation accruals		1.7		5.0
Fair value of derivatives		0.6		4.4
Capital lease obligations — current		—		3.0
Other accruals		36.7		41.3
Total accrued and other current liabilities	$	180.3	$	179.8

Other long-term liabilities at December 31 consisted of the following (in millions):

	2007		2006
Deferred rent	$	25.5	$	24.3
Unfunded pension liability		—		3.2
Other		13.3		13.5
Total accrued and other current liabilities	$	38.8	$	41.0

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Severance, restructuring and other charges accrual

The following table summarizes activities related to the severance, restructuring and other charges and the rollforward of the related accruals (in millions):

							Other
	Facilities			Severance			Costs			Total
Balance at December 31, 2004	$	16.7		$	1.3		$	—		$	18.0
Restructuring and other charges		0.5			11.5			2.4			14.4
Reversal of prior year accrual		(1.7	)		(0.9	)		—			(2.6	)
Cash payments		(2.9	)		(6.1	)		—			(9.0	)
Non-cash charges		—			—			(1.9	)		(1.9	)
Balance at December 31, 2005	$	12.6		$	5.8		$	0.5		$	18.9
Restructuring and other charges		1.1			14.8			1.1			17.0
Reversal of prior year accrual(1)		(9.4	)		(0.1	)		—			(9.5	)
Cash payments		(3.7	)		(14.3	)		(0.5	)		(18.5	)
Non-cash charges		—			—			(1.1	)		(1.1	)
Balance at December 31, 2006	$	0.6		$	6.2		$	—		$	6.8
Restructuring and other charges		1.3			30.7			1.3			33.3
Reversal of prior year accrual		—			(0.9	)		—			(0.9	)
Cash payments		(0.8	)		(24.8	)		(0.1	)		(25.7	)
Non-cash charges		—			(1.7	)		(1.2	)		(2.9	)
Balance at December 31, 2007	$	1.1		$	9.5		$	—		$	10.6

⁽¹⁾ Principally related to the reversal of a charge for future lease payments on an unutilized facility in South San Francisco. As part of the restructuring of our Biopharmaceuticals R&D activities in 2006, this facility was brought back into use.

18.   Current and Long-Term Debts

Current and long-term debts at December 31, 2007 and 2006 consisted of the following (in millions):

	Due		2007		2006
Current
Athena Notes (redeemed in full in January 2007)		2008	$	—	$	613.2
Long-term
7.75% Notes		2011	$	850.0	$	850.0
Floating Rate Notes due 2011		2011		300.0		300.0
8.875% Notes		2013		465.0		465.0
Floating Rate Notes due 2013		2013		150.0		150.0
Total long term debts			$	1,765.0	$	1,765.0
Total current and long term debts			$	1,765.0	$	2,378.2

Athena Notes

In February 2001, Athena Neurosciences Finance, LLC (Athena Finance), an indirect wholly-owned subsidiary, issued $650.0 million in aggregate principal amount of Athena Notes due February 2008 at a discount of

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$2.5 million. The Athena Notes were senior, unsecured obligations of Athena Finance and were fully and unconditionally guaranteed on a senior unsecured basis by Elan Corporation, plc and certain of our subsidiaries. Issuance costs associated with the financing amounted to $8.3 million. Interest was paid in cash semi-annually.

On January 14, 2002, we entered into an interest rate swap to convert our fixed rate interest obligations for $100.0 million of the Athena Notes to variable rate interest obligations. The swap had a fair value loss of $0.4 million at December 31, 2006 (2005: $0.2 million gain). On November 22, 2004, we entered into two interest rate swaps to convert an additional $150.0 million and $50.0 million of this debt to variable rate interest obligations. These swaps had a total fair value loss of $4.0 million at December 31, 2006 (2005: $5.3 million). All swaps were cancelled in January 2007 as discussed below.

In June 2005, we retired $36.8 million in aggregate principal amount of the Athena Notes, which were purchased for $33.3 million plus accrued interest of $0.6 million. As a result of the retirement, we recorded a net gain of $3.1 million, net of $0.2 million for the write off of deferred financing costs.

In December 2006, we issued an early redemption notice for the Athena Notes. In January 2007, the remaining aggregate principal amount of $613.2 million of the Athena Notes was redeemed and the related $300.0 million of interest rate swaps were cancelled. As a result, we recorded a net charge on debt retirement of $18.8 million in 2007, comprised of a call premium of $13.4 million, the unamortized basis adjustment relating to the swaps of $4.2 million and unamortized financing costs of $1.2 million. As of December 31, 2006, the $613.2 million of aggregate principal amount for the Athena Notes were classified as current liabilities.

7.75% Notes

In November 2004, we completed the offering and sale of $850.0 million in aggregate principal amount of 7.75% senior notes (7.75% Notes) due November 15, 2011, issued by Elan Finance plc. Elan Corporation, plc and certain of our subsidiaries have guaranteed the 7.75% Notes. At any time prior to November 15, 2008, we may redeem the 7.75% Notes, in whole, but not in part, at a price equal to 100% of their principal amount, plus a make-whole premium and accrued but unpaid interest. We may redeem the 7.75% Notes, in whole or in part, beginning on November 15, 2008 at an initial redemption price of 103.875% of their principal amount, which decreases to par over time, plus accrued and unpaid interest. Interest is paid in cash semi-annually. For additional information, refer to Note 31.

Floating Rate Notes due 2011

In November 2004, we also completed the offering and sale of $300.0 million in aggregate principal amount of senior floating rate notes due November 15, 2011 (Floating Rate Notes due 2011), also issued by Elan Finance plc. The Floating Rate Notes due 2011 bear interest at a rate, adjusted quarterly, equal to the three-month London Interbank Offer Rate (LIBOR) plus 4.0%, except the first interest payment, which bears interest at a rate equal to the six-month LIBOR plus 4.0%. Elan Corporation, plc and certain of our subsidiaries have guaranteed the Floating Rate Notes due 2011. We may redeem the Floating Rate Notes due 2011, in whole or in part, at a redemption price of 101% of their principal amount, which decreases to par over time, plus accrued and unpaid interest. Interest is paid in cash semi-annually. For additional information, refer to Note 31.

8.875% Notes

In November 2006, we completed the offering and sale of $465.0 million in aggregate principal amount of 8.875% senior notes (8.875% Notes) due December 1, 2013, issued by Elan Finance plc. Elan Corporation, plc and certain of our subsidiaries have guaranteed the 8.875% Notes. At any time prior to December 1, 2010, we may redeem the 8.875% Notes, in whole, but not in part, at a price equal to 100% of their principal amount, plus a make-whole premium and accrued but unpaid interest. We may redeem the 8.875% Notes, in whole or in part, beginning on December 1, 2010 at an initial redemption price of 104.438% of their principal amount, plus accrued and unpaid

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interest. In addition, at any time after February 23, 2008 and on or prior to December 1, 2009, we may redeem up to 35% of the 8.875% Notes using the proceeds of certain equity offerings at a redemption price of 108.875% of the principal, which decreases to par over time, plus accrued and unpaid interest. Interest is paid in cash semi-annually. The proceeds from the offering, including the Floating Rate Note due 2013 below, were used principally to redeem the Athena Notes in January 2007. For additional information, refer to Note 31.

Floating Rate Notes due 2013

In November 2006, we also completed the offering and sale of $150.0 million in aggregate principal amount of senior floating rate notes due December 1, 2013 (Floating Rate Notes due 2013), also issued by Elan Finance plc. The Floating Rate Notes due 2013 bear interest at a rate, adjusted quarterly, equal to the three-month LIBOR plus 4.125%. Elan Corporation, plc and certain of our subsidiaries have guaranteed the Floating Rate Notes due 2013.

At any time prior to December 1, 2008, we may redeem the Floating Rate Notes due 2013, in whole, but not in part, at a price equal to 100% of their principal amount, plus a make-whole redemption premium and accrued but unpaid interest. We may redeem the Floating Rate Notes due 2013, in whole or in part, beginning on December 1, 2008 at an initial redemption price of 102% of their principal amount, which decreases to par over time, plus accrued and unpaid interest. In addition, at any time after February 23, 2008 and on or prior to December 1, 2008, we may redeem up to 35% of the Floating Rate Notes due 2013 using the proceeds of certain equity offerings at a redemption price of 100% of the principal amount plus a premium equal to the interest rate per annum on the Floating Rate Notes due 2013, plus accrued and unpaid interest thereon. Interest is paid in cash semi-annually. For additional information, refer to Note 31.

For additional information related to interest expense on our debts, refer to Note 6.

Covenants

The agreements governing some of our outstanding long-term indebtedness contain various restrictive covenants that limit our financial and operating flexibility. The covenants do not require us to maintain or adhere to any specific financial ratios, however, they do restrict within certain limits our ability to, among other things:

•  Incur additional debt;

•  Create liens;

•  Enter into certain transactions with related parties;

•  Enter into certain types of investment transactions;

•  Engage in certain asset sales or sale and leaseback transactions;

•  Pay dividends or buy back our Ordinary Shares; and

•  Consolidate, merge with, or sell substantially all our assets to, another entity.

The breach of any of these covenants may result in a default under the applicable agreement, which could result in the indebtedness under the agreement becoming immediately due and payable and may result in a default under our other indebtedness subject to cross acceleration provisions.

Our debt covenants do not require us to maintain or adhere to any specific financial ratios. Consequently, the shareholders’ deficit of $234.7 million at December 31, 2007 has no impact on our ability to comply with our debt covenants.

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19.   Fair Value of Financial Instruments

Fair value is the amount at which a financial instrument could be exchanged in an arms-length transaction between informed and willing parties, other than in a forced or liquidation sale. Cash and cash equivalents and current investment securities are held at fair value on the Consolidated Balance Sheets.

Debt Instruments

The fair values of debt instruments were as follows (in millions):

	At December 31, 2007				At December 31, 2006
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
7.75% Notes	$	850.0	$	795.8	$	850.0	$	838.3
Floating Rate Notes due 2011		300.0		284.3		300.0		297.8
8.875% Notes		465.0		456.3		465.0		465.0
Floating Rate Notes due 2013		150.0		144.2		150.0		148.9
Athena Notes(1)		—		—		613.2		625.5
Total convertible debt and guaranteed notes	$	1,765.0	$	1,680.6	$	2,378.2	$	2,375.5

⁽¹⁾ Redeemed in full in January 2007.

Derivative Instruments

The fair values of derivative instruments were as follows (in millions):

	At December 31, 2006
	Contract/		Fair Value
	Nominal Amount		Asset/(Liability)
Forward contracts:
Euro forward contracts	$	68.0	$	2.7
Swap contracts:
Interest rate swap — January 2002	$	100.0	$	(0.4	)
Interest rate swap — November 2004	$	150.0	$	(3.0	)
Interest rate swap — November 2004	$	50.0	$	(1.0	)

We did not hold any swap or forward currency contracts at December 31, 2007. We held freestanding warrants with a fair value liability of $0.6 million and a fair value asset of $0.7 million at December 31, 2007 and 2006, respectively.

Forward contracts

During 2007, we entered into a number of Euro forward currency contracts at various rates of exchange that required us to sell U.S. dollars for Euros on various dates. These forward contracts expired on various dates throughout 2007.

Swaps

On January 14, 2002, we entered into an interest rate swap to convert our 7.25% fixed rate interest obligations on $100.0 million of the Athena Notes to variable rate interest obligations. On November 22, 2004, we entered into two interest rate swaps to convert an additional $200.0 million of this debt to variable rate interest obligations. These

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swaps qualified as highly effective fair value hedges. The swaps were cancelled in January 2007 in connection with the redemption of the Athena Notes. For additional information, refer to Note 18.

20.   Deferred Revenue

Deferred revenue at December 31, 2007 consists of a current portion of $3.2 million and a non-current portion of $1.5 million (2006: $12.4 million, $3.7 million, respectively).

As a part of our license agreement with Watson Pharmaceutical, Inc. (Watson) for the licensing of rights to our generic form of Adalat CC^tm (nifedipine) in 2002, we received $45.0 million in cash from Watson. The deferred revenue relating to Adalat CC was fully amortized by June 2007.

As a part of our Tysabri collaboration agreement with Biogen Idec, we received total approval and milestone payments of $52.0 million through December 2004. The milestones were recognized as revenue based on the proportional performance method, which was based on the percentage of costs incurred to date compared to the total costs expected under the contract. The deferred revenue relating to Tysabri was fully amortized by December 2007.

21.   Provision for/(Benefit from) Income Taxes

The following table sets forth the details of the provision for/(benefit from) income taxes for the years ended December 31 (in millions):

	2007			2006			2005
Irish corporation tax — current	$	0.3		$	(12.1	)	$	(1.1	)
Irish corporation tax — deferred		0.6			(2.8	)		—
Foreign taxes — current		7.9			6.5			2.0
Foreign taxes — deferred		(1.9	)		(0.6	)		0.1
Income tax expense/(benefit)	$	6.9		$	(9.0	)	$	1.0
Tax benefit reported in shareholders’ equity related to:
Exercise of stock options	$	(1.8	)	$	(2.0	)	$	(0.6	)

Current tax, including Irish corporation tax and foreign taxes, is provided on our taxable profits, using the tax rates and laws that have been enacted by the balance sheet date. In each of the three years ended December 31, 2007, 2006 and 2005, substantially all of our income in Ireland was exempt from tax by virtue of tax losses incurred or relief granted on income derived from patents. The total tax provision of $6.9 million and tax benefit of $9.0 million for 2007 and 2006, respectively, reflect the availability of tax losses, tax at standard rates in the jurisdictions in which we operate, income derived from Irish patents and foreign withholding tax.

The deferred tax benefit of $1.3 million for 2007 (2006: $3.3 million benefit; 2005: $0.1 million provision) reflects the availability of net operating losses in Ireland, the United States and the United Kingdom and U.S. state deferred tax arising on temporary differences in certain U.S. state jurisdictions.

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For the years ended December 31, a reconciliation of the expected tax expense/(benefit) on continuing operations (computed by applying the standard Irish tax rate to (losses)/profits before tax) to the actual tax expense/(benefit) is as follows (in millions):

	2007			2006			2005
Irish standard tax rate		12.5	%		12.5	%		12.5	%
Taxes at the Irish standard rate	$	(49.8	)	$	(34.5	)	$	(47.9	)
Irish income at reduced rates		(18.3	)		(8.6	)		(7.5	)
Foreign income at rates other than the Irish standard rate		(31.1	)		(37.5	)		(53.8	)
Losses creating no tax benefit		106.1			71.6			110.2
Income tax expense/(benefit)	$	6.9		$	(9.0	)	$	1.0

For the years ended December 31, the distribution of income/(loss) from continuing operations before provision for income taxes by geographical area was as follows (in millions):

	2007			2006			2005
Loss from continuing operations before provision for income taxes:
Ireland	$	(705.5	)	$	(581.5	)	$	(475.8	)
Foreign		307.4			305.2			92.6
Loss from continuing operations before provision for income taxes	$	(398.1	)	$	(276.3	)	$	(383.2	)

Deferred Tax

The full potential amounts of deferred tax comprised the following deferred tax assets and liabilities at December 31 (in millions):

	2007			2006
Deferred tax liabilities:
Property, plant and equipment	$	(8.1	)	$	(0.6	)
Total deferred tax liabilities	$	(8.1	)	$	(0.6	)
Deferred tax assets:
Net operating losses	$	353.2		$	350.3
Deferred interest		170.8			162.0
Intangibles/capitalized items		58.7			79.8
Tax credits		83.3			77.1
Reserves/provisions		31.2			23.9
Fixed assets		0.6			0.4
Share-based compensation expense under SFAS 123R		25.3			14.6
Other		5.1			5.1
Total deferred tax assets	$	728.2		$	713.2
Valuation allowance	$	(715.5	)	$	(709.3	)
Net deferred tax asset	$	4.6		$	3.3

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The valuation allowance recorded against the deferred tax assets as of December 31, 2007 was $715.5 million. The net change in the valuation allowance for 2007 was an increase of $6.2 million (2006: increase of $137.0 million; 2005: increase of $128.0 million).

We have adjusted the above deferred tax assets in relation to net operating losses to exclude stock option deductions. In 2007, we have credited $1.8 million (2006: $2.0 million; 2005: $0.6 million) to shareholders’ equity to reflect recognition of U.S. state tax and U.K. corporation tax benefits from the utilization of stock option deductions.

The gross amount of unused tax loss carryforwards with their expiration dates is as follows:

	At December 31, 2007
			U.S.		U.S.		Rest of
	Ireland		State		Federal		World		Total
One year	$	—	$	—	$	—	$	—	$	—
Two years		—		—		—		—		—
Three years		—		0.5		27.4		—		27.9
Four years		—		5.3		62.5		—		67.8
Five years		—		3.0		1.0		—		4.0
More than five years		2,246.0		183.8		531.3		23.0		2,984.1
Total	$	2,246.0	$	192.6	$	622.2	$	23.0	$	3,083.8

At December 31, 2007, certain of our Irish subsidiaries had net operating loss carryovers for income tax purposes of $2,246.0 million. These can be carried forward indefinitely but are limited to the same trade/trades.

At December 31, 2007, certain U.S. subsidiaries had net operating loss carryovers for federal income tax purposes of approximately $622.2 million and for state income tax purposes of approximately $192.6 million. These net operating losses include stock option deductions. The federal net operating losses expire from 2010 to 2025. The state net operating losses expire from 2010 to 2025. In addition, at December 31, 2007, certain U.S. subsidiaries had federal research and orphan drug credit carryovers of $54.2 million, of which $40.1 million of research credit will expire from 2007 through 2027 and $14.1 million of orphan drug credit which can be carried to subsequent tax years indefinitely. Certain U.S. subsidiaries also had state credit carryovers of $41.2 million, mostly research credits, of which $40.9 million can be carried to subsequent tax years indefinitely, and $0.3 million which will expire from 2009 to 2011. We may have had “changes in ownership” as described in the U.S. Internal Revenue Code Section 382 in 2007. Consequently, utilization of federal and state net operating losses and credits may be subject to certain annual limitations.

Of the remaining loss carryovers, $2.0 million has arisen in the United Kingdom and can be carried forward indefinitely and $21.0 million has arisen in The Netherlands and is subject to time limits and other local rules.

At December 31, 2007, approximately $517.9 million of the net operating losses is derived from stock option exercises, and accordingly, we would record a credit of up to approximately $152.6 million to shareholders’ equity to reflect the recognition of tax benefits to the extent that these stock option deductions are utilized in the future.

No taxes have been provided for the unremitted earnings of our overseas subsidiaries as these are considered permanently employed in the business of these companies. Cumulative unremitted earnings of overseas subsidiaries totaled approximately $1,933.8 million at December 31, 2007. Unremitted earnings may be liable to overseas taxes or Irish taxation if they were to be distributed as dividends. It is impracticable to determine at this time the potential amount of additional tax due upon remittance of such earnings.

On January 1, 2007, we adopted the provisions of FASB issued Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (FIN 48). This interpretation

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clarifies the criteria for recognizing income tax benefits under FASB Statement No. 109, Accounting for Income Taxes, and requires additional disclosures about uncertain tax positions.

As a result of adoption, we recorded no adjustments to retained earnings as of January 1, 2007. Our gross unrecognized tax benefits at December 31, 2007 were $47.2 million, of which $39.8 million, if recognized, would not impact the effective tax rate as this amount would be offset by compensating adjustments in our deferred tax assets that would be subject to a valuation allowance based on conditions existing at our reporting date.

We report accrued interest and penalties related to unrecognized tax benefits in income tax expense. During 2007, we accrued interest of $0.5 million related to unrecognized tax benefits and in total, as of December 31, 2007, we have recorded a liability for potential penalties and interest of $0.5 million and $1.3 million, respectively.

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

The following table summarizes the activity related to our unrecognized tax benefits (in millions):

Balance at January 1, 2007	$	27.6
Tax positions related to current year:
Additions		0.7
Reductions		—
Tax positions related to prior years:
Additions		20.1
Reductions		—
Settlements		(0.1	)
Expiration of statutes of limitations		(1.1	)
Balance at December 31, 2007	$	47.2

Our major taxing jurisdictions include Ireland and the United States (federal and state). These jurisdictions have varying statutes of limitations. In the United States, the 2003 through 2007 tax years generally remain subject to examination by the respective tax authorities. Additionally, because of our U.S. loss carryforwards, years from 1992 through 2001 may be adjusted. These years generally remain open for three to four years after the loss carryforwards have been utilized. In Ireland, the tax years 2003 to 2007 remain subject to examination by the Irish tax authorities.

22.   Leases

Operating Leases

We lease certain of our facilities under non-cancelable operating lease agreements that expire at various dates through 2024. The major components of our operating leases are as described below.

In August 1998, we entered into an agreement for the lease of four buildings located in South San Francisco, California. These buildings are utilized for R&D, administration and other corporate functions. The lease period expires in December 2012. Thereafter, we have an option to renew for two additional five-year periods.

In August 1996 and August 2000, we entered into lease agreements for our R&D facility located in King of Prussia, Pennsylvania. During 2006, the lease agreements were extended, with expiration dates of May 2009 and April 2011, respectively. The lease agreement that expires in May 2009 includes an option to renew for an additional three-year period.

In January 2004, we entered into a lease agreement for our sales and administrative facility at Lusk Campus, San Diego, California. In January 2006, we extended the lease on part of this campus through January 2012. The lease on the remaining part of the facility expired in January 2007 and was not renewed. In November 2007, we

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terminated our Lusk Campus lease as part of the consolidation of our U.S. West Coast locations. We received a lease termination payment of $0.9 million, which was recorded net of other net charges.

In September 2004, we entered into a lease agreement for our corporate headquarters located in the Treasury Building, Dublin, Ireland. This lease expires in July 2014, with an option to renew for two additional 10-year periods. The agreement provides us with an option to cancel five years from the commencement date. The cancellation will require a nine-month written notice and will include a penalty equal to six months of rental payments.

In June 2007, we entered into a lease agreement for a building in South San Francisco, California. The building is under construction and will be utilized for R&D, sales and administrative functions. We expect the lease term to commence in the first quarter of 2009. The lease term is 15 years, with an option to renew for one additional five-year period. The agreement provides us with the option to cancel 10 years from the commencement date. The cancellation will require a one-year written notice and will include a penalty equal to nine months of rental payments and any unamortized landlord costs for tenant improvements. At December 31, 2007, we estimate the total rental payments and leasehold improvement incentives to be $100.8 million and $7.2 million, respectively. The rental payments and leasehold improvement incentives will be finalized upon completion of the building.

In July 2007, we entered into a lease agreement for a portion of a building in South San Francisco, California. The leased space is for our sales and administrative functions. The lease period expires in August 2009. Thereafter, we have an option to renew for two additional one-year periods.

In December 2007, we entered into a lease agreement for a building in South San Francisco, California. The building is under construction and will be utilized for R&D, sales and administrative functions. We expect the lease term to commence in the first quarter of 2010. The lease term is 15 years, with an option to renew for one additional five-year period. The agreement provides us with the option to cancel 10 years from the commencement date. The cancellation will require a one-year written notice and will include a penalty equal to nine months of rental payments and any unamortized landlord costs for tenant improvements. At December 31, 2007, we estimate the total rental payments and leasehold improvement incentives to be $81.0 million and $5.6 million, respectively. The rental payments and leasehold improvement incentives will be finalized upon completion of the building.

In addition, we also have various operating leases for equipment and vehicles, with lease terms that range from three to five years.

We recorded expense under operating leases of $22.7 million in 2007 (2006: $23.2 million; 2005: $25.5 million), net of sublease income of $Nil in 2007 (2006: $Nil; 2005: $0.1 million). As of December 31, 2007, our future minimum rental commitments for operating leases with non-cancelable terms in excess of one year are as follows (in millions):

Due in:
2008	$	17.1
2009		15.0	(1)
2010		27.0	(1)
2011		29.4
2012		28.2
2013 and thereafter		159.1
Total	$	275.8

⁽¹⁾ Net of estimated incentives for tenant leasehold improvements of $10.0 million and $2.8 million in 2009 and 2010, respectively.

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Capital Leases

The net book value of assets under capital leases at December 31, 2007 amounted to $7.0 million (2006: $12.6 million), which includes $66.0 million of accumulated depreciation (2006: $70.6 million). Depreciation expense related to assets under capital leases for 2007 amounted to $3.0 million (2006: $4.5 million; 2005: $5.8 million).

In prior years, we disposed of plant and equipment and subsequently leased them back and also entered into an arrangement with a third party bank, the substance of which allows us a legal right to require a net settlement of our obligations under the leases. The cash and borrowings relating to the previous sale and leaseback transactions have been offset in the Consolidated Financial Statements in the amount of $37.6 million at December 31, 2007 (2006: $36.2 million).

23.   Share Capital

Share capital at December 31, 2007 and 2006 was as follows:

	No. of Ordinary Shares
Authorized Share Capital	2007		2006
Ordinary Shares (par value €0.05)		670,000,000		670,000,000
Executive Shares (par value €1.25) (the Executive Shares)		1,000		1,000
“B” Executive Shares (par value €0.05) (the “B” Executive Shares)		25,000		25,000

	At December 31, 2007				At December 31, 2006
Issued and Fully Paid Share Capital	Number		$000s		Number		$000s
Ordinary Shares		470,195,498		27,412		466,619,156		27,184
Executive Shares		1,000		2		1,000		2
“B” Executive Shares		21,375		2		21,375		2

The Executive Shares do not confer on the holders thereof the right to receive notice of, attend or vote at any of our meetings, or the right to be paid a dividend out of our profits, except for such dividends as the directors may from time to time determine.

The “B” Executive Shares confer on the holders thereof the same voting rights as the holders of Ordinary Shares. The “B” Executive Shares do not confer on the holders thereof the right to be paid a dividend out of our profits except for such dividends as the directors may from time to time determine.

On September 6, 2007, the board of directors approved the cancellation of 850,947 Ordinary Shares that were previously held in treasury stock and, accordingly, all of the treasury stock shares were retired in 2007.

24.   Accumulated Other Comprehensive Income/(Loss)

The components of accumulated OCI, net of $Nil taxes, were as follows (in millions):

	2007			2006
Net unrealized gains on investment securities	$	3.8		$	4.7
Currency translation adjustments		(11.0	)		(11.7	)
Unamortized net actuarial loss on pension plans		(3.6	)		(13.9	)
Unamortized prior service cost on pension plans		(0.9	)		(0.9	)
Accumulated other comprehensive loss	$	(11.7	)	$	(21.8	)

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25.   Pension and Other Employee Benefit Plans

Pension

The pension costs of the Irish retirement plans have been presented in the following tables in accordance with the requirements of SFAS 132R, as amended by SFAS 158. We fund the pensions of certain employees based in Ireland through two defined benefit plans. In general, on retirement, eligible employees are entitled to a pension calculated at 1/60th of their final salary for each year of service, subject to a maximum of 40 years. These plans are managed externally and the related pension costs and liabilities are assessed in accordance with the advice of a qualified professional actuary. The investments of the plans at December 31, 2007 consisted of units held in independently administered funds. The change in projected benefit obligation was (in millions):

	2007			2006
Projected benefit obligation at January 1	$	69.9		$	57.9
Service cost		3.3			2.8
Interest cost		3.1			2.5
Plan participants’ contributions		1.8			1.5
Actuarial gain		(16.9	)		(1.6	)
Benefits paid and other disbursements		(0.4	)		(0.4	)
Foreign currency exchange rate changes		6.9			7.2
Projected benefit obligation at December 31	$	67.7		$	69.9

The changes in plan assets at December 31 were (in millions):

	2007			2006
Fair value of plan assets at beginning of year	$	66.7		$	49.4
Actual (loss)/return on plan assets		(1.8	)		7.4
Employer contribution		2.9			2.3
Plan participants’ contributions		1.8			1.5
Benefits paid and other disbursements		(0.4	)		(0.4	)
Foreign currency exchange rate changes		7.3			6.5
Fair value of plan assets at end of year	$	76.5		$	66.7
Overfunded/(unfunded) status at end of year	$	8.8		$	(3.2	)
Unamortized net actuarial loss in accumulated OCI		3.6			13.9
Unamortized prior service cost in accumulated OCI		0.9			0.9
Net amount recognized	$	13.3		$	11.6

Amounts recognized in the Consolidated Balance Sheet at December 31 (in millions):

	2007		2006
Overfunded/(unfunded) status — non-current asset/(liability)	$	8.8	$	(3.2	)
Accumulated OCI		4.5		14.8
Net amount recognized	$	13.3	$	11.6

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The net periodic pension cost was comprised of the following (in millions):

	2007			2006			2005
Service cost	$	3.3		$	2.8		$	2.0
Interest cost		3.1			2.5			2.0
Expected return on plan assets		(4.5	)		(3.3	)		(2.7	)
Amortization of net loss		0.4			0.6			0.5
Amortization of prior service cost		0.1			0.1			0.2
Net periodic pension cost	$	2.4		$	2.7		$	2.0

The weighted-average assumptions used to determine net periodic pension cost and benefit obligation at December 31 were:

	2007			2006
Discount rate		5.4	%		4.3	%
Expected return on plan assets		6.7	%		6.3	%
Rate of compensation increase		3.8	%		3.5	%

Pursuant to SFAS 87 (as amended by SFAS 158), we look to rates of return on high-quality fixed-income investments in determining the assumed discount rate. Since no significant market exists for high-quality fixed income investments in Ireland, the assumed discount rate at December 31, 2007 of 5.4% (2006: 4.3%) was determined based on the iBoxx Corporate Bond Index for AA rated corporate bonds with durations of 10 years or more. The estimated expected cash outflows for each of the next 10 years are projected to be less than the estimated contribution inflows. Therefore, we consider the iBoxx index of AA rated corporate bonds with mean durations of 10 years and over to be the closest available match for the expected defined benefit payments in the longer term.

The expected long-term rate of return on assets of 6.7% was calculated based on the assumptions of the following returns for each asset class: Equities 7.5%, Property 6.5%, Government Bonds 4.5% and Cash 2.5%. The fixed interest yield at December 31, 2007 was 4.5%; hence the assumed return on bonds is 4.5%. Returns for the other asset classes are set by reference to the fixed interest yield plus a risk premium. For equities, the risk premium is 3.0% and, for property, the premium is 2.0%.

The weighted-average asset allocations at December 31 by asset category were:

	2007			2006
Equity		77.0	%		78.1	%
Bonds		12.5	%		11.5	%
Property		3.4	%		3.2	%
Cash and other		7.1	%		7.2	%
Total		100.0	%		100.0	%

Our pension plan assets are invested in two managed unit trusts. Our key objective is to achieve long-term capital growth by investing primarily in a range of Eurozone and international equities, bonds, property and cash.

The investment mix is biased towards equities, with a diversified domestic and international portfolio of shares listed and traded on recognized Exchanges.

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The long-term asset allocation ranges of the trusts are as follows:

Equities	60%-80%
Bonds	10%-40%
Property	0%-10%
Cash	0%-10%

The total accumulated benefit obligation for the defined benefit pension plans was $58.9 million at December 31, 2007 (2006: $61.1 million).

At December 31, 2007, the expected future cash benefits per year to be paid in respect of the plans for the period of 2008-2012 are collectively less than $0.5 million. The expected cash benefits to be paid in the period of 2013-2017 are approximately $2.5 million. We expect to contribute approximately $2.6 million to our defined benefit plans in 2008.

The expected benefits to be paid are based on the same assumptions used to measure our benefit obligation at December 31, 2007, including the estimated future employee service.

During 2008, we expect to recognize $0.1 million of the unamortized net actuarial loss and $0.1 million of the unamortized prior service cost that was included in accumulated OCI at December 31, 2007.

In addition to the defined benefit pension plans, we operate a number of defined contribution retirement plans, primarily for employees outside of Ireland. The costs of these plans are charged to the income statement in the period they are incurred. The costs of the defined contribution plans were $4.7 million, $5.9 million and $6.2 million for 2007, 2006 and 2005, respectively.

Stock Options and Warrants

At our Annual General Meeting held on May 25, 2006, the Company’s shareholders approved a single Long Term Incentive Plan (2006 LTIP), which provides for the issuance of share options, RSUs and other equity awards. The shareholders also approved the closure of all pre-existing share option and RSU plans. Our equity award program is a long-term retention program that is intended to attract, retain and provide incentives for Elan employees, officers and directors, and to align shareholder and employee interests. We consider our equity award program critical to our operation and productivity. Currently, we grant equity awards from the 2006 LTIP, under which awards can be granted to all directors, employees and consultants.

Stock options are granted at the price equal to the market value at the date of grant and will expire on a date not later than 10 years after their grant. Options generally vest between one and four years from the date of grant.

The following table summarizes the number of options outstanding as of December 31 (in thousands):

	2007		2006
1996 Plan		7,240		8,959
1998 Plan		1,206		1,527
1999 Plan		9,038		12,791
Consultant Plan		—		150
2006 LTIP		4,312		596
Total		21,796		24,023

As of December 31, 2007, there were 4,311,589 stock options/RSUs available for grant from the 2006 LTIP (2006: 9,403,880).

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We have also granted options and warrants for various acquisitions. The following table summarizes the number of acquisition-related options outstanding as of December 31 (in thousands):

	2007		2006
Neurex		—		7
Liposome		70		109
Dura		31		51
Total		101		167

In connection with the acquisition of Liposome, we granted warrants to purchase 385,000 Ordinary Shares. These warrants were exercisable at $38.96 from May 2000 to July 2007 and expired unexercised.

The stock options outstanding, vested and expected to vest, and exercisable are summarized as follows:

						Weighted Average		Aggregate
						Remaining		Intrinsic
	No. of Options			WAEP(1)		Contractual Life		Value
	(In thousands)					(In years)		(In millions)
Outstanding at December 31, 2005		26,846		$	17.19
Exercised		(3,210	)		8.04
Granted		2,700			15.77
Forfeited		(896	)		16.66
Expired		(1,250	)		31.57
Outstanding at December 31, 2006		24,190		$	17.52
Exercised		(3,765	)		6.48
Granted		3,870			14.55
Forfeited		(736	)		16.17
Expired		(1,662	)		30.46
Outstanding at December 31, 2007		21,897		$	17.89		5.6	$	175.2
Vested and expected to vest at December 31, 2007		21,232		$	18.01		5.5	$	170.0
Exercisable at December 31, 2007		14,629		$	19.62		4.9	$	118.9

⁽¹⁾ Weighted-average exercise price

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of 2007 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2007. This amount changes based on the fair market value of our stock. The total intrinsic value of options exercised in 2007 was $46.2 million (2006: $26.1 million). The total fair value of options vested in 2007 was $29.7 million (2006: $34.2 million).

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At December 31, 2007, the range of exercise prices and weighted-average remaining contractual life of outstanding and exercisable options were as follows:

	Options Outstanding						Options Exercisable
			Weighted-						Weighted-
			Average						Average
	Options		Remaining				Options		Remaining
Range	Outstanding		Contractual Life		WAEP		Outstanding		Contractual Life		WAEP
	(In thousands)		(In years)				(In thousands)		(In years)
$ 1.93-$10.00		6,116		5.9	$	4.89		5,179		5.6	$	4.42
$10.01-$25.00		10,526		6.7	$	15.37		4,429		6.5	$	15.84
$25.01-$40.00		3,570		2.8	$	31.24		3,336		2.6	$	31.58
$40.01-$58.60		1,685		3.2	$	52.61		1,685		3.2	$	52.61
$ 1.93-$58.60		21,897		5.6	$	17.89		14,629		4.9	$	19.62

Since we adopted SFAS 123R, effective January 1, 2006, equity settled share-based payments made to employees have been recognized in the financial statements based on the fair value of the awards measured at the date of grant. We use the graded-vesting attribution method for recognizing share-based compensation expense over the requisite service period for each separately vesting tranche of award as though the awards were, in substance, multiple awards. The fair value of share options is calculated using a binomial option-pricing model and the fair value of options issued under employee equity purchase plans is calculated using the Black-Scholes option-pricing model, taking into account the relevant terms and conditions. The binomial option-pricing model is used to estimate the fair value of our share options because it better reflects the possibility of exercise before the end of the options’ life. The binomial option-pricing model also integrates possible variations in model inputs, such as risk-free interest rates and other inputs, which may change over the life of the options. Options issued under our employee equity purchase plans have relatively short contractual lives, or must be exercised within a short period of time after the vesting date, and the input factors identified above do not apply. Therefore, the Black-Scholes option-pricing model produces a fair value that is substantially the same as a more complex binomial option-pricing model for our employee equity purchase plans. The amount recognized as an expense is adjusted each period to reflect actual and estimated future levels of vesting.

We use the implied volatility for traded options on our stock with remaining maturities of at least one year to determine the expected volatility assumption required in the binomial model. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The dividend yield assumption is based on the history and expectation of dividend payouts.

As share-based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures were estimated based on historical experience and our estimate of future employee turnover.

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The estimated weighted-average grant date fair values of the individual options granted during the years ended December 31, 2007, 2006 and 2005 were $8.85, $10.45 and $5.89, respectively. The fair value of options granted during these years was estimated using the binomial option-pricing model with the following weighted-average assumptions:

	2007			2006			2005
Risk-free interest rate		4.88	%		4.48	%		4.00	%
Expected volatility(1)		63.0	%		72.3	%		59.2	%
Dividend yield		Nil			Nil			Nil
Expected life (years)		—	(2)		—	(2)		—	(2)

(1)	The expected volatility for 2007, 2006 and 2005 grants was determined based on the implied volatility of traded options on our stock.
(2)	The expected lives of options granted in 2007, as derived from the output of the binomial model, ranged from 5.0 years to 8.0 years (2006: 5.1 years to 8.1 years; 2005: 5.4 years to 8.2 years). The contractual life of the options, which is not later than 10 years from the date of grant, is used as an input into the binomial model.

Restricted Stock Units

In February 2006, we began to grant RSUs to certain employees. The RSUs generally vest between one and four years from the date of grant, and shares are issued to employees as soon as practicable following vesting. The fair value of services received in return for the RSUs is measured by reference to the fair value of the underlying shares at grant date.

The non-vested RSUs are summarized as follows:

				Weighted-Average
				Grant Date
	No. of RSUs			Fair Value
	(In thousands)
Non-vested at December 31, 2005		—		$	—
Granted		1,367			15.90
Vested		—			—
Forfeited		(70	)		15.90
Non-vested at December 31, 2006		1,297		$	15.90
Granted		1,723			13.95
Vested		(366	)		15.65
Forfeited		(372	)		14.98
Non-vested at December 31, 2007		2,282		$	14.62

Employee Equity Purchase Plans

In June 2004, our shareholders approved a qualified Employee Equity Purchase Plan (U.S. Purchase Plan), under Sections 421 and 423 of the Internal Revenue Code (IRC), which became effective on January 1, 2005 for eligible employees based in the United States. The plan allows eligible employees to purchase common stock at 85% of the lower of the fair market value at the beginning of the offering period or the fair market value on the last trading day of the offering period. Purchases are limited to $25,000 (fair market value) per calendar year, 1,000 shares per offering period, and subject to certain IRC restrictions.

The board of directors approved the Irish Sharesave Option Scheme 2004 and U.K. Sharesave Option Plan 2004, effective January 1, 2005, for employees based in Ireland and the United Kingdom, respectively (the Irish and U.K. Sharesave Plans). The Irish and U.K. Sharesave Plans allow eligible employees to purchase Ordinary Shares at

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no lower than 85% of the fair market value at the start of the 36 month saving period. Eligible employees could save up to €320 per month under the Irish Scheme or £250 under the U.K. Plan, which entitles them an option to buy common stock at a discounted price of $22.29 for a period of six months from February 1, 2008, the end of the first and only saving period.

In May 2006, our shareholders approved an increase of 1,500,000 shares in the number of shares available to employees to purchase in accordance with the terms of the U.S. Purchase Plan. In total, 3,000,000 shares have been reserved for issuance under the Irish and U.K. Sharesave Plans and U.S. Purchase Plan combined. In 2007, 272,931 (2006: 394,533) shares were issued under the U.S. Purchase Plan and as of December 31, 2007, 1,723,933 shares (2006: 2,006,966 shares) were reserved for future issuance under the U.S. Purchase Plan and Irish and U.K. Sharesave Plans.

The weighted-average fair value of options granted under the U.S. Purchase Plan during the 12 months ended December 31, 2007 was $4.31. The estimated fair values of these options were charged to expense over the respective three-month offering periods. The options issued under the Irish/U.K. Sharesave Plans were granted in 2005 and the estimated fair values of the options are being expensed over the 36 month saving period from the grant date. This is because these plans were considered to be compensatory under SFAS 123 and APB 25 prior to the implementation of SFAS 123R, whereas the U.S. Purchase Plan was non-compensatory under SFAS 123 and APB 25. The fair value per option granted under the Irish/U.K. Sharesave Plans in 2005 was $11.68. The estimated fair values of options granted under the U.S. Purchase Plan in the years ended December 31, were calculated using the following inputs into the Black-Scholes option-pricing model:

	2007			2006
Weighted-average share price	$	16.36		$	14.88
Weighted-average exercise price	$	13.91		$	12.65
Expected volatility(1)		53.2	%		73.3	%
Expected life		3 months			3 months
Expected dividend yield		—			—
Risk-free rate		4.87	%		4.72	%

⁽¹⁾ The expected volatility was determined based on the implied volatility of traded options on our stock.

The following information regarding net loss and loss per share was determined as if we had accounted for our employee stock options under the fair value method prescribed by SFAS 123 in the year ended December 31, 2005.

	2005
	(In millions)
Net loss as reported	$	(383.6	)
Add: Intrinsic value method expense		0.1	(1)
Deduct: Fair value method expense		(36.2	)
Pro-forma net loss	$	(419.7	)
Basic and diluted loss per Ordinary Share:
As reported	$	(0.93	)
Pro-forma	$	(1.01	)

⁽¹⁾ The intrinsic value method expense in 2005 relates to compensatory employee equity purchase plans.

For awards granted prior to the adoption of SFAS 123R, we determined the pro-forma share-based compensation expense based on the nominal vesting period of the awards. For awards granted subsequent to the adoption of SFAS 123R, we recognize share-based compensation expense over the requisite service period, which is the period from the grant date to the date the employee is eligible to vest in the award, while continuing to reflect

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compensation expense over the nominal vesting period for awards granted prior to the adoption of SFAS 123R. The share-based compensation expense recognized in 2007 for awards granted prior to the adoption of SFAS 123R, which would have been included in the pro-forma expense for previous periods had the requisite service period guidance in SFAS 123R been applied, was $0.3 million (2006: $0.4 million).

As permitted by SFAS 123, we determined the pro-forma share-based compensation expense by assuming all awards will vest, adjusting for actual forfeitures as they occurred. On adoption of SFAS 123R, the impact of estimating forfeitures of awards granted prior to the adoption of SFAS 123R was an additional $1.3 million of the share-based compensation expense in 2006.

In April 2007, we modified outstanding stock option grants and outstanding 2007 RSUs held by members of the Operating Committee of Elan (15 members at the modification date) to provide for the accelerated vesting of the awards upon involuntary termination, for any reason other than cause, together with the extension of the period to exercise outstanding stock options for a two-year period (previously 90 days) from the termination date. This resulted in the fair value of the outstanding options being remeasured at the modification date. The impact of the modification for all applicable outstanding awards amounted to additional share-based compensation expense of $0.8 million, which has been and will be taken into account over the remaining vesting terms of the awards from the modification date.

Pursuant to SFAS 123R, we recognized total expenses and a corresponding increase in equity of $45.1 million (2006: $47.1 million; 2005: $Nil), related to the fair value of equity-settled share-based compensation during 2007. The expenses have been recognized in the following line items in the Consolidated Statement of Operations (in millions):

	2007		2006
Cost of sales	$	4.0	$	4.2
Selling, general and administrative expenses		23.9		28.8
Research and development expenses		15.5		14.1
Other net charges		1.7		—
Total	$	45.1	$	47.1

The total equity-settled share-based compensation expense related to non-vested awards not yet recognized, adjusted for estimated forfeitures, is $32.2 million at December 31, 2007. This expense is expected to be recognized over a weighted-average of 1.2 years.

Approved Profit Sharing Scheme

We also operate a profit sharing scheme, as approved by the Irish Revenue Commissioners, which permits employees and executive directors who meet the criteria laid down in the scheme to allocate a portion of their annual bonus to purchase shares. Participants may elect to take their bonus in cash subject to normal income tax deductions or may elect to have the bonus amount (subject to certain limits) paid to the independent trustees of the scheme who use the funds to acquire shares. In addition, participants may voluntarily apply a certain percentage (subject to certain limits) of their gross basic salary towards the purchase of shares in a similar manner. The shares must be held by the trustees for a minimum of two years after which participants may dispose of the shares but will be subject to normal income taxes until the shares have been held for a minimum of three years.

Employee Savings and Retirement Plan 401(K)

We maintain a 401(k) retirement savings plan for our employees based in the United States. Participants in the 401(k) plan may contribute up to 100% of their annual compensation, limited by the maximum amount allowed by the IRC. We match 3% of each participating employee’s annual compensation on a quarterly basis and may

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contribute additional discretionary matching up to another 3% of the employee’s annual qualified compensation. Our matching contributions are vested immediately. For the year ended December 31, 2007, we recorded $4.7 million (2006: $5.5 million; 2005: $5.8 million), of expense in connection with the matching contributions under the 401(k) plan.

26.   Commitments and Contingencies

As of December 31, 2007, the directors had authorized capital commitments for the purchase of property, plant and equipment of $12.7 million (2006: $5.6 million).

At December 31, 2007, we had commitments to invest $1.8 million (2006: $2.4 million) in healthcare managed funds.

For additional information, refer to Note 22.

27.   Litigation

We are involved in legal and administrative proceedings that could have a material adverse effect on our consolidated results of operations or financial position.

Securities and Tysabri matters

Commencing in January 1999, several class actions were filed in the U.S. District Court for the Southern District of California against Dura Pharmaceuticals, Inc. (Dura or defendant), one of our subsidiaries, and various then current or former officers of Dura. The actions, which allege violations of the U.S. federal securities laws, were consolidated and sought damages on behalf of a class of shareholders who purchased Dura common stock during a defined period. On June 6, 2006, the U.S. District Court issued an order granting in part and denying in part the defendants’ motion to dismiss. On July 21, 2006, the plaintiffs filed an amended complaint seeking to cure their pleading problems. The defendants subsequently filed a motion to dismiss in response to the amended complaint. The parties await a final ruling on the defendants’ motion.

We and some of our officers and directors have been named as defendants in putative class actions originally filed in the U.S. District Courts for the District of Massachusetts (on March 4 and 14, 2005) and the Southern District of New York (on March 15 and 23, 2005). On August 4, 2005, the U.S. District Court for the Southern District of New York issued an order consolidating the New York actions. The cases originally filed in Massachusetts were subsequently transferred to the Southern District of New York on or about August 29, 2005. Accordingly, all of these matters are now consolidated and pending before the federal district court in New York. The plaintiffs’ amended, consolidated class action complaint alleges claims under the U.S. federal securities laws and state laws and seeks damages on behalf of a class of shareholders who purchased our stock prior to the announcement of the voluntary suspension of Tysabri on February 28, 2005. The complaint alleges that we caused the release of materially false or misleading information regarding Tysabri. The complaint alleges that class members were damaged when our share price fell after we and Biogen Idec announced the voluntary suspension of the commercialization and dosing of Tysabri in response to reports of serious adverse events involving clinical trial patients treated with Tysabri. The complaint seeks damages, reimbursement of costs and other relief that the courts may deem just and proper. On April 20, 2007, we filed a motion to dismiss in response to plaintiffs’ amended, consolidated complaint. Plaintiffs filed opposition papers on July 20, 2007, and we subsequently filed reply papers in support of our dismissal motion. We are awaiting a ruling by the court on our motion. In the event that the court denies our motion to dismiss, we intend to vigorously defend against any claims that remain.

In March 2005, we received a letter from the SEC stating that the SEC’s Division of Enforcement was conducting an informal inquiry into actions and securities trading relating to Tysabri events. The SEC’s inquiry primarily relates to events surrounding the February 28, 2005 announcement of the decision to voluntarily suspend

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the marketing and clinical dosing of Tysabri. We have provided materials to the SEC in connection with the inquiry but have not received any additional requests for information or interviews relating to the inquiry.

Antitrust matters

In March 2001, Andrx Corporation (Andrx) filed a complaint in the U.S. District Court for the Southern District of Florida alleging that we engaged in anti-competitive activities in an effort to prevent or delay the entry of a generic alternative to Naprelan (naproxen sodium controlled-release) tablets. We filed a motion to dismiss the complaint and for judgment on the pleadings. In April 2003, the court granted our motion and dismissed Andrx’s complaint with prejudice and without leave to amend. Andrx subsequently appealed this decision. On August 29, 2005, the appellate court upheld the lower court’s ruling, in part, but remanded the matter to the district court to address certain issues. This matter remains pending.

Indirect purchasers of Naprelan have filed three putative class actions in the U.S. District Court for the Eastern District of Pennsylvania against Elan and Skye Pharma, Inc. In September 2002, the cases were consolidated and in October 2002, a consolidated amended class action complaint was filed. The consolidated complaint alleges that we violated the antitrust laws by engaging in sham patent litigation and entering into an unlawful settlement agreement in an effort to prevent or delay the entry of a generic alternative to Naprelan. The damages claimed are unspecified. Other than preliminary document production, the litigation has been stayed and the case placed on the court’s suspense docket pending the outcome of further proceedings in pending related patent infringement litigation between Elan and Andrx.

In 2002 and 2003, 10 actions were filed in the U.S. District Courts (seven in the District of Columbia and three in the Southern District of New York) claiming that we (and others) violated federal and state antitrust laws based on a licensing arrangement between Elan and Biovail Corporation relating to Nifedipine. The complaints seek various forms of remedy, including damages and injunctive relief. The actions have been brought by putative classes of direct purchasers, individual direct purchasers, and putative classes of indirect purchasers. On May 29, 2003, the Judicial Panel for Multidistrict Litigation coordinated and consolidated for pre-trial proceedings all pending cases in the U.S. District Court for the District of Columbia. On September 1, 2004, the Court issued a Memorandum Opinion and Order granting in part and denying in part the defendants’ motions to dismiss. The Court held that none of the claims for injunctive relief had any basis and, accordingly, the Court lacked jurisdiction over the indirect purchaser federal and state claims. Consequently, the Court granted the motion as it related to the putative class of indirect purchasers and dismissed that consolidated class complaint without prejudice. The Court also dismissed the claims for injunctive relief of the purported direct purchaser plaintiffs. The Court declined to dismiss the damage claims of the purported direct purchaser plaintiffs, ruling that it would be premature to do so without allowing discovery given the Court’s obligation to accept as true all allegations when tested on a motion to dismiss. The parties in the litigation are in the process of completing discovery.

Counsel for the putative indirect purchaser class commenced an action asserting the same or similar claims under California state law in California state court. The parties agreed to the settlement of the California action and executed a settlement agreement to that effect. The parties’ settlement received final court approval in December 2007.

In June 2001, we received a letter from the U.S. Federal Trade Commission (FTC) stating that the FTC was conducting a non-public investigation to determine whether Brightstone Pharma, Inc. (Brightstone), Elan or others may have engaged in an effort to restrain trade by entering into an agreement that may restrict the ability of Brightstone or others to market a bioequivalent or generic version of Naprelan. In October 2001, our counsel met informally with FTC staff to discuss the matter. No further communication from the FTC was received until December 2002, when we were served with a subpoena from the FTC for the production of documents related to Naprelan. We provided documents and witness testimony in response to the subpoena and continue to cooperate with the FTC relating to this investigation.

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Other matters

In January 2006, our subsidiary, Elan Pharmaceuticals, Inc. (EPI) received a letter and subpoena from the U.S. Department of Justice and the U.S. Department of Health and Human Services asking for documents and materials primarily related to marketing practices concerning our former Zonegran product. In April 2004, we completed the sale of our interests in Zonegran in North America and Europe to Eisai. We are cooperating with the government in its investigation. The resolution of this Zonegran matter could require Elan to pay substantial fines and to take other actions that could have a material adverse effect on Elan. In April 2006, Eisai delivered to Elan a notice making a contractual claim for indemnification in connection with a similar subpoena received by Eisai.

28.   Related Parties

Mr. John Groom

Mr. Groom, a former director of Elan, had a consultancy agreement with us. Effective July 1, 2003, the consultancy agreement was cancelled and we entered into a pension agreement of $200,000 per year payable until May 16, 2008. Mr. Groom received $200,000 per year under this pension agreement in 2007, 2006 and 2005. On May 26, 2005, Mr. Groom retired from the board of Elan.

Dr. Lars Ekman

On August 9, 2007, we announced that Dr. Lars Ekman would, with effect from December 31, 2007, transition from his operational role as president of research and development and that Dr. Ekman would continue as a member of the board of directors of Elan.

Under the agreement reached with Dr. Ekman, we agreed by reference to Dr. Ekman’s contractual entitlements and in accordance with our severance plan to (a) make a lump-sum payment of $2,500,000; (b) make milestone payments to Dr. Ekman, subject to a maximum amount of $1,000,000, if we achieve certain milestones in respect of our Alzheimer’s disease program; (c) accelerate the vesting of, and grant a two-year exercise period, in respect of certain of his equity awards, with a cash payment being made in respect of one grant of RSUs (which did not permit accelerated vesting); and (d) continue to make annual pension payments in the amount of $60,000 per annum, provide the cost of continued health coverage and provide career transition services to Dr. Ekman for a period of up to two years. A total severance charge of $3.6 million was expensed in 2007 for Dr. Ekman, excluding potential future success milestone payments related to our Alzheimer’s disease program.

Dr. Dennis Selkoe

On July 1, 2006, EPI entered into a consultancy agreement with Dr. Selkoe whereby Dr. Selkoe agreed to provide consultant services with respect to the treatment and/or prevention of neurodegenerative and autoimmune diseases. We will pay Dr. Selkoe a fee of $12,500 per quarter. The agreement is effective for three years unless terminated by either party upon 30 days written notice and supersedes all prior consulting agreements between Dr. Selkoe and Elan. Prior thereto, Dr. Selkoe was party to various consultancy agreements with EPI and Athena Neurosciences, Inc. Under the consultancy agreements, Dr. Selkoe received $50,000 in 2007 and 2006 and $25,000 in 2005.

29.   Development and Marketing Collaboration Agreement with Biogen Idec

In August 2000, we entered into a development and marketing collaboration agreement with Biogen Idec, successor to Biogen, Inc., to collaborate in the development and commercialization of Tysabri for multiple sclerosis and Crohn’s disease, with Biogen Idec acting as the lead party for MS and Elan acting as the lead party for CD.

In November 2004, Tysabri received regulatory approval in the United States for the treatment of relapsing forms of MS. In February 2005, Elan and Biogen Idec voluntarily suspended the commercialization and dosing in

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clinical trials of Tysabri. This decision was based on reports of two serious adverse events, one of which was fatal, in patients treated with Tysabri in combination with Avonex^® in clinical trials. These events involved two cases of progressive multifocal leukoencephalopathy (PML), a rare and potentially fatal, demyelinating disease of the central nervous system. Both patients received more than two years of Tysabri therapy in combination with Avonex. In March 2005, the companies announced that their ongoing safety evaluation of Tysabri led to a previously diagnosed case of malignant astrocytoma being reassessed as PML, in a patient in an open label CD clinical trial. The patient had received eight doses of Tysabri over an 18-month period. The patient died in December 2003.

A comprehensive safety evaluation of more than 3,000 Tysabri patients was performed in collaboration with leading experts in PML and neurology. The results of the safety evaluation yielded no new confirmed cases of PML beyond the three previously reported.

In September 2005, Elan and Biogen Idec submitted to the U.S. Food and Drug Adminstration (FDA) a supplemental Biologics License Application for Tysabri, which the FDA subsequently designated for Priority Review. On March 7-8, 2006, the Peripheral Central Nervous System Drug Advisory Committee reviewed and voted unanimously to recommend that Tysabri be reintroduced as a treatment for relapsing forms of MS.

In June 2006, the FDA approved the reintroduction of Tysabri for the treatment of relapsing forms of MS. Approval for the marketing of Tysabri in the European Union was also received in June 2006 and has subsequently been received in a number of other countries. The distribution of Tysabri in both the United States and the European Union commenced in July 2006. Global in-market net sales of Tysabri in 2007 were $342.9 million (2006: $38.1 million; 2005: $11.0 million), consisting of $217.4 million (2006: $28.2 million; 2005: $11.0 million) in the U.S. market and $125.5 million (2006: $9.9 million; 2005: $Nil) in the ROW.

Tysabri was developed and is now being marketed in collaboration with Biogen Idec. In general, subject to certain limitations imposed by the parties, we share with Biogen Idec most development and commercialization costs. Biogen Idec is responsible for manufacturing the product. In the United States, we purchase Tysabri from Biogen Idec and are responsible for distribution. Consequently, we record as revenue the net sales of Tysabri in the U.S. market. We purchase product from Biogen Idec as required at a price, which includes the cost of manufacturing, plus Biogen Idec’s gross profit on Tysabri and this cost, together with royalties payable to other third parties, is included in cost of sales.

In the ROW market, Biogen Idec is responsible for distribution and we record as revenue our share of the profit or loss on ROW sales of Tysabri, plus our directly-incurred expenses on these sales. In 2007, we recorded revenue of $14.3 million (2006: negative $10.7 million; 2005: $Nil).

At December 31, 2007, we owed Biogen Idec $25.0 million (2006: $42.9 million).

Under our collaboration agreement with Biogen Idec, if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $125 million per calendar quarter, then we may elect to make a milestone payment to Biogen Idec of $75 million in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $700 million. Additionally, if we have made this first milestone payment, then we may elect to pay a further $50 million milestone to Biogen Idec if global in-market net sales of Tysabri are, on average, for four calendar quarters, in excess of $200 million per calendar quarter, in order to maintain our percentage share of Tysabri at approximately 50% for annual global in-market net sales of Tysabri that are in excess of $1.1 billion. Should we elect not to make the first milestone payment of $75 million, then our percentage share of Tysabri will be reduced to approximately 35% for annual global in-market net sales of Tysabri exceeding $700 million. If we elect to make the first milestone payment, but not the second milestone payment, then our percentage share of Tysabri will be reduced to approximately 35% for annual global in-market net sales of Tysabri exceeding $1.1 billion. For additional information relating to Tysabri, refer to Note 3.

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30.   Segment Information

Our business is organized into two business units: Biopharmaceuticals and EDT. Biopharmaceuticals engages in research, development and commercial activities primarily in Alzheimer’s disease, Parkinson’s disease, multiple sclerosis, Crohn’s disease, severe chronic pain and infectious diseases. EDT is an established specialty pharmaceutical business unit of Elan.

During the year ended December 31, 2007, we changed the manner in which our chief operating decision maker assesses the operating performance of, and allocation of resources to, both of our segments. Specifically, we revised the method of allocation of centrally incurred corporate and management expenses and reallocated the assets and associated operating results of the fill-finish facility in Athlone, Ireland, from EDT to Biopharmaceuticals, in conjunction with our current operating activities and how we now manage our combined businesses. For comparability, certain segmental financial information for prior periods presented has been reclassified between segments to conform to the current presentation and presentation going forward.

For fiscal years 2007, 2006 and 2005, our revenue and operating (loss)/income are presented below by geographical area. Similarly, total assets and property, plant and equipment are presented below on a geographical basis at December 31, 2007 and 2006.

Revenue by region (by destination of customers) (in millions):

	2007		2006		2005
Region:
Ireland	$	72.2	$	65.3	$	71.9
United States		630.6		432.8		370.1
Rest of World		56.6		62.3		48.3
Total revenue	$	759.4	$	560.4	$	490.3

Distribution of operating (loss)/income by region (in millions):

	2007			2006			2005
Ireland	$	(312.9	)	$	(241.7	)	$	(116.4	)
United States		47.1			72.8			(49.5	)
Rest of World		0.5			2.5			(32.6	)
Total operating loss	$	(265.3	)	$	(166.4	)	$	(198.5	)

Total assets by region (in millions):

	2007		2006
Ireland	$	569.3	$	1,245.2
United States		912.3		994.9
Bermuda		140.0		337.9
Rest of World		159.8		168.3
Total assets	$	1,781.4	$	2,746.3

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Property, plant and equipment by region (in millions):

	2007		2006
Ireland	$	229.1	$	242.8
United States		99.7		98.3
Bermuda		0.1		0.1
Rest of World		—		0.8
Total property, plant and equipment	$	328.9	$	342.0

Major customers

The following three customers contributed 10% or more of our total revenue in 2007, 2006 or 2005:

	2007			2006			2005
AmerisourceBergen		38	%		18	%		15	%
Cardinal Health		9	%		16	%		15	%
McKesson Corporation		7	%		11	%		11	%

No other customer accounted for more than 10% of our total revenue in 2007, 2006 or 2005.

Our segment results of operations and revenue for the years ended December 31, 2007, 2006 and 2005, together with goodwill and total assets by segment at December 31, 2007 and 2006 are as follows:

Analysis of results of operations by segment (in millions):

	Biopharmaceuticals									EDT								Total
	2007			2006			2005			2007		2006			2005			2007			2006			2005
Product revenue	$	454.6		$	269.8		$	219.6		$	274.0	$	263.1		$	238.5		$	728.6		$	532.9		$	458.1
Contract revenue		9.3			8.5			12.1			21.5		19.0			20.1			30.8			27.5			32.2
Total revenue		463.9			278.3			231.7			295.5		282.1			258.6			759.4			560.4			490.3
Operating expenses:
Cost of sales		224.2			87.4			84.0			113.7		122.9			112.1			337.9			210.3			196.1
Selling, general and administrative expenses		297.4			323.1			331.3			44.4		39.3			28.1			341.8			362.4			359.4
Research and development expenses		212.0			170.1			192.8			48.4		47.4			39.5			260.4			217.5			232.3
Net gain on sale of products and businesses		—			(43.1	)		(103.1	)		—		—			(0.3	)		—			(43.1	)		(103.4	)
Other net (gains)/charges		80.8			26.3			4.4			3.8		(46.6	)		—			84.6			(20.3	)		4.4
Total operating expenses		814.4			563.8			509.4			210.3		163.0			179.4			1,024.7			726.8			688.8
Operating income/(loss)	$	(350.5	)	$	(285.5	)	$	(277.7	)	$	85.2	$	119.1		$	79.2		$	(265.3	)	$	(166.4	)	$	(198.5	)
Depreciation and amortization	$	81.5		$	86.3		$	87.8		$	36.8	$	49.3		$	42.9		$	118.3		$	135.6		$	130.7
Capital expenditures	$	13.0		$	18.3		$	22.4		$	9.6	$	15.0		$	20.1		$	22.6		$	33.3		$	42.5

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Reconciliation of operating loss to net loss (in millions):

	2007			2006			2005
Operating loss	$	(265.3	)	$	(166.4	)	$	(198.5	)
Net interest and investment losses		132.8			109.9			184.7
Provision for/(benefit from) income taxes		6.9			(9.0	)		1.0
Net income from discontinued operations		—			—			0.6
Net loss	$	(405.0	)	$	(267.3	)	$	(383.6	)

Revenue analysis by segment (in millions):

	2007		2006		2005
Product revenue	$	728.6	$	532.9	$	458.1
Contract revenue		30.8		27.5		32.2
Total revenue	$	759.4	$	560.4	$	490.3

Product revenue can be further analyzed as follows:

	2007		2006			2005
Biopharmaceuticals:
Tysabri — U.S.	$	217.4	$	28.2		$	11.0
Tysabri — ROW		14.3		(10.7	)		—
Total Tysabri		231.7		17.5			11.0
Maxipime		122.5		159.9			140.3
Azactam		86.3		77.9			57.7
Prialt		12.3		12.1			6.3
Royalties		1.8		2.4			4.3
Total product revenue from Biopharmaceuticals business		454.6		269.8			219.6
EDT:
Manufacturing revenue and royalties		269.5		232.4			204.5
Amortized revenue — Adalat/Avinza		4.5		30.7			34.0
Total product revenue from EDT business		274.0		263.1			238.5
Total product revenue	$	728.6	$	532.9		$	458.1

Contract revenue can be further analyzed as follows:

	2007		2006		2005
Biopharmaceuticals:
Amortized fees	$	2.0	$	8.5	$	12.1
Research revenues/milestones		7.3		—		—
Total Biopharmaceuticals contract revenue	$	9.3	$	8.5	$	12.1

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	2007		2006		2005
EDT:
Amortized fees	$	4.3	$	4.2	$	4.3
Research revenues/milestones		17.2		14.8		15.8
Total EDT contract revenue	$	21.5	$	19.0	$	20.1
Total contract revenue	$	30.8	$	27.5	$	32.2

Goodwill (in millions):

	2007		2006
Biopharmaceuticals	$	218.3	$	218.3
EDT		49.7		49.7
Total goodwill	$	268.0	$	268.0

Total assets (in millions):

	2007		2006
Biopharmaceutical assets	$	1,251.6	$	2,200.0
EDT assets		529.8		546.3
Total assets	$	1,781.4	$	2,746.3

31.   Supplemental Guarantor Information

As part of the offering and sale of the $850.0 million in aggregate principal amount of 7.75% Notes due November 15, 2011 and the $300.0 million Floating Rate Notes due November 15, 2011, Elan Corporation, plc and certain of its subsidiaries have guaranteed the 7.75% Notes and the Floating Rate Notes due 2011. Substantially equivalent guarantees have also been given to the holders of the 8.875% Notes and the Floating Rate Notes due in 2013, which were issued in November 2006.

Presented below is condensed consolidating information for Elan Finance plc, the issuer of the debt, Elan Corporation, plc, the parent guarantor of the debt, the guarantor subsidiaries of Elan Corporation, plc, listed below, and the non-guarantor subsidiaries of Elan Corporation, plc. All of the subsidiary guarantors are wholly owned subsidiaries of Elan Corporation, plc.

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Elan Corporation, plc

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Elan Corporation, plc

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2007

	Elan											Non-
	Finance,			Athena		Parent			Guarantor			Guarantor			Elimination
	plc			Finance		Company			Subsidiaries			Subsidiaries			Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	—	$	—		$	1,123.8		$	1.6		$	(366.0	)	$	759.4
Operating expenses:
Cost of sales		—			—		—			476.9			—			(139.0	)		337.9
Selling, general and administrative expenses		—			—		52.9			306.8			—			(17.9	)		341.8
Research and development expenses		—			—		0.2			479.6			1.6			(221.0	)		260.4
Net gain on sale of products and businesses		—			—		—			—			—			—			—
Other net (gains)/charges		—			—		(158.8	)		84.1			0.1			159.2			84.6
Total operating expenses		—			—		(105.7	)		1,347.4			1.7			(218.7	)		1,024.7
Operating income/(loss)		—			—		105.7			(223.6	)		(0.1	)		(147.3	)		(265.3	)
Share of net losses of subsidiaries		—			—		510.7			—			—			(510.7	)		—
Net interest and investment (gains)/losses		(2.2	)		—		—			267.1			(0.4	)		(131.7	)		132.8
Income/(loss) from continuing operations before provision for/(benefit from) income taxes		2.2			—		(405.0	)		(490.7	)		0.3			495.1			(398.1	)
Provision for/(benefit from) income taxes		0.6			—		—			3.8			—			2.5			6.9
Net income/(loss)	$	1.6		$	—	$	(405.0	)	$	(494.5	)	$	0.3		$	492.6		$	(405.0	)

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2006

	Elan											Non-
	Finance,			Athena		Parent			Guarantor			Guarantor			Elimination
	plc			Finance		Company			Subsidiaries			Subsidiaries			Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	—	$	65.9		$	736.5		$	1.6		$	(243.6	)	$	560.4
Operating expenses:
Cost of sales		—			—		11.6			218.7			—			(20.0	)		210.3
Selling, general and administrative expenses		—			—		72.4			383.2			0.1			(93.3	)		362.4
Research and development expenses		—			—		11.0			364.2			1.6			(159.3	)		217.5
Net gain on sale of products and businesses		—			—		—			(43.1	)		—			—			(43.1	)
Other net (gains)/charges		—			—		(59.6	)		32.3			(0.2	)		7.2			(20.3	)
Total operating expenses		—			—		35.4			955.3			1.5			(265.4	)		726.8
Operating income/(loss)		—			—		30.5			(218.8	)		0.1			21.8			(166.4	)
Share of net losses of subsidiaries		—			—		291.6			—			—			(291.6	)		—
Net interest and investment (gains)/losses		1.3			—		6.1			118.7			(1.1	)		(15.1	)		109.9
Income/(loss) from continuing operations before provision for/(benefit from) income taxes		(1.3	)		—		(267.2	)		(337.5	)		1.2			328.5			(276.3	)
Provision for/(benefit from) income taxes		(2.8	)		—		0.1			3.4			0.1			(9.8	)		(9.0	)
Net income/(loss)	$	1.5		$	—	$	(267.3	)	$	(340.9	)	$	1.1		$	338.3		$	(267.3	)

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Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Statements of Operations

For the Year Ended December 31, 2005

	Elan											Non-
	Finance,			Athena		Parent			Guarantor			Guarantor			Elimination
	plc			Finance		Company			Subsidiaries			Subsidiaries			Adjustments			Consolidated
	(In millions)
Revenue	$	—		$	—	$	71.8		$	679.5		$	7.3		$	(268.3	)	$	490.3
Operating expenses:
Cost of sales		—			—		8.6			287.8			—			(100.3	)		196.1
Selling, general and administrative expenses		—			—		54.9			319.4			6.0			(20.9	)		359.4
Research and development expenses		—			—		6.4			385.6			1.4			(161.1	)		232.3
Net gain on sale of products and businesses		—			—		(0.7	)		(102.7	)		—			—			(103.4	)
Other net (gains)/charges		—			—		—			(31.6	)		2.5			33.5			4.4
Total operating expenses		—			—		69.2			858.5			9.9			(248.8	)		688.8
Operating income/(loss)		—			—		2.6			(179.0	)		(2.6	)		(19.5	)		(198.5	)
Share of net losses of subsidiaries		—			—		328.0			—			—			(328.0	)		—
Net interest and investment (gains)/losses		6.0			—		58.2			195.7			(67.8	)		(7.4	)		184.7
Income/(loss) from continuing operations before provision for/(benefit from) income taxes		(6.0	)		—		(383.6	)		(374.7	)		65.2			315.9			(383.2	)
Provision for/(benefit from) income taxes		—			—		—			1.9			—			(0.9	)		1.0
Net income/(loss) from continuing operations		(6.0	)		—		(383.6	)		(376.6	)		65.2			316.8			(384.2	)
Income from discontinued operations (net of tax)		—			—		—			0.5			0.1			—			0.6
Net income/(loss)	$	(6.0	)	$	—	$	(383.6	)	$	(376.1	)	$	65.3		$	316.8		$	(383.6	)

141

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Balance Sheets

As of December 31, 2007

	Elan										Non-
	Finance,			Athena		Parent			Guarantor		Guarantor			Elimination
	plc			Finance		Company			Subsidiaries		Subsidiaries			Adjustments			Consolidated
	(In millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	6.4		$	—	$	2.0		$	413.0	$	2.1		$	—		$	423.5
Restricted cash — current		—			—		—			20.1		—			—			20.1
Accounts receivable, net		—			—		—			137.4		—			—			137.4
Investment securities — current		—			—		—			291.6		—			(14.7	)		276.9
Inventory		—			—		—			41.8		—			(5.1	)		36.7
Intercompany receivables		18.1			—		2,090.5			3,090.0		0.3			(5,198.9	)		—
Prepaid and other current assets		2.3			—		12.0			17.7		0.1			(10.3	)		21.8
Total current assets		26.8			—		2,104.5			4,011.6		2.5			(5,229.0	)		916.4
Property, plant and equipment, net		—			—		—			331.5		—			(2.6	)		328.9
Goodwill and other intangible assets, net		—			—		—			294.8		—			162.8			457.6
Investment securities — non-current		—			—		—			10.0		—			12.5			22.5
Investments in subsidiaries		—			—		—			12,024.1		—			(12,024.1	)		—
Restricted cash — non-current		—			—		—			9.5		—			—			9.5
Intercompany receivables		1,720.9			—		—			6,088.2		—			(7,809.1	)		—
Other assets		26.6			—		—			11.0		—			8.9			46.5
Total assets		1,774.3			—		2,104.5			22,780.7		2.5			(24,880.6	)		1,781.4
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable		—			—		—			27.2		—			0.1			27.3
Accrued and other current liabilities		16.0			—		4.6			149.2		0.2			10.3			180.3
Deferred revenue — current		—			—		—			1.3		—			1.9			3.2
Intercompany payables		—			—		2,234.9			4,272.1		—			(6,507.0	)		—
Total current liabilities		16.0			—		2,239.5			4,449.8		0.2			(6,494.7	)		210.8
Long term and convertible debts		1,765.0			—		—			—		—			—			1,765.0
Deferred revenue — non-current		—			—		—			1.5		—			—			1.5
Intercompany payables		—			—		99.7			11,994.9		4.2			(12,098.8	)		—
Other liabilities		—			—		—			38.8		—			—			38.8
Total liabilities		1,781.0			—		2,339.2			16,485.0		4.4			(18,593.5	)		2,016.1
Shareholders’ equity/(deficit)		(6.7	)		—		(234.7	)		6,295.7		(1.9	)		(6,287.1	)		(234.7	)
Total liabilities and shareholders’ equity/(deficit)	$	1,774.3		$	—	$	2,104.5		$	22,780.7	$	2.5		$	(24,880.6	)	$	1,781.4

142

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Balance Sheets

As of December 31, 2006

	Elan									Non-
	Finance,			Athena		Parent		Guarantor		Guarantor			Elimination
	plc			Finance		Company		Subsidiaries		Subsidiaries			Adjustments			Consolidated
	(In millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	612.5		$	—	$	5.2	$	890.7	$	2.2		$	—		$	1,510.6
Restricted cash		—			—		—		23.2		—			—			23.2
Accounts receivable, net		—			—		0.1		107.3		—			—			107.4
Investment securities — current		—			—		—		6.8		—			4.4			11.2
Inventory		—			—		—		26.0		—			3.2			29.2
Intercompany receivables		12.4			666.7		77.4		1,036.6		0.3			(1,793.4	)		—
Prepaid and other current assets		2.8			—		14.5		68.8		0.2			(11.6	)		74.7
Total current assets		627.7			666.7		97.2		2,159.4		2.7			(1,797.4	)		1,756.3
Property, plant and equipment, net		—			—		—		342.0		—			—			342.0
Goodwill and other intangible assets, net		—			—		—		435.0		—			147.2			582.2
Investment securities — non-current		—			—		—		10.6		—			(1.4	)		9.2
Investments in subsidiaries		—			—		—		9,533.8		—			(9,533.8	)		—
Intercompany receivables		1,116.4			—		1,071.5		5,902.0		—			(8,089.9	)		—
Other assets		31.2			1.4		—		24.2		—			(0.2	)		56.6
Total assets		1,775.3			668.1		1,168.7		18,407.0		2.7			(19,275.5	)		2,746.3
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Accounts payable		—			—		—		46.1		—			—			46.1
Accrued and other current liabilities		18.2			15.8		5.1		142.3		0.4			(2.0	)		179.8
Current portion of long term debts		—			613.2		—		—		—			—			613.2
Deferred revenue		—			—		—		6.6		—			5.8			12.4
Intercompany payables		0.5			39.1		907.5		1,633.5		—			(2,580.6	)		—
Total current liabilities		18.7			668.1		912.6		1,828.5		0.4			(2,576.8	)		851.5
Long term and convertible debts		1,765.0			—		—		—		—			—			1,765.0
Deferred revenue		—			—		—		1.3		—			2.4			3.7
Intercompany payables		—			—		171.0		12,279.2		4.5			(12,454.7	)		—
Other liabilities		—			—		—		37.8		—			3.2			41.0
Total liabilities		1,783.7			668.1		1,083.6		14,146.8		4.9			(15,025.9	)		2,661.2
Shareholders’ equity/(deficit)		(8.4	)		—		85.1		4,260.2		(2.2	)		(4,249.6	)		85.1
Total liabilities and shareholders’ equity/(deficit)	$	1,775.3		$	668.1	$	1,168.7	$	18,407.0	$	2.7		$	(19,275.5	)	$	2,746.3

143

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2007

	Elan												Non-
	Finance,			Athena			Parent			Guarantor			Guarantor
	plc			Finance			Company			Subsidiaries			Subsidiaries			Elimination		Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in) operating activities	$	(606.0	)	$	626.6		$	(31.2	)	$	(156.8	)	$	(0.1	)	$	—	$	(167.5	)
Cash flows from investing activities:
Increase in restricted cash		—			—			—			(6.8	)		—			—		(6.8	)
Proceeds from disposal of property, plant and equipment		—			—			—			0.2			—			—		0.2
Purchase of property, plant and equipment		—			—			—			(26.1	)		—			—		(26.1	)
Purchase of investment securities		—			—			—			(12.3	)		—			—		(12.3	)
Transfer of enhanced cash fund to investment securities		—			—			—			(305.9	)		—			—		(305.9	)
Proceeds from disposal of investments		—			—			—			3.4			—			—		3.4
Sale of marketable investment securities		—			—			—			27.9			—			—		27.9
Purchase of intangible assets		—			—			—			(2.5	)		—			—		(2.5	)
Proceeds from product and business disposals		—			—			—			4.0			—			—		4.0
Net cash provided by investing activities		—			—			—			(318.1	)		—			—		(318.1	)
Cash flows from financing activities:
Proceeds from employee stock issuances		—			—			28.2			—			—			—		28.2
Repayment of loans and capital lease obligations		—			(626.6	)		(0.2	)		(2.8	)		—			—		(629.6	)
Issue of loan notes		(0.1	)		—			—			—			—			—		(0.1	)
Excess tax benefit from share-based compensation		—			—			—			1.8			—			—		1.8
Net cash provided by/(used in) financing activities		(0.1	)		(626.6	)		28.0			(1.0	)		—			—		(599.7	)
Effect of exchange rate changes on cash		—			—			—			(1.8	)		—			—		(1.8	)
Net increase/(decrease) in cash and cash equivalents		(606.1	)		—			(3.2	)		(477.7	)		(0.1	)		—		(1,087.1	)
Cash and cash equivalents at beginning of year		612.5			—			5.2			890.7			2.2			—		1,510.6
Cash and cash equivalents at end of year	$	6.4		$	—		$	2.0		$	413.0		$	2.1		$	—	$	423.5

144

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2006

	Elan										Non-
	Finance,		Athena		Parent			Guarantor			Guarantor
	plc		Finance		Company			Subsidiaries			Subsidiaries			Elimination		Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in) operating activities	$	8.5	$	—	$	(50.9	)	$	(198.8	)	$	(0.3	)	$	—	$	(241.5	)
Cash flows from investing activities:
Decrease in restricted cash		—		—		—			2.8			—			—		2.8
Proceeds from disposal of property, plant and equipment		—		—		—			0.6			—			—		0.6
Purchase of property, plant and equipment		—		—		—			(29.9	)		—			—		(29.9	)
Purchase of investment securities		—		—		—			(0.2	)		—			—		(0.2	)
Sale of non-current investment securities		—		—		—			13.2			—			—		13.2
Sale of current investment securities		—		—		—			0.9			—			—		0.9
Purchase of intangible assets		—		—		—			(4.1	)		—			—		(4.1	)
Proceeds from product and business disposals		—		—		—			54.2			—			—		54.2
Net cash provided by investing activities		—		—		—			37.5			—			—		37.5
Cash flows from financing activities:
Proceeds from employee stock issuances		—		—		29.8			—			—			—		29.8
Repayment of loans and capital lease obligations		—		—		(1.2	)		(4.5	)		—			—		(5.7	)
Net proceeds from debt issuance		602.8		—		—			—			—			—		602.8
Excess tax benefit from share-based compensation		—		—		2.0			—			—			—		2.0
Proceeds from government grants		—		—		—			0.4			—			—		0.4
Net cash provided by/(used in) financing activities		602.8		—		30.6			(4.1	)		—			—		629.3
Effect of exchange rate changes on cash		—		—		—			4.6			—			—		4.6
Net increase/(decrease) in cash and cash equivalents		611.3		—		(20.3	)		(160.8	)		(0.3	)		—		429.9
Cash and cash equivalents at beginning of year		1.2		—		25.5			1,051.5			2.5			—		1,080.7
Cash and cash equivalents at end of year	$	612.5	$	—	$	5.2		$	890.7		$	2.2		$	—	$	1,510.6

145

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Elan Corporation, plc

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2005

	Elan												Non-
	Finance,			Athena			Parent			Guarantor			Guarantor
	plc			Finance			Company			Subsidiaries			Subsidiaries			Elimination			Consolidated
	(In millions)
Cash flows from operating activities:
Net cash provided by/(used in) operating activities	$	(8.3	)	$	33.3		$	(35.6	)	$	(475.9	)	$	34.4		$	0.6		$	(451.5	)
Cash flows from investing activities:
Decrease in restricted cash		—			—			—			168.0			—			—			168.0
Proceeds from disposal of property, plant and equipment		—			—			—			0.6			—			—			0.6
Purchase of property, plant and equipment		—			—			—			(43.7	)		—			—			(43.7	)
Purchase of investment securities		—			—			—			(0.4	)		—			—			(0.4	)
Sale of non-current investment securities		—			—			—			44.4			1.2			—			45.6
Sale of current investment securities		—			—			—			17.1			—			—			17.1
Purchase of intangible assets		—			—			—			(7.1	)		—			—			(7.1	)
Proceeds from product and business disposals		—			—			—			108.8			—			—			108.8
Net cash provided by investing activities		—			—			—			287.7			1.2			—			288.9
Cash flows from financing activities:
Proceeds from employee stock issuances		—			—			23.8			—			—			—			23.8
Repayment of loans and capital lease obligations		—			(33.3	)		(1.3	)		(53.2	)		(39.0	)		—			(126.8	)
Net payments for debt issuance		(0.7	)		—			—			—			—			—			(0.7	)
Proceeds from government grants		—			—			—			4.0			—			—			4.0
Net cash provided by/(used in) financing activities		(0.7	)		(33.3	)		22.5			(49.2	)		(39.0	)		—			(99.7	)
Effect of exchange rate changes on cash		—			—			—			(4.6	)		—			—			(4.6	)
Net increase/(decrease) in cash and cash equivalents		(9.0	)		—			(13.1	)		(242.0	)		(3.4	)		0.6			(266.9	)
Cash and cash equivalents at beginning of year		10.2			—			38.6			1,293.5			5.9			(0.6	)		1,347.6
Cash and cash equivalents at end of year	$	1.2		$	—		$	25.5		$	1,051.5		$	2.5		$	—		$	1,080.7

32.   Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements,” (SFAS 157), which is effective for financial statements issued for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. On December 14, 2007, the FASB issued FASB Staff Position (FSP) FAS 157-b, which will delay the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. This

146

Elan Corporation, plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

proposed FSP partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008. We do not expect that the adoption of SFAS 157 will have a material impact on our financial position or results from operations.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial and Financial Liabilities,” (SFAS 159), which is effective for fiscal years beginning after November 15, 2007. SFAS 159 provides companies with the option to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. We are currently evaluating the provisions of SFAS 159; however we do not expect that its adoption will have a material impact on our financial position or results of operations.

In June 2007, the FASB ratified EITF Issue No. 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,” (EITF 07-03). EITF 07-03 is effective prospectively for fiscal years beginning after December 15, 2007. EITF 07-03 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. We do not expect that the adoption of EITF 07-03 will have a material impact on our financial position or results from operations.

In November 2007, the FASB’s EITF reached consensus on Issue 07-01, “Accounting for Collaborative Arrangements,” (EITF 07-01), which is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. EITF 07-01 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. We do not expect that the adoption of EITF 07-01 will have a material impact on our financial position or results from operations.

In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations,” (SFAS 141R), which is effective for financial statements issued for fiscal years beginning after December 15, 2008, with early adoption not permitted. SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements at full fair value the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. We are currently evaluating the potential impact, if any, of the adoption of SFAS 141R on our consolidated results of operations and financial position.

In December 2007, the FASB issued Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51,” (SFAS 160), which is effective for financial statements issued for fiscal years beginning after December 15, 2008, with early adoption not permitted. SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes to a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. We are currently evaluating the potential impact, if any, of the adoption of SFAS 160 on our consolidated results of operations and financial position.

33.   Post Balance Sheet Events

On January 14, 2008, the FDA approved Elan and Biogen Idec’s supplemental Biologics License Application for Tysabri for CD. Tysabri is now approved for inducing and maintaining clinical response and remission in adult patients with moderately to severely active CD with evidence of inflammation who have had an inadequate response to, or are unable to tolerate, conventional CD therapies and inhibitors of TNF-alpha.

147

Item 19.   Exhibits.

Exhibit
Number	Description
1.1	Memorandum and Articles of Association of Elan Corporation, plc (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File No. 333-135185) filed with the Commission on June 21, 2006).
2(b)(1)	Indenture dated as of November 16, 2004, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York, as Trustee (incorporated by reference to Exhibit 99.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc (SEC File No. 001-13896) filed with the Commission on November 19, 2004).
2(b)(2)	Indenture dated as of November 22, 2006, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York, as Trustee (including Forms of Global Exchange Notes) (incorporated by reference to Exhibit 2(b)(2) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(a)(1)	Antegren Development and Marketing Collaboration Agreement, dated as of August 15, 2000, by and between Biogen, Inc. and Elan Pharma International Limited (incorporated by reference to Exhibit 4(a)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002).
4(a)(2)	Amended and Restated Asset Purchase Agreement, dated as of May 19, 2003, by and among Elan Corporation, plc, Elan Pharma International Limited, Elan Pharmaceuticals, Inc., King Pharmaceuticals, Inc., Jones Pharma Incorporated and Monarch Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(a)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002).
4(a)(3)	Research, Development and Commercialization Agreement by and among Wyeth (formerly known as American Home Products Corporation acting through American Home Products Corporation’s Wyeth-Ayerst Laboratories Division) and Elan Pharma International Limited (by assignment from Neuralab Limited) dated March 17, 2000, Amendment No. 1, dated as of April 4, 2000, to Research, Development and Commercialization Agreement, Amendment No. 2, dated as of April 4, 2002, to Research, Development and Commercialization Agreement, Amendment No. 3, dated as of May 1, 2005, to the Research, Development and Commercialization Agreement, and Amendment No. 4, dated as of May 1, 2007, to the Research, Development and Commercialization Agreement. (Confidential Treatment has been requested for portions of this Agreement and its Amendments, which portions have been omitted and filed separately with the Commission).
4(b)(1)	Lease dated as of June 1, 2007 between Chamberlin Associates 180 Oyster Point Blvd., LLC and Elan Pharmaceuticals, Inc.
4(b)(2)	Lease dated as of December 17, 2007 between Chamberlin Associates 200 Oyster Point, L.P. and Elan Pharmaceuticals, Inc.
4(c)(1)	Elan Corporation, plc 1999 Stock Option Plan (2001 Amendment) (incorporated by reference to Exhibit 4(c)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(2)	Elan Corporation, plc 1998 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(2) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(3)	Elan Corporation, plc 1996 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(4)	Elan Corporation, plc 1996 Consultant Option Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(4) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(5)	Elan Corporation, plc Employee Equity Purchase Plan (U.S.), as amended (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File No. 333-135184) filed with the Commission on June 21, 2006).
4(c)(6)	Elan Corporation, plc Employee Equity Purchase Plan Irish Sharesave Option Scheme (incorporated by reference to Exhibit 4(c)(6) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2004).

148

Exhibit
Number	Description
4(c)(7)	Elan Corporation, plc Employee Equity Purchase Plan U.K. Sharesave Plan (incorporated by reference to Exhibit 4(c)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(8)	Elan Corporation, plc 2004 Restricted Stock Unit Plan (incorporated by reference to Exhibit 4(c)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(9)	Letter Agreement, dated as of February 12, 2002, between John Groom and Elan Corporation, plc (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form F-3 of Elan Corporation, plc, Registration Statement No. 333-100252, filed with the Commission on October 1, 2002).
4(c)(10)	Consulting Agreement, dated as of July 1, 2006, between Dr. Dennis J. Selkoe and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(c)(10) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(11)	Employment Agreement, dated as of December 7, 2005, among Elan Pharmaceuticals, Inc., Elan Corporation, plc and G. Kelly Martin, (incorporated by reference to the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc, filed with the Commission on December 7, 2005).
4(c)(12)	July 18, 2007 Letter Agreement between Dr. Lars Ekman and Elan Pharmaceuticals, Inc.
4(c)(13)	Elan Corporation, plc Cash Bonus Plan effective January 1, 2006, and revised as of May 22, 2006 (incorporated by reference to Exhibit 4(c)(14) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(14)	Elan Corporation, plc Profit Sharing Scheme 2006 (incorporated by reference to Exhibit 4(c)(16) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(15)	Elan Corporation, plc 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 4.4 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File 333-13185) filed with the Commission on June 21, 2006).
4(c)(16)	Letter Agreement dated as of January 1, 2007 between Elan Corporation, plc and Shane Cooke (incorporated by reference to Exhibit 4(c)(17) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(17)	Form of Deed of Indemnity between Elan Corporation, plc and directors and certain officers of Elan Corporation, plc (incorporated by reference to Exhibit 99.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on November 15, 2006).
4(c)(18)	Elan U.S. Severance Plan.
4(c)(19)	Form of Memo Agreement dated May 17, 2007 amending certain outstanding grant agreements for restricted stock units and stock option agreements held by senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(20)	Form of Restricted Stock Unit Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(21)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(22)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for new members of the Board of Directors of Elan Corporation, plc.
4(c)(23)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for members of the Board of Directors of Elan Corporation, plc.
8.1	Subsidiaries of Elan Corporation, plc.
12.1	Certification of G. Kelly Martin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Shane Cooke pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification of G. Kelly Martin pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification of Shane Cooke pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1	Consent of Independent Registered Public Accounting Firm, KPMG.

149

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Elan Corporation, plc

/s/  SHANE COOKE

Shane Cooke

Executive Vice President and Chief Financial Officer

Date: February 28, 2008

150

Elan Corporation, plc

Schedule II

Valuation and Qualifying Accounts and Reserves

Years ended December 31, 2007, 2006 and 2005

	Balance at
	Beginning										Balance at
Description	of Year		Additions(1)		Deductions(2)			Divestments			End of Year
	(In millions)
Allowance for doubtful accounts:
Year ended December 31, 2007	$	0.7	$	—	$	(0.7	)		—		$	—
Year ended December 31, 2006	$	3.9	$	0.7	$	(3.9	)		—		$	0.7
Year ended December 31, 2005	$	5.5	$	0.3	$	(1.9	)		—		$	3.9
Sales returns and allowances, discounts, chargebacks and rebates(3):
Year ended December 31, 2007	$	16.5	$	69.8	$	(67.4	)		—		$	18.9
Year ended December 31, 2006	$	17.2	$	43.9	$	(44.6	)		—		$	16.5
Year ended December 31, 2005	$	22.1	$	56.2	$	(60.3	)		(0.8	)	$	17.2

(1)	Additions to allowance for doubtful accounts are recorded as an expense.
(2)	Represents amounts written off or returned against the allowance or reserves, or returned against earnings. Deductions to sales discounts and allowances relate to sales returns and payments.
(3)	Additions to sales discounts and allowances are recorded as a reduction of revenue.

151

EXHIBIT INDEX

Exhibit
Number	Description
1.1	Memorandum and Articles of Association of Elan Corporation, plc (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File No. 333-135185) filed with the Commission on June 21, 2006).
2(b)(1)	Indenture dated as of November 16, 2004, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York, as Trustee (incorporated by reference to Exhibit 99.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc (SEC File No. 001-13896) filed with the Commission on November 19, 2004).
2(b)(2)	Indenture dated as of November 22, 2006, among Elan Finance public limited company, Elan Finance Corp., Elan Corporation, plc, the Subsidiary Note Guarantors party thereto and The Bank of New York, as Trustee (including Forms of Global Exchange Notes) (incorporated by reference to Exhibit 2(b)(2) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission of February 28, 2007).
4(a)(1)	Antegren Development and Marketing Collaboration Agreement, dated as of August 15, 2000, by and between Biogen, Inc. and Elan Pharma International Limited (incorporated by reference to Exhibit 4(a)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002).
4(a)(2)	Amended and Restated Asset Purchase Agreement, dated as of May 19, 2003, by and among Elan Corporation, plc, Elan Pharma International Limited, Elan Pharmaceuticals, Inc., King Pharmaceuticals, Inc., Jones Pharma Incorporated and Monarch Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(a)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2002).
4(a)(3)	Research, Development and Commercialization Agreement by and among Wyeth (formerly known as American Home Products Corporation acting through American Home Products Corporation’s Wyeth-Ayerst Laboratories Division) and Elan Pharma International Limited (by assignment from Neuralab Limited) dated March 17, 2000, Amendment No. 1, dated as of April 4, 2000, to Research, Development and Commercialization Agreement, Amendment No. 2, dated as of April 4, 2002, to Research, Development and Commercialization Agreement, Amendment No. 3, dated as of May 1, 2005, to the Research, Development and Commercialization Agreement, and Amendment No. 4, dated as of May 1, 2007, to the Research, Development and Commercialization Agreement. (Confidential Treatment has been requested for portions of this Agreement and its Amendments, which portions have been omitted and filed separately with the Commission).
4(b)(1)	Lease dated as of June 1, 2007 between Chamberlin Associates 180 Oyster Point Blvd., LLC and Elan Pharmaceuticals, Inc.
4(b)(2)	Lease dated as of December 17, 2007 between Chamberlin Associates 200 Oyster Point, L.P. and Elan Pharmaceuticals, Inc.
4(c)(1)	Elan Corporation, plc 1999 Stock Option Plan (2001 Amendment) (incorporated by reference to Exhibit 4(c)(1) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(2)	Elan Corporation, plc 1998 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(2) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(3)	Elan Corporation, plc 1996 Long-Term Incentive Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(3) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(4)	Elan Corporation, plc 1996 Consultant Option Plan (2001 Restatement) (incorporated by reference to Exhibit 4(c)(4) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2001).
4(c)(5)	Elan Corporation, plc Employee Equity Purchase Plan (U.S.), as amended (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File No. 333-135184) filed with the Commission on June 21, 2006).
4(c)(6)	Elan Corporation, plc Employee Equity Purchase Plan Irish Sharesave Option Scheme (incorporated by reference to Exhibit 4(c)(6) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2004).

Exhibit
Number	Description
4(c)(7)	Elan Corporation, plc Employee Equity Purchase Plan U.K. Sharesave Plan (incorporated by reference to Exhibit 4(c)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(8)	Elan Corporation, plc 2004 Restricted Stock Unit Plan (incorporated by reference to Exhibit 4(c)(8) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(9)	Letter Agreement, dated as of February 12, 2002, between John Groom and Elan Corporation, plc (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form F-3 of Elan Corporation, plc, Registration Statement No. 333-100252, filed with the Commission on October 1, 2002).
4(c)(10)	Consulting Agreement, dated as of July 1, 2006, between Dr. Dennis J. Selkoe and Elan Pharmaceuticals, Inc. (incorporated by reference to Exhibit 4(c)(10) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(11)	Employment Agreement, dated as of December 7, 2005, among Elan Pharmaceuticals, Inc., Elan Corporation, plc and G. Kelly Martin, (incorporated by reference to the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc, filed with the Commission on December 7, 2005).
4(c)(12)	July 18, 2007 Letter Agreement between Dr. Lars Ekman and Elan Pharmaceuticals, Inc.
4(c)(13)	Elan Corporation, plc Cash Bonus Plan effective January 1, 2006, and revised as of May 22, 2006 (incorporated by reference to Exhibit 4(c)(14) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(14)	Elan Corporation, plc Profit Sharing Scheme 2006 (incorporated by reference to Exhibit 4(c)(16) of Elan Corporation, plc’s Annual Report on Form 20-F for the fiscal year ended December 31, 2005).
4(c)(15)	Elan Corporation, plc 2006 Long Term Incentive Plan (incorporated by reference to Exhibit 4.4 of the Registration Statement on Form S-8 of Elan Corporation, plc (SEC File 333-13185) filed with the Commission on June 21, 2006).
4(c)(16)	Letter Agreement dated as of January 1, 2007 between Elan Corporation, plc and Shane Cooke (incorporated by reference to Exhibit 4(c)(17) of Elan Corporation, plc’s Annual Report on Form 20-F filed with the Commission on February 28, 2007).
4(c)(17)	Form of Deed of Indemnity between Elan Corporation, plc and directors and certain officers of Elan Corporation, plc (incorporated by reference to Exhibit 99.2 of the Report of Foreign Issuer on Form 6-K of Elan Corporation, plc filed with the Commission on November 15, 2006).
4(c)(18)	Elan U.S. Severance Plan.
4(c)(19)	Form of Memo Agreement dated May 17, 2007 amending certain outstanding grant agreements for restricted stock units and stock option agreements held by senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(20)	Form of Restricted Stock Unit Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(21)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for senior officers who are members of the Operating Committee of Elan Corporation, plc.
4(c)(22)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for new members of the Board of Directors of Elan Corporation, plc.
4(c)(23)	Form of Nonstatutory Stock Option Agreement under the Elan Corporation, plc 2006 Long Term Incentive Plan for members of the Board of Directors of Elan Corporation, plc.
8.1	Subsidiaries of Elan Corporation, plc.
12.1	Certification of G. Kelly Martin pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Certification of Shane Cooke pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Certification of G. Kelly Martin pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Certification of Shane Cooke pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1	Consent of Independent Registered Public Accounting Firm, KPMG.

EX-4.(A)(3)

Exhibit 4(a)(3)

RESEARCH, DEVELOPMENT AND
COMMERCIALIZATION AGREEMENT

by and among

AMERICAN HOME PRODUCTS CORPORATION

acting through

AMERICAN HOME PRODUCTS CORPORATION’S
WYETH-AYERST LABORATORIES DIVISION,

and

NEURALAB LIMITED

March 17, 2000

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Table of Contents

		Page
1. DEFINITIONS			1
1.1.	“Ab Peptide” or “Ab”		1
1.2.	“Affiliate(s)”		1
1.3.	“AHPC Forecasted Share of Pro-Forma Net Profits”		2
1.4.	“AHPC In-License”		2
1.5.	“AHPC Intellectual Property”		2
1.6.	“AHPC Know-How”		2
1.7.	“AHPC Manufacturing Profit”		2
1.8.	“AHPC Non-Collaboration Invention”		2
1.9.	“AHPC Patent Rights”		2
1.10.	“AHPC Pre-tax Profit”		3
1.11.	“AHPC Prior Invention”		3
1.12.	“AHPC Share of Pro-Forma Net Profit”		3
1.13.	“Assigned Sales Force Effort”		3
1.14.	“Base Price”		3
1.15.	“Betabloc”		3
1.16.	“Blocking Third Party Intellectual Property”		3
1.17.	“Calendar Quarter”		4
1.18.	“Change of Control”		4
1.19.	“Collaboration Intellectual Property”		4
1.20.	“Collaboration Inventions”		4
1.21.	“Collaboration Know-How”		4
1.22.	“Collaboration Patent Rights”		4
1.23.	“Commercialization”		4
1.24.	“Commercially Reasonable Efforts”		4
1.25.	“Confidential Information”		5
1.26.	“Control” or “Controlled”		5
1.27.	“Copyright”		6
1.28.	“Cost of Goods Manufactured for Sale”		6
1.29.	“Current Clinical Trials”		6
1.30.	“Detail”		6
1.31.	“Detail Cost”		6
1.32.	“Development”		6
1.33.	“Distribution Expenses”		6
1.34.	“Effective Date”		7
1.35.	“ELAN”		7
1.36.	“ELAN Forecasted Share of Pro Forma Net Profits”		7
1.37.	“ELAN In-Licenses”		7
1.38.	“ELAN Intellectual Property”		7
1.39.	“ELAN Know-How”		7

-i-

		Page
1.40.	“ELAN/Lilly Litigation”		7
1.41.	“ELAN/Lilly Patent Rights”		7
1.42.	“ELAN Manufacturing Profit”		8
1.43.	“ELAN Non-Collaboration Invention”		8
1.44.	“ELAN Patent Rights”		8
1.45.	“ELAN Pre-tax Profit”		8
1.46.	“ELAN Prior Invention”		8
1.47.	“ELAN Share of Pro-Forma Net Profit”		8
1.48.	“Enhancing Third Party Intellectual Property”		8
1.49.	“Entry Into Pivotal Clinical Trials”		9
1.50.	“Exchange Product”		9
1.51.	“FDA”		9
1.52.	“FD&C Act”		9
1.53.	“Field”		9
1.54.	“First Commercial Sale”		9
1.55.	“FTE”		9
1.56.	“Fully-Absorbed Standard Cost”		9
1.57.	“Global Research and Development Plan”		9
1.58.	“Good Clinical Practice" or "GCP”		10
1.59.	“Good Laboratory Practice" or "GLP”		10
1.60.	“Good Manufacturing Practice" or "GMP”		10
1.61.	“HSR Act”		10
1.62.	“HSR Clearance Date”		10
1.63.	“Improvement Product”		10
1.64.	“IND”		11
1.65.	“Interim Clinical Evaluation" or "ICE”		11
1.66.	“Invention”		11
1.67.	“Know-How”		11
1.68.	“Lilly”		11
1.69.	***		11
1.70.	“Manufacture", "Manufactured" or "Manufacturing”		11
1.71.	***		11
1.72.	“Net Sales”		11
1.73.	“Non-Collaboration Invention”		12
1.74.	“Patent Rights”		12
1.75.	“Pivotal Clinical Study”		12
1.76.	“Post-Approval Research”		12
1.77.	“Post-Approval Research and Regulatory Expenses”		12
1.78.	“Pre-Marketing Expenses”		13
1.79.	“Pre-tax Profit”		13

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

-ii-

		Page
1.80.	“Prior Invention”		13
1.81.	“Product”		13
1.82.	“Product Sales Forecast”		13
1.83.	“Pro-Forma Net Profit”		13
1.84.	“Promotion”		13
1.85.	“R&D Expenses”		13
1.86.	“Regulatory Approval”		14
1.87.	“Regulatory Approval Filing”		14
1.88.	“Regulatory Authority”		14
1.89.	“Research”		14
1.90.	“Research Term”		14
1.91.	“Research and Development Candidate" or "R&D Candidate”		14
1.92.	“Sales and Marketing Expenses”		14
1.93.	“Sales Force Effort”		15
1.94.	“Sample”		15
1.95.	“Sample Receipt Forms”		15
1.96.	“Sublicensee”		15
1.97.	“Territory”		15
1.98.	“Third Part(y/ies)”		15
1.99.	“Third Party License”		15
1.100.	“Third Party License Fee”		16
1.101.	“Trademark”		16
1.102.	“Working Capital Charges”		16
1.103.	Additional Definitions		16
2. LICENSES			17
2.1.	Licenses to AHPC		17
2.2.	Licenses to ELAN		18
2.3.	Licensing and Sublicensing to Third Parties		19
2.4.	Exclusive Working Relationship		20
2.5.	Right of Reference		20
2.6.	No Other Rights		20
3. MANAGEMENT OF COLLABORATION			20
3.1.	Joint Steering Committee		20
3.2.	Authority		24
3.3.	Project Coordinators		24
3.4.	Meetings of Chief Executive Officers		24
3.5.	Compliance with Laws		24
4. RESEARCH AND DEVELOPMENT			24
4.1.	The Research and Development Programs		24
4.2.	The Research and Development Plans		25
4.3.	Funding of the Global Research and Development Plan.		27

-iii-

		Page
4.4.	Reporting and Disclosure		30
4.5.	Disclosure		30
5. MANUFACTURING AND REGULATORY MATTERS			30
5.1.	Manufacture and Supply of Products		30
5.2.	Labeling		32
5.3.	Regulatory Matters		33
6. COMMERCIALIZATION OF PRODUCTS			34
6.1.	Commercialization in the Territory		34
6.2.	Accounting Considerations		40
6.3.	Product Pricing		41
6.4.	Diligence		41
7. CONSIDERATION			41
7.1.	Reimbursement of Expenditures for Previously Developed Intellectual Property		41
7.2.	Additional Payments		41
7.3.	Sales Bonus		44
7.4.	Reports and Payments		44
7.5.	Maintenance of Records; Audits		45
7.6.	Interest		46
7.7.	GAAP		46
8. INTELLECTUAL PROPERTY			46
8.1.	Ownership		46
8.2.	Joint Patent Committee		47
8.3.	Prosecution and Maintenance of Patent Rights		47
8.4.	Trademarks		49
8.5.	Enforcement of Patent Rights		49
8.6.	Third Party Claims		50
8.7.	Third Party Licenses		51
8.8.	Patent Marking		52
8.9.	Patent Certifications		52
8.10.	Certain Actions		52
8.11.	Limitation		53
9. CONFIDENTIALITY			53
9.1.	Confidentiality		53
9.2.	Terms of Agreement		53
9.3.	Permitted Disclosures		54
9.4.	Publications		54

-iv-

		Page
10. REPRESENTATIONS AND WARRANTIES			54
10.1.	Representations and Warranties of Each Party.		54
10.2.	Additional Representations and Warranties of ELAN.		55
10.3.	Additional Representations and Warranties of AHPC		56
10.4.	Representation by Legal Counsel.		56
10.5.	No Inconsistent Agreements.		56
10.6.	Disclaimer.		56
11. ***			56
*** Approximately 9 lines omitted ***
12. GOVERNMENT APPROVALS.			56
12.1.	HSR Filing.		57
12.2.	ELAN’s and AHPC’s Obligations.		57
12.3.	Additional Approvals.		57
12.4.	Termination.		57
13. TERM AND TERMINATION.			57
13.1.	Term.		57
13.2.	Termination for Cause.		58
13.3.	Termination for Convenience.		59
13.4.	Termination Pursuant to Section 11.2.		60
13.5.	Termination for Failure to Reach Certain Net Sales Levels.		60
13.6.	Provision for Insolvency.		60
13.7.	Provision for Certain Changes of Control.		62
13.8.	Survival of Certain Obligations.		63
14. PRODUCT LIABILITY, INDEMNIFICATION AND INSURANCE.			63
14.1.	Sharing of Product Liability Expenses.		63
14.2.	Indemnification by AHPC.		63
14.3.	Indemnification by ELAN.		64
14.4.	Procedure.		64
14.5.	Insurance.		65
15. EXCHANGE PRODUCT.			65
15.1.	Exchange Product Offerings.		65
	CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
	WITH THE SECURITIES AND EXCHANGE COMMISSION.
	ASTERISKS (*) DENOTE SUCH OMISSIONS.

-v-

		Page
16. ASSIGNMENTS; CHANGES OF CONTROL			66
16.1.	Assignments		66
16.2.	Anti-Takeover Covenant		66
17. MISCELLANEOUS			66
17.1.	Further Actions		66
17.2.	Force Majeure.		66
17.3.	Notices		67
17.4.	Amendment		68
17.5.	Waiver		68
17.6.	Severability		68
17.7.	Descriptive Headings		68
17.8.	Governing Law; Venue.		68
17.9.	Entire Agreement of the Parties		68
17.10.	Independent Contractors		69
17.11.	Debarment		69
17.12.	Counterparts		69
17.13.	NO CONSEQUENTIAL DAMAGES		69

LIST OF EXHIBITS
Exhibit 1.9	AHPC Patent Rights
Exhibit 1.29	Current Clinical Trials
Exhibit 1.41	Elan/Lilly Patent Rights
Exhibit 1.44	Elan Patent Rights
Exhibit 1.56	Elements of Fully Absorbed Standard Costs
Exhibit 4.1.1	R&D Candidates
Exhibit 4.2.2	Annual Research Plan/Annual Development Plan
Exhibit 5.3	Adverse Event Reporting Procedures
Exhibit 10.2(a)	Certain ELAN Patent Rights
Exhibit 10.2(b)	Government Funding - ELAN Patent Rights
Exhibit 10.3(a)	Certain AHPC Patent Rights
Exhibit 10.3(b)	Government Funding - AHPC Patent Rights

-vi-

RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     THIS RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the “Agreement”) is entered into on this 17th day of March, 2000, by and among American Home Products Corporation, a Delaware corporation, together with Affiliates of American Home Products Corporation, acting through American Home Products Corporation’s Wyeth-Ayerst Laboratories Division (collectively, “AHPC”) and Neuralab Limited, a Bermuda private limited company (“NEURALAB”). AHPC and ELAN (as defined below) may each be referred to herein individually as a “Party” and collectively as the “Parties”.

BACKGROUND

1.	AHPC is engaged in the research, development and commercialization of human pharmaceutical products.
2.	ELAN is the owner of certain patent rights and know-how relating to the use of certain peptide immunogens and antibodies for the treatment and prevention of neurodegenerative conditions in humans associated with b amyloid deposition.
3.	AHPC and ELAN have agreed to collaborate, on the terms and conditions set forth in this Agreement, on the research, development and commercialization of such peptide immunogens and antibodies.

NOW THEREFORE, in consideration of the mutual promises and covenants set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. DEFINITIONS.

     1.1. “Ab Peptide” or “Ab”. Ab Peptide or Ab shall mean b amyloid protein *** Approximately 3 lines omitted *** .

     1.2. “Affiliate(s)”. Affiliate(s) shall mean, with respect to any person or entity, any other person or entity which controls, is controlled by or is under common control with such person or entity. A person or entity shall be regarded as in control of another entity if it owns or controls at least fifty percent (50%) of the equity securities of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority), provided, however, that the term “Affiliate” shall not include subsidiaries or other entities in which a Party or its Affiliates owns a majority of the ordinary voting power necessary to elect a majority of the board of directors or other governing

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board, but is restricted from electing such majority by contract or otherwise, until such time as such restrictions are no longer in effect.

     1.3. “AHPC Forecasted Share of Pro-Forma Net Profits”. AHPC Forecasted Share of Pro-Forma Net Profits shall mean, on a Product-by-Product and country by-country basis,           ***          of the Pro-Forma Net Profits, subject to upward adjustment to correspond with any upward adjustment in AHPC Share of Pro-Forma Net Profit as set forth in Article11, forecasted to be obtained from the distribution and sale of such Product in such country during a given calendar year.

     1.4. “AHPC In-License”. AHPC In-License shall mean any agreement between AHPC and any Third Party pursuant to which AHPC Controls those AHPC Patent Rights which claim any R&D Candidate or Product or are used in the Research, Development, Manufacture or Commercialization of any R&D Candidate or Product, provided, however, that the Parties agree not to practice any such AHPC Patent Right in the Research, Development, Manufacture or Commercialization of any R&D Candidate or Product unless and until the JSC has reviewed such agreement and, after consideration of the terms and conditions therein, elected to utilize such AHPC Patent Rights in the Research Development, Manufacture or Commercialization of any R&D Candidate or Product.

     1.5. “AHPC Intellectual Property”. AHPC Intellectual Property shall mean AHPC’s interest in (a) the AHPC Know-How, (b) the AHPC Patent Rights, (c) the Collaboration Know-How, (d) the Collaboration Patent Rights, (e) the Copyrights and (f) the Trademarks.

     1.6. “AHPC Know-How”. AHPC Know-How shall mean Know-How, excluding the Collaboration Know-How, that AHPC Controls as of the Effective Date or that comes into the Control of AHPC during the term of this Agreement.

     1.7. “AHPC Manufacturing Profit”. AHPC Manufacturing Profit shall mean, on a Product-by-Product basis, an amount (such amount not to be less than zero) per unit of such Product to be determined and approved by the JSC at least ninety (90) days prior to the beginning of each calendar year during which such Product is to be delivered to ELAN for supply by ELAN to the Distributing Party for commercial sale hereunder, which amount shall not exceed *** of the AHPC Forecasted Share of Pro-Forma Net Profits to be obtained from the sale of such Product during such calendar year divided by the total number of units of such Product included in the applicable Product Sales Forecast for such calendar year.

     1.8. “AHPC Non-Collaboration Invention”. AHPC Non-Collaboration Invention shall mean a Non-Collaboration Invention Controlled by AHPC.

     1.9. “AHPC Patent Rights”. AHPC Patent Rights shall mean Patent Rights that AHPC Controls as of the Effective Date or that come into the Control of AHPC during the

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term of this Agreement, which Patent Rights claim any AHPC Prior Invention and/or AHPC Non-Collaboration Invention. Those AHPC Patent Rights known to be existing as of the Effective Date are listed on Exhibit 1.9 attached hereto.

     1.10. “AHPC Pre-tax Profit”. AHPC Pre-tax Profit shall mean, on a Product-by-Product and country-by-country basis, AHPC’s share of the Pro Forma Net Profit from the sale of such Product in such country during a given Calendar Quarter after deduction of any AHPC Manufacturing Profit paid to AHPC in connection with the sale of such Product in such country during such Calendar Quarter.

     1.11. “AHPC Prior Invention”. AHPC Prior Invention shall mean a Prior Invention Controlled by AHPC.

     1.12. “AHPC Share of Pro-Forma Net Profit”. AHPC Share of Pro-Forma Net Profit shall mean, on a Product-by-Product and country-by-country basis and subject to upward adjustment as set forth in Article 11, *** of the Pro-Forma Net Profit obtained from such Product in such country.

     1.13. “Assigned Sales Force Effort”. Assigned Sales Force Effort shall mean the estimated number of Details to be performed by a Party in the Promotion of a Product in a country of the Territory during any Calendar Quarter or calendar year, as applicable, as assigned by the JSC under the then applicable Annual Commercialization Plan and in accordance with Section 6.1.2.

     1.14. “Base Price”. Base Price shall mean, in the case of either Party, on a Product-by-Product basis, the actual cost to acquire such unit of Product, or components thereof, from either the other Party or a Third Party pursuant to Section 5.1, plus its Fully-Absorbed Standard Cost to produce or complete the production, as applicable, of such Product, plus (or minus, as the case may be): (a) such Party’s costs for Product inventory adjustments and losses, (b) any Manufacturing cost variances incurred by such Party and allocable to such Product, (c) amortization of such Party’s new standard costs for such Product, and (d)such Party’s prior period adjustments allocable to such Product. For the sake of clarity, the Base Price for such Product shall be equal to such Party’s Cost of Goods Manufactured for Sale.

     1.15. “Betabloc”. Betabloc shall mean any therapeutic or prophylactic vaccine *** .

     1.16. “Blocking Third Party Intellectual Property”. Blocking Third Party Intellectual Property shall mean, with respect to any country in the Territory, on a country-by-country basis, a valid patent or patent application in such country owned or otherwise controlled by a Third Party, in the absence of a license to which, the Research and/or Development of an R&D

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Candidate and/or the Manufacture and/or Commercialization of a Product would infringe such patent or a patent that issues from such patent application.

          1.17. “Calendar Quarter”. Calendar Quarter shall mean the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31, for so long as this Agreement is in effect.

          1.18. “Change of Control”. Change of Control shall mean any of the following: (a) the sale or disposition of all or substantially all of the assets of a Party to a Third Party, (b) the acquisition by a Third Party, other than an employee benefit plan (or related trust) sponsored or maintained by a Party or any of its Affiliates, of more than 50% of such Party’s outstanding shares of voting capital stock, or (c) the merger or consolidation of a Party with or into another corporation, other than, in the case of (b) or (c) of this Section, an acquisition or a merger or consolidation of a Party in which holders of shares of such Party’s voting capital stock immediately prior to the acquisition, merger or consolidation will have at least fifty percent (50%) of the ownership of voting capital stock of the acquiring Third Party or the surviving corporation in such merger or consolidation, as the case may be, immediately after the merger or consolidation.

          1.19. “Collaboration Intellectual Property”. Collaboration Intellectual Property shall mean the Collaboration Know-How and the Collaboration Patent Rights.

          1.20. “Collaboration Inventions”. Collaboration Inventions shall mean all Inventions Controlled by either Party, either alone or jointly with the other Party, which Inventions are made (meaning that they are conceived prior to or during the Research Term and experimentation has been initiated in the course of the Research Program) by either Party’s employees, agents or subcontractors in the performance of such Party’s obligations under the Research Program and Development Program or in performing any Post-Approval Research, regardless of whether such Inventions are made solely by such Party’s employees, agents or subcontractors or jointly with the employees, agents or subcontractors of the other Party.

          1.21. “Collaboration Know-How”. Collaboration Know-How shall mean that Know-How that is created or developed by or on behalf of either Party, either alone or jointly with the other Party, in performing its obligations under the Research Program and Development Program or in performing any Post-Approval Research.

          1.22. “Collaboration Patent Rights”. Collaboration Patent Rights shall mean those Patent Rights that claim Collaboration Inventions.

          1.23. “Commercialization”. Commercialization shall mean any and all activities of using, importing, marketing, promoting, distributing, offering for sale and selling a Product in the Field and shall include Promotion. When used as a verb, “Commercialize” shall mean to engage in Commercialization.

          1.24. “Commercially Reasonable Efforts”. Commercially Reasonable Efforts shall mean, in the conduct of the Research Program and the Development Program, those efforts and resources normally used by a Party for a product or compound owned by it or to which it has rights, which is of similar market potential at a similar stage in its development or product life, taking into account, without limitation, issues of safety and efficacy, product profile, the proprietary

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position of the R&D Candidate or Product, the regulatory environment and status of the R&D Candidate or Product, and other relevant scientific factors. Without limiting the foregoing, Commercially Reasonable Efforts as it applies to the clinical development of R&D Candidates and Products hereunder shall mean adherence to the activities and time lines (to the extent adherence to such activities and time lines is controllable by the Party responsible for performing such activities) set forth in the Global Research and Development Plan prepared by the JSC, as may be amended from time to time based on the results of studies conducted with an R&D Candidate or Product, and regulatory factors. In all other instances, “Commercially Reasonable Efforts” shall mean those efforts and resources normally used by a Party for a product or compound owned by it or to which it has rights, which is of similar market potential at a similar stage in its development or product life, taking into account, without limitation, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the R&D Candidate or Product, the regulatory environment and status of the R&D Candidate or Product, the profitability of the Product and other relevant scientific and commercial factors. Notwithstanding the foregoing, to the extent that the performance of a Party’s obligations hereunder is adversely affected by the other Party’s failure to perform its obligations hereunder, such Party shall not be deemed to have failed to use its Commercially Reasonable Efforts in performing such obligations.

          1.25. “Confidential Information”. Confidential Information shall mean, with respect to a Party, all information (and all tangible and intangible embodiments thereof), which is Controlled by such Party, is disclosed by such Party to the other Party pursuant to this Agreement, and is designated as confidential in writing by the disclosing Party whether by letter or by use of an appropriate stamp or legend, prior to or at the time any such information is disclosed by the disclosing Party to the other Party. In addition, any information which is orally, electronically or visually disclosed by a Party, or is disclosed in writing without an appropriate letter, stamp or legend, shall constitute Confidential Information if the disclosing Party, within thirty (30) days after such disclosure, delivers to the receiving Party a written document or documents describing the information disclosed and referencing the place and date of such oral, visual, electronic or written disclosure and the names of the person(s) to whom such disclosure was made, provided, however, that any technical information disclosed at a meeting of the JSC shall constitute Confidential Information unless otherwise specified. Notwithstanding the foregoing, Confidential Information of a Party shall not include information which, and only to the extent, the receiving Party can establish by written documentation (a) has been publicly known prior to disclosure of such information by the disclosing Party to the receiving Party, (b) has become publicly known, without breach of this Agreement on the part of the receiving Party, subsequent to disclosure of such information by the disclosing Party to the receiving Party, (c) has been received by the receiving Party at any time from a source, other than the disclosing Party, rightfully having possession of and the right to disclose such information free of confidentiality obligations, (d) has been otherwise known by the receiving Party free of confidentiality obligations to the disclosing Party prior to disclosure of such information by the disclosing Party to the receiving Party, or (e) has been independently developed by employees or others on behalf of the receiving Party without the aid, application or use of such information disclosed by the disclosing Party to the receiving Party.

          1.26. “Control” or “Controlled”. Control or Controlled shall mean with respect to any (a) item of information, including, without limitation, Know-How, or (b) intellectual

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property right, the possession (whether by ownership or license, other than pursuant to this Agreement) by a Party of the ability to grant to the other Party access and/or a license as provided herein under such item or right without violating the terms of any agreement or other arrangements with any Third Party existing before or after the Effective Date.

          1.27. “Copyright”. Copyright shall mean any copyright Controlled by a Party or by both Parties, which copyright pertains to the promotional materials and literature that is selected for use by the JSC in connection with the Promotion of Products in the Territory pursuant to Section 6.1.7.

          1.28. “Cost of Goods Manufactured for Sale”. Cost of Goods Manufactured for Sale shall mean a Party’s actual cost to acquire Product from a Third Party, or its Fully-Absorbed Standard Cost to produce the Product, plus (or minus, as the case may be): (a)the Party’s costs for Product inventory adjustments and losses, (b) any Manufacturing cost variances allocable to such Product, (c) amortization of new standard costs for such Product, and (d) prior period adjustments allocable to such Product.

          1.29. “Current Clinical Trials”. Current Clinical Trials shall mean the clinical trials underway as of the Effective Date, as more fully described in Exhibit 1.29.

          1.30. “Detail”. Detail shall mean a face-to-face meeting between one or more physicians and one or more professional sales representatives, made in compliance with the target market allocation of the JSC under Section 6.1.2 during which a complete Product presentation, as defined from time to time by the JSC, is communicated, which Product presentation is either the first or second product-related information communicated by such professional sales representative during such meeting. When used as a verb, “Detail” shall mean to perform a Detail.

          1.31. “Detail Cost”. Detail Cost shall mean, on a Product-by-Product and country-by country basis, the cost per Detail agreed to by the JSC, which shall be consistent with industry standards for similar types of products (if available), which agreement shall be reached at least ninety (90) days prior to the beginning of each calendar year.

          1.32. “Development”. Development shall mean, on an R&D Candidate-by-R&D Candidate and country-by-country basis, all activities performed by or on behalf of either Party pursuant to the Global Research and Development Plan on such R&D Candidate in the Field from the date on which the JSC designates such R&D Candidate for further pre-clinical development toward IND filing until Regulatory Approval of such R&D Candidate is obtained in such country for the indication under study. Development shall include, without limitation, all activities related to preclinical testing, test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, quality assurance/quality control, clinical studies, regulatory affairs, statistical analysis and report writing. When used as a verb, “Develop” shall mean to engage in Development.

          1.33. “Distribution Expenses”. Distribution Expenses shall mean a Party’s actual distribution costs (other than those deducted as part of the calculation of Net Sales), warehousing

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costs and billing, receiving, collection and other miscellaneous costs incurred by the Party as they relate to distribution of the Products.

          1.34. “Effective Date”. Effective Date shall mean the date two (2) business days after the HSR Clearance Date.

          1.35. “ELAN”. ELAN shall mean Neuralab Limited, a Bermuda private limited company, and its Affiliates, which Neuralab Limited designates to carry out its rights and obligations under this Agreement.

          1.36. “ELAN Forecasted Share of Pro Forma Net Profits”. ELAN Forecasted Share of Net Profits shall mean, on a Product-by-Product and country-by-country basis,          ***           of the Pro-Forma Net Profits, subject to downward adjustment to correspond with any downward adjustment in ELAN Share of Pro-Forma Net Profit as set forth in Article11, forecasted to be obtained from the distribution and sale of such Product in such country during a given calendar year.

          1.37. “ELAN In-Licenses”. ELAN In-Licenses shall mean *** Approximately 5 lines omitted *** .

          1.38. “ELAN Intellectual Property”. ELAN Intellectual Property shall mean ELAN’s interest in (a) the ELAN Know-How, (b) the ELAN Patent Rights, (c) the Collaboration Know-How, (d) the Collaboration Patent Rights, (e) the Copyrights and (f) the Trademarks.

          1.39. “ELAN Know-How”. ELAN Know-How shall mean Know-How, excluding the Collaboration Know-How and any Invention claimed in the ELAN/Lilly Patent Rights, that ELAN Controls as of the Effective Date or that comes into the Control of ELAN during the term of this Agreement.

          1.40. “ELAN/Lilly Litigation”. ELAN/Lilly Litigation shall mean ELAN Pharmaceuticals, Inc. and Neuralab Limited v. Eli Lilly and Company, Civil Action No. C 99-04222 WHA, pending in the United States District Court for the Northern District of California — San Francisco Division.

          1.41. “ELAN/Lilly Patent Rights”. ELAN/Lilly Patent Rights shall mean the patent rights listed on Exhibit 1.41 attached hereto as well as any patents and patent applications from which such patent rights claim priority, and all provisional applications, substitutions, continuations, continuations-in-part, divisions, renewals, and all patents granted thereon, and all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including, without limitation, supplementary protection certificates or the equivalent thereof.

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          1.42. “ELAN Manufacturing Profit”. ELAN Manufacturing Profit shall mean, on a Product-by-Product basis, an amount (such amount not to be less than zero) per unit of such Product to be determined and approved by the JSC at least ninety (90) days prior to the beginning of each calendar year during which such Product is to be delivered to the Distributing Party for commercial sale hereunder, which amount shall not exceed           ***           of the ELAN Forecasted Share of Pro-Forma Net Profits to be obtained from the sale of such Product during such calendar year divided by the total number of units of such Product included in the applicable Product Sales Forecast for such calendar year.

          1.43. “ELAN Non-Collaboration Invention”. ELAN Non-Collaboration Invention shall mean a Non-Collaboration Invention Controlled by ELAN.

          1.44. “ELAN Patent Rights”. ELAN Patent Rights shall mean Patent Rights that ELAN Controls as of the Effective Date or that come into the Control of ELAN during the term of this Agreement, which Patent Rights claim any ELAN Prior Invention and/or ELAN Non-Collaboration Invention. Those ELAN Patent Rights known to be existing as of the Effective Date are listed on Exhibit 1.44 attached hereto.

          1.45. “ELAN Pre-tax Profit”. ELAN Pre-tax Profit shall mean, on a Product-by-Product and country-by-country basis, ELAN’s share of the Pro Forma Net Profit from the sale of such Product in such country during a given Calendar Quarter after deduction of any ELAN Manufacturing Profit paid to ELAN in connection with the sale of such Product in such country during such Calendar Quarter.

          1.46. “ELAN Prior Invention”. ELAN Prior Invention shall mean a Prior Invention Controlled by ELAN, provided, however, that ELAN Prior Invention shall not include any Invention claimed in the ELAN/Lilly Patent Rights.

          1.47. “ELAN Share of Pro-Forma Net Profit”. ELAN Share of Pro-Forma Net Profit shall mean, on a Product-by-Product and country-by-country basis and subject to downward adjustment as set forth in Article 11,           ***           of the Pro Forma Net Profit obtained from such Product in such country.

          1.48. “Enhancing Third Party Intellectual Property”. Enhancing Third Party Intellectual Property shall mean, with respect to any country in the Territory, on a country-by-country basis, a valid patent or patent application in such country owned or otherwise controlled by a Third Party that covers an invention, which if utilized by the Parties under this Agreement would facilitate the Research, Development and/or Manufacture of an R&D Candidate or Product, as the case may be, and/or if included in a Product would materially enhance the commercial value of such Product. For purposes of clarity, Enhancing Third Party Intellectual Property shall not include Blocking Third Party Intellectual Property.

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          1.49. “Entry Into Pivotal Clinical Trials”. Entry Into Pivotal Clinical Trials shall mean, with respect to Betabloc, the earliest point in time when all of the following shall have occurred: (i) the JSC has determined that the Current Clinical Trials have been successfully completed with respect to safety and the absence of need to conduct any additional study prior to pivotal study(ies), and (ii) the FDA has accepted pivotal study protocols; (iii) the JSC has determined that the data expected to be generated under such pivotal study protocols, when taken together with any other completed studies, would be accepted as “fileable” as the basis for Regulatory Approval by the FDA; and (iv) the first dosing of a patient in the pivotal study for which such protocols have been accepted has occurred.

          1.50. “Exchange Product”. Exchange Product shall mean a pharmaceutical product, of AHPC’s sole choosing, which product is Controlled by AHPC and is marketed or, within the one (1) year period following an Exchange Product Offering made to Elan for such product, is expected to be marketed in the United States, provided, however, that Elan shall have no right to require AHPC to designate any particular product as an Exchange Product.

          1.51. “FDA”. FDA shall mean the United States Food and Drug Administration or any successor agency thereto.

          1.52. “FD&C Act”. FD&C Act shall mean the United States Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder.

          1.53. “Field”. Field shall mean the treatment and/or prevention of neurodegenerative conditions in humans associated with [$]-amyloid deposition, including, without limitation, Alzheimer’s disease (“AD”) *** Approximately 4 lines omitted ***.

          1.54. “First Commercial Sale”. First Commercial Sale shall mean, with respect to any Product and any country of the world, the first sale of such Product under this Agreement, for use in the Field, to a Third Party in such country, after such Product has been granted Regulatory Approval for use in the Field by the competent Regulatory Authorities in such country.

          1.55. “FTE”. FTE shall mean a total of           ***           per year of scientific work on the Research Program carried out by employees of a Party having the appropriate scientific expertise to conduct such activities.

          1.56. “Fully-Absorbed Standard Cost”. Fully-Absorbed Standard Cost shall mean the cost for those items specified in Exhibit 1.56 attached hereto, which costs have been incurred by a Party in Manufacturing and/or distributing Products.

          1.57. “Global Research and Development Plan”. Global Research and Development Plan shall mean the comprehensive plan for the Research and Development of an R&D Candidate which is created and updated periodically by the JSC in accordance with Section

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4.2.1, and designed to generate the preclinical, clinical and regulatory information required for regulatory filings for such R&D Candidate in the Major Market Countries and in such other countries of the Territory where the JSC elects to seek Regulatory Approval for such R&D Candidate.

          1.58. “Good Clinical Practice” or “GCP”. Good Clinical Practice or GCP shall mean the then current standards for clinical trials for pharmaceuticals, as set forth in the FD&C Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good clinical practice as are required by the European Union and other organizations and governmental agencies in countries in which the Products are intended to be sold, to the extent such standards are not less stringent than United States GCP.

          1.59. “Good Laboratory Practice” or “GLP”. Good Laboratory Practice or GLP shall mean the then current standards for laboratory activities for pharmaceuticals, as set forth in the FD&C Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good laboratory practice as are required by the European Union and other organizations and governmental agencies in countries in which the Products are intended to be sold, to the extent such standards are not less stringent than United States GLP.

          1.60. “Good Manufacturing Practice” or “GMP”. Good Manufacturing Practice or GMP shall mean the then current standards for manufacturing activities for pharmaceuticals, as set forth in the FD&C Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good manufacturing practice as are required by the European Union and other organizations and governmental agencies in countries in which the Products are intended to be manufactured or sold, to the extent such standards are not less stringent than United States GMP.

          1.61. “HSR Act”. HSR Act shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

          1.62. “HSR Clearance Date”. HSR Clearance Date shall mean the earliest date on which the Parties have actual knowledge that all applicable waiting periods under the HSR Act with respect to the transactions contemplated hereunder have expired or have been terminated.

          1.63. “Improvement Product”. Improvement Product shall mean any therapeutic and/or preventative pharmaceutical product, other than Betabloc, within the Field that has previously been Developed as an R&D Candidate. Improvement Product shall include, without limitation, *** Approximately 6 lines omitted *** .

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          1.64. “IND”. IND shall mean an Investigational New Drug Application, as defined in the FD&C Act, that is required to be filed with the FDA before beginning clinical testing of a Product in human subjects, or an equivalent foreign filing.

          1.65. “Interim Clinical Evaluation” or “ICE”. Interim Clinical Evaluation or ICE shall mean the determination by the JSC that an R&D Candidate, having entered the Development Program, meets JSC criteria with respect to Phase I safety, and, if so designed, initial evidence of efficacy in a Phase I/II study. In addition, in order to meet such criteria for ICE, such R&D Candidate must demonstrate a clinically acceptable side effect profile, and the cost of goods, expected formulation and dosing schedule must remain commercially reasonable in order to warrant further Development.

          1.66. “Invention”. Invention shall mean any discovery or other finding that relates to the Field, to any R&D Candidate and/or Product, the Research and/or Development of any R&D Candidate and/or Product, any method of making an R&D Candidate and/or Product or any method of using an R&D Candidate and/or Product.

          1.67. “Know-How”. Know-How shall mean all Inventions, discoveries, data, information, processes, methods, techniques, materials, technology, results or other know-how, whether or not patentable but which are not generally known, that (a) are Controlled by either Party as of the Effective Date or come into the Control of either Party or of both Parties during the term of this Agreement and (b) relate to the Field, any R&D Candidate and/or Product, the Research and/or Development of any R&D Candidate and/or Product, any method of making any R&D Candidate and/or Product and/or any method of using an R&D Candidate and/or Product.

          1.68. “Lilly”. Lilly shall mean Eli Lilly and Company, an Indiana corporation.

          1.69. *** Approximately 2 lines omitted ***

          1.70. “Manufacture”, “Manufactured” or “Manufacturing”. Manufacture, Manufactured or Manufacturing shall mean all activities involved in the production of an R&D Candidate or Product to be Developed and/or Commercialized under this Agreement.

          1.71. *** Approximately 4 lines omitted ***

          1.72. “Net Sales”. Net Sales shall mean the gross amounts charged for sales of Products by a Party and/or its Sublicensees, as appropriate, to Third Parties, less the sum of (a) and (b) where (a) is a provision for (i) reasonable trade, cash and quantity discounts or rebates (other than price discounts granted at the time of the sale), reasonable service allowances and reasonable broker’s or agent’s commissions, if any, actually allowed or paid, (ii) credits or allowances actually given or made for rejection or return of, previously sold products or for retroactive price reductions (including Medicaid, Medicare, government, commercial and similar

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types of rebates), (iii) taxes, duties or other governmental charges levied on or measured by the billing amount (excluding income and franchise taxes), as adjusted for rebates and refunds, (iv) charges actually incurred for freight and insurance directly related to the distribution of the Product (excluding amounts reimbursed by Third Party customers), (v)reasonable credits or allowances actually given or made for wastage replacement, and (vi) taxes paid by a Party and/or its Sublicensees, as appropriate, to the United States Government or an instrumentality thereof under 42 U.S.C. 300 aa-1 et seq. or other similar legislation, or to a State of the United States or to a government of any other country or portion thereof insuring against liability arising out of the manufacture, use or sale of Products by a Party and/or its Sublicensees; and (b) is a periodic adjustment of the provision determined in (a) to reflect amounts actually incurred for (i), (ii), (iii), (iv), and (v). A “sale” of a Product is deemed to occur upon the invoicing, or if no invoice is issued, upon the earlier of shipment or transfer of title in the Product to a Third Party.

          1.73. “Non-Collaboration Invention”. Non-Collaboration Invention of a Party shall mean an Invention Controlled by either Party, which Invention (a) is made by such Party’s employees, agents or subcontractors during the term of this Agreement or otherwise comes into the Control of such Party during the term of this Agreement and (b) is not made in the performance of the Research Program, the Development Program or any Post-Approval Research.

          1.74. “Patent Rights”. Patent Rights shall mean any and all (a) patents, (b)pending patent applications, including, without limitation, all provisional applications, substitutions, continuations, continuations-in-part, continued prosecution applications, requests for continued examination, divisions, renewals, and all patents granted thereon, and (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including, without limitation, supplementary protection certificates or the equivalent thereof, that (i) are Controlled by either Party as of the Effective Date or come into the Control of either Party or of both Parties during the term of this Agreement and (ii) claim any Invention.

          1.75. “Pivotal Clinical Study”. Pivotal Clinical Study shall mean a pivotal study in patients, conducted in accordance with a protocol approved by the JSC, which protocol is designed to ascertain efficacy and safety of an R&D Candidate for the purpose of preparing and submitting applications for Regulatory Approval to the competent Regulatory Authorities in a country of the world.

          1.76. “Post-Approval Research”. Post-Approval Research shall mean ongoing research and development of a Product, pursuant to this Agreement, after such Product has received Regulatory Approval in a country of the Territory, including, without limitation, Phase IV clinical studies and clinical studies in support of additional indications within the Field or labeling changes for such Product in such country during the term of this Agreement.

          1.77. “Post-Approval Research and Regulatory Expenses”. Post-Approval Research and Regulatory Expenses shall mean those costs incurred, on a Product-by-Product and country-by-country basis, by either Party directly attributable to (a) Post-Approval Research and/or (b) complying with its regulatory reporting obligations in the Territory in accordance with Section 5.3.3 and 5.3.4.

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          1.78. “Pre-Marketing Expenses”. Pre-Marketing Expenses shall mean those expenses incurred on a Product-by-Product and country-by-country basis, by either Party, other than R&D Expenses, before Regulatory Approval of the Product in such country, directly attributable to the carrying out of such Party’s obligations under the Commercialization Plan or an Annual Commercialization Plan, as applicable, in preparation for the Commercialization of such Product in such country. Such expenses may include, without limitation, costs incurred for professional education, Product-related public relations, relationships with opinion leaders and professional societies, market research, health care economics studies, and establishment of the supply chain for the distribution and sale of such Product in such country. Such expenses may include both internal expenses incurred by a Party, excluding costs of field sales force personnel (i.e., excluding salaries, bonus, benefits, sales force automation, and personnel expenses — telephone, supplies, postage, meetings, travel and voice mail including all information technology) but including costs of other Product marketing personnel, as well as out-of-pocket expenses paid to Third Parties by a Party at reasonable rates preapproved by the JSC.

          1.79. “Pre-tax Profit”. Pre-tax Profit shall mean on a country-by-country and Product-by-Product basis, the Pro-Forma Net Profit less the AHPC Manufacturing Profit and the ELAN Manufacturing Profit.

          1.80. “Prior Invention”. Prior Invention of a Party shall mean an Invention Controlled by either Party, which Invention is made by the Party’s employees, agents or subcontractors before the Effective Date or which otherwise came into the Control of such Party before the Effective Date.

          1.81. “Product”. Product shall mean Betabloc or an Improvement Product.

          1.82. “Product Sales Forecast”. Product Sales Forecast shall mean, on a Product-by-Product basis, a forecast, to be approved by the JSC no later than ninety (90) days prior to the beginning of each calendar year, of the amount of such Product (excluding Samples) anticipated to be distributed and sold by the Distributing Party, in each country of the Territory, during such calendar year.

          1.83. “Pro-Forma Net Profit”. Pro-Forma Net Profit shall mean, on a Product-by-Product and country-by-country basis, the Net Sales obtained from the sale of such Product in such country less the Cost of Goods Manufactured for Sale, the Third Party License Fees, the Sales and Marketing Expenses, the Assigned Sales Force Adjustment Payment, the Distribution Expenses, the Working Capital Charges and the Post-Approval Research and Regulatory Expenses for such Product.

          1.84. “Promotion”. Promotion shall mean those activities, including, without limitation, Detailing and distributing Samples of a Product, normally undertaken by a pharmaceutical company’s sales force to implement marketing plans and strategies aimed at encouraging the appropriate use of a particular Product. When used as a verb, “Promote” shall mean to engage in such activities.

          1.85 “R&D Expenses”. R&D Expenses shall mean, on an R&D Candidate-by-R&D Candidate basis, the expenses (other than Third Party License Fees) of the Parties incurred

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in performing the Research Program, the Development Program and in obtaining Regulatory Approval for such R&D Candidate pursuant to the Global Research and Development Plan. Payments made under Section 7.1 or 7.2 shall not be R&D Expenses.

          1.86. “Regulatory Approval”. Regulatory Approval shall mean the technical, medical and scientific licenses, registrations, authorizations and approvals (including, without limitation, approvals of BLAs or their foreign equivalents, supplements and amendments, pre- and post- approvals, pricing and third party reimbursement approvals, and labeling approvals) of any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, necessary for the commercial manufacture, distribution, marketing, promotion, offer for sale, use, import, export and sale of Product(s) in a regulatory jurisdiction. For the sake of clarity, Regulatory Approval shall not be achieved for a Product in a country until any applicable pricing and governmental third party reimbursement approvals (other than those required by Medicaid or Medicare) have also been obtained in such country.

          1.87. “Regulatory Approval Filing”. Regulatory Approval Filing shall mean, on a country by country basis, the submission of an application for Regulatory Approval of a Product to the appropriate Regulatory Authorities in such country and the acceptance, by such Regulatory Authorities, of such application for review.

          1.88. “Regulatory Authority”. Regulatory Authority shall mean any national (e.g., the FDA), supra-national (e.g., the European Commission, the Council of the European Union, or the European Agency for the Evaluation of Medicinal Products), regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in each country of the world involved in the granting of Regulatory Approval for a Product.

          1.89. “Research”. Research shall mean, on an R&D Candidate-by-R&D Candidate basis, those preclinical activities undertaken by or on behalf of either Party prior to Development of such R&D Candidate, including, without limitation, medicinal chemistry, immunochemistry, immunology, cell biology, pharmacology, preclinical toxicology, and formulation of such R&D Candidate in the Field.

          1.90. “Research Term”. Research Term shall mean the Initial Research Term and any extensions thereof.

          1.91. “Research and Development Candidate” or “R&D Candidate”. Research and Development Candidate or R&D Candidate shall mean any compound, molecule or macromolecule that the JSC, in accordance with Section 4.1.1, selects or otherwise designates for evaluation under the Research Program and/or the Development Program.

          1.92. “Sales and Marketing Expenses”. Sales and Marketing Expenses shall mean those expenses (other than those deducted as part of the calculation of Net Sales) directly allocable, on a Product-by-Product and country-by-country basis, to the Parties’ market development and/or Promotion of such Product in the Territory, consistent with the Commercialization Plan for such Product. Sales and Marketing Expenses shall include: (a) costs for Promotion of the Product, excluding costs of the field sales force personnel (i.e., excluding Detailing expenses,

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including, without limitation, salaries, bonus, benefits, sales force automation, and personnel expenses — telephone, supplies, postage, meetings, travel and voice mail including all information technology and out-of-pocket expenses paid to a Contract Sales Organization) but including costs of other Product marketing personnel; (b) out-of-pocket payments to Third Parties incurred by such Party and specifically attributable to such Party’s performance under the Commercialization Plan, excluding Third Party License Fees, (c) costs for activities related to obtaining reimbursement from payers, (d) market research costs (including, without limitation, actual costs of sales and marketing data), (e) marketing and advertising costs (including, without limitation, cost for preparing and reproducing detail aids and other promotional materials), (f) professional education, (g) Product related public relations, (h) costs of pharmacoeconomics studies, (i) costs for Manufacturing and distributing Samples, and (j) costs for conducting seminars, attending conventions and industry meetings, and establishing relationships with opinion leaders and professional societies in connection with the Product. Such costs enumerated above will include both internal costs (e.g., salaries, benefits, supplies and materials, etc.) as well as the actual amounts paid to outside service providers (e.g., consultants, agency fees, meeting costs, etc.). Sales and Marketing Expenses will specifically exclude the cost of activities that promote either Party’s business as a whole without being Product specific (such as corporate image advertising).

          1.93. “Sales Force Effort”. Sales Force Effort, with respect to a Party, shall mean, on a Product-by-Product and country-by-country basis, the actual number of Details provided during a given calendar year by such Party.

          1.94. “Sample”. Sample shall mean a unit of a Product that is not intended to be sold and is intended to promote the sale of such Product. When used as a verb, “Sample” shall mean to provide Samples to health care providers.

          1.95. “Sample Receipt Forms”. Sample Receipt Forms shall mean those multi-part paper forms (or an electronic version thereof) supplied by the Distributing Party for the purpose of recording Detail and Sample activity performed by each Party’s sales representatives during Details. These forms are also used as Sample receipts on which to obtain a physician’s signature in acknowledgment of the physician’s receipt of Samples.

          1.96. “Sublicensee”. Sublicensee shall mean a Third Party that is granted a license and/or sublicense under this Agreement pursuant to Section 2.3 to both make and sell Products. “Sublicensee” shall also include a Third Party that is granted the right to distribute Product, provided that such Third Party is also responsible for marketing and promotion of the Product within the applicable territory. “Sublicense” shall mean an agreement or arrangement pursuant to which such a sublicense or distribution right has been granted.

          1.97. “Territory”. Territory shall mean the entire world.

          1.98. “Third Part(y/ies)”. Third Part(y/ies) shall mean any person(s) or entit(y/ies) other than AHPC or ELAN.

          1.99. “Third Party License”. Third Party License shall mean any agreement with a Third Party for a license under intellectual property rights or technology necessary or useful

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for the Research, Development, Manufacture or Commercialization of an R&D Candidate or a Product, which license is entered into, during the term of this Agreement, by a Party pursuant to Section 8.7.

          1.100. “Third Party License Fee”. Third Party License Fee shall mean license fees, royalties and other amounts paid to any Third Party under each Third Party License, AHPC In-License, or ELAN In-License.

          1.101. “Trademark”. Trademark shall mean any trademark Controlled by a Party or by both Parties, that is selected for use by the JSC in connection with the Commercialization of any Product hereunder, provided, however, that the term “Trademark” shall not include the tradename of either Party or any trademark or trade dress of either Party which is not used exclusively in connection with the Products Commercialized under this Agreement.

          1.102. “Working Capital Charges”. Working Capital Charges shall mean a Party’s internal finance charges for carrying Product in inventory and receivables in respect of Products. The cost of capital used by a Party in calculating such charges shall be no greater than the lowest cost of capital routinely used by such Party in calculating internal working capital charges for products carried in inventory that are not Products and receivables in respect of such products.

          1.103. Additional Definitions. Each of the following definitions is set forth in the section of this Agreement indicated below:

Definition	Section
***	10.2(g)
***	16.2
AD	1.51
Adverse Event Reporting Procedures	5.3.3
Agreement	Introduction
AHPC	Introduction
AHPC Indemnified Party	14.3
American	16.2
Annual Commercialization Plan	6.1.2
Annual Development Plan	4.2.2
Annual Research Plan	4.2.2
Antitrust Division	12.1
Assigned Sales Force Adjustment Payment	6.1.4
Athena	10.2(f)
Audited Party	4.3.6 and 7.5.2
Auditing Party	4.3.6 and 7.5.2
Contract Sales Organization	2.3.1
Commercialization Plan	6.1.2
Development Program	4.1.1
Development Term	4.1.3

CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS(*) DENOTE SUCH OMISSIONS.

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Definition	Section
Distributing Party	6.1.1
***	13.7.2
ELAN	Introduction
ELAN Indemnified Party	14.2
Exchange Act	16.2
Exchange Product Offering	15.1
FTC	12.1
Indemnified Party	14.4
Indemnifying Party	14.4
Initial Research Term	4.1.2
Joint Patent Committee/JPC	8.2.1
Joint Steering Committee/JSC	3.1
Liability	14.2
Licensing Party	8.7.1
Manufacturing Subcontractor	5.1.1
Marketing Account	6.1.6(b)
Parties	Introduction
Party	Introduction
Product Liability Expenses	14.1
R&D Account	4.3.2
Report	12.1
Research Program	4.1.1
Right of Reference	2.5
Section 13.5 Terminating Party	13.5.1
Section 13.7 Party	13.7.1
Section 13.7 Terminating Party	13.7.3
Sued Party	8.6.3
Terminating Party	13.2.2
Termination for Convenience	13.3.1
Title 11	13.6.2
Title 11 Party	13.6.2

2. LICENSES.

          2.1. Licenses to AHPC.

          (a) Subject to the terms and conditions of this Agreement, including, without limitation, Section 2.4, ELAN hereby grants to AHPC

     (i) a worldwide, exclusive (except to the extent necessary for ELAN to exercise its rights and perform its activities under this Agreement in the conduct of the

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

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Research Program, the Development Program and any Post-Approval Research) license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under the ELAN Intellectual Property, to practice the ELAN Know-How and the Collaboration Know-How to the extent necessary for AHPC to exercise its rights and perform its activities, under this Agreement, in the conduct of the Research Program, the Development Program and any Post-Approval Research;

     (ii) a worldwide, non-exclusive license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under ELAN’s interest in the ELAN/Lilly Patent Rights, to practice any invention claimed in the ELAN/Lilly Patent Rights to the extent necessary for AHPC to exercise its rights and perform its activities, under this Agreement, in the conduct of the Research Program, the Development Program and any Post-Approval Research;

     (iii) a worldwide, exclusive (except to the extent necessary for ELAN to Manufacture and/or Commercialize Products pursuant to this Agreement) license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under the ELAN Intellectual Property, to Manufacture and Commercialize Products in the Territory; and

     (iv) a worldwide, non-exclusive license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under ELAN’s interest in the ELAN/Lilly Patent Rights, to Manufacture and Commercialize Products in the Territory.

          (b) In the event that the Research and Development of R&D Candidates under this Agreement and/or the Manufacture and/or Commercialization of Products in the Territory by AHPC and/or its Sublicensees would, during the term of this Agreement, misappropriate any know-how and/or infringe any patent rights Controlled by ELAN that are not covered by the licenses and sublicenses granted to AHPC in Section 2.1(a), ELAN hereby grants to AHPC, to the extent ELAN is legally able to do so, a worldwide, nonexclusive, non-royalty bearing license, under such know-how and patent rights, to enable AHPC and/or its Sublicensees to Research and Develop R&D Candidates under this Agreement and to Manufacture and/or Commercialize Products in the Territory in accordance with the licenses and sublicenses granted in Section 2.1(a).

          2.2. Licenses to ELAN. Subject to the terms and conditions of this Agreement, AHPC hereby grants to ELAN

          (a) a worldwide, exclusive (except to the extent necessary for AHPC to exercise its rights and perform its activities under this Agreement in the conduct of the Research Program, the Development Program and any Post-Approval Research) license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under the AHPC Intellectual Property, to practice the AHPC Know-How and the Collaboration Know-How to the extent necessary for ELAN to exercise its rights and perform its activities under this Agreement in the conduct of the Research Program, the Development Program and any Post-Approval Research; and

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          (b) a worldwide, exclusive (except to the extent necessary for AHPC to Manufacture and/or Commercialize Products pursuant to this Agreement) license or sublicense, as the case may be, without the right to grant sublicenses except pursuant to the terms set forth in Section 2.3, under the AHPC Intellectual Property, to Manufacture and/or Commercialize Products in the Territory.

          In the event that the Research and Development of R&D Candidates under this Agreement and/or the Manufacture and/or Commercialization of Products in the Territory by ELAN and/or its Sublicensees would, during the term of this Agreement, misappropriate any know-how and/or infringe any patent rights Controlled by AHPC that are not covered by the licenses and sublicenses granted to ELAN in Sections 2.2(a) and/or (b), AHPC hereby grants to ELAN, to the extent AHPC is legally able to do so, a worldwide, non-exclusive, non-royalty bearing license, under such know-how and patent rights, to enable ELAN and/or its Sublicensees to Research and Develop R&D Candidates under this Agreement and to Manufacture and/or Commercialize Products in the Territory in accordance with the licenses and sublicenses granted in Sections 2.2(a) and/or (b).

     2.3. Licensing and Sublicensing to Third Parties.

     2.3.1. Right to Grant Licenses and Sublicenses. Subject to Section 2.3.2, is pursuant to Section 4.2.3, the JSC approves the utilization of one or more Third Parties to perform certain tasks in the conduct of the Research Program, the Development Program or any Post-Approval Research, the Party entering into a contract with such Third Party for the performance of such services, may, as part of such contract, grant to such Third Party a nonexclusive, nontransferable license or sublicense, as applicable, without the right to grant sublicenses, under the AHPC Intellectual Property, the ELAN Intellectual Property or ELAN’s interest in the ELAN/Lilly Patent Rights, as applicable, only to the extent and only for so long as such license or sublicense is necessary for such Third Party to perform such tasks. All such contracts and sublicenses entered into by either party with any such Third Party shall be subject to the prior written approval of the JSC with the prior review of each Party’s legal department, which approval shall not be unreasonably withheld or delayed. Subject to Section 2.3.2, if pursuant to Section 6.1.1, the JSC approves the utilization of one or more professional sales organizations (each a “Contract Sales Organization”) to perform all or part of a Party’s activities in Promoting Products pursuant to this Agreement, such Party may, as part of such contract, grant to such Contract Sales Organization a nonexclusive, nontransferable, license or sublicense, as applicable, without the right to grant sublicenses, under the AHPC Intellectual Property, the ELAN Intellectual Property or ELAN’s interest in the ELAN/Lilly Patent Rights, as applicable, only to the extent and only for so long as such license or sublicense is necessary for such Contract Sales Organization to perform such Promotion. All such contracts and sublicenses entered into by either Party with a Contract Sales Organization shall be subject to the prior written approval of the JSC with the prior review of each Party’s legal department, which approval shall not be unreasonably withheld or delayed.

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          2.3.2. Limitations.

          (a) Elan hereby agrees to not grant to Lilly and/or any Affiliate of Lilly, any license or sublicense, as applicable, under the AHPC Intellectual Property or ELAN’s interest in the Collaboration Intellectual Property or the Copyrights or the Trademarks, as applicable, without the express written consent of AHPC.

          (b) AHPC hereby agrees to not grant to Lilly and/or any Affiliate of Lilly, any license or sublicense, as applicable under the AHPC Intellectual Property or AHPC’s interest in the Collaboration Intellectual Property or the Copyrights or the Trademarks, as applicable, without the express written consent of ELAN.

          2.4. Exclusive Working Relationship. Except as expressly set forth in this Agreement, it is understood and agreed by the Parties that: (a) *** the Parties shall work exclusively with each other in the Field under the terms of this Agreement, (b)                                                                ***                                                           the Parties shall have the right, alone but not in collaboration with or through the grant of rights to any Third Party, to research, develop, manufacture and commercialize, in the Field, product candidates and products, as applicable, other than R&D Candidates and Products under this Agreement, (c)                                                                ***                                                           the Parties shall have the right, either alone or in collaboration with or through the grant of rights to any Third Party, to research, develop, manufacture and commercialize, in the Field, product candidates and products, as applicable, other than R&D Candidates and Products under this Agreement, and (d)                   ***                  the Parties shall work exclusively with each other to Research, Develop, Manufacture and Commercialize R&D Candidates and Products, and shall not, either alone or in collaboration with or through the grant of rights to any Third Party, develop, make, import, export, distribute, offer for sale, sell, or otherwise commercialize, outside of the Field, such R&D Candidate or Product in any country in the Territory.

          2.5. Right of Reference. Each Party hereby grants the other a “Right of Reference,” as that term is defined in 21 C.F.R. § 314.3(b), to any data developed under this Agreement, and a Party shall provide a signed statement to this effect, if requested by the other, in accordance with 21 C.F.R. § 314.50(g)(3).

          2.6. No Other Rights. No rights, other than those expressly set forth in this Agreement are granted to either Party hereunder, and no additional rights shall be deemed granted to either Party by implication, estoppel or otherwise.

3. MANAGEMENT OF COLLABORATION.

          3.1. Joint Steering Committee.

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

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     3.1.1. Formation, Membership. Within thirty (30) days after the Effective Date, ELAN and AHPC shall establish a “Joint Steering Committee” or “JSC” to oversee and direct the conduct of the Research and Development of each R&D Candidate and to oversee and coordinate those activities that are necessary for the successful Commercialization for a Product in the Territory, as further described below in this Agreement. The JSC shall be comprised of four (4) representatives from each Party as appointed by such Party, which representatives shall be senior representatives of each Party (i.e., vice president or higher) and shall have expertise suitable to the then-current activities of the collaboration. The JSC may change its size from time to time by mutual consent of its members. A Party may replace one (1) or more of its representatives from time to time upon written notice to the other Party. The JSC may establish subcommittees to oversee specific projects or activities or to perform certain of its functions, and such subcommittees shall be constituted as the JSC shall determine, but shall always include equal representation from each Party. The JSC will exist until the termination of this Agreement unless the Parties otherwise agree in writing.

     3.1.2. Chairperson; Secretary. The chairperson and secretary of the JSC shall rotate on an annual basis between the Parties. The chairperson and secretary shall not be from the same Party at the same time. The first chairperson shall be designated by AHPC. The chairperson will be responsible for scheduling meetings of the JSC, preparing agendas for meetings, sending to all JSC members notices of all regular meetings and agendas for such meetings at least five (5) business days before such meetings. The secretary shall record the minutes of the meeting, circulate copies of meeting minutes to the Parties and each JSC member promptly following the meeting for review, comment and approval, and shall finalize approved meeting minutes. The chairperson shall be a member of the JSC but the secretary need not be a member of the JSC.

     3.1.3. Meetings. The JSC shall meet at least once each Calendar Quarter during the term of this Agreement, unless otherwise mutually agreed by the Parties. Either Party may call a special meeting of the JSC on fifteen (15) days written notice to the other Party and each of the JSC members. Such written notice shall include an agenda for the special meeting. Meetings, including without limitation, special meetings, of the JSC will alternate between the offices of the Parties, unless otherwise agreed by the members of the JSC, or may be held telephonically or by video-conference. Meetings of the JSC shall be effective only if at least one (1) representative of each Party is in attendance or participating in the meeting. Members of the JSC shall have the right to participate in and vote at meetings by telephone. The most senior attending representative of each Party on the JSC shall have the right to vote on behalf of any members of the JSC from such Party not attending a JSC meeting in person or by telephone. Each Party shall be responsible for expenses incurred by its employees and its members of the JSC in attending or otherwise participating in JSC meetings.

     3.1.4. Decision Making. All decisions of the JSC shall be made by majority vote, with at least one representative from each Party voting with the majority. In the event that the JSC is unable to reach a decision with respect to any scientific matter under its consideration, such matter shall be referred for resolution to the President, Wyeth-

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Ayerst Research and the Executive Vice President, Elan Pharmaceuticals (who shall be the most senior individual within ELAN’s research and development organization). In the event that the JSC is unable to reach a decision with respect to any commercial matter under its consideration, such matter shall be referred for resolution to the President, Wyeth-Ayerst Global Pharmaceuticals and the President, Elan Pharmaceuticals. A matter shall be considered referred by the JSC as of the date that either Party or the JSC provides each decision-making individual a written description of the disputed matter, which written description shall include the positions taken by each member of the JSC as to such matter, all other information relevant to such matter and a copy of the minutes of each JSC meeting at which such matter was discussed. Within ten (10) days after such matter is so presented by the JSC, the Parties’ decision-making individuals noted above shall determine the date, time and location of the meeting to address such matter. Such decision-making meetings will alternate between the offices of the Parties, unless otherwise agreed by the Parties, or may be held telephonically or by video-conference. Each Party shall be responsible for expenses incurred by its decision-making individual in attending or otherwise participating in such meetings. If any of such referred matters cannot be resolved by such individuals, either Party may elect to bring the matter to the attention of the Executive Vice President, AHPC and the President, Elan Corporation, plc (or such other officer exercising the duties of this office) and thereafter should a dispute not be resolved, to the Chief Executive Officers of said corporations. If disputes are not resolved at this level, then subject to Section 3.1.5 either Party may seek any remedy, at law or in equity, that may be available.

     3.1.5. Mediation. If a dispute arises between the Parties, and if such dispute cannot be resolved pursuant to Section 3.1.4 above, the Parties agree to try in good faith to resolve any dispute, controversy or claim (except as to any issue relating to intellectual property) arising out of or relating to this Agreement, or the breach, termination or invalidity thereof by non-binding mediation administered by the American Arbitration Association in accordance with its commercial mediation rules. Unless otherwise mutually agreed upon by the Parties, the mediation proceedings shall be conducted at the location chosen by the Party not originally requesting the resolution of the dispute. The Parties agree that they shall share equally the cost of the mediation, including filing and hearing fees, and the cost of the mediator(s). Each Party shall bear its own attorneys’ fees and associated costs and expenses.

     3.1.6. Responsibilities of the JSC. In addition to its general responsibility to oversee and coordinate Research and Development according to the Research Program and the Development Program, ensure a regular flow of Research and Development information between the Parties and to oversee and coordinate the Commercialization of Products in the Territory, the JSC shall in particular:

          (a) prepare the Global Research and Development Plan pursuant to Section 4.2.1;

          (b) review and update as necessary the Global Research and Development Plan;

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          (c) approve the Annual Research Plan for the period from the Effective Date through calendar year 2001 in accordance with Section 4.2.2, and prepare and approve an updated Annual Research Plan during each subsequent year in which the Parties engage in Research activities;

          (d) review and approve any substantive departure from any Annual Research Plan pursuant to Section 4.2.2;

          (e) approve the Annual Development Plan for the period from the Effective Date through calendar year 2001 in accordance with Section 4.2.2, and prepare and approve an updated Annual Development Plan during each subsequent year in which the Parties engage in Development activities;

          (f) review and approve any substantive departure from any Annual Development Plan pursuant to Section 4.2.2;

          (g) oversee the activities of the project team(s) that is/are performing the Party’s activities under the Research Program and the Development Program;

          (h) facilitate the flow of information between the Parties with respect to all Research and Development work being conducted for each R&D Candidate in the Field on a worldwide basis;

          (i) ascertain, at least on an annual basis, what, if any intellectual property owned by, licensed to or developed by each Party would be useful for the Research, Development and Commercialization of R&D Candidates and Products;

          (j) determine whether an R&D Candidate has or has not met the criteria for payment of milestones;

          (k) review and approve any recommendations by the Joint Patent Committee that a Third Party License should be entered pursuant to Section 8.7;

          (l) review and approve all scientific and clinical protocols, which shall provide that all preclinical and clinical development work under this Agreement shall be conducted in accordance with GLPs and GCPs;

          (m) review and approve the contents and filings of INDs, applications for Regulatory Approval, and related and supporting submissions to Regulatory Authorities;

          (n) prepare and approve a Commercialization Plan pursuant to Section 6.1.2;

          (o) prepare an Annual Commercialization Plan pursuant to Section 6.1.2; and

          (p) at least ninety (90) days prior to the beginning of each calendar year, prepare an estimate of Pro Forma Net Profits on a Product-by-Product and country-by-country basis.

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     3.1.7. Guiding Principle. The Parties’ intent is to Develop and Commercialize Products as expeditiously as possible with resources and responsibilities allocated on the basis of the Parties’ respective capabilities and availability of adequate capacities, either internally or through subcontractors obtained in accordance with Sections 4.2.3 and/or 6.1.1. Subject to the foregoing, the guiding principle to be followed by the JSC is to allocate such resources and responsibilities                    ***                    .

          3.2. Authority. The Parties agree that, in voting on matters as described in this Article 3, it shall be conclusively presumed that each voting member of the JSC has the authority and approval of such member’s respective senior management in casting his or her vote and that decisions of the JSC made in accordance with this Article 3 shall be binding upon each of the Parties; provided, however, that the JSC shall not have the authority to amend or modify this Agreement.

          3.3. Project Coordinators. Each Party shall designate one (1) or two (2) of its employees as project coordinator(s) for all of the activities contemplated under this Agreement. Such project coordinators will be responsible for the day-to-day coordination of the collaboration contemplated by this Agreement and will serve to facilitate communication between the Parties. A Party may, from time to time, replace its designated project coordinator(s) upon providing the other Party with written notice to that effect.

          3.4. Meetings of Chief Executive Officers. The Chief Executive Officers (CEOs) of AHPC and Elan Corporation, plc, or their designated direct-reporting representative, shall meet two (2) times per year during the term of this Agreement, unless otherwise agreed upon in writing by the Parties. In such meetings, the CEOs shall review the progress of the collaboration and shall discuss any current issues of the collaboration with the intent of proposing resolutions for such issues. Meetings, including without limitation, special meetings called pursuant to Section 3.1.4, shall alternate between the offices of the Parties, unless otherwise agreed by the CEOs or their respective representatives, or may be held telephonically or by videoconference.

          3.5. Compliance with Laws. Each Party agrees that, in conducting its activities under this Agreement, it shall at all times comply with all applicable material laws and regulations.

4. RESEARCH AND DEVELOPMENT.

     4.1. The Research and Development Programs.

     4.1.1. Conduct of the Research and Development Programs. Under the terms and conditions set forth herein, AHPC and ELAN shall collaborate through one or more joint project teams in the conduct of a collaborative research program (the “Research

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Program”) and a collaborative development program (the “Development Program”) for the pre-clinical and clinical Research and Development of R&D Candidates in the Field. The JSC shall identify R&D Candidates for Research under the Research Program. The R&D Candidates as of the Effective Date include, without limitation, those listed on Exhibit 4.1.1. Each R&D Candidate shall be advanced from the Research Program into the Development Program on the date that the JSC designates such R&D Candidate for further pre-clinical development toward IND filing. An R&D Candidate shall remain in the Development Program until such time as (i) the JSC determines that such R&D Candidate should be returned to the Research Program for the conduct of further pre-clinical studies, (ii) such R&D Candidate is dropped from the Research Program and Development Program or (iii) such R&D Candidate receives Regulatory Approval in the Territory at which time such R&D Candidate shall be deemed a Product. Each of the Research Program and Development Program shall be conducted in accordance with the Global Research and Development Plan as described in Section 4.2.

     4.1.2. The Research Program. The Research Program shall be conducted for an initial term of      ***       (the “Initial Research Term”). The Research Term shall be extended for a period of        ***        if, during the Initial Research Term, the JSC determines that there exists an approach on which either Party has initiated Research, other than *** Approximately 5 lines omitted ***. The Initial Research Term may also be extended upon mutual agreement of the Parties, which extension shall be agreed upon at least four (4) months in advance of the end of the initial term or the then current extension. At the first JSC meeting following the end of each calendar year during the Research Term, and within thirty (30) days after the end of the Research Term, the JSC shall meet to prepare a list identifying all R&D Candidates and Products which were Researched or Developed during the calendar year or the Research Term, as applicable, and which remain subject to the terms and conditions of this Agreement, which lists shall be provided in writing to each Party.

     4.1.3. The Development Program. The Development Program shall have a term (the “Development Term”) which commences on the Effective Date and shall continue until the JSC agrees to cease the clinical development of the final R&D Candidate or until all Regulatory Approvals for all R&D Candidates have been received in the Territory.

     4.2. The Research and Development Plans.

     4.2.1. Global Research and Development Plan. Within sixty (60) days following its formation, the JSC shall prepare and approve a Global Research and Development Plan which shall set forth the goals and objectives of the Research Program and the Development Program. The Global Research and Development Plan shall set forth

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generally (i) the research activities that shall be undertaken by the Parties in the identification of R&D Candidates under the Research Program, (ii) the pre-clinical activities to be undertaken with any R&D Candidate toward an IND filing under the Research Program, (iii) the target date for submission of any IND other than the IND for the Current Clinical Trials, (iv) the clinical development activities that shall be undertaken after such IND is filed to obtain Regulatory Approval of an R&D Candidate under the Development Program, (iv) date of first enrollment and completion of patient accrual for clinical trials, (v) global regulatory filing strategy, (vi) global manufacturing strategy, and (vii) target submission dates for applications for Regulatory Approval of an R&D Candidate in the Major Market Countries. The Global Research and Development Plan shall be kept current by the JSC, updated on such schedule as the JSC may determine but not less often than once per calendar year. The Global Research and Development Plan may only be modified or amended upon written approval of the JSC.

     4.2.2. Annual Research and Development Plans. Within sixty (60) days after the Effective Date, the Parties shall prepare an annual research plan (the “Annual Research Plan”) and shall prepare an annual development plan for each R&D candidate in the Development Program (each an “Annual Development Plan”) each of which shall address the specific collaborative Research and Development activities of the Parties from the Effective Date through calendar year 2001 pursuant to this Agreement. The initial Annual Research Plan and Annual Development Plan shall address the elements set forth in Exhibit 4.2.2 to this Agreement, as well as other elements that may be appropriate for inclusion therein. The JSC shall review and approve such initial Annual Research Plan and Annual Development Plan within sixty (60) days following its formation. Thereafter, on or before October 31 of each year (commencing in 2001), the JSC shall prepare and approve an Annual Research Plan and an Annual Development Plan addressing the collaborative Research and Development activities (as applicable) to be undertaken by the Parties during the following calendar year pursuant to this Agreement and the then current Global Research and Development Plan. Each Annual Research Plan and each Annual Development Plan shall include, without limitation, detailed plans for, as applicable, the collaborative Research and Development activities, Manufacturing and scale-up tasks, and clinical studies of R&D Candidates for use in the Field, designation of which Party is responsible for each task, staffing levels required to carry out such activities (which levels shall be reasonably necessary for the attainment of the Annual Research Plan or Annual Development Plan, as applicable), and a budget setting forth the estimated expenditures required to carry out such activities. Should the JSC determine that a specific activity would best be undertaken by a Third Party contractor, the JSC shall indicate which Party shall manage such Third Party contractor. The Annual Research Plan and Annual Development Plan may only be modified or amended upon written approval of the JSC.

     4.2.3. Conduct of the Annual Research Plan and Annual Development Plans. ELAN and AHPC shall each use Commercially Reasonable Efforts to perform its respective activities under the then current Annual Research Plan and Annual Development Plan and each Party shall perform such activities in accordance with applicable GLPs and GCPs. All activities to be undertaken in the performance of an Annual Research Plan or Annual Development Plan shall be carried out by employees of

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the Parties and/or their respective Affiliates, provided, however, that if either Party is able to reasonably demonstrate, and the JSC agrees, that (a) it would be in the best interests of both Parties to contract with one (1) or more Third Parties to perform certain tasks under either an Annual Research Plan or Annual Development Plan, and (b) any such Third Party is capable of performing such tasks in a manner competitive with the Parties in terms of cost and quality, then, the Party responsible for such task may enter into a contract with a Third Party to perform such task, which contract shall be subject to the prior written approval of the JSC. In determining whether to utilize the services of any Third Party in conducting activities under an Annual Research Plan or Annual Development Plan, the Parties shall consider, inter alia, what would be the most efficient and cost effective means for accomplishing the proposed activity, any relevant intellectual property issues that may impede a Third Party’s ability to perform the proposed activity or that may warrant limiting the performance of the proposed activity to one of the Parties, and other relevant factors. The responsibility for performing clinical studies of each R&D Candidate will be assigned to AHPC, ELAN and/or Third Party contractors selected by the JSC in accordance with this Section.

     4.2.4. Periodic Inspections. With respect to any facility or site at which a Party conducts Research, Development or Manufacturing pursuant to this Agreement, including, where commercially reasonable and within the control of the other Party, Third Party facilities or sites, each Party shall have the right, at its expense, upon reasonable written notice and during normal business hours, to inspect such site and facility and any records relating thereto as is reasonably necessary to verify the other Party’s compliance with the terms of this Agreement relating to GLP, GCP and GMP. Such inspection shall be subject to the confidentiality provisions of this Agreement. Each Party agrees to, to the maximum extent possible, to include in any agreement with a Third Party relating to such facilities and sites a clause permitting the other Party to exercise its rights under this Section.

     4.3. Funding of the Global Research and Development Plan.

     4.3.1. Research and Development Expenses. From the Effective Date forward, the Parties shall share all R&D Expenses     ***    .

     4.3.2. Payment of Expenses; R&D Accounts. Subject to reconciliation as provided in Section 4.3.4, each Party shall be responsible and pay for all expenses incurred by it in performing its activities under the Research Program and the Development Program. Subject to the limitations set forth in Section 4.3.3, each Party shall charge all such expenses so incurred by it or its Affiliates to a separate account created by such Party on its books and records solely for the purpose of tracking expenses incurred in connection with the Research Program and Development Program (each, an

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“R&D Account”). Within thirty (30) days after the end of each Calendar Quarter, each Party shall submit to the other Party a written summary of all expenses charged to its R&D Account during such Calendar Quarter, which summary shall be accompanied by reasonable supporting documentation for such expenses. The Parties will work together to report to each other estimates of the amounts to be included in such reports prior to the expiration of such thirty (30) day period.

     4.3.3. Expense Limitations. The expenses charged by either Party to its R&D Account in accordance with Section 4.3.2, shall not be in an amount in excess of           ***           of the amount included for such expenses in the then current Annual Research Plan or Annual Development Plan, as appropriate, unless the JSC recommends and each Party approves such excess expenses. Additionally, the Parties hereby agree that efforts of the employees of a Party or its Affiliates in performing its activities hereunder shall be charged to such Party’s R&D Account at the applicable FTE rate set forth in the applicable Annual Research Plan or Annual Development Plan, provided, however, that only those efforts that are contemplated by the Global Research and Development Plan and/or the applicable Annual Research Plan or Annual Development Plan shall be chargeable by a Party to its R&D Account, except as otherwise approved in writing by the JSC. The FTE rates set forth in any Annual Research Plan or Annual Development Plan shall be based upon direct costs plus a minimum overhead allocation established by the JSC. All payments made by a Party to a Third Party in connection with the performance of its activities under an Annual Research Plan or Annual Development Plan shall be charged to such Party’s R&D Account at such Party’s actual out-of-pocket cost. Expenses incurred by each Party for equipment, materials and supplies utilized in performing its activities under an Annual Research Plan or Annual Development Plan shall not be separately charged to such Party’s R&D Account, except for those expenses incurred by a Party, with the prior written consent of the JSC, in the purchase or making of equipment, materials or supplies (other than common laboratory supplies, e.g., pipettes, test tubes, petri dishes, reagents, and the like) that are to be used exclusively in connection with the performance of such Party’s activities under an Annual Research Plan or Annual Development Plan (e.g., laboratory animals, compounds that are R&D Candidates, Products, placebo supplies, etc.), which expenses shall be charged to such Party’s R&D Account at such Party’s actual out-of-pocket expense incurred in purchasing or making such equipment, materials or supplies. Notwithstanding the foregoing, in the case of materials supplied to the Parties by either Party for use in clinical trials of R&D Candidates or Products, the supplying Party shall charge to its R&D Account its Fully Absorbed Standard Cost for such materials, as adjusted to account for manufacturing cost variances allocable to such materials.

     4.3.4. Reconciliation of Expenses. Within sixty (60) days after the end of each calendar year, AHPC shall prepare a reconciliation report, accompanied by reasonable

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supporting documents and calculations, which reconciles the amounts charged to each Party’s R&D Account during such calendar year pursuant to Section 4.3.2, including, without limitation, making any necessary adjustments for prior period manufacturing cost variances allocable to Products utilized in Development, and the share of the Parties’ aggregate R&D Expenses to be allocated to each of the Parties for such calendar year in accordance with Section 4.3.1. Within thirty (30) days after AHPC delivers such reconciliation report to ELAN, the net amount shown as being due either AHPC or ELAN will be paid by the Party owing such amount.

     4.3.5. Third Party License Fees. Until such date as a Product is Commercialized in the Territory the Parties shall           ***           the costs of any Third Party License Fees for such Product. The Party paying any Third Party License Fee shall invoice the other Party for its share of such Third Party License Fee within          ***          days after the end of each calendar year. The Party receiving such invoice shall reimburse the other Party for its share of such Third Party License Fees within          ***          days after receiving the invoice therefor.

     4.3.6. Records and Audits. During the term of this Agreement, each Party shall keep and maintain accurate and complete records showing the expenses incurred by it in performing its activities under the Annual Research Plans and Annual Development Plans during the                          ***                          which books and records shall be in sufficient detail such that R&D Expenses can accurately be determined. Upon fifteen (15) days prior written notice from a Party (the “Auditing Party”), the other Party (the “Audited Party”) shall permit an independent certified public accounting firm of nationally recognized standing selected by the Auditing Party and reasonably acceptable to the Audited Party, to examine the relevant books and records of the Audited Party and its Affiliates as may be reasonably necessary to verify the reports submitted by the Audited Party in accordance with Section 4.3.2 and the accuracy of the reconciliation report prepared in accordance with Section 4.3.4. An examination by a Party under this Section 4.3.6 shall occur not more than once in any calendar year and shall be limited to the pertinent books and records for any calendar year ending not more than            ***            before the date of the request. The accounting firm shall be provided access to such books and records at the Audited Party’s facility(ies) where such books and records are normally kept and such examination shall be conducted during the Audited Party’s normal business hours. The Audited Party may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to the Audited Party’s facilities or records. Upon completion of the audit, the accounting firm shall provide both AHPC and ELAN a written report disclosing whether the reports submitted by the Audited Party are correct or incorrect and the specific details concerning any discrepancies. No other information shall be provided to the Auditing Party. If the accountant determines that, based on errors in the reports so submitted, the reconciliation

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report prepared in accordance with Section 4.3.4 is incorrect, the Parties shall promptly revise the reconciliation report and any additional amount owed by one Party to the other shall be paid within thirty (30) days after receipt of the accountant’s report, along with interest at the annual interest rate of    ***   , compounded monthly from the date that such additional amount should have first been paid, provided, however, that no such interest shall be payable if the errors leading to the reconciliation report being incorrect were in the reports provided by the Party to receive such additional amount. Additionally, if the accountant determines that the reports submitted by the Audited Party overstate the Audited Party’s expenses by more than           ***          , the Audited Party shall reimburse the Auditing Party for the expenses incurred by the Auditing Party in conducting the audit.

     4.4. Reporting and Disclosure.

     4.4.1. Reports. Before each quarterly meeting of the JSC, ELAN and AHPC will each provide the other with written copies of all materials they intend to present at the JSC meeting plus, to the extent not set forth in the JSC materials, a written report summarizing any other material data and information arising out of the conduct of the Research Program and/or Development Program including, without limitation, data and information relating to any Inventions made by such Party. If after receipt of any such report, either Party shall request additional data or information relating to an Annual Research Plan or Annual Development Plan or Collaboration Intellectual Property licensed hereunder, the Party to whom such request is made shall promptly provide to the other Party such data or information that such Party reasonably believes is necessary for the continued conduct of the Research Program or the Development Program.

     4.4.2. Quarterly Meeting. At the quarterly meeting of the JSC, AHPC and ELAN will review in reasonable detail (i) all data and information generated in the conduct of the Annual Research Plan and Annual Development Plan by each Party, and (ii) all Collaboration Intellectual Property licensed hereunder developed by the Parties.

     4.5. Disclosure. During the term of this Agreement, the Parties will promptly disclose to one another all data, information, Inventions, techniques and discoveries (whether patentable or not) arising out of the conduct of the Research Program and the Development Program, and all Inventions, techniques and discoveries (whether patentable or not) included in Collaboration Intellectual Property licensed hereunder. Such disclosures may take the form of limited visits by ELAN and AHPC personnel to the facilities being utilized for the Research Program and the Development Program to permit observation of the procedures being employed.

5. MANUFACTURING AND REGULATORY MATTERS.

          5.1. Manufacture and Supply of Products.

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     5.1.1. Responsible Party. ELAN shall be responsible for the Manufacture and supply to AHPC of Products for worldwide sale and distribution by AHPC, provided however, ELAN will distribute Products in those countries designated by the JSC under Section 6.1.1. ELAN can elect to Manufacture the entire Product or a component thereof, including without limitation its packaging or formulations, provided that, ELAN is competitive with Third Parties in Cost of Goods Manufactured for Sale and quality. In the event that ELAN does not elect to Manufacture, then AHPC shall have the option to be the Contract Manufacturer for ELAN of that portion of Product Manufacturing which ELAN declined to Manufacture, provided that, AHPC is competitive with Third Parties in Cost of Goods Manufactured for Sale and quality. Should neither AHPC nor ELAN elect to Manufacture Products, then ELAN shall choose a Third Party to be a Contract Manufacturer, subject to AHPC’s prior approval, which shall not be unreasonably withheld. In the event that either AHPC or a Third Party (each a “Manufacturing Subcontractor”) is to Manufacture Product or a component thereof, ELAN shall, in accordance with Section 5.1.3 below, negotiate in good faith and enter into a supply agreement with such Manufacturing Subcontractor.

     5.1.2. Agreement for Supply of Product to AHPC. Within           ***           after the Effective Date (or such later time upon which the Parties may mutually agree), ELAN and AHPC shall negotiate, in good faith, and enter into a written supply agreement which sets forth the rights and obligations of the Parties in connection with ELAN’s exclusive supply of Product to AHPC for worldwide sale and distribution by AHPC (except for those countries in which Elan is designated as the Distributing Party in accordance with Section 6.1.1), provided that the Parties shall on a semi-annual basis, prior to the second anniversary of the Effective Date, consider whether the timetable for negotiating and entering into such supply agreement should be accelerated. Such supply agreement shall not be inconsistent with the terms and conditions of this Agreement and shall include provisions to ensure the timely Manufacture and supply of Product for sale and distribution by the Distributing Party hereunder, including, without limitation, forecasting, ordering and delivery schedules and procedures, product warranties, and procedures to address periods of supply shortages, including, without limitation, providing AHPC the right to Manufacture Product to meet its requirements during supply shortages and allocation of Product inventories during such supply shortages. The purchase price, on a country-by-country basis, to be paid to ELAN (or ELAN’s Affiliate) by AHPC for each unit of Product delivered to AHPC under such supply agreement for distribution in such country shall be equal to the Base Price (on a per unit of Product basis) plus the ELAN Manufacturing Profit for such country, provided, however, that the purchase price for any units of Product to be distributed in such country as Samples shall be the Base Price and shall not include any ELAN Manufacturing Profit. The Base Price portion of the purchase price shall be payable within thirty (30) days after such Product is delivered to AHPC and the ELAN Manufacturing Profit portion of such purchase price

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shall be paid within sixty (60) days after the end of the Calendar Quarter during which such Product is sold by AHPC. Upon ELAN’s request, AHPC shall supply such technical assistance and expertise as may be reasonably necessary to permit ELAN to discharge its Manufacturing responsibilities.

     5.1.3. Agreement for Supply of Product to ELAN. In the event that ELAN determines that a Manufacturing Subcontractor shall Manufacture and supply Product to ELAN, ELAN shall, as soon as practicable after such determination, but in no event longer than                                 ***                               , negotiate, in good faith, and enter into a written supply agreement with such Manufacturing Subcontractor, which written agreement shall be subject to the prior review and written approval of the JSC and, if the Manufacturing Subcontractor is a Third Party, AHPC. Such supply agreement shall not be inconsistent with the terms and conditions of this Agreement and shall include provisions to ensure the timely Manufacture and supply of Product so that ELAN is able to meet its obligations under the supply agreement entered into with AHPC under Section 5.1.2 above, including, without limitation, forecasting, ordering and delivery procedures and schedules, product warranties, and procedures to address periods of supply shortages, including, without limitation, providing ELAN and/or AHPC the right to Manufacture Product to meet the Distributing Party’s requirements during supply shortages and allocation of Product inventories during such supply shortages. In the event that the Manufacturing Subcontractor is AHPC, the purchase price to be paid by ELAN, on a country-by-country basis, for each unit of Product supplied by AHPC for ultimate distribution in such country, shall be the Base Price (on a per unit of Product basis) plus the AHPC Manufacturing Profit for such country, provided, however, that the purchase price for any units of Product to be distributed as Samples shall be the Base Price and shall not include any AHPC Manufacturing Profit. The Base Price portion of the purchase price shall be payable within thirty (30) days after such Product is delivered to ELAN and the AHPC Manufacturing Profit portion of such purchase price shall be paid within sixty (60) days after the end of the Calendar Quarter during which such Product is sold by the Distributing Party.

          5.2. Labeling. To the extent permitted by applicable laws and regulations, as may be reasonably requested by the other Party, the Manufacturing Party shall include in all Product Labels, Labeling, and Packaging, as those terms are use in the FD&C Act, a statement indicating that such Product was developed in collaboration with the other Party. Should either Party believe that any change in a Label relating to a Product be necessary, such Party shall notify the other Party in writing, specifying the proposed change. The Parties shall thereafter consult with each other regarding the proposed change, and the Party which is responsible for regulatory matters in the relevant country shall not unreasonably refuse to submit such proposed change to the Regulatory Authorities in such country. The Parties shall seek to include uniform

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Labeling for each Product in all countries to the extent permitted by applicable laws and regulations.

     5.3. Regulatory Matters.

     5.3.1. International Regulatory Approvals. AHPC shall file, in its own name, all applications for Regulatory Approval for Products in all countries of the Territory other than the United States. AHPC shall have the primary responsibility for communicating with any Regulatory Authority regarding any such application for Regulatory Approval or any Regulatory Approval once granted, provided, however, that ELAN shall (a) provide AHPC with advice and reasonable assistance in (i) developing a Regulatory Approval filing strategy for Products, (ii) reviewing study reports from clinical trials of Products, (iii) preparing applications for Regulatory Approval for Products, (iv) preparing supplements to applications for Regulatory Approval for Products, (v) responding to questions from Regulatory Authorities regarding applications for Regulatory Approval or any supplement thereto and (b) participate in interactions with Regulatory Authorities concerning the Products.

     5.3.2. United States Regulatory Approvals. ELAN shall file, in its own name, all applications for Regulatory Approval for Products in the United States. ELAN shall have the primary responsibility for communicating with any Regulatory Authority regarding any such application for Regulatory Approval or any Regulatory Approval once granted, provided, however, that AHPC shall (a) provide ELAN with advice and reasonable assistance in (i) developing a Regulatory Approval filing strategy for Products, (ii) reviewing study reports from clinical trials of Products, (iii) preparing applications for Regulatory Approval for Products, (iv) preparing supplements to applications for Regulatory Approval for Products, (v) responding to questions from Regulatory Authorities regarding applications for Regulatory Approval or any supplement thereto and (b) participate in interactions with Regulatory Authorities concerning the Products.

     5.3.3. International Regulatory Reporting. AHPC shall be responsible for filing all reports required to be filed in order to maintain any Regulatory Approvals granted for Products in all countries of the Territory other than the United States, including, without limitation, adverse drug experience reports. ELAN shall cooperate with AHPC in preparing and filing all such reports and, upon AHPC’s request, provide AHPC with any information in ELAN’s possession or Control which AHPC reasonably deems to be relevant to any such reports. Notwithstanding the foregoing, to the extent ELAN has or receives any information regarding any adverse drug experience which may be related to the use of any Product, ELAN shall promptly provide AHPC with all such information in accordance with the adverse event reporting procedures (as may be amended from time to time upon mutual agreement of the Parties) set forth in Exhibit 5.3 attached hereto (the “Adverse Event Reporting Procedures”). Expenses (both internal expenses and out-of-pocket costs paid to a Third Party) incurred by a Party in performing its regulatory reporting obligations under this Section in connection with Regulatory Approvals in the Territory shall be charged by such Party to such Party’s Marketing Account for such Product as a Post-Approval Research and Regulatory Expense.

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     5.3.4. United States Regulatory Reporting. ELAN shall be responsible for filing all reports required to be filed in order to maintain any Regulatory Approvals granted for Products in the United States, including, without limitation, adverse drug experience reports. AHPC shall cooperate with ELAN in preparing and filing all such reports and, upon ELAN’s request, provide ELAN with any information in AHPC’s possession or Control which ELAN reasonably deems to be relevant to any such reports. Notwithstanding the foregoing, to the extent AHPC has or receives any information regarding any adverse drug experience which may be related to the use of any Product, AHPC shall promptly provide ELAN with all such information in accordance with the Adverse Event Reporting Procedures. Expenses (both internal expenses and out-of-pocket costs paid to a Third Party) incurred by a Party in performing its regulatory reporting obligations under this Section in connection with Regulatory Approvals in the Territory shall be charged by such Party to such Party’s Marketing Account for such Product as a Post-Approval Research and Regulatory Expense.

     5.3.5. Regulatory Processes and Procedures. Within sixty (60) days after the approval of the Global Research and Development Plan, the Parties’ respective regulatory affairs or other applicable departments shall meet and agree upon processes and procedures for sharing information needed to support each Party’s respective regulatory responsibilities, including without limitation, a global safety database relating to R&D Candidates and Products.

     5.3.6. Coordination. To the extent practical, the other Party shall be given the opportunity to participate in substantive discussions and meetings with Regulatory Authorities which relate to R&D Candidates or Products, including, but not limited to, with respect to any IND or Regulatory Approval Filings. The Parties shall cooperate in good faith with respect to the conduct of any inspections by any Regulatory Authority of a Party’s site and facilities related to R&D Candidates or Products, and each Party shall at a minimum be given the opportunity to attend the summary, or wrap up, meeting related to R&D Candidates or Products with such Regulatory Authority at the conclusion of such site inspection. Each Party shall consider the attendance of the other Party at any such regulatory inspections, but shall not be obligated to accept the other Party’s attendance at such inspections if such attendance would result in the disclosure to the other Party of confidential information or trade secrets unrelated to the R&D Candidates or Products. To the extent either Party receives written or material oral communication from the Regulatory Authority relating to the R&D Candidates or Products, the Party receiving such communication shall notify the other Party and provide a copy of any written communication as soon as reasonably practicable.

6. COMMERCIALIZATION OF PRODUCTS.

     6.1. Commercialization in the Territory.

     6.1.1. Principles of Copromotion and Distribution. Subject to the terms of this Agreement, the Parties shall Commercialize each Product in the Territory during the term of this Agreement exclusively with the other Party and under the same brand name, using professional sales representatives who are full time employees of the Parties, provided,

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however, that if either Party is able to reasonably demonstrate, and the JSC agrees, that it would be in the best interest of both Parties to contract with one (1) or more Contract Sales Organizations to perform all or part of such Party’s Product Promotion obligations hereunder, then such Party may enter into a contract with such Contract Sales Organization to perform such Product Promotion activities, which contract shall be subject to the prior written approval of the JSC. In the event that, under applicable laws or regulations, copromotion of a Product is not permitted in a country of the Territory, the JSC shall determine which Party shall be responsible for the Commercialization of such Product in such country, taking into account the respective resources and expertise of each Party. Notwithstanding the foregoing, AHPC shall be responsible for distributing Products in each country of the Territory and collecting revenues from the sale of such Products unless, pursuant to the preceding sentence, ELAN is designated by the JSC to assume such responsibilities in a country. The Party distributing Product and collecting revenues from the sale of such Product in a country shall be the “Distributing Party” in such country with respect to such Product.

     6.1.2. Commercialization Plan. On a Product-by-Product basis,                                                              ***                                                             the JSC shall prepare and approve a rolling multiyear (                       ***                      ) plan for Commercializing such Product in the Territory (the “Commercialization Plan”), which plan includes a comprehensive market development, marketing, sales, supply and distribution strategy for such Product in the Territory. The Commercialization Plan shall be updated by the JSC at least once each calendar year such that it addresses no less than the                      ***                    . Not later than thirty (30) days after the filing of the first application for Regulatory Approval of a Product in the Territory and thereafter on or before September 30 of each calendar year, the JSC shall prepare an annual commercialization plan (the “Annual Commercialization Plan”), which plan is based on the then current Commercialization Plan and includes a comprehensive market development, marketing, customer support, sales, supply and distribution strategy, including an overall budget for anticipated marketing, promotion and sales efforts in the upcoming calendar year (the first such Annual Commercialization Plan shall cover the remainder of the calendar year in which such Product is anticipated to be approved plus the first full calendar year thereafter). The Annual Commercialization Plan will specify which audiences and distribution channels each Party shall devote its respective Promotion efforts towards, the personnel and other resources to be devoted by each Party to such efforts, the number and positioning of Details to be performed by each Party (which as much as is reasonably possible shall represent an equal effort on the part of each Party), as well as market and sales forecasts and related operating expenses, for the Product in each country of the Territory, and budgets for projected Pre-Marketing Expenses, Distribution Expenses, Third Party License Fees, Assigned Sales Force Adjustment Payment, Working Capital Charges, Sales and Marketing Expenses and Post-

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Approval Research and Regulatory Expenses. In preparing and updating the Commercialization Plan and each Annual Commercialization Plan, the JSC will take into consideration factors such as market conditions, regulatory issues and competition. The number of Details assigned to a Party by the JSC in accordance with this Section shall be such Party’s Assigned Sales Force Effort.

     6.1.3. Performance Metrics. The number of Details actually performed by either Party as part of its Assigned Sales Force Effort shall be determined according to Detail reporting mechanisms and methodology that are approved and applied consistently by the JSC.

     6.1.4. Assigned Sales Force Adjustment. If, on a Product-by-Product and country-by-country basis, a Party’s Assigned Sales Force Effort during a given Calendar Quarter is greater than              ***              of both Parties’ combined Assigned Sales Force Effort during such Calendar Quarter for such Product in such country, such Party shall be considered to have provided an excess Assigned Sales Force Effort during such Calendar Quarter with respect to such Product in such country and shall be entitled to charge to its Marketing Account and to receive, as part of the reimbursement made under Section 6.1.6(d), an “Assigned Sales Force Adjustment Payment” which will be in the amount of either:

     (i)     in the event that, during a given Calendar Quarter, the other Party’s Assigned Sales Force Effort for such Product in such country is less than or equal to                   ***                  of the Parties’ combined Assigned Sales Force Effort for such Product in such country, the sum of

     *** Approximately 6 lines omitted***

     (ii)     in the event that, during a given Calendar Quarter, the other Party’s Assigned Sales Force Effort for such Product in such country is greater than           ***

                   but less than           ***               of the Parties’ combined Assigned Sales Force Effort for such Product in such country, the sum of

     *** Approximately 5 lines omitted***

     6.1.5. Recalls; Customer Support.

          (a) Recalls. The determination of whether a Product recall is required shall, to the extent feasible, be made jointly by the Parties, provided that, to the extent required by regulatory time frames or public safety considerations, the Distributing Party shall have the right to make the Product recall decision. During the term of this Agreement, the Distributing Party shall be responsible for handling and implementing all recalls and market withdrawals of any

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Product in the Territory. The other Party will make available to the Distributing Party, upon request, all of the other Party’s pertinent records that the Distributing Party may reasonably request to assist it in effecting any recall or market withdrawals. The Parties shall share equally all costs of a recall or marketing withdrawal of a Product in the Territory. A Party shall have no obligation to reimburse or otherwise compensate the other Party for any lost profits or income that may arise in connection with any such recall or market withdrawal. Any investigation conducted in connection with a Product recall shall be undertaken jointly by the Parties.

          (b) Customer Support. The Distributing Party shall, using Commercially Reasonable Efforts, perform, and in consultation with the other Party, be responsible for all customer support services necessary to discharge its Distribution and Commercialization obligations hereunder, except that any customer support services which require regulatory approval, acquiescence or oversight, including, without limitation, pharmacovigilance, responding to physician inquiries, or professional education, shall be conducted by the Party with regulatory responsibility in the country in which the Product is distributed.

          6.1.6. Commercialization Expenses.

          (a) Premarketing Expenses. On a Product by Product and country by country basis, before Regulatory Approval of such Product in such country of the Territory, the Pre-Marketing Expenses incurred by the Parties with respect to such Product in anticipation of obtaining Regulatory Approval of such Product in such country shall be shared                       ***            consistent with plans and budgets established in the applicable Annual Development Plan. As such Pre-Marketing Expenses are incurred they shall be paid for by the Party incurring such expenses, subject to reimbursement as set forth in Section 4.3.4.

          (b) Payment of Expenses, Marketing Accounts. Subject to reconciliation as provided in Sections 6.1.6(d) and 6.1.6(e), as applicable, each Party shall be responsible and pay for the Sales and Marketing Expenses, Third Party License Fees, Assigned Sales Force Adjustment Payment, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges incurred by it in performing its activities in connection with the Commercialization of Products in the Territory. Subject to the limitations set forth in Section 6.1.6(c), each Party shall charge all such expenses so incurred by it or its Affiliates to a separate account created by such Party on its books and records solely for the purpose of tracking expenses incurred in connection with the Commercialization of Products in the Territory (each, a “Marketing Account”). Within thirty (30) days after the end of each Calendar Quarter, each Party shall submit to the other Party a written summary of all Sales and Marketing Expenses, Third Party License Fees, Assigned Sales Force Adjustment Payment, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges incurred by it in performing its activities in connection with the Commercialization of Products in the Territory,

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charged to its Marketing Account during such Calendar Quarter, which summary shall be accompanied by reasonable supporting documentation for such expenses.

          (c) Expense Limitations. The Sales and Marketing Expenses, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges charged by either Party to its Marketing Account in accordance with this Section 6.1.6, shall not be in an amount in excess of                         ***                      of the amount included for such expenses in the then current Annual Commercialization Plan, unless the JSC approves such excess expenses. All payments made by a Party to any Third Party in connection with the performance of its activities in connection with the Commercialization of a Product in the Territory shall be charged to such Party’s Marketing Account at such Party’s actual out-of-pocket cost incurred in accordance with the JSC approved contract entered into with such Third Party.

          (d) Reimbursement of Certain Expenses. At the time the Distributing Party, pursuant to Section 7.4.1, distributes to the other Party, such other Party’s share of Pre-tax Profits obtained from the sale of a Product in a country of the Territory during any Calendar Quarter, the Distributing Party shall also reimburse each of AHPC and ELAN for those Sales and Marketing Expenses, Assigned Sales Force Adjustment Payments, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges that are (i) directly allocable to the Commercialization of such Product in such country during such Calendar Quarter, (ii)properly charged by such Party to its Marketing Account and (iii)reported to the other Party in accordance with this Section. Such reimbursements shall be made solely from revenues obtained by the Distributing Party which are attributable to the Net Sales of such Product in such country of the Territory, with each Party receiving such reimbursement simultaneously in an amount proportional to the expenditures actually made by such Party *** Approximately 10 lines omitted *** . If the Net Sales are insufficient in any Calendar Quarter to fully reimburse the Parties proportionately as set forth above, reimbursement payments shall be made in a sequential manner first for the Cost of Goods Manufactured for Sale, second for the Third Party License Fees and third for the summed Sales and Marketing Expenses, Assigned Sales Force Adjustment Payments, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges charged to a Party’s Marketing Account with respect to such Calendar Quarter. After such sequential reimbursement payments have been made, the Party having the lower amount remaining in its Marketing Account shall pay to the other Party            ***           of the difference between the amount in such Party’s Marketing Account and the other Party’s Marketing Account.

     (e) Extra Sales Force Effort Reconciliation. Within sixty (60) days after the end of each calendar year, the JSC shall meet to review the Sales Force Effort provided by each of the Parties on a Product-by-Product and country-by-country basis during such calendar year. If, with respect to any Product in any country, a Party’s actual Sales Force Effort during such

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calendar year is materially different from such Party’s Assigned Sales Force Effort for such Product in such country during such calendar year, the JSC shall determine whether it is necessary for either Party to make an adjustment payment to the other Party, which adjustment payment shall be equivalent to:

     *** Approximately 11 lines omitted***

     The Party obligated to make such adjustment payment shall make such payment to the other Party within thirty (30) days after the JSC determines such adjustment payment is necessary.

     6.1.7. Marketing and Promotional Materials. The JSC shall determine the content, quantity and method of distribution of any promotional materials related to the Product in the Territory, provided, however, that all such marketing and promotional materials shall be subject to the approval of AHPC’s and ELAN’s legal, medical affairs, marketing and regulatory affairs departments before any use thereof by either Party. The JSC shall determine which Party will be responsible for preparing and duplicating such marketing and promotional materials and shall provide reasonable quantities of the same to each Party for use by such Party in connection with its Promotion of the Product in the Territory hereunder. Each Party shall use only marketing and promotional materials approved by the JSC. All Copyright and other intellectual property rights in said promotional materials shall remain vested in the Party that owns such promotional materials. Neither Party may independently create, distribute or use sales, promotion or other similar material relating to a Product in the Territory without the prior written consent of either the JSC or the other Party.

     6.1.8. Promotional Claims. Each Party shall limit the claims of safety and efficacy that such Party or its sales force makes for a Product in the Territory to those that are consistent with the approved labeling for such Product in such country of the Territory. Neither Party may add, delete or modify claims of efficacy or safety in its Promotion of any Product in the Territory nor make any changes in Promotion materials and literature approved by the JSC. Each Party’s Detailing and Promotion of a Product in the Territory shall be in strict adherence to all regulatory, professional and legal requirements including, without limitation, FDA’s regulations and guidelines concerning the advertising of prescription drug products, the American Medical Association’s Guidelines on Gifts to Physicians, the PhRMA Guidelines for Marketing Practices, the ACCME Standards for Commercial Support of Continuing Medical Education, the then current Annual Commercialization Plan for the Product and any updates thereto.

     6.1.9. Samples. When Detailing and Sampling the Product, each Party’s professional sales representative shall complete Sample Receipt Forms provided by the

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Distributing Party. A copy of the completed Sample Receipt Forms shall be left with the physician receiving the Detail. Such professional sales representative shall mail to the Distributing Party, in pre-addressed, postage-paid envelopes provided by the Distributing Party, at the close of each business day the original completed Sample Receipt Forms for all Details performed by such professional sales representative that day. A copy of all such Sample Receipt Forms shall be kept by each such professional sales representative. Each Party shall ensure that each of its professional sales representatives fills out the Sample Receipt Forms accurately, completely and timely. The Fully-Absorbed Standard Cost incurred by the Distributing Party in providing and processing Sample Receipt Forms shall be charged by the Distributing Party to its Marketing Account as a Sales and Marketing Expense.

     6.1.10. Communications. Each Party shall be fully responsible for disseminating accurate information regarding a Product to its professional sales representatives based on the Product’s approved labeling and information provided by the JSC.

     6.1.11. Training. Each Party shall be responsible for the training of its own professional sales representatives, in accordance with the training requirements and training programs and using training materials approved by the JSC and shall require each of its professional sales representatives to attend sales training for a Product before their Promotion of such Product in the Territory hereunder. After the initial training meeting, each Party shall periodically provide additional training, in accordance with the training requirements and training programs and using training materials approved by the JSC, to each of its professional sales representatives Promoting Products hereunder. The expenses incurred by each Party in training its professional sales representatives shall be borne by the Party.

     6.1.12. Compliance. In connection with its Promotion of the Product in the Territory, each Party shall comply and shall cause each of its employees, representatives and agents, including, without limitation, each of its professional sales representatives, to comply with all laws and regulations of the Territory and shall do nothing which such Party knows or reasonably should know would jeopardize the goodwill or reputation of either Party or the reputation of any Product.

          6.2. Accounting Considerations         . The Parties have structured the Manufacturing and Commercialization provisions of this Agreement with a view to permitting *** Approximately 3 lines omitted ***. The Parties will use reasonable efforts to cause the current Manufacturing and Commercialization provisions to satisfy the foregoing accounting objectives. Notwithstanding any provision of this Agreement, if ELAN at any time can reasonably demonstrate to AHPC that the Manufacturing and Commercialization provisions do not achieve the foregoing accounting objectives, the Parties agree to negotiate in good faith to achieve these accounting objectives (subject to the provisions of Article 11), which shall, if required, include, but not be limited to, modification of responsibility for Product Distribution in some countries.

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          6.3. Product Pricing. At regular intervals consistent with the preparation of the Commercialization Plan and Annual Commercialization Plan, AHPC shall conduct studies relating to the optimal Product pricing or reimbursement strategies on a country-by-country, or as applicable, regional basis. AHPC shall have sole discretion with respect to the manner, nature and conduct of such studies, but shall consult with and permit ELAN to comment on and provide guidance thereto. AHPC shall present its findings and any recommendations relating to pricing and reimbursement strategies to the JSC in order to permit it to prepare the Commercialization Plan and the Annual Commercialization Plans. No recommendation made by AHPC or discussed by the JSC shall be binding on either Party. AHPC shall have sole decision authority and discretion with respect to all pricing decisions relating to Products in the United States, its territories and possessions, and ELAN shall have sole decision authority and discretion with respect to all pricing decisions relating to Products in all countries of the Territory except the United States, its territories and possessions provided, however, that on a country-by-country basis, in the event that the Parties cannot agree that it would be lawful for AHPC or ELAN to have pricing authority in such country (where confirmed in writing by a mutually acceptable independent outside counsel), the Distributing Party in such country shall have sole decision authority and discretion with respect to all pricing decisions relating to Products in such country.

          6.4. Diligence. Each Party shall use its respective Commercially Reasonable Efforts in carrying out all of its obligations in connection with the Manufacture, Distribution and Commercialization of Products under the then current Annual Commercialization Plan.

7. CONSIDERATION.

          7.1. Reimbursement of Expenditures for Previously Developed Intellectual Property.

          7.1.1. To NEURALAB. On the Effective Date, AHPC shall pay NEURALAB *** Approximately 5 lines omitted *** .

          7.1.2. To AHPC. On the Effective Date, NEURALAB shall pay to AHPC *** Approximately 2 lines omitted*** .

          7.1.3. No Refunds or Credits. The payments set forth in Section 7. 1.1 and 7.1.2 shall not be refundable or creditable and shall not be subject to or create future performance obligations upon either AHPC or ELAN.

          7.2. Additional Payments.

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     7.2.1. One-Time Payments. In consideration of NEURALAB’s contributions to the Research Program and the Development Program, subject to Article 11, AHPC shall pay to NEURALAB the following additional Research and Development expense reimbursement payments, each such payment being due and payable one time only and within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 10 lines omitted ***	***Approximately 3 lines omitted ***

     7.2.2. Pre-Approval Payments. In consideration of NEURALAB contributions to the Research Program and the Development Program, subject to Article 11, AHPC shall pay to NEURALAB the following additional Research and Development expense reimbursement payments, each such payment being due and payable within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 25 lines omitted ***	*** Approximately 13 lines omitted ***

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     7.2.3. Approval Payments. Subject to Article 11, AHPC shall pay to NEURALAB the following payments based on specific approvals set forth below. These payments are for past Research and Development efforts. Each such payment shall be due and payable within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 24 lines omitted ***	*** Approximately 12 lines omitted ***

     7.2.4. Additional Products. Subject to Article 11, each of the additional payments set forth in this Section 7.2 are payable only once with respect to any Product and shall be non-refundable and non-creditable. Notwithstanding the immediately preceding sentence, subject to Article 11, additional payments equal to           ***            of the payment indicated above in Section 7.2.2 and 7.2.3 shall be payable for up to           ***                 R&D Candidates or Products, as applicable, with respect to which each event set forth above occurs; provided that such    ***    additional payments shall only be payable

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if subsequent occurrences of any event result from R&D Candidates or Products, as applicable, that *** Approximately 8 lines omitted ***.

          7.3. Sales Bonus. Subject to Article 11, AHPC shall pay to NEURALAB a one-time sales bonus payment in the amount of                 ***                  within thirty (30) days after the first occasion on which aggregate world-wide Net Sales of a Product or Products under this Agreement, *** Approximately 2 lines omitted ***.

     7.4. Reports and Payments.

     7.4.1. Pre-tax Profit Statements and Payments. After the First Commercial Sale of a Product in the Territory, the Distributing Party, within sixty (60) days after the end of each Calendar Quarter, shall deliver to the other Party a report setting forth for such Calendar Quarter the following information, on a Product-by-Product and country-by-country basis: (i) the Net Sales of such Product in each country of the Territory, (ii) the Pro-Forma Net Profit obtained from the sale of such Product in each country of the Territory, (iii) the deductions made from Net Sales in calculating such Pro-Forma Net Profit, including, without limitation, the computation of Cost of Goods Manufactured for Sale in such detail as the Distributing Party customarily uses for its own internal reporting purposes, or as reasonably requested by the other Party, each Party’s Sales and Marketing Expenses, Third Party License Fees, Assigned Sales Force Adjustment Payments, Distribution Expenses, Post-Approval Research and Regulatory Expenses and Working Capital Charges, and (iv) the amount of the AHPC Pre-tax Profit and the ELAN Pre-tax Profit. No such reports shall be due with respect to any Product before the First Commercial Sale of such Product in the Territory. At the time such report is made, the Distributing Party shall, after reimbursement under Section 6.1.6(d) has been made, remit to the other Party the amount of the AHPC Pre-tax Profit or ELAN Pre-tax Profit, as applicable, if any, allocated to such other Party for such Calendar Quarter after any deductions made in accordance with this Section. The Parties will work together to report to each other estimates of the amounts to be included in such reports prior to the expiration of such sixty (60) day period.

     7.4.2. Taxes and Withholding. All payments under this Agreement will be made without any deduction or withholding for or on account of any tax unless such deduction or withholding is required by applicable laws or regulations. As of the Effective Date, the Parties believe that, under applicable laws and regulations, withholding of taxes on payments made under Section 7.1 and 7.2 is not required, provided, however, that if due to any change in the applicable laws or regulations, or either Party’s interpretation thereof, withholding is required, the provisions of this Section 7.4.2 shall govern. If the paying Party is so required to deduct or withhold such Party will (i) promptly notify the other Party of such requirement, (ii) pay to the relevant authorities the full amount

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required to be deducted or withheld promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against the other Party, (iii) promptly forward to the other Party an official receipt (or certified copy) or other documentation reasonably acceptable to the other Party evidencing such payment to such authorities.

     7.4.3. Currency. All amounts payable and calculations hereunder shall be in United States dollars. As applicable, Net Sales, Pre-tax Profits and any expenses incurred by either Party shall be translated into United States dollars in accordance with the paying Party’s customary and usual currency conversion procedures, consistently applied. If, due to restrictions or prohibitions imposed by national or international authority, payments cannot be made as provided in this Article 7, the Parties shall consult with a view to finding a prompt and acceptable solution, and the paying Party will deal with such monies as the other Party may lawfully direct at no additional out-of-pocket expense to the paying Party.

     7.5. Maintenance of Records; Audits.

     7.5.1. Record Keeping for the Territory. Each Party shall keep and maintain accurate and complete records in connection with the sale by it of Products in the Territory hereunder and each Party shall keep and maintain accurate and complete records showing the expenses incurred and efforts employed by or on behalf of it in Promoting Products in the Territory hereunder, which books and records shall be in sufficient detail to permit the accurate determination of Net Sales, Pre-tax Profits and all other figures necessary for the verification of the allocation of Pre-tax Profits. Each Party shall maintain and cause its Affiliates to maintain such records for a period of at least                 ***                after the end of the calendar year in which they were generated.

     7.5.2. Audits. Upon thirty (30) days prior written notice from a Party (the “Auditing Party”), the other Party (the “Audited Party”) shall permit an independent certified public accounting firm of nationally recognized standing selected by the Auditing Party and reasonably acceptable to the Audited Party, to examine, at the Auditing Party’s sole expense, the relevant books and records of the Audited Party as may be reasonably necessary to verify the accuracy of the reports submitted by the Audited Party in accordance with Section 7.4.1 and the calculation and allocation of Pre-tax Profits. An examination by a Party under this Section 7.5.2 shall occur not more than once in any calendar year and shall be limited to the pertinent books and records for any calendar year ending not more than            ***             before the date of the request. The accounting firm shall be provided access to such books and records at the Audited Party’s facility(ies) where such books and records are normally kept and such examination shall be conducted during the Audited Party’s normal business hours. The

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Audited Party may require the accounting firm to sign a standard non-disclosure agreement before providing the accounting firm access to the Audited Party’s facilities or records. Upon completion of the audit, the accounting firm shall provide both AHPC and ELAN a written report disclosing whether the reports submitted by the Audited Party are correct or incorrect, whether the calculation and allocation of Pre-tax Profits are correct or incorrect, and, in each case, the specific details concerning any discrepancies. No other information shall be provided to the Auditing Party.

     7.5.3. Underpayments/Overpayments. If such accounting firm correctly concludes that additional Pre-tax Profits were due to a Party, the other Party shall pay to such Party such additional Pre-tax Profits together with any interest that may be due thereon as provided in Section 7.6 within thirty (30) days of the date the Parties receives such accountant’s written report so correctly concluding. If an underpayment to an Auditing Party exceeds                 ***                of the Pre-tax Profits that were to be distributed to such Auditing Party, the other Party also shall reimburse the Auditing Party for the out-of-pocket expenses incurred in conducting the audit, except in the event that such underpayment was due to any inaccurate information provided by the Auditing Party.

     7.5.4. Confidentiality. All financial information of a Party which is subject to review under this Section 7.5 shall be deemed to be Confidential Information subject to the provisions of Article 9, and such Confidential Information shall not be disclosed to any Third Party or used for any purpose other than verifying payments to be made by one Party to the other hereunder, provided, however, that such Confidential Information may be disclosed to Third Parties only to the extent necessary to enforce a Party’s rights under this Agreement.

          7.6. Interest. Any payment under this Article 7 that is more than            ***             past due shall thereafter be subject to interest at an annual percentage rate of              ***           . Likewise, any overpayment that is not refunded within            ***             after the date such overpayment was identified shall thereafter be subject to interest at an annual percentage rate of           ***           , provided, however, that if the overpayment is due to errors in reports provided by the overpaid Party, such interest shall accrue from the date the overpayment was made.

          7.7. GAAP. The calculation of all expenditures, payments and reimbursements made by either Party under this Agreement shall be made in accordance with United States generally accepted accounting procedures.

8. INTELLECTUAL PROPERTY.

          8.1. Ownership. All Collaboration Inventions shall be owned jointly by the Parties. All patent applications and patents covering any Collaboration Invention shall be owned

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jointly by the Parties. Nothing in this Section 8.1 shall affect the ownership of Prior Inventions or Non-Collaboration Inventions.

     8.2. Joint Patent Committee.

     8.2.1. Membership. Within thirty (30) days after the Effective Date, ELAN and AHPC shall establish a “Joint Patent Committee” or “JPC” to oversee and direct the continued prosecution of ELAN Patent Rights and the preparation and filing of new patent applications covering Collaboration Inventions. The JPC shall be comprised of one (1) senior patent attorney from each Party as appointed by such Party. A Party may replace its representative from time to time upon written notice to the other Party. The JPC shall exist until the termination of this Agreement.

     8.2.2. Decisions. All decisions of the JPC shall be unanimous, and in the event that a decision cannot be reached by the JPC, the matter shall be referred to the Associate General Counsel – Patents and Trademarks for AHPC and the Vice President, Intellectual Property, ELAN Pharmaceuticals for further review and resolution. In the event that such officers are unable to reach a decision with respect to any such matter, then such matter shall be resolved in accordance with Section 3.1.4.

     8.3. Prosecution and Maintenance of Patent Rights.

     8.3.1. ELAN Patent Rights. Decisions as to whether to file, prosecute and maintain, and in which countries to do so, ELAN Patent Rights licensed to AHPC hereunder, along with other strategic decisions relating thereto, shall be made by the JPC. Based on such decisions, ELAN shall use diligent efforts to prepare, file, prosecute and maintain all of the ELAN Patent Rights which are licensed to AHPC hereunder, using patent counsel that is reasonably acceptable to AHPC. With respect to any such ELAN Patent Right, ELAN shall give AHPC an opportunity to review and comment upon the text of the applications before filing, shall consult with AHPC with respect to such application, and shall supply AHPC with a copy of the applications as filed, together with notice of its filing date and serial number whether such ELAN Patent Rights are filed prior to or after the Effective Date, as well as full copies of the prosecution history for those ELAN Patent Rights filed prior to the Effective Date. ELAN shall keep AHPC advised of the status of the actual and prospective patent filings, including, without limitation, the grant of any ELAN Patent Rights, and shall provide advance copies of any official correspondence related to the filing, prosecution and maintenance of such patent filings for review and comment by AHPC. If ELAN, on a country-by-country basis, elects not to file a patent application or to cease the prosecution and/or maintenance of any such ELAN Patent Right in such country, ELAN shall provide AHPC with written notice immediately upon the decision to not file or continue the prosecution of such patent application or maintenance of such patent and at least sixty (60) days before ceasing prosecution and/or maintenance of such ELAN Patent Right and, in such case, shall permit AHPC, at AHPC’s sole discretion, to file and/or continue prosecution and/or maintenance of such Patent Right in such country at AHPC’s own expense. If AHPC elects to continue prosecution or maintenance, ELAN, upon AHPC’s request, shall assign such Patent Right to AHPC and execute such documents and perform such acts, at

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AHPC’s expense, as may be reasonably necessary to permit AHPC to file, prosecute and/or maintain such ELAN Patent Right in such country. Notwithstanding the foregoing, the rights of AHPC under this Section 8.3.1 shall not apply where the exercise of such rights would violate applicable law or any agreement between ELAN and a Third Party.

     8.3.2. Collaboration Patent Rights.

          (a) Upon the identification of a Collaboration Invention, the JPC shall (i) promptly discuss such Collaboration Invention, (ii) promptly discuss the desirability of filing a United States patent application covering such Collaboration Invention, as well as any foreign counterparts, (iii) make the final decision with respect to any such filings as soon as practicable, and (iv) designate the Party to be responsible for the supervision of the preparation, filing and prosecution of such patent application by outside patent counsel reasonably acceptable to the JPC. Such outside patent counsel shall be instructed to act in the best interests of both Parties taking into consideration their relative interests under this Agreement.

          (b) The Party responsible for the preparation, filing and prosecution of a patent application covering a Collaboration Invention shall provide the other Party with a copy of any patent application which first discloses such Collaboration Invention prior to filing the first of such applications in any jurisdiction, if possible, for review and comment by the other Party. The Party responsible for each patent application shall keep the other Party advised of the status of the actual and prospective patent filings, including, without limitation, the grant of any Collaboration Patent Rights, and shall provide advance copies of any official correspondence related to the filing, prosecution and maintenance of such patent filings for review and comment by the other Party. The Party receiving any such patent application and official correspondence shall maintain such information in confidence.

          (c) Subject to (i) the grant of licenses to AHPC and ELAN under Article 2, and (ii) the exclusivity provisions of Section 2.4, each Party shall be free to exploit Collaboration Patent Rights within the Territory without restriction and without payment of any compensation to the other Party.

     8.3.3. Patent Term Extensions. The Parties shall cooperate, if necessary and appropriate, with each other in gaining patent term extension, including without limitation, supplementary protection certificates and any other extensions that are now or become available in the future wherever applicable to Patent Rights covering Products. The Parties shall, if necessary and appropriate, use reasonable efforts to agree upon a joint strategy relating to patent term extensions, but, in the absence of mutual agreement with respect to any extension issue, a patent shall be extended if either Party elects to extend such patent. All filings for such extension shall be made by the Party to whom the patent is assigned, provided, however, that in the event that the Party to whom the patent is assigned elects not to file for an extension, such Party shall (i) inform the other Party of its intention not to file and (ii) grant the other Party the right to file for such extension.

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     8.3.4. Costs and Expenses. The Parties shall                 ***                all costs and expenses of filing, prosecuting, maintaining and extending the Collaboration Patent Rights. AHPC shall reimburse ELAN for            ***             of the reasonable costs associated with the ELAN Patent Rights incurred after the Effective Date. Notwithstanding the foregoing, any expenses regarding intellectual property within the ELAN Patent Rights that is not limited to Betabloc or Improvement Products or the Field, as well as any expenses regarding intellectual property that is non-exclusively licensed to AHPC, shall be paid solely by ELAN.

     8.4. Trademarks.

     8.4.1. Product Trademark. All Products shall be sold in the Territory under Trademarks selected by the JSC. AHPC shall own such Trademarks and shall be responsible for the filing, prosecution and maintenance of such Trademarks in each country of the Territory. The JSC shall use its best efforts to select a world-wide Trademark for each Product. The costs of obtaining and maintaining said Trademarks shall be shared equally by the Parties.

     8.4.2. Party Name on Product Promotional Material. To effectuate the purposes of this Agreement, AHPC shall grant to Elan an exclusive, royalty free license in a separate written agreement, to use Trademarks in connection with the Commercialization of a Product in a country where ELAN is the Distributing Party. With respect to Product promotional materials, packaging, labels or package inserts, to the extent such items identify or otherwise make reference to either of the Parties, ELAN and AHPC shall both be presented and described with equal prominence and emphasis as having joined and participated in the joint Development and Commercialization of the Product (subject to compliance with the applicable laws and regulations of each country in which such Product is to be presented). All documentary information and oral presentations (where practical) regarding the Detailing and Promotion of Products shall state this arrangement and display the names, logos and company trademarks of ELAN and AHPC with equal prominence.

     8.5. Enforcement of Patent Rights.

     8.5.1. Notice. If ELAN or AHPC becomes aware that any ELAN Intellectual Property, AHPC Intellectual Property or Collaboration Patent Rights is infringed or misappropriated by a Third Party or is subject to a declaratory judgment action arising from such infringement, ELAN or AHPC, as the case may be, shall promptly notify the other Party.

     8.5.2. Enforcement by AHPC. AHPC shall have the first right (but not the obligation), at its sole expense, to enforce the Collaboration Patent Rights, AHPC Patent

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     Rights and ELAN Patent Rights; provided, however, that (i)ELAN shall have the right to join such proceeding at any time at its own expense and will do so at any time if it is deemed to be a necessary Party, and (ii)AHPC shall not admit the invalidity or unenforceability of any Collaboration Patent Rights or ELAN Patent Rights without ELAN’s prior written consent. AHPC shall keep ELAN reasonably informed on a quarterly basis, in person or by telephone, prior to and during any such enforcement. ELAN shall assist AHPC, upon request and at ELAN’s expense in taking any action to enforce the Collaboration Patent Rights or ELAN Patent Rights and shall join in any such action if deemed to be a necessary party. AHPC shall incur no liability to ELAN as a consequence of such litigation or any unfavorable decision resulting therefrom, including any decision holding any of the Collaboration Patent Rights or ELAN Patent Rights invalid, not infringed or unenforceable.

     8.5.3. Enforcement by ELAN. If AHPC fails to abate an infringement of the Collaboration Patent Rights or ELAN Patent Rights, or to file an action to abate such infringement, within six (6) months after a written request from ELAN to do so, or if AHPC discontinues the prosecution of any such action, ELAN at its expense may, in its discretion, undertake such action as it determines appropriate (other than the grant of a license to the allegedly infringing Third Party) to enforce such Collaboration Patent Rights or ELAN Patent Rights. ELAN shall keep AHPC reasonably informed on a quarterly basis, in person or by telephone, prior to and during any such enforcement. In such case, AHPC shall assist ELAN, upon request and at AHPC’s sole expense, in taking any action to enforce the Collaboration Patent Rights or ELAN Patent Rights.

     8.5.4. Recoveries. All monies recovered upon the final judgment or settlement of any such action shall be used first to reimburse the costs and expenses (including reasonable attorneys’ fees and costs) of AHPC and ELAN and thereafter the Parties shall                ***               .

     8.6. Third Party Claims.

     8.6.1. Third Party Claims — Course of Action. If the Commercialization of a Product, under this Agreement, is alleged by a Third Party to infringe a Third Party’s patent or misappropriate a Third Party’s trade secret, the Party becoming aware of such allegation shall promptly notify the other Party thereof, in writing, reasonably detailing the claim.

     8.6.2. Negotiation with Third Party. The JSC shall determine which Party shall negotiate with said Third Party for a suitable license or assignment and execute such license or assignment, provided, however, that such Party shall enter into no such agreement unless it has first obtained the other Party’s written approval of the terms of

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such agreement, including the amounts of any royalties or payments, which approval shall not be unreasonably withheld. If such negotiation results in a consummated agreement, such Party shall make all payments to the Third Party and such payments shall *** Approximately 4 lines omitted *** .

     8.6.3. Third Party Suit. If a Third Party sues a Party (the “Sued Party”) alleging that the Sued Party’s or the Sued Party’s Sublicensees’ Research, Development, Manufacture or Commercialization of any R&D Candidate and/or Product infringes or will infringe said Third Party’s patent or misappropriates said Third Party’s trade secret, then upon the Sued Party’s request and in connection with the Sued Party’s defense of any such Third Party suit, the other Party shall provide reasonable assistance to the Sued Party for such defense and shall join such suit if deemed a necessary party. The Sued Party shall keep the other Party, if such other Party has not joined in such suit, reasonably informed on a quarterly basis, in person or by telephone, prior to and during the pendency of any such suit. The Sued Party shall not admit the invalidity of any patent within the Collaboration Patent Rights, the ELAN Patent Rights or the AHPC Patent Rights, nor settle any such suit, without written consent of the other Party. The Parties shall *** Approximately 3 lines omitted ***.

     8.7. Third Party Licenses.

     8.7.1. General. If either Party believes that there exists Third Party intellectual property that constitutes Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be, it shall notify the JSC and the JPC. The JPC shall then determine whether or not such Third Party intellectual property constitutes Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be. If the determination of the JPC is affirmative, the JSC shall determine whether, on what terms (economic or otherwise), and by which Party (the “Licensing Party”) such Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be, shall be licensed for the purposes of this Agreement. Prior to entering into a license agreement with respect to such Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be, the Licensing Party shall submit the proposed license agreement to the JSC for approval. If the JSC approves the proposed license agreement, the Licensing Party shall enter into such license agreement and shall pay the Third Party License Fees due thereunder, subject to reimbursement in accordance with Section 4.3.5 or 6.1.6(d), as applicable. Any agreement entered into pursuant to this Section 8.7.1 and any ELAN In-License or other agreements between a Party and any Third Party existing as of the Effective Date and relating to either Elan Intellectual Property or AHPC Intellectual Property, shall not be amended without the prior written consent of the JSC.

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     8.7.2. Failure to Obtain a Third Party License. If, within ninety (90) days after a Licensing Party has been instructed by the JSC, pursuant to Section 8.7.1, to attempt to enter into a license agreement with respect to Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be, it is determined by the JSC that no license is obtainable on commercially reasonably terms despite a good faith attempt by such Licensing Party to obtain such license, then (a) neither Party shall practice the Third Party intellectual property that was the subject of the proposed license agreement and (b) in the case of Blocking Third Party Intellectual Property only, neither Party shall proceed with the Research, Development, Manufacture and/or Commercialization of an R&D Candidate or Product, as the case may be, to the extent doing so would infringe such Blocking Third Party Intellectual Property.

     8.7.3. Resolution of Disputes. If the JPC is unable to reach a determination under Section 8.7.1 with respect to whether Third Party intellectual property constitutes Blocking Third Party Intellectual Property or Enhancing Third Party Intellectual Property, as the case may be, then such issue shall be presented to the JSC for determination. If the JSC is unable to resolve such issue, or is unable to reach a determination under Section 8.7.1 or 8.7.2 with respect to any issue relating to a proposed license agreement, then such issue shall be evaluated in accordance with the procedures set forth in Section 3.1.4. If such issue cannot be resolved, pursuant to Section 3.1.4, then *** Approximately 6 lines omitted ***.

          8.8. Patent Marking. Each Party agrees to mark and have its Affiliates and all Sublicensees mark all Products (or their containers or labels) sold pursuant to this Agreement in accordance with the applicable statutes or regulations in the country or countries of manufacture and sale thereof.

          8.9. Patent Certifications. Each Party shall immediately give written notice to the other of any certification of which it becomes aware filed pursuant to 21 U.S.C. § 355(b)(2)(A), or § 355(j)(2)(A)(vii) (or any amendment or successor statute thereto) claiming that the ELAN Patent Rights, AHPC Patent Rights or Collaboration Patent Rights covering any Product are invalid or that infringement will not arise from the manufacture, use or sale of such Product by a Third Party.

     8.10. Certain Actions.

     8.10.1. ELAN. During the term of this Agreement, ELAN shall use reasonable efforts not to diminish the rights under ELAN Intellectual Property or ELAN/Lilly Patent Rights granted to AHPC under this Agreement, including without limitation by not committing or permitting any actions or omissions which would cause the breach of any agreements between itself and Third Parties (including ELAN In-Licenses) which

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provide for intellectual property rights applicable to the Research, Development, Manufacture or Commercialization of any R&D Candidate or Product and shall provide AHPC with prompt written notice of any alleged breach of any such agreements.

     8.10.2. AHPC. During the term of this Agreement, AHPC shall use reasonable efforts not to diminish the rights under AHPC Intellectual Property granted to ELAN under this Agreement, including without limitation by not committing or permitting any actions or omissions which would cause the breach of any agreements between itself and Third Parties which provide for intellectual property rights applicable to the Research, Development, Manufacture or Commercialization of any R&D Candidate or Product and shall provide ELAN with prompt written notice of any alleged breach of any such agreements.

          8.11. Limitation. Notwithstanding any other provision in this Article 8, the Parties acknowledge and understand that ELAN shall not be obligated to prepare, file, prosecute, and maintain patents and patent applications, or to bring or pursue enforcement proceedings or defend declaratory judgment actions regarding the ELAN Patent Rights if, and to the extent that, ELAN is not entitled to do so under applicable agreements with Third Parties.

9.  CONFIDENTIALITY.

          9.1. Confidentiality. During the term of this Agreement and for a period of                 ***                following the expiration or earlier termination thereof, each Party shall maintain in confidence the Confidential Information of the other Party, and shall not disclose, use or grant to a Third Party the right to use any of the Confidential Information of the other Party except on a need-to-know basis to such Party’s directors, officers and employees, and to such

          Party’s consultants working on such Party’s premises, to the extent such disclosure is reasonably necessary in connection with such Party’s activities as expressly authorized by this Agreement. To the extent that disclosure to any person is authorized by this Agreement, prior to disclosure, a Party shall obtain written agreement of such person to hold in confidence and not disclose, use or grant the use of the Confidential Information of the other Party except as expressly permitted under this Agreement. Each Party shall notify the other Party promptly upon discovery of any unauthorized use or disclosure of the other Party’s Confidential Information.

          9.2. Terms of Agreement. Neither Party shall disclose any terms or conditions of this Agreement to any Third Party without the prior written consent of the other Party; provided, however, that a Party may disclose the terms or conditions of this Agreement, (a) on a need-to-know basis to its legal and financial advisors, who are obligated to maintain such information in confidence, and (b) to a Third Party (who is obligated to maintain such information in confidence) in connection with (i) an equity investment in ELAN by such Third Party, which investment is in excess of                 ***                of ELAN’s market capitalization at such time,

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(ii) a merger, consolidation or similar transaction by such Party, or (iii) the sale of all or substantially all of the assets of such Party relating to the subject matter of this Agreement. Notwithstanding the foregoing, prior to execution of this Agreement, the Parties have agreed upon the substance of information that can be used to describe the terms and conditions of this transaction, and each Party may disclose such information, as modified by mutual written agreement the Parties, without the consent of the other Party.

          9.3. Permitted Disclosures. The confidentiality obligations under this Article 9 shall not apply (a) to the extent that a Party is required to disclose information by applicable law, regulation or order of a governmental agency or a court of competent jurisdiction, or (b) to the extent necessary or desirable to allow either Party (where possible, with adequate safeguards for confidentiality) to defend against litigation or to file and prosecute patent applications; provided, however, in either such case that such Party shall provide written notice thereof to the other Party, consult with the other Party with respect to such disclosure and provide the other Party sufficient opportunity to object to any such disclosure or to request that the disclosing Party seek confidential treatment thereof, in which event the disclosing Party shall use all reasonable efforts to accommodate the other Party’s requests.

          9.4. Publications. During the term of this Agreement, each Party will submit to the other Party for review and approval all proposed academic, scientific and medical publications and public presentations relating to Collaboration Intellectual Property, the Research Program, Development Program, R&D Candidates and/or Products for review in connection with preservation of exclusive Patent Rights and/or to determine whether Confidential Information should be modified or deleted, provided, however that after the approval of an academic, scientific or medical publication and/or public presentation has been given, then such Party shall not have to resubmit any such information for re-approval should it be republished or publicly disclosed in another form. Written copies of such proposed publications and presentations shall be submitted to the other Party no later than sixty (60) days before submission for publication or presentation and such other Party shall provide its comments with respect to such publications and presentations within thirty (30) days following its receipt of such written copy. Notwithstanding the foregoing, no such publication or presentation shall be made until such publication or presentation has been approved by each Party’s respective patent counsel. ELAN and AHPC will each comply with standard academic practice regarding authorship of scientific publications and recognition of contribution of other parties in any publications relating to the Research Program, the Development Program, R&D Candidates, Products and/or Collaboration Intellectual Property.

10. REPRESENTATIONS AND WARRANTIES

          10.1. Representations and Warranties of Each Party. As of the Effective Date, each of ELAN and AHPC hereby represents and warrants to the other Party hereto as follows:

     (a) it is a corporation or entity duly organized and validly existing under the laws of the state or other jurisdiction of its incorporation or formation;

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     (b) the execution, delivery and performance of this Agreement by such Party has been duly authorized by all requisite corporate action and does not require any shareholder action or approval;

     (c) it has the power and authority to execute and deliver this Agreement and to perform its obligations hereunder;

     (d) the execution, delivery and performance by such Party of this Agreement and its compliance with the terms and provisions does not and will not conflict with or result in a breach of any of the terms and provisions of or constitute a default under (i) a loan agreement, guaranty, financing agreement, agreement affecting a product or other agreement or instrument binding or affecting it or its property; (ii) the provisions of its charter or operative documents or bylaws; or (iii) any order, writ, injunction or decree of any court or governmental authority entered against it or by which any of its property is bound;

     (e) its Patent Rights and Know-How are existing and, to the best of its knowledge, are not invalid or unenforceable, in whole or in part; and

     (f) it has the full right, power and authority to grant all of the right, title and interest in the licenses granted to the other Party under this Agreement.

          10.2. Additional Representations and Warranties of ELAN. ELAN hereby represents and warrants to AHPC that as of the Effective Date:

     (a) ELAN has the sole right, title and interest in and to the ELAN Patent Rights listed in Exhibit 10.2(a) to this Agreement;

     (b) no ELAN Patent Rights are subject to, or were developed pursuant to, any funding agreement with any government or government agency, except as provided on Exhibit 10.2(b) to this Agreement;

     (c) to ELAN’s knowledge, the use of Ab in the Field does not infringe any issued U.S. or European patents owned or controlled by any Third Party (except as licensed to ELAN by such Third Party);

     (d) ELAN is not in breach of any material provisions of any agreements with Third Parties (including without limitation the ELAN In-Licenses) relating to the ELAN Patent Rights;

     (e) ELAN has neither represented nor conceded that Lilly has rights to the use of Ab in the Field;

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            *** Approximately 3 lines omitted ***           

           *** Approximately 3 lines omitted ***            

The outcome of the ELAN/Lilly Litigation shall not be determinative as to the absence or presence of a breach of the foregoing representations and warranties in Sections 10.1 and 10.2.

          10.3. Additional Representations and Warranties of AHPC. AHPC hereby represents and warrants to ELAN that as of the Effective Date:

     (a) AHPC has the sole right, title and interest in and to the AHPC Patent Rights listed in Exhibit 10.3(a) to this Agreement;

     (b) No AHPC Patent Rights are subject to, or were developed pursuant to any funding agreement with any government or government agency, except as provided in Exhibit 10.3(b) to this Agreement; and

     (c) AHPC is not in breach of any material provisions of any agreements with Third Parties relating to the AHPC Patent Rights.

          10.4. Representation by Legal Counsel. Each Party hereto represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall exist or be implied against the Party which drafted such terms and provisions.

          10.5. No Inconsistent Agreements. Neither Party has in effect and after the Effective Date neither Party shall enter into any oral or written agreement or arrangement that would be inconsistent with its obligations under this Agreement.

          10.6. Disclaimer. THE FOREGOING WARRANTIES OF EACH PARTY ARE IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF NONINFRINGEMENT, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR ANY IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY SPECIFICALLY EXCLUDED AND DISCLAIMED.

11. *** Approximately 185 lines omitted ***

12. GOVERNMENT APPROVALS.

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          12.1. HSR Filing. Each of ELAN and AHPC shall file, as soon as practicable after the date this Agreement is signed by each of the Parties, with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) the notification and report form (the “Report”) required under the HSR Act with respect to the transactions as contemplated hereby and shall reasonably cooperate with the other Party to the extent necessary to assist the other Party in the preparation of its Report and to proceed to obtain necessary approvals under the HSR Act, including but not limited to the expiration or earlier termination of any and all applicable waiting periods required by the HSR Act. Each Party shall bear its own expenses, including, without limitation, legal fees incurred in connection with preparing such filings, except that AHPC shall pay any HSR filing fees required of either Party.

          12.2. ELAN’s and AHPC’s Obligations. Each of ELAN and AHPC shall use its good faith efforts to eliminate any concern on the part of any court or government authority regarding the legality of the proposed transaction, including, if required by federal or state antitrust authorities, promptly taking all steps to secure government antitrust clearance, including, without limitation, cooperating in good faith with any government investigation including the prompt production of documents and information demanded by a second request for documents and of witnesses if requested.

          12.3. Additional Approvals. ELAN and AHPC will cooperate and use respectively all reasonable efforts to make all other registrations, filings and applications, to give all notices and to obtain as soon as practicable all governmental or other consents, transfers, approvals, orders, qualifications authorizations, permits and waivers, if any, and to do all other things necessary or desirable for the consummation of the transactions as contemplated hereby. Neither Party shall be required, however, to divest or out-license products or assets or materially change its business if doing so is a condition of obtaining approval under the HSR Act or other governmental approvals of the transactions contemplated by this Agreement.

          12.4. Termination. If a Report is required to be filed under the HSR Act, either Party may, before the Effective Date, terminate this Agreement by written notice to the other Party, if, within one hundred fifty (150) days after the Report is filed in accordance with Section 12.1, approval of the transactions contemplated by this Agreement under the HSR Act has not been obtained or the notice and waiting period, as may be extended by the FTC, under the HSR Act has not expired without adverse action regarding this Agreement or the transactions contemplated hereby. If this Agreement is terminated pursuant to this Section 12.4, then, notwithstanding any provision in this Agreement to the contrary, neither Party shall have any further obligation to the other Party with respect to the subject matter of this Agreement except for the obligations set forth in Article 9, which obligations shall survive any termination of this Agreement.

13. TERM AND TERMINATION.

          13.1. Term. The term of this Agreement will commence on the Effective Date and, unless earlier terminated as provided in Article 11, this Article13 or in Section 12.4, shall continue in full force and effect on a Product-by-Product and country-by-country basis for so long as any R&D Candidate is being Developed or any Product is being sold under this

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Agreement. Notwithstanding the foregoing, the Research Term shall be as set forth in Section 4.1.2, unless this Agreement is terminated as provided in Article11, this Article 13 or in Section 12.4.

          13.2. Termination for Cause.

          13.2.1. Termination for Cause. This Agreement may be terminated effective immediately by written notice by either Party at any time during the term of this Agreement for a continuing material breach or recurring material breaches by the other Party, which breach or breaches remain uncured for            ***           in the case of nonpayment of any amount due (unless there exists a bona fide dispute as to whether such payment is owing, in which case the            ***             period shall be tolled pending resolution of such dispute) and               ***               for all other breaches, each measured from the date written notice of such breach is given to the breaching Party, provided, however, that if such breach is not susceptible of cure within the stated period and the breaching Party uses diligent good faith efforts to cure such breach, the stated period will be extended by an additional            ***            .

     13.2.2. Effect of Termination for Cause on Licenses. If a Party (the “Terminating Party”) terminates this Agreement pursuant to this Section 13.2 or pursuant to Section 13.7.3:

     (a) all licenses granted by the Terminating Party to the other Party hereunder will automatically terminate;

     (b) all licenses granted by the other Party to the Terminating Party will become fully paid up, irrevocable, perpetual, royalty-free licenses;

     (c) the other Party will assign to the Terminating Party all right, title and interest in and to: (i) all regulatory filings and Regulatory Approvals pertaining to any Product which regulatory filings and Regulatory Approvals, if any, are Controlled by the other Party, (ii) all of the other Party’s interest in any Trademark, including, without limitation, the goodwill symbolized by such Trademark used for Products, and (iii) all of the other Party’s interest in any Copyrights necessary or useful for Commercializing Products;

     (d) the other Party will grant to the Terminating Party a worldwide, exclusive (even as to the other Party) license to practice any invention claimed in the Collaboration Patent Rights and to practice the Collaboration Know-How for all research and commercial purposes in the Field; and

     (e) the other Party will have no right to receive a share of Pre-tax Profits or any other payments which may result from the sale of any Product, the occurrence of any event or the conduct of any activity after the effective date of such termination, provided,

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however, that the other Party shall remain entitled to receive any payments that accrued before the effective date of such termination.

     13.3. Termination for Convenience.

     13.3.1. Right to Terminate. Subject to adjustment as set forth in Section 13.7.3, at any time                                                                  ***                                                     , AHPC may terminate this Agreement upon one hundred eighty (180) days prior written notice to ELAN (a “Termination for Convenience”).

     13.3.2. Effect of Termination for Convenience. If AHPC elects to effect a Termination for Convenience:

     (a) the licenses under AHPC Intellectual Property granted by AHPC to ELAN shall be limited in scope so that they only permit ELAN to continue Research, Development, Manufacture and Commercialization of R&D Candidates and Products created by the Parties prior to such termination, and as so limited will become fully paid up, irrevocable, perpetual, royalty-free licenses, and all other licenses granted by AHPC to ELAN will automatically terminate;

     (b) all licenses granted by ELAN to AHPC will automatically terminate;

     (c) AHPC will assign to ELAN all right, title and interest in and to: (i) all regulatory filings and Regulatory Approvals pertaining to any Product created by the Parties prior to such termination, which regulatory filings and Regulatory Approvals, if any, are Controlled by AHPC, (ii) all of AHPC’s interest in any Trademark, including, without limitation, the goodwill symbolized by such Trademark used for Products created by the Parties prior to such termination, and (iii) all of AHPC’s interest in any Copyrights necessary or useful for Commercializing Products created by the Parties prior to such termination;

     (d) AHPC will grant to ELAN a worldwide, exclusive (even as to AHPC) license to practice any invention claimed in the Collaboration Patent Rights and to practice the Collaboration Know-How for all research and commercial purposes in the Field; and

     (e) AHPC will have no right to receive a share of Pre-tax Profits or any other payments which may result from the sale of any Product, the occurrence of any event or the conduct of any activity after the effective date of such termination, provided, however, that AHPC shall remain entitled to receive any payments that accrued before the effective date of such termination.

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          13.4. Termination Pursuant to Section 11.2. In the event of a termination under Section 11.2, then, notwithstanding any provision of this Agreement to the contrary, neither Party shall have any further obligation to the other Party with respect to the subject matter of this Agreement except for the obligations set forth in Article 9, which obligations shall survive any termination of this Agreement.

          13.5. Termination for Failure to Reach Certain Net Sales Levels.

     13.5.1. Right to Terminate. If Net Sales of Products during a calendar year fail to reach *** Approximately 3 lines omitted *** then either Party (the “Section 13.5 Terminating Party”) may terminate this Agreement upon one hundred eighty (180) days prior written notice to the other Party.

     13.5.2. Effect on Other Rights and Obligations. If a Party terminates this Agreement in accordance with Section 13.5.1, then: (a) all rights to Research, Develop, Manufacture and Commercialize R&D Candidates and Products shall vest in the other Party; (b) all licenses granted to the Section 13.5 Terminating Party hereunder shall terminate; (c) the Section 13.5 Terminating Party shall assign to the other Party all right, title and interest in and to: (i) all regulatory filings and Regulatory Approvals pertaining to any Product which regulatory filings and Regulatory Approvals, if any, are owned or otherwise controlled by the Section 13.5 Terminating Party, (ii) all of the Section 13.5 Terminating Party’s interest in any Trademark, including, without limitation, the goodwill symbolized by such Trademark used for Products, and (iii) all of the Section 13.5 Terminating Party’s interest in any copyrights necessary or useful for Commercializing Products; (d) the Section 13. 5 Terminating Party shall grant to the other Party a worldwide, exclusive (even as to the Section 13.5 Terminating Party) license to practice any invention claimed in the Collaboration Patent Rights and to practice the Collaboration Know-How for all research and commercial purposes in the Field; and (e) no further payments shall be required under Article 7, except that the other Party shall thereafter pay the Section 13.5 Terminating Party a Trademark and Know-How royalty on its Net Sales of each Product (on a Product-by-Product basis) as follows:

*** Approximately 5 lines omitted ***

     13.6. Provision for Insolvency.

     13.6.1. Termination. This Agreement may be terminated by written notice by either Party at any time during the term of this Agreement upon the declaration by a court of competent jurisdiction that the other Party is bankrupt and, pursuant to the U.S. Bankruptcy Code such other Party’s assets are to be liquidated, the filing or institution of bankruptcy, liquidation or receivership proceedings (other than reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code), or upon an assignment of a

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substantial portion of the assets for the benefit of creditors by the other Party, or in the event a receiver or custodian is appointed for such Party’s business, or if a substantial portion of such Party’s business is subject to attachment or similar process; provided, however, that in the case of any involuntary bankruptcy proceeding such right to terminate shall only become effective if the proceeding is not dismissed within sixty (60) days after the filing thereof.

     13.6.2. Effect on Licenses. All rights and licenses granted under or pursuant to this Agreement by one Party to the other Party are, for all purposes of Section 365(n) of Title 11 of the United States Code (“Title 11”), licenses of rights to “intellectual property” as defined in Title 11. Each Party agrees that the other Party, as licensee of such rights under this Agreement shall retain and may fully exercise all of its rights and elections under Title 11. Each Party agrees during the term of this Agreement to create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, to the extent feasible, of all such intellectual property. If a case is commenced by or against a Party under Title 11 (the “Title 11 Party”), such Party (in any capacity, including debtor-in-possession) and its successors and assigns (including, without limitation, a Title 11 Trustee) shall, as the other Party may elect in a written request, immediately upon such request:

     (i) perform all of the obligations provided in this Agreement to be performed by the Title 11 Party including, where applicable and without limitation, providing to the other Party portions of such intellectual property (including embodiments thereof) held by the Title 11 Party and such successors and assigns or otherwise available to them; or

     (ii) provide to the other Party all such intellectual property (including all embodiments thereof) held by the Title 11 Party and such successors and assigns or otherwise available to them; and

     (iii) not interfere with the rights of the other Party under this Agreement, or any agreement supplemental hereto, to such intellectual property (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity.

     13.6.3. Rights to Intellectual Property. If a Title 11 case is commenced by or against the Title 11 Party, and this Agreement is rejected as provided in Title 11, and the other Party elects to retain its rights hereunder as provided in Title 11, then the Title 11 Party (in any capacity, including debtor-in-possession) and its successors and assigns (including, without limitation, a Title 11 Trustee) shall provide to the other Party all such intellectual property (including all embodiments thereof) held by the Title 11 Party and such successors and assigns, or otherwise available to them, immediately upon the other Party’s written request. Whenever the Title 11 Party or any of its successors or assigns provides to the other Party any of the intellectual property licensed hereunder (or any embodiment thereof) pursuant to this Section 13.6, the other Party shall have the right to perform the obligations of the Title 11 Party hereunder with respect to such intellectual property, but neither such provision nor such performance by the other Party shall release the Title 11 Party from any such obligation or liability for failing to perform it.

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     13.6.4. Additional Rights. All rights, powers and remedies of a Party provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including, without limitation, Title 11) in the event of the commencement of a Title 11 case by or against the Title 11 Party. A non-Title 11 Party, in addition to the rights, power and remedies expressly provided herein, shall be entitled to exercise all other such rights and powers and resort to all other such remedies as may now or hereafter exist at law or in equity (including, without limitation, Title 11) in such event. The Parties agree that they intend the foregoing rights to extend to the maximum extent permitted by law, including, without limitation, for purposes of Title 11:

     (a) the right of access to any intellectual property (including all embodiments thereof) of the Title 11 Party, or any Third Party with whom the Title 11 Party contracts to perform an obligation of the Title 11 Party under this Agreement, and, in the case of the Third Party, which is necessary for the Research, Development, Manufacture and Commercialization of Products; and

     (b) the right to contract directly with any Third Party described in Section 2.3 to complete the contracted work.

     13.7. Provision for Certain Changes of Control.

     13.7.1 Change of Control Notice. A Party subject to a Change of Control shall provide, where possible, written notice to the other Party (the “Section 13.7 Party”) at least sixty (60) days prior to the Change of Control.

     13.7.2 *** Approximately 20 lines omitted ***

     13.7.3 Right to Terminate. This Agreement may be terminated effective immediately by written notice by either Party (the “Section 13.7 Terminating Party”) at any time within sixty (60) days after the Section 13.7 Terminating Party learns or is notified in writing of a Change of Control of the other Party, if, within such sixty (60) day period such other Party does not provide written confirmation reasonably satisfactory to the Section 13.7 Terminating Party to the effect that: (i) after such Change of Control, the Research Program and Development Program contemplated by this Agreement will have a priority which is equal to or greater than the priority that the Research Program and Development Program had in such other Party’s overall business organization prior to such Change in Control and (ii) such other Party will continue to meet its obligations under this Agreement           ***           . If applicable, in order to prevent the Section 13.7 Terminating Party from exercising its right of termination under this Section 13.7.3, the Party undergoing a Change of Control will, in addition to providing the written confirmation specified in the preceding sentence, *** Approximately 3 lines

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omitted ***. In the event of a termination pursuant to this Section, the effects of termination set forth in Section 13.2.2 shall apply.

     13.8. Survival of Certain Obligations. Expiration or termination of this Agreement shall not relieve the Parties of any obligation accruing before such expiration or termination, and the provisions of the last sentence of Section 4.1.2, Section 7.5, Article 9 and Article 13 shall survive the expiration of the Agreement. Any expiration or early termination of this Agreement shall be without prejudice to the rights of either Party against the other accrued or accruing under this Agreement before termination, including, without limitation, the obligation to distribute Pre-tax Profits for Product(s) sold before such termination.

14. PRODUCT LIABILIlTY, INDEMNIFICATION AND INSURANCE.

     14.1. Sharing of Product Liability Expenses. Except where proximately caused by the gross negligence or willful misconduct of a Party seeking reimbursement, the Parties shall *** Approximately 2 lines omitted *** arising out of or caused by (a) the Manufacture of a Product; (b) the death or bodily injury of any person on account of the use of a Product; and/or (c) any recall or withdrawal of a Product (collectively, “Product Liability Claims”).

     14.2. Indemnification by AHPC. AHPC will indemnify, defend and hold harmless ELAN, its Affiliates, and each of its and their respective employees, officers, directors and agents (each, an “ELAN Indemnified Party”) from and against any and all liability, loss, damage, expense (including reasonable attorneys’ fees and expenses) and cost (collectively, a “Liability”) that the ELAN Indemnified Party may be required to pay to one or more Third Parties resulting from or arising out of:

     (a) any claims of any nature, other than Product Liability Claims or claims by Third Parties relating to patent infringement, arising out of the conduct of the Research Program and Development Program by, on behalf of, or under the authority of AHPC (other than by ELAN);

     (b) any AHPC representation or warranty set forth herein being untrue in any material respect when made; and/or

     (c) any Product Liability Claims proximately caused by the gross negligence or willful misconduct of AHPC;

except in each case, to the extent caused by the gross negligence or willful misconduct of ELAN or any ELAN Indemnified Party. Notwithstanding the foregoing, AHPC shall have no obligation

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to defend, indemnify or hold harmless any ELAN Indemnified Party from and against any Liability arising out of or resulting from the infringement of a Third Party patent.

     14.3. Indemnification by ELAN. ELAN will indemnify, defend and hold harmless AHPC, its Affiliates, sublicensees, distributors and each of its and their respective employees, officers, directors and agents (each, an “AHPC Indemnified Party”) from and against any and all Liabilities that the AHPC Indemnified Party may be required to pay to one or more Third Parties arising out of:

     (a) any claims of any nature, other than Product Liability Claims or claims by Third Parties relating to patent infringement, arising out of the conduct of the Research Program by, on behalf of, or under the authority of ELAN (other than by AHPC);

     (b) any ELAN representation or warranty set forth herein being untrue in any material respect when made; and/or

     (c) any Product Liability Claims proximately caused by the gross negligence or willful misconduct of ELAN;

except in each case, to the extent caused by the gross negligence or willful misconduct of AHPC or any AHPC Indemnified Party. Notwithstanding the foregoing, ELAN shall have no obligation to defend, indemnify or hold harmless any AHPC Indemnified Party from and against any Liability arising out of or resulting from the infringement of a Third Party patent.

     14.4. Procedure. Each Party will notify the other in the event it becomes aware of a claim for which indemnification may be sought hereunder. In case any proceeding (including any governmental investigation) shall be instituted involving any Party in respect of which indemnity may be sought pursuant to this Article 14, such Party (the “Indemnified Party”) shall promptly notify the other Party (the “Indemnifying Party”) in writing and the Indemnifying Party and Indemnified Party shall meet to discuss how to respond to any claims that are the subject matter of such proceeding. The Indemnifying Party, upon request of the Indemnified Party, shall retain counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, the Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of the Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both Parties by the same counsel would be inappropriate due to actual or potential differing interests between them. All such fees and expenses shall be reimbursed as they are incurred. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. The Indemnifying Party shall not, without the written consent of the Indemnified

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Party, effect any settlement of any pending or threatened proceeding in respect of which the Indemnified Party is, or arising out of the same set of facts could have been, a party and indemnity could have been sought hereunder by the Indemnified Party, unless such settlement includes an unconditional release of the Indemnified Party from all liability on claims to which the indemnity relates that are the subject matter of such proceeding.

     14.5. Insurance. Each Party further agrees to use its reasonable efforts to obtain and maintain, during the term of this Agreement, Commercial General Liability Insurance, including Products Liability Insurance, with reputable and financially secure insurance carriers to cover its indemnification obligations under Sections 14.2 or 14.3, as applicable, or self-insurance, with limits of not less than *** Approximately 2 lines omitted *** .

15. EXCHANGE PRODUCT.

     15.1. Exchange Product Offerings. During the         ***          period following the         ***         , AHPC shall make up to         ***          offers (each, an “Exchange Product Offering”) to Elan for Elan to copromote, along with AHPC, an Exchange Product of AHPC’s sole choosing to a specialty (niche) market segment (i.e., to a particular class of target physicians other than general practitioners) in the United States. Each such Exchange Product Offering shall be presented to Elan by written notice, which notice shall specify the Exchange Product that is the subject of the Exchange Product Offering, the market segment within the United States that AHPC proposes Elan would market such Exchange Product to, if such Exchange Product has previously been sold in the United States by AHPC, United States sales data for such Exchange Product for the most recent calendar year, if such Exchange Product is currently marketed, and AHPC’s proposed financial terms for Elan’s copromotion of such Exchange Product. Within thirty (30) days of receiving such notice, Elan shall notify AHPC in writing as to whether or not it desires to negotiate a copromotion agreement for such Exchange Product. If Elan either fails to respond to such notice within such thirty (30) day period or notifies AHPC that it does not desire to negotiate a copromotion agreement for such Exchange Product Offering, Elan shall be deemed to have rejected such Exchange Product Offering, and AHPC thereafter shall be free to market the Product itself or pursuant to a copromotion agreement or other agreement with any Third Party. If Elan notifies AHPC that it desires to negotiate a copromotion agreement for such Exchange Product, the Parties shall promptly initiate good faith negotiations of such a copromotion agreement, provided, however, that if the Parties fail to enter into a copromotion agreement within three (3) months (unless extended at AHPC’s sole discretion) after AHPC’s receipt of such notice from Elan, Elan shall be deemed to have rejected such Exchange Product Offering and AHPC thereafter shall be free to market the Exchange Product itself or pursuant to a copromotion agreement or other agreement with any Third Party. If Elan has accepted an Exchange Product Offering and the Parties, in accordance with this Section 15.1 have

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negotiated and entered into a copromotion agreement for the Exchange Product that is the subject of the Exchange Product Offering, AHPC shall have no obligation to make any further Exchange Product Offerings to Elan. Likewise, if AHPC has made        ***          Exchange Product Offerings to Elan and Elan has rejected all        ***          of such Exchange Product Offerings, AHPC shall have no obligation to make any further Exchange Product Offerings to Elan.

16. ASSIGNMENTS; CHANGES OF CONTROL.

     16.1. Assignments. Neither this Agreement nor any right or obligation hereunder may be assigned or delegated, in whole or part, by either Party without the prior express written consent of the other, except as expressly set forth below in this Section16.1. Notwithstanding the foregoing, either Party may, without the written consent of the other Party, assign this Agreement and its rights and delegate its obligations hereunder to any of its Affiliates or to a Third Party in connection with the transfer or sale of all or substantially all of its business relating to the subject matter of this Agreement (provided that any such assignment to a Third Party shall be deemed a Change in Control of the assigning Party for purposes of Section 13.7).

          16.2 Anti-Takeover Covenant. From the Effective Date until the earlier of (a) *** Approximately 2 lines omitted ***, neither American Home Products Corporation (“American”) nor any of its subsidiaries (as defined in Rule 1-02(x) of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will or will assist or encourage others to, directly or indirectly, without the prior approval of ELAN’s Board of Directors: (i) acquire or agree, offer, seek or propose to acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of any voting securities of ELAN or direct or indirect rights to acquire any voting securities of ELAN or any subsidiaries of ELAN or substantially all of the assets or businesses of ELAN; (ii) seek or propose to influence or control ELAN’s management or policies; or (iii) make, or in any way participate in, directly or indirectly, any “solicitation” of “proxies” (as such terms are used in the rules of the Exchange Act) to vote, or seek to advise or influence any person or entity with respect to the voting of, any voting securities of ELAN.  *** Approximately 20 lines omitted ***         .

17. MISCELLANEOUS.

     17.1. 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.

     17.2. Force Majeure. Nonperformance of a Party (other than for the payment of money) shall be excused to the extent that performance is rendered impossible by strike, fire, earthquake, flood, governmental acts or orders or restrictions, failure of suppliers, or

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any other reason where failure to perform, is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the nonperforming Party. The nonperforming Party shall notify the other Party promptly should such circumstances arise, giving an indication of the likely extent and duration thereof, and shall use all reasonable efforts to resume performance of its obligations as soon as practicable, provided, however, that neither Party shall be required to settle any labor dispute or disturbance.

     17.3. Notices. All requests and notices required or permitted to be given to the Parties hereto shall be given in writing, shall expressly reference the section(s) of this Agreement to which they pertain, and shall be delivered to the other Party, and shall be deemed given if delivered personally or by facsimile transmission (receipt verified), mailed by registered or certified mail (return receipt requested), postage prepaid, or sent by nationally recognized express courier service, to the Parties, at the appropriate address as set forth below or to such other addresses as may be designated in writing by the Parties from time to time during the term of this Agreement:

All correspondence to AHPC shall be addressed as follows:

Wyeth-Ayerst Laboratories
555 East Lancaster Avenue
St. Davids, Pennsylvania 19087
Attn: Senior Vice President, Global Business Development
Fax: (610) 688-9498

with a copy to:

American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Attn: Senior Vice President and General Counsel
Fax: (973) 660-7156

All correspondence to ELAN shall be addressed as follows:

Neuralab Limited
102 St. James Court
Flatts, Smiths, FL-04
Bermuda
Attn: President
Fax: (441) 292-2224

with a copy to:

Elan Corporation, plc
2 Lincoln House
Lincoln Place
Dublin, Ireland

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Attn: Chief Executive Officer
Fax: 011-35-31-709-4810

and

Elan Pharmaceuticals, Inc.
800 Gateway Blvd.
South San Francisco, CA 94080
Attn: General Counsel
Fax: (650) 875-3620

     17.4. Amendment. No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in writing and signed by a duly authorized officer of each Party.

     17.5. Waiver. No provision of this Agreement shall be waived by any act, omission or knowledge of a Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorized officer of the waiving Party.

     17.6. Severability. If any clause or portion thereof in this Agreement is for any reason held to be invalid, illegal or unenforceable, the same shall not affect any other portion of this Agreement, as it is the intent of the Parties that this Agreement shall be construed in such fashion as to maintain its existence, validity and enforceability to the greatest extent possible. In any such event, this Agreement shall be construed as if such clause or portion thereof had never been contained in this Agreement, and there shall be deemed substituted therefor such provision as will most nearly carry out the intent of the Parties as expressed in this Agreement to the fullest extent permitted by applicable law unless doing so would have the effect of materially altering the rights and obligations of the Parties in which event this Agreement shall terminate and all the rights and obligations granted to the Parties hereunder shall cease and be of no further force and effect.

     17.7. Descriptive Headings. The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

     17.8. Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the substantive laws of the State of New York, except matters of intellectual property law, which shall be governed by and interpreted in accordance with the national intellectual property laws relevant to the intellectual property in question, without regard to conflict of law principles thereof. Venue for any action brought under this Agreement shall lie exclusively in the United States of America and both Parties hereby consent to such venue.

     17.9. Entire Agreement of the Parties. This Agreement constitutes and contains the complete, final and exclusive understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and

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agreements, whether oral or written, among the Parties respecting the subject matter hereof.

     17.10. Independent Contractors. Both Parties are independent contractors under this Agreement. Nothing herein contained shall be deemed to create an employment, agency, joint venture or partnership relationship between the Parties or any of their agents or employees, or any other legal arrangement that would impose liability upon one Party for the act or failure to act of the other Party. Neither Party shall have any express or implied power to enter into any contracts or commitments or to incur any liabilities in the name of, or on behalf of, the other Party, or to bind the other Party in any respect whatsoever.

     17.11. Debarment. Each Party agrees that it will not use, in any capacity, in connection with any of its obligations to be performed under the Research Program or the Development Program any individual who has been debarred under the FD&C Act or the Generic Drug Enforcement Act.

     17.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which need not contain the signature of more than one Party but all such counterparts taken together shall constitute one and the same agreement.

     17.13. NO CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL A PARTY HERETO BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES. NOTHING IN THIS SECTION 17.13 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY.

          IN WITNESS WHEREOF, duly authorized representatives of the Parties have duly executed this Agreement to be effective as of the Effective Date.

AMERICAN HOME PRODUCTS CORPORATION		NEURALAB LIMITED
By:	/s/ Kenneth Martin	By:	/s/ Kevin Insley
	Name: Kenneth Martin		Name: Kevin Insley
	Title: Senior Vice President and Chief Financial Officer		Title: Vice President

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GUARANTEE

          In consideration of AHPC entering into the foregoing Research, Development and Commercialization Agreement (the “Agreement”), Elan Corporation, plc, an Irish public limited company (“ELAN”) hereby irrevocably and unconditionally guarantees to AHPC as principal and not as surety the performance by Neuralab Limited (“NEURALAB “) and any Affiliate of ELAN or NEURALAB of all of NEURALAB’s obligations under the Agreement, including, without limitation, the obligation to make all payments to AHPC and grant all licenses to AHPC required under the Agreement.

          AHPC may enforce its rights under this Guarantee without first seeking to obtain performance from NEURALAB or exercising any other remedy or right that AHPC may have. If AHPC decides to proceed first to exercise any other remedy or right, or to proceed against another party, AHPC retains all of its rights under this Guarantee.

          ELAN hereby consents to the non-exclusive jurisdiction of the state and federal courts of New York with respect to any and all disputes, claims, actions or proceedings arising out of the execution, delivery or performance of this Guarantee and waives all rights it might otherwise have to object to venue before and the jurisdiction of such courts.

          This Guarantee shall survive the expiration or other termination of the Agreement and shall survive and apply regardless of any amendments, waivers, extensions, modifications or other changes in the obligations of NEURALAB under the Agreement.

ELAN CORPORATION, PLC
By	/s/ Seamus Mulligan
	Seamus Mulligan
Its:	Executive Vice President, Corporate
	Development
Date:	March 17, 2000

EXHIBIT 1.9

AHPC PATENT RIGHTS

          The following are those patent applications and patents Controlled by AHPC which AHPC, as of the Effective Date, has identified as potentially being useful in connection with the Research Program and the Development Program.

 *** Approximately 70 lines omitted ***

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EXHIBIT 1.29

CURRENT CLINICAL TRIALS

*** Approximately 6 lines omitted ***

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EXHIBIT 1.41

ELAN-LILLY PATENT RIGHTS

*** Approximately 55 lines omitted ***

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EXHIBIT 1.44

ELAN PATENT RIGHTS

*** Approximately 72 lines omitted ***

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EXHIBIT 1.56

ELEMENTS OF FULLY-ABSORBED STANDARD COSTS

*** Approximately 48 lines omitted ***

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EXHIBIT 4.1.1

R&D CANDIDATES

*** Approximately 3 lines omitted ***

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EXHIBIT 4.2.2

ELEMENTS OF ANNUAL RESEARCH PLAN
AND ANNUAL DEVELOPMENT PLAN

*** Approximately 29 lines omitted ***

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EXHIBIT 5.3

ADVERSE EVENT REPORTING PROCEDURES

          The Parties hereby agree that the following terms will govern disclosures of each Party to the other with respect to adverse event reporting relating to any R&D Candidate or Product as clinically tested or marketed by or on behalf of either Party.

1. DEFINITIONS.

          1.1. Adverse Experience or Event (AE): An AE is defined as any untoward, undesired, or unplanned event in the form of signs, symptoms, disease, or laboratory or physiological observations occurring in a human being in a temporal relationship to use of a Product regardless of causal relationship. This includes:

• any clinically significant worsening of a pre-existing condition;

• an AE occurring from overdose (i.e., a dose higher than that prescribed by a health care professional for clinical reasons) of a Product, whether accidental or intentional;

• an AE occurring from abuse (i.e., use for non-clinical reasons) of a Product;

• an AE that has been associated with the discontinuation of the use of a Product;

• any failure of expected pharmacological action (for spontaneous reports).

          If there is any doubt whether the information constitutes an AE, the information will be treated as an AE.

          1.2. Serious AE: A serious AE is defined as an AE occurring at any dose that: results in death; is life-threatening (see below); requires inpatient hospitalization or prolongation of an existing hospitalization; results in a persistent or significant disability or incapacity (see below); results in cancer; results in a congenital anomaly or birth defect. Additionally, important medical events that may not result in death, be life-threatening, or require hospitalization may be considered a serious AE when, based upon appropriate medical judgment, they may jeopardize the patient or subject and may require medical or surgical intervention to prevent one of the outcomes listed in this definition. Examples of such medical events include allergic bronchospasm requiring intensive treatment in an emergency room or at home; blood dyscrasias or convulsions that do not result in hospitalization; or the development of drug dependency or abuse.

          1.2.1. Life-threatening refers to immediate risk of death as the event occurred. A life-threatening experience does not include an experience that, had it occurred in a more severe form, might have caused death but as it actually occurred did not create an immediate risk of death. For example, hepatitis that resolved without evidence of hepatic failure would not be considered life-threatening even though hepatitis of a more severe nature can be fatal. Similarly,

an allergic reaction resulting in angioedema of the face would not be life-threatening, even though angioedema of the larynx, allergic bronchospasm, or anaphylaxis can be fatal.

          1.2.2. Disability is defined as a substantial disruption in a person’s ability to conduct normal life functions.

          1.2.3. For studies, all pregnancies and all overdoses will be reported to GSSE in the same time frame as serious AEs.

          1.2.4. A serious AE obtained from tests in laboratory animals includes any experience suggesting a significant risk for human subjects, including any findings of mutagenicity, teratogenicity, or carcinogenicity.

          1.2.5. If there is any doubt whether the information constitutes a serious AE, the information will be treated as a serious AE.

          1.3. Non-Serious AE: is any AE which does not meet the criteria for a serious AE.

          1.4. Unexpected AE: An unexpected AE is one that is not listed in the current product labeling. The current product labeling is either the package insert (for marketed Products) or the current investigator’s brochure (for investigational Products). An unexpected AE includes any event that may be symptomatically and pathophysiologically related to an event listed in the labeling, but differs from the labeled event because of greater severity or specificity. For example, hepatic necrosis would be unexpected (by virtue of greater severity) if the product labeling referred only to elevated hepatic enzymes or hepatitis. Similarly, cerebral thromboembolism and cerebral vasculitis would be unexpected (by virtue of greater specificity) if the labeling only listed cerebral vascular accidents.

          1.5. Product (Drug, Vaccine, Biological, Device)-Related: For the purposes of regulatory reporting for investigational products, an AE will be considered “product-related” (i.e., drug-related, vaccine-related, etc.) for studies if either the investigator, the Medical Monitor, the CR&D Clinical Project Team Medical Monitor (or designee), or the Local Monitor (if applicable) assesses the AE(s) as possibly, probably, or definitely related.

          1.6. An AE will be considered “not product-related” for studies if the investigator and the medical monitor(s) and the local monitor (if applicable) assess the AE(s) as probably not related or definitely not related, or “relationship remote.”

          1.7. Whenever the investigator’s or monitor’s assessment is unknown or unclear, the AE(s) will be treated as product-related for the purposes of reporting to regulatory authorities.

          1.8. Protocol-Related: AEs from studies that are not product-related may nevertheless be considered by the investigator or the medical monitor(s) or the local monitor (if applicable) to be protocol-related. For purposes of reporting to GSSE and regulatory authorities, these will be reported in the same manner as product-related events.

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          1.9. BLA Holder is defined as: An “Applicant” as defined in 21 C.F.R. Section 3 14.3(b), for regulatory approval of a Product in any regulatory jurisdiction, including a holder of a foreign equivalent thereto.

          1.10. IND Holder is defined as: A “Sponsor” as defined in 21 C.F.R. Section 312.3(b) of an investigational new drug in any regulatory jurisdiction, including a holder of a foreign equivalent thereto.

          1.11. Capitalized terms not defined in this Exhibit shall have the meaning assigned thereto in the Agreement.

With respect to any R&D Candidate or Product, the Parties agree as follows:

     a. All initial reports and any follow-up information (oral or written) for any and all Serious AEs as defined above, (other than with respect to animal studies) which become known to either Party (other than from disclosure by or on behalf of the other Party) must be communicated by telephone, telefax or electronically directly to the other Party and/or the BLA Holder, IND Holder (individually and collectively referred to as “Holders”) within forty-eight (48) hours of receipt of the information. Written confirmation of the Serious AE received by such Party should be sent to the other Party and/or the Holders as soon as it becomes available, but in any event within forty-eight (48) hours of initial report of the Serious AE by such Party.

     b. Both Parties shall exchange Medwatch and/or CIOMs forms and other health authority reports within forty-eight (48) hours of submission to any Regulatory Authority.

     c. All initial reports and follow-up information received for all Non-Serious AEs for marketed Product which become known to a Party (other than from disclosure by or on behalf of the other Party) must be communicated in writing, by telefax or electronically to the other Party within the required time frame to meet the regulatory obligations of either Party, on Medwatch or CIOMs forms (where possible).

     d. Each Party shall coordinate and cooperate with the other whenever practicable to prepare a single written report regarding all Serious and/or Non-Serious AEs, provided, however, that neither Party shall be obligated to delay reporting of any AE in violation of applicable law or regulations regarding the reporting of AEs.

2. THE PARTIES FURTHER AGREE THAT:

     a. A written report be forwarded to the other Party within forty-eight (48) hours of receipt by the Party making the report, for AEs for animal studies which suggest a potential significant risk for humans;

     b. Each Party will give the other Party a report via a print-out or computer disk of all AEs reported to it and its Affiliates relating to any R&D Candidate or Product

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within the last year, within thirty (30) days of receipt of a request from the other Party but not more often than four (4) times a year;

     c. If either Party wishes access to AE Reports of the other Party relating to an R&D Candidate or Product, upon request of that Party, the other Party shall make available its AE records relating to the Product or Substance (including computer files) for viewing and copying by the other Party. The Parties may discuss the transfer of AE Reports by computer disk.

     d. Disclosure of information hereunder by a Party to the other Party shall continue as long as either Party and/or its Affiliates or designees continue to clinically test or market an R&D Candidate or Product.

3. Each Party shall diligently undertake the following further obligations where both Parties are or will be commercializing the R&D Candidate or product pursuant to the Agreement and/or performing clinical trials with respect to the R&D Candidate or Product:

     a. Upon the Effective Date, each Party shall identify individuals who shall be responsible for identifying all AE reporting requirements in all countries of the world as set forth in the Agreement, and any amendments thereto;

     b. To immediately consult with the other Party, with respect to the investigation and handling of any Serious AE disclosed to it by the other Party or by a third Party and to allow the other Party to review the Serious AE and to participate in the follow-up investigation;

     c. To immediately advise the other Party of any R&D Candidate and/or Product safety communication received from a health authority and consult with the other Party with respect to any Product and/or Substance warning, labeling change or change to an investigator’s brochure involving safety issues proposed by the other Party, including, but not limited to the safety issues agreed to by the Parties;

     d. To diligently handle in a timely manner the follow-up investigation and resolution of each AE reported to it;

     e. To provide the other Party mutually agreed upon audit rights of its AE reporting system and documentation as related to any R&D Candidate and/or Product, upon prior notice, during normal business hours, at the expense of the auditing Party and under the confidentiality obligations set forth in the Agreement;

     f. To meet in a timely fashion from time to time as may be reasonably required to implement the adverse event reporting and consultation procedures described in this Exhibit 5.3, including identification of those individuals in each Party’s Drug Safety group who will be responsible for reporting to and receiving AE information from the other Party, and the development of a written standard operating procedure with respect to adverse event reporting responsibilities, including reporting responsibilities to investigators;

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     g. Where possible, to transmit all data electronically;

     h. To report to each other any addenda, revisions or changes to the Agreement (e.g., change in territories, local regulations, addition of new licensors/licensees to the Agreement, etc.) which might alter the adverse event reporting responsibilities hereunder;

     i. To utilize English as the language of communication and data exchange between the Parties;

     j. To develop a system of exchange of documents and information if the Agreement involves more than two Parties;

     k. To work together to develop an electronic system to transmit AE data.

4. The Parties shall meet within ninety (90) days after the Effective Date of the Agreement to review this Exhibit and, if necessary, make modifications hereto, (which modifications need only be approved by each Party’s head of regulatory affairs) or to establish a separate agreement for adverse event exchange which will supersede this Exhibit.

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EXHIBIT 10.2(a)

CERTAIN ELAN PATENT RIGHTS

*** Approximately 30 lines omitted ***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

EXHIBIT 10.2(b)

GOVERNMENT FUNDING — ELAN PATENT RIGHTS

*** Approximately 18 lines omitted ***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

EXHIBIT 10.3(a)

CERTAIN AHPC PATENT RIGHTS

*** Approximately 35 lines omitted ***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

EXHIBIT 10.3(b)

GOVERNMENT FUNDING — AHPC PATENT RIGHTS

          The AHPC Patent Rights listed below were developed, at least in part, under a government funding agreement.

          *** Approximately 17 lines omitted ***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

AMENDMENT NO. 1
to
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

This is Amendment No. 1, dated as of April 4, 2000 (“Amendment No. 1”), to the Research, Development and Commercialization Agreement dated as of March 17, 2000 (the “Agreement”) by and among American Home Products Corporation, a Delaware corporation, together with its Affiliates, acting through its Wyeth-Ayerst Laboratories Division (collectively, “AHPC”) and Neuralab Limited, a Bermuda private limited company (“Neuralab”).

INTRODUCTION

The Parties have determined that it is in their mutual best interests to amend the Agreement in the manner set forth below.

Accordingly, in accordance with Section 17.4 of the Agreement, the Parties agree to amend the Agreement as follows:

     1. Use of Terms. Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to such terms in the Agreement.

     2. Section 10.2. Section 10.2 of the Agreement is hereby amended by deleting the word “and” at the end of subsection (f) thereof and by inserting the following new subsections (h) and (i) immediately after subsection (g) thereof:

“(h)	Neither ELAN nor any of its employees or agents has at any time made any misrepresentation, omitted to make any disclosure, or concealed any information relating to Betabloc or to any Invention, which misrepresentation, omission or concealment supports a finding of fraud by the trier of fact in the ELAN/Lilly Litigation; and
(i)	ELAN is not aware of any information in the possession of Lilly that could provide material support for any claim by Lilly to any right, title or interest in or to Betabloc or in or to any Invention disputed in the ELAN/Lilly Litigation.”

     Section 10.2 of the Agreement is hereby further amended by deleting the final sentence thereof in its entirety and inserting the following sentence in its place:

“The outcome of the ELAN/Lilly Litigation shall not be determinative as to the absence or presence of a breach of the foregoing representations and warranties in Sections 10.1 and 10.2; provided, however, that any unappealed or unappealable final decision by a court of competent jurisdiction based upon a record containing an explicit finding by the court or jury of facts sufficient to establish the presence of a breach of the representations and warranties set forth in Section 10.2(h) shall be determinative of the presence of such breach unless the parties to the ELAN/Lilly Litigation have entered into a settlement agreement that (x)

Page 1 of 3

compromises any appeal of such decision, (y)     ***      and (z) results in the termination of the ELAN/Lilly Litigation (including any appeal therein).”

     3. *** Approximately 4 lines omitted ***

     4. *** Approximately 3 lines omitted ***

     5. *** Approximately 19 lines omitted ***

     6. Section 13.4. Section 13.4 of the Agreement is hereby amended by deleting Section 13.4 in its entirety and by substituting the following in its place:

     “13.4 Section 13.4. Reserved.”

     7. Section 17.9. Section 17.9 of the Agreement is hereby amended by deleting Section 17.9 in its entirety and by substituting the following in its place:

“17.9 Entire Agreement of the Parties. This Agreement constitutes and contains the complete, final and exclusive understanding and agreement of the Parties and, except for the Joint Defense Letter dated as of January 21, 2000 by and between American Home Products Corporation and Elan Pharmaceuticals, Inc., cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, among the Parties respecting the subject matter hereof.”

     8. General. In all other respects, the Agreement is hereby ratified and confirmed.

     IN WITNESS WHEREOF, the Parties have executed this Amendment No. 1 as of the date set forth above.

AMERICAN HOME PRODUCTS CORPORATION

By: /s/ Louis Hoynes

Title: Senior Vice President and General Counsel

NEURALAB LIMITED

By: /s/ Kevin Insley

Title: Vice President

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Page 2 of 3

GUARANTEE

The undersigned, an Irish public limited company, hereby guarantees the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the foregoing Amendment No. 1 to the same extent and in the same manner as the undersigned guaranteed the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the Agreement, as set forth in the Guarantee dated March 17, 2000 executed by the undersigned in connection with the Agreement.

ELAN CORPORATION, plc
By:	/s/ Seamus Mulligan
Title:	Executive Vice President

Page 3 of 3

AMENDMENT NO. 2
to
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     This Amendment (“Amendment No. 2”), dated as of April 4, 2002 (“the Amendment Effective Date”), to the Research, Development and Commercialization Agreement dated as of March 17, 2000 (as previously amended, the “Agreement”) is entered into by and among Wyeth (formerly known as “American Home Products Corporation”), a Delaware corporation, together with its Affiliates, acting through its Wyeth Pharmaceuticals Division (formerly known as its “Wyeth-Ayerst Laboratories Division”) (collectively, “Wyeth”) and Neuralab Limited, a Bermuda private limited company (“Neuralab”). Wyeth and Neuralab may each be referred to herein individually as a “Party” and collectively as the “Parties”.

     WHEREAS, on November 16, 2000, Wyeth, Neuralab and Elan Pharmaceuticals, Inc. (together, with Neuralab, “Elan”) entered into a letter agreement (the “Consent Letter”) pursuant to which Wyeth provided its consent for Elan to enter into a Settlement Agreement and Release (the “Settlement Agreement”) with Eli Lilly and Company (“Lilly”), to settle the ELAN/Lilly Litigation;

     WHEREAS, pursuant to the Consent Letter, Wyeth’s provision of such consent was conditioned upon the Parties amending the Agreement to address (i) the responsibilities of the Parties for           ***           under the Settlement Agreement, (ii) the mechanisms for           ***           and (iii) adjustments to certain payments to be made by Wyeth to Neuralab under the Agreement;

     WHEREAS, Elan has entered into the Settlement Agreement with Lilly and the Parties now desire to enter into this Amendment No. 2 to satisfy the above stated condition of the Consent Letter; and

     WHEREAS, the Parties had a dispute as to whether the first payment set forth in Section 7.2.1 of the Agreement had become due and now also wish to amend the Agreement in settlement of such dispute.

     NOW THEREFORE, in consideration of the foregoing premises, the following mutual promises and covenants and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.	Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to such terms in the Agreement.
2.	Due to the change of the name of Wyeth, which name change became effective on March 11, 2002, the name “Wyeth” is hereby substituted for the name “American Home Products Corporation” or “AHPC” each time it appears in the Agreement

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Page 1 of 4

and the name “Wyeth Pharmaceuticals” is hereby substituted for the name “Wyeth-Ayerst Laboratories” each time it appears in the Agreement.

3. Section 1.47 of the Agreement is hereby amended by deleting Section 1.47 in its entirety and replacing it with the following:

“1.47 “ELAN Share of Pro-Forma Net Profit”. ELAN Share of Pro-Forma Net Profit shall mean, on a Product-by-Product and country by country basis and subject to upward or downward adjustment as set forth in Article 11,           ***            of the Pro-Forma Net Profit obtained from such Product in such country.”

4. As, under the Settlement Agreement,     *** Approximately 3 lines omitted ***     , the Parties agree that Section           ***            of the Agreement became applicable as of the date of the Settlement Agreement, and hereby agree, that, notwithstanding any provision to the contrary in Section           ***            or any other provision of the Agreement, the application of Section           ***           shall have the following effects on the Agreement:

(a)	Under Section    *** Approximately 11 lines omitted ***    .
(b)	As the     *** Approximately 18 lines omitted ***    of the Agreement.
(c)	As the *** Approximately 4 lines omitted ***   , such that

(i)	pursuant to Section *** Approximately 4 lines omitted ***     ; and
(ii)	pursuant to Section    *** Approximately 20 lines omitted *** of the Agreement.

5. The Parties agree that, as of the Amendment Effective Date, no event that would trigger a payment under Section 7.2.1 of the Agreement has occurred. In settlement of the dispute between the Parties as to whether any such event has occurred the Parties hereby agree that the payment to be made within thirty (30) days after *** Approximately 4 lines omitted ***   . Additionally, the Parties hereby agree to amend Section 7.2.1 of the Agreement by adding the following additional payment events to Section 7.2.1 of the Agreement:

Event	Additional Payment
*** Approximately 7 lines omitted ***	***
*** Approximately 3 lines omitted ***	***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

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	provided, however, that (i) such additional payments will only be made if, prior to the corresponding triggering event,           ***            such that the first payment required under Section 7.2.1, as amended hereby, has become due and (ii) if either of such additional payments are made,     *** Approximately 3 lines omitted ***     . It is understood and agreed that the amounts set forth in the table above reflect the adjustments made pursuant to Section 3(c) of this Amendment No. 2.
6.	For the sake of clarity, the payments to be made under Sections 7.2 and 7.3 of the Agreement, as reduced and otherwise modified by this Amendment No. 2, are set forth in Exhibit A attached hereto and Sections 7.2 and 7.3 of the Agreement are hereby replaced by the Sections 7.2 and 7.3 set forth in Exhibit A attached hereto.
7.	In all other respects, the Agreement is hereby ratified and confirmed.

     IN WITNESS WHEREOF, the Parties have executed this Amendment No. 2 as of the date set forth above.

WYETH
By:	/s/ Jeffrey S. Sherman
Title:	Vice President
NEURALAB LIMITED
By:	/s/ Kevin Insley
Title:	Vice President

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

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GUARANTEE

The undersigned, an Irish public limited company, hereby guarantees the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the foregoing Amendment No. 2 to the same extent and in the same manner as the undersigned guaranteed the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the Agreement, as set forth in the Guarantee dated March 17, 2000 executed by the undersigned in connection with the Agreement.

ELAN CORPORATION, plc
By:	/s/ Seamus Mulligan
Title:	Executive Vice President

Page 4 of 4

EXHIBIT A

     The amounts payable under Sections 7.2 and 7.3 of the Agreement, as adjusted in accordance with Section 11.4 of the Agreement as implemented by this Amendment shall be as follows:

7.2 Additional Payments.

7.2.1 One-Time Payments.

(a) In consideration of NEURALAB’s contributions to the Research Program and the Development Program, subject to Article 11, Wyeth shall pay to NEURALAB the following additional Research and Development expense reimbursement payments, each such payment being due and payable one time only and within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 15 lines omitted ***	*** Approximately 5 lines omitted ***

(b) Additionally, in the event that *** Approximately 3 lines omitted ***, Wyeth also shall pay to NEURALAB the following additional Research and Development expense reimbursement payments, each such payment being due and payable one time only and within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 10 lines omitted ***	*** Approximately 2 lines omitted ***

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Exhibit A — Page 1 of 3

	provided, however, that if either of such additional payments are made, they shall each be *** Approximately 3 lines omitted ***     .
(c)	For the sake of clarity, in no event shall the total amount paid to NEURALAB as a result of the first event listed in Section 7.2.1(a) and the events listed in Section 7.2.1(b) exceed           ***           .

7.2.2 Pre-Approval Payments. In consideration of NEURALAB contributions to the Research Program and the Development Program, subject to Article 11, Wyeth shall pay to NEURALAB the following additional Research and Development expense reimbursement payments, each such payment being due and payable within thirty (30) days after the occurrence of the corresponding event:

Event	Additional Payment
*** Approximately 23 lines omitted ***	*** Approximately 13 lines omitted ***

7.2.3 Approval Payments. Subject to Article 11, Wyeth shall pay to NEURALAB the following payments based on specific approvals set forth below. These payments are for past Research and Development efforts. Each such payment shall be due and payable within thirty (30) days after the occurrence of the corresponding event:

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Exhibit A — Page 2 of 3

Event	Additional Payment
*** Approximately 23 lines omitted ***	*** *** Approximately 12 lines omitted ***

7.2.4 Additional Products. Subject to Article 11, each of the additional payments set forth in this Section 7.2 are payable only once with respect to any Product and shall be non-refundable and non-creditable. Notwithstanding the immediately preceding sentence, subject to Article 11, additional payments equal to           ***           of the payment indicated above in Section 7.2.2 and 7.2.3 shall be payable for up to           ***            R&D Candidates or Products, as applicable, with respect to which each event set forth above occurs; provided that such additional payments shall only be payable if subsequent occurrences of any event result from R&D Candidates or Products, as applicable, that     *** Approximately 10 lines omitted ***         .

7.3 Sales Bonus. Subject to Article 11, Wyeth shall pay to NEURALAB a one-time sales bonus payment in the amount of           ***            within thirty (30) days after the first occasion on which aggregate world-wide Net Sales of a Product or Products under this Agreement, *** Approximately 2 lines omitted *** .

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Exhibit A — Page 3 of 3

AMENDMENT NO. 3
to
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     This Amendment (“Amendment No. 3”), dated as of May 1, 2005 (“the Amendment Effective Date”), to the Research, Development and Commercialization Agreement dated as of March 17, 2000 (as previously amended, the “Agreement”) is entered into by and among Wyeth (formerly known as “American Home Products Corporation”), a Delaware corporation, together with its Affiliates, acting through its Wyeth Pharmaceuticals Division (formerly known as its “Wyeth-Ayerst Laboratories Division”) (collectively, “Wyeth”) and Neuralab Limited, a Bermuda private limited company (“Neuralab”). Wyeth and Neuralab may each be referred to herein individually as a “Party” and collectively as the “Parties”.

     WHEREAS, under the Agreement the Parties have been conducting a Research Program and the Initial Term of such Research Program expires on           ***            unless extended by the Parties; and

     WHEREAS, the Parties now desire to extend the Initial Research Term under the Agreement.

     NOW THEREFORE, in consideration of the foregoing premises, the following mutual promises and covenants and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.	Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to such terms in the Agreement.
2.	The Parties hereby agree to extend the Initial Research Term under the Agreement by a period of           ***            such that the Research Term now will expire on           ***           , unless further extended pursuant to the provisions of Section 4.1.2.
3.	In all other respects, the Agreement is hereby ratified and confirmed.

     IN WITNESS WHEREOF, the Parties have executed this Amendment No. 2 as of the date set forth above.

WYETH		NEURALAB LIMITED
By:	/s/ Mark L. Lee	By:	/s/ Kevin Insley
Name:	Mark L. Lee	Name:	Kevin Insley
Title:	Sr. VP. Business Devp.	Title:	President

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

GUARANTEE

The undersigned, an Irish public limited company, hereby guarantees the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the foregoing Amendment No. 3 to the same extent and in the same manner as the undersigned guaranteed the performance of Neuralab and any Affiliate of Neuralab of all of Neuralab’s obligations under the Agreement, as set forth in the Guarantee dated March 17, 2000 executed by the undersigned in connection with the Agreement.

ELAN CORPORATION, plc
By:	/s/ William Daniel
Title:	EVP, Company Secretary

Page 2 of 2

AMENDMENT NO. 4
to
RESEARCH, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     This Amendment (“Amendment No. 4”), dated as of May 1, 2007 (“the Amendment Effective Date”), to the Research, Development and Commercialization Agreement dated as of March 17, 2000 (as previously amended, the “Agreement”) is entered into by and among Wyeth (formerly known as “American Home Products Corporation”), a Delaware corporation, together with its Affiliates, acting through its Wyeth Pharmaceuticals Division (formerly known as its “Wyeth-Ayerst Laboratories Division”) (collectively, “Wyeth”) and Elan Pharma International Limited, a private limited company incorporated under the laws of Ireland and having its registered office at Monnksland, Athlone, County Westmeath, Ireland (“EPIL”), successor in interest to Neuralab Limited. Wyeth and EPIL may each be referred to herein individually as a “Party” and collectively as the “Parties”.

     WHEREAS, under the Agreement the Parties have been conducting a Research Program and the Term of such Research Program as extended by Amendment No. 3 expires on           ***            unless extended by the Parties; and

     WHEREAS, the Parties now desire to further extend the Research Term under the Agreement.

     NOW THEREFORE, in consideration of the foregoing premises, the following mutual promises and covenants and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

1.	Capitalized terms used herein and not defined herein shall have the respective meanings ascribed to such terms in the Agreement.
2.	The Parties hereby agree to further extend the Research Term under the Agreement by a period of           ***            such that the Research Term now will expire on           ***          , unless further extended pursuant to the provisions of Section 4.1.2.
3.	In all other respects, the Agreement is hereby ratified and confirmed.

CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.

Page 1 of 3

     IN WITNESS WHEREOF, the Parties have executed this Amendment No. 4 as of the date set forth above.

WYETH		ELAN PHARMA INTERNATIONAL LIMITED
By:	/s/ Robert J. Smith	By:	/s/ Shane Cooke
Name:	Robert J. Smith	Name:	Shane Cooke
Title:	Senior Vice President	Title:	CFO, Director
	Global Licensing
		By:	/s/ William Daniel
		Name:	William Daniel
		Title:	Director

Page 2 of 3

GUARANTEE

The undersigned, an Irish public limited company, hereby guarantees the performance of EPIL and any Affiliate of EPIL of all of EPIL’s obligations under the foregoing Amendment No. 4 to the same extent and in the same manner as the undersigned guaranteed the performance of EPIL and any Affiliate of EPIL of all of EPIL’s obligations under the Agreement, as set forth in the Guarantee dated March 17, 2000 executed by the undersigned in connection with the Agreement.

ELAN CORPORATION, plc
By:	/s/ William Daniel
Name:	William Daniel
Title:	EVP & Company Secretary

Page 3 of 3

EX-4.(B)(1)

Exhibit 4(b)(1)

STANDARD SINGLE-TENANT NET LEASE

CHAMBERLIN ASSOCIATES 180 OYSTER POINT BLVD., LLC,
A California limited liability company,
As Landlord

AND

ELAN PHARMACEUTICALS, INC.,
A Delaware corporation,
As Tenant

SUMMARY OF EXHIBITS AND AMENDMENTS TO LEASE FORM

EXHIBIT A — LEGAL DESCRIPTION

EXHIBIT B — WORK LETTER

EXHIBIT C — RULES AND REGULATIONS

EXHIBIT D — CALCULATION OF BUILDING MINIMUM
MONTHLY RENT DURING FIRST YEAR OF TERM

EXHIBIT E — TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

EXHIBIT F — FINAL BUILDING / PARKING / SERVICE AREA PLAN

EXHIBIT G — GUARANTY

EXHIBIT H — TERMS UNDER WHICH THE LETTER OF CREDIT CAN BE REDUCED

EXHIBIT I — LIST OF BASELINE REPORTS

EXHIBIT J — DEPICTION OF SERVICE AREA

EXHIBIT K — RULES AND REGULATIONS GOVERNING ALTERATIONS

1

1.1. DATE. This lease is dated for reference purposes only June 1, 2007.

1.2. PARTIES AND NOTICE ADDRESSES

1.2.1 LANDLORD: Chamberlin Associates 180 Oyster Point Blvd., LLC

1.2.1.1 ADDRESS FOR NOTICES TO LANDLORD

                         c/o Chamberlin Associates
                         5880 West Las Positas Boulevard, Suite 34
                         Pleasanton, CA 94588-8552
                         Attention: Anne Hoffman AND Rahn Verhaeghe
                         E-Mail: Legal@Chamb.com
                                        Rahn@Chamb.com

          With a copy to:

                         Law Offices of Glenn M. Feeley
                         1660 Olympic Blvd., Suite 350
                         Walnut Creek, CA 94596
                         Attention: Glenn M. Feeley
                         E-Mail: glenn@gfeeley.com

1.2.2 TENANT: Elan Pharmaceuticals, Inc.

1.2.2.1 ADDRESS FOR NOTICES TO TENANT

                         Elan Pharmaceuticals, Inc.
                         7475 Lusk Boulevard
                         San Diego, California 92121
                         Attn: Rick Smith
                         E-Mail: charles.smith@elan.com

          With a copy to:

                         Elan Pharmaceuticals, Inc.
                         800 Gateway Boulevard
                         South San Francisco, CA 94080
                         Attn: Vice President, Corporate Legal
                         E-Mail: legal_corporate@elan.com

1.3. PREMISES.

     (Section 2.1) The entire parcel of land legally described in Exhibit A and all improvements thereto.

1.4 BUILDING

     (Section 2.1) 180 Oyster Point Boulevard, So. San Francisco, CA 94080.

1.5 COMMENCEMENT /EXPIRATION DATES.

     1.5(a). COMMENCEMENT DATE. Notwithstanding anything to the contrary contained herein or in the Work Letter, Landlord and Tenant acknowledge and agree that the construction of the Initial Tenant Improvements may be completed by Tenant on a floor by floor basis, with the Commencement Date occurring on the earlier of (a) four (4) months after the Substantial Completion of the Building Shell, as adjusted for any Tenant Delays such that the date of Substantial Completion of the Building Shell, for purposes of this Section 1.5, shall occur on the date that the Building Shell would have been Substantially Complete but for any Tenant Delays (the terms Initial Tenant Improvements, Landlord’s Work, Substantial Completion, Tenant Delays, and Building Shell are defined in the Work Letter attached to the Lease as Exhibit B, the “Work Letter”)), or (b) the date that Tenant occupies the first, second and third floors of the Premises and commences business operations thereon, following the date that Tenant obtains a temporary or final certificate of occupancy for the Building. If Tenant occupies one or more floors (but not all floors) of the Premises prior to the Commencement Date for the Premises (the “Early Occupancy Period”), Tenant shall be obligated to pay Minimum Monthly Rent for only the floor(s) of the Premises occupied during such Early Occupancy Period from the date that any portion of such floor is occupied by Tenant for the purposes of operating Tenant’s business therein (and not solely for the limited purpose of installing its furniture, fixtures and equipment therein); provided that such early occupancy shall also be subject to the other terms of the Lease and the Work Letter, including but not limited to Tenant’s obligation to provide Landlord with proof of Tenant’s insurance as set forth in Section 6..3.3. The Minimum Monthly Rent payable for a floor during the Early Occupancy Period shall be equal to one-third (1/3) of the Minimum Monthly Rent payable for the Premises during the first full month after the Commencement Date.

     Following the Commencement Date, Landlord shall deliver written notice to Tenant of the Commencement Date (as may be adjusted herein) after finally determining the same, and unless Tenant delivers written notice of objection to Landlord within five (5) business days after receiving Landlord’s written notice of the Commencement

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Date, Tenant shall be deemed to have approved of, and shall be bound by, Landlord’s determination of the Commencement Date.

     1.5(b) EXPIRATION DATE. The last day of the calendar month in which the fifteenth (15th) anniversary of the Commencement Date occurs.

1.6 TERM (Section 3.1) Approximately 180 months, expiring on the Expiration Date.

1.7 RENT. The Minimum Monthly Rent for the Initial Year shall be determined in accordance with the terms and provisions of Exhibit D (the Calculation of the Building Minimum Monthly Rent During the First Year of Term).

1.8 OPERATING EXPENSE/MONTHLY PAYMENT (See Section 6.1): Initially an estimated amount to be provided by Landlord after the date of this Lease.

1.9 LETTER OF CREDIT. (See Section 22.0) Six Million Dollars ($6,000,000.00)

1.10 USE. Except as provided in the last sentence of this Section 1.10, the Premises shall be used solely for pharmaceutical/biotechnology research and for pharmaceutical/biotechnology manufacturing, marketing and distribution and any other use generally associated with diagnostic and pharmaceutical development and production, and for those other uses associated therewith, including but not limited to general office space, vivarium space, cold room and glass washing facilities, and radioactive material and chemical storage space, and employee amenities such as a gymnasium and a cafeteria. Notwithstanding the foregoing, any use of the Premises which is permitted by law and consistent with other activities conducted on the Premises is permissible.

1.11 CONTENTS Included as part of this Lease are Exhibits A through K, which are attached hereto and incorporated herein by this reference.

2.0 PREMISES

     2.1 Description. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the real property described in Exhibit A (the “Real Property”), together with the entirety of the building to be constructed by Landlord along with the other improvements to be located thereon (collectively, the “Premises”) to be constructed by Landlord and Tenant, respectively, in accordance with the Work Letter, including, but not limited to, a “basement” parking structure (the “Basement Parking Structure”), a service loading dock, ramp and adjacent loading area, surface parking, the Service Area (as defined in Section 5.2), and an outdoor patio area (“Patio Area”), all substantially in the size and location as set forth in the Design Documents, all of which are reserved for the exclusive use of Tenant and its employees, contractors, agents, invitees and guests throughout the Term of this Lease as part of Tenant’s leasehold interest in the Premises, subject to (i) any other rights of Landlord set forth herein, (ii) any matters of public record existing as of the date of this Agreement, and (iii) any other rights or matters that are reasonably necessary for Landlord’s development of the Property as contemplated herein (such as a reciprocal driveway easement or the Reciprocal Parking Easement defined in Section 25 below) (collectively, the items in clauses (i) through (iii) above are referred to herein as “Landlord’s Reserved Rights”). Landlord shall not, subject to the Landlord’s Reserved Rights, operate or make available any portion of the Premises for use by any person other than Tenant during the Term as long as Tenant is not in default under this Lease. Tenant shall have the exclusive right, subject to Landlord’s Reserved Rights, to use the Patio Area for employee dining, and for Tenant’s social and/or business functions, with no additional rent for such use payable by Tenant.

     The “Rentable Square Footage of the Building” is estimated to be approximately 108,500 square feet. Prior to the Commencement Date, the Building will be measured by Landlord’s Architect (as defined in the Work Letter) in accordance with BOMA measurement standards pursuant to BOMA ANSI Z65.1-1996, revised and readopted June 7, 1996; provided, however, that except as otherwise expressly set forth herein, no floor area of the Building (nor of the Basement Parking Structure, Patio Area or Service Area) other than (a) the first, second and third floors of the Building and (b) those portions of the upper level garage within the Building constituting a lobby area and/or used for circulation to the elevators, shall be included in the determination of the Rentable Square Footage of the Building (i.e. regardless of whether any portion of the Basement Parking Structure, Service Area or the Building roof includes any storage areas, machinery or electrical rooms or HVAC chiller facilities, such areas shall not be included in the calculation of the rentable square feet of the Building for purposes of determining Tenant’s Minimum Monthly Rent payments and Landlord’s contribution of Tenant Improvement Allowance. If such measurement results in a change in the Rentable Square Footage of the Building from the number stated above, the Minimum Monthly Rent and the other provisions of this Lease based on square footage shall be recalculated accordingly. Rentable square footage of the Service Area shall be measured in accordance with Section 5.2 below. Before commencement of the Initial Tenant Improvements, Landlord and Tenant will attempt to reach an agreement on the rentable square feet of the Building. If Landlord and Tenant are unable to mutually agree upon the rentable square footage of the Building, either Landlord or Tenant shall have the right to demand that the parties submit the dispute as to the rentable square feet of the Building to a third party space management professional jointly for resolution. Should such a demand be made, then within ten (10) days after either party delivers written notice to the other of such demand, the parties shall select an independent third party space management professional to resolve the dispute (the “Space Management Professional”). Landlord shall initially retain the Space Management Professional, but the costs and expenses of the Space Management Professional shall be split between the parties (with Tenant paying Landlord its share of such costs and expenses within thirty (30)days after receiving an invoice from Landlord requesting payment thereof). Thereafter, within ten (10) days after the parties select the Space Management Professional, each party shall deliver to such Space Management Professional, in a sealed envelope, their determination of the rentable square footage of the Building. If a party fails to deliver its determination of the rentable square footage of the Building to the Space Management Professional within said ten (10) day period, and thereafter, if such party

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fails to deliver its determination of the rentable square footage of the Building to the Space Management Professional within five (5) days after receiving written notice from the other party demanding that its determination be delivered to the Space Management Professional, then the determination of the party providing its determination of the rentable square footage of the Building to the Space Management Professional shall be binding on the parties. Should both parties timely deliver their determination of the rentable square footage of the Building to the Space Management Professional, then within forty-eight (48) hours after receiving both determinations, the Space Management Professional shall call a meeting of the parties, and during such meeting, the Space Management Professional shall open the envelopes containing the parties determinations of the rentable square footage of the Building. If such determinations differ by less than one percent (1%) of the lower number, then the rentable square footage of the Building shall be the average of those two determinations, which number shall be binding on the parties. Moreover, upon such determination, Landlord and Tenant shall set forth such rentable square footage of the Building based on such process in a writing signed by Landlord and Tenant. If such determinations are equal to or more than one percent (1%) of the lower number, then the Space Management Professional shall field measure the rentable square feet of the Building in accordance with this Section 2.1. Thereafter, the determination of the parties as to the rentable square footage of the Building (as set forth in their submittal to the Space Management Professional) that is closest to the measurement determined by the Space Management Professional shall be the Rentable Square Footage of the Building for purposes of this Lease, and shall be binding on the parties, and shall be set forth, in a writing, signed by both Landlord and Tenant. Once the Rentable Square Footage of the Building is determined as provided in this Section 2.1, the Rentable Square Footage of the Building shall not be subject to re-measurement.

     2.2 Initial Tenant Improvements. Initial Tenant Improvements to the Premises shall be completed in accordance with the terms and provisions of the Work Letter attached hereto as Exhibit B (the “Work Letter”).

     2.3 Delivery. Tenant shall accept possession of the Building Shell as of the date of Substantial Completion of the Building Shell, subject to the terms and conditions of the Work Letter and Landlord’s rights set forth therein to complete any Punch List Items, and Tenant’s taking possession of the Building Shell on that date shall be conclusive evidence that Tenant accepts the Building Shell in its then existing condition, and that the Building Shell was in good condition at the time possession was taken, subject to the Punch List items associated therewith.

     Tenant shall accept possession of the Premises as of the date of Substantial Completion of Landlord’s Work, subject to the terms and conditions of this Lease, the Work Letter and Landlord’s rights set forth therein to complete any Punch List Items, and Tenant’s taking possession of the Premises on that date shall be conclusive evidence that Tenant accepts the Premises in its then existing condition, and that the Premises were in good condition at the time possession was taken, subject to the Punch List items associated therewith.

     Tenant agrees and acknowledges that, except as expressly set forth elsewhere in this Lease and the Work Letter, neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Real Property, and/or the suitability of the Premises or the Real Property for the conduct of Tenant’s business.

     2.4 Construction Defects. Notwithstanding anything to the contrary in Section 2.3 above, Landlord shall, at Landlord’s sole cost and expense, repair or replace any “Construction Defects” (defined below) that Tenant notifies Landlord of, in writing, during the Landlord’s Warranty Period (as defined in the Work Letter). Such repair obligation is referred to herein as “Landlord’s Warranty.” Such costs and expenses shall not be included as an Operating Expense. Moreover, if Landlord is obligated hereunder to correct a violation of Landlord’s Warranty, such corrective work shall be completed within thirty (30) days after Landlord receives notice of such Construction Defect from Tenant; provided however, if by the nature of such correction more than thirty (30) days is required to effect such correction, Landlord shall not be in default hereunder if such correction is commenced within such thirty (30) day period and is diligently pursued to completion.

     For purposes of this Lease, and the attached Work Letter, the term “Construction Defects” shall mean (a) any defect in design, workmanship or materials with respect to Landlord’s Work, (b) the failure of Landlord’s Work to be constructed in accordance with the Plans (as defined in Section 1.7.3 below), (c) the failure of Landlord’s Work to comply with all applicable laws and regulations, including but not limited to the California Uniform Building Code, and (c) any introduction or generation of any Hazardous Materials in, on or about the Premises by Landlord or anyone under Landlord’s control as part of Landlord’s Work in violation of applicable law.

     Tenant’s taking possession of the Premises and acceptance of the Premises shall not constitute a waiver of any claims based upon warranty or defect in regard to the design, materials, or construction of the Building Shell or any other Landlord’s Work against the Landlord’s Architect, contractor, materialmen, manufacturers and other responsible party. The expense of repairs and replacements attributable to defects in design, materials or construction are payable by Tenant to the extent not covered by Landlord’s warranty obligations in this Section 2.3 and the Work Letter. Pursuant thereto, Tenant shall be entitled to receive any recovery from the Landlord’s Architect, contractor, materialmen, manufacturers and other responsible party, and from applicable insurance policies, to the extent Tenant pays such expense; otherwise, Landlord shall be entitled to any such recovery. Landlord hereby assigns to Tenant, effective as of the expiration of the Landlord’s Warranty Period (the “Warranty Assignment Date”), and Tenant shall have the benefit of, on a non-exclusive basis as of the Warranty Assignment Date, any and all warranties with respect to the design, materials and construction of the Landlord’s Work, although such warranties shall revert to Landlord exclusively upon the expiration or earlier termination of this Lease.

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3.0 TERM

     3.1 Period; Commencement. The Term of this Lease shall commence in accordance with Section 1.5(a) (the “Commencement Date”), and shall be for the Term specified in Section 1.6, expiring on the date specified in Section 1.5(b) (the “Expiration Date”).

4.0 USE

     4.1 Authorized. The Premises may be used and occupied only for the purposes specified in Section 1.10 hereof, and for no other purpose or purposes.

     4.2 Compliance. Subject to Landlord’s construction and repair obligations set forth herein and/or in the Work Letter, Tenant accepts the Premises by its occupancy of the Premises, and subject to all applicable laws, ordinances, rules, regulations, orders, restrictions of record, and requirements in effect during the Term regulating the Premises, with which Tenant shall comply at its sole cost as they relate to Tenant’s use of the Premises or to any improvements, alterations or installations made to the Premises by or for Tenant, or to the operation of Tenant’s business. Landlord makes no warranty that Tenant’s particular use of the Premises complies with the zoning applicable to the Premises

     4.3 Restricted Activities. Tenant shall not cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances or materials at or from the Premises in violation of any Environmental Laws. Tenant shall not allow the storage or use of such substances or materials in any manner which does not comply with all applicable Environmental Laws in all material respects. For purposes of this Lease, the phrases “hazardous substance,” “hazardous materials,” “hazardous substances or materials” and “hazardous substances and materials” shall mean any chemical, compound, material, mixture, living organism or substance that is now or hereafter becomes defined or listed in, or otherwise classified pursuant to and Environmental Law as a hazardous substance, hazardous material, hazardous waste, extremely hazardous waste, infectious waste, toxic substance, toxic pollutant or any other formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity or toxicity, and shall include, without limitation, any polychlorinated biphenyls (PCBs), asbestos, lead-based paint or building materials, radon, petroleum, natural gas, natural gas liquids, liquified natural gas or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). “Environmental Law” shall mean any and all present and future federal, state and local laws, statutes, rules or regulations, or any requirements under permits issued pursuant to these laws, and other requirements of governmental authorities relating to the environment, to any hazardous substance or to any activity involving hazardous substances, and shall include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Federal Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) (“OSHA”) and all other applicable provisions of federal, state and local laws related to the environment.

     If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of hazardous substances or materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional Rent (as defined in Section 5.1 below) if such release occurred and was caused or permitted by Tenant, or arose as a result of the business activities of Tenant. In addition, Tenant shall execute affidavits, certificates and the like from time to time at Landlord’s request concerning Tenant’s actual knowledge regarding the presence of hazardous substances or materials on the Premises. In all events, Tenant shall protect, defend, indemnify and hold harmless Landlord and its officers, members, partners, employees, agents and representatives (collectively, the “Landlord Parties”) in the manner provided in Section 11.1 of this Lease from any release of hazardous substances and/or materials on the Premises occurring while Tenant is in possession thereof. If at any time during or after the Term of this Lease, as it may be extended, Tenant becomes aware of any inquiry, investigation, or proceeding by any governmental agency related to hazardous materials on or under the Premises, Tenant shall within five (5) business days after first learning of such inquiry, investigation or proceeding give Landlord written notice of same. This section shall survive the expiration or earlier termination of the Lease.

     Tenant acknowledges receipt of those documents and reports relating to the soil and environmental conditions at the Premises (including but not limited to that certain Phase I Environmental Assessment Report for 180 Oyster Point Boulevard dated as of December 2005, prepared for a prior owner by PIERS Environmental Services, Inc.) that are set forth in Exhibit I, which is attached hereto and is expressly incorporated herein (collectively, the “Baseline Environmental Reports”). Landlord makes no representations or warranties as to the truth or accuracy of the Baseline Environmental Reports, or as to the contents thereof, except that Landlord hereby represents that Landlord’s Work (as described in the Work Letter) shall be constructed in accordance with the recommendations set forth in the latest soils report for the Real Property with respect to corrosivity (as set forth in that certain letter regarding soil corrosivity of the Real Property dated January 29, 2000 from J. Darby Howard, Jr., of Cerco Analytical, Inc. to Jeff Saunders of Treadwell & Rollo). Tenant shall not be obligated to remediate any pre-existing hazardous materials disclosed in the Baseline Environmental Reports unless such pre-existing contamination is exacerbated by the gross negligence or willful misconduct of Tenant or any of its subtenants or assigns. Landlord agrees to provide Tenant with copies of any and all of the environmental reports performed by or for, or received by, Landlord (at no expense to Tenant except as expressly provided in this Section 4.3) within thirty (30) days of Landlord’s receipt thereof, including, but not limited to, all monitoring and closure reports relating to the former Blue Line Transfer Station previously located on or near the Premises.

     Tenant shall, prior to Tenant’s vacation and surrender of the Premises on or prior to the Expiration Date, comply with all Environmental Laws, to surrender the Premises at the expiration of the Term, free from any residual impact from the Tenant’s hazardous materials storage and use at the Premises, including, without limitation, complying with the facility closure process required by the San Mateo County Department of Health

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and/or Health Services Agency (“County”), and those other facility closure environmental laws, ordinances, rules, regulations, orders, restrictions of record and requirements promulgated or issued by a federal, state or local governmental department or agency required for the issuance of a facility closure permit, or its equivalent (the “Closure Permit”), from all applicable governmental authorities with jurisdiction over the subject matter (collectively, the “Closure Authority”). Tenant shall, within two (2) business days of Tenant’s filing or receipt of the same, provide Landlord with copies of: (a) the closure plan submitted by Tenant to the Closure Authority; and (b) the closure report or any other closure approval(s) issued by the Closure Authority. Notwithstanding anything to the contrary contained herein, Tenant shall remove from the Premises at the end of the Term all hazardous waste containers that are brought onto the Premises by or for Tenant or anyone under Tenant’s control during the Term.

     At least three (3) months prior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by the Closure Authority) to be taken by Tenant in order to surrender the Premises at the expiration of the Term, free from any residual impact from the Tenant’s hazardous materials storage and use at the Premises (the “Surrender Plan”), prepared by a third party environmental consultant hired by Tenant, at Tenant’s sole cost and expense (the “Environmental Consultant”), which Surrender Plan shall incorporate the proposed closure plan to be submitted to the Closure Authority as required for the Closure Permit. Landlord shall review such Surrender Plan and determine whether such Surrender Plan is acceptable for the purpose of satisfying the Tenant’s surrender obligations relating to hazardous substances and/or materials on the Premises. At a minimum, the Surrender Plan shall contain a listing of (i) all hazardous materials licenses and permits held by or on behalf of Tenant with respect to the Premises, and (ii) all hazardous materials used, stored, handled, treated, generated, released or disposed of from the Premises for which a hazardous materials business plan is required under applicable laws (e.g., excluding incidental hazardous materials in office and cleaning supplies). Landlord shall either accept or propose reasonable modifications to the Surrender Plan within thirty (30) days following Tenant’s delivery thereof to Landlord; and if Landlord does not respond to the Surrender Plan with proposed modifications within such 30-day period, then the Surrender Plan shall be deemed to be acceptable to Landlord. In connection with Landlord’s review of the Surrender Plan, Tenant shall provide to Landlord such additional non-proprietary information concerning Tenant’s hazardous materials use as Landlord may reasonably request. After Landlord’s approval of the Surrender Plan, Tenant shall submit to, and obtain the Closure Authority’s approval of the closure plan contained in the Surrender Plan, and after obtaining such approval, Tenant shall comply with all governmental requirements indicated by the Closure Authority as conditions to issuance of the Closure Permit. Upon Tenant’s vacating the Premises, and as a condition to Tenant’s surrender of the Premises to Landlord at the expiration of the Term (subject to Tenant’s right to holdover pursuant to Section 16.2), Tenant shall deliver to Landlord, in addition to the Closure Permit, reasonable written evidence that all other actions required by the Surrender Plan have been satisfactorily completed. Under no circumstances shall Landlord’s review of the Surrender Plan, or any proposed modifications to the Surrender Plan, subject Landlord to any liability or responsibility for the contents of such Surrender Plan or for the Surrender Plan’s compliance with all applicable laws and regulations, nor shall Landlord’s review or proposed modifications to the Surrender Plan satisfy Tenant’s obligation to comply with all applicable legal requirements with respect to Tenant’s hazardous materials storage and use at the Premises.

5.0 RENTS

     5.1 Minimum Monthly Rent. Tenant shall pay to Landlord at the place designated in Section 1.2, or at such place as Landlord may otherwise designate, without deduction, offset, counterclaim, prior notice or demand, as Minimum Monthly Rent, the sum of the “Building Minimum Monthly Rent” and the “Service Area Minimum Monthly Rent.” All such Minimum Monthly Rent Payments shall be payable in advance on the first day of each month during the Lease Term. All other costs and expenses that Tenant assumes or agrees to pay to Landlord under the Lease shall be deemed additional rent (which, together with the Minimum Monthly Rent, is sometimes referred to as the “Rent”). If the Term shall commence or end on a day other than the first day of a calendar month, then Tenant shall pay, as rent for such partial calendar month, a pro rata portion of the Minimum Monthly Rent, prorated on a per diem basis, with respect to the portions of the fractional calendar month included in the Term.

     5.2 Rents; Adjustments. The Building Minimum Monthly Rent is the minimum monthly rent associated with the Building, which during the first one year period after the Commencement Date (as defined in Section 1.5) shall be equal to the amount determined in accordance with the formula set forth in Exhibit D, which is attached hereto and is incorporated herein (the “Calculation of the Building Minimum Monthly Rent During First Year of Term”). On each annual anniversary of the Commencement Date, the Building Minimum Monthly Rent shall increase by three percent (3%) from the prior year’s Building Minimum Monthly Rent.

     The Premises will include a service area (the “Service Area”), which shall be a secured area to be used for loading, storage and distribution of Tenant’s process equipment, gas and chemicals, as well as bio-waste containers, electrical transformers generators and other service equipment. The location of the Service Area is generally depicted in Exhibit J (the “Depiction of the Service Area”). After the Substantial Completion of the Building Shell, Landlord shall cause Landlord’s Architect to determine the rentable square footage of the Service Area, which shall mean the surface area of the Service Area measured to the internal boundary of all surrounding walls and fences, less the area of any easement or right of way in which no improvements are permitted to be constructed by Tenant and any areas occupied by equipment or structures installed by Landlord that are not a part of the Initial Tenant Improvements (except for the area upon which the PG&E transformer is located, which shall be included in the determination of the rentable square footage of the Service Area); and Landlord shall notify Tenant, in writing, of such determination prior to the Commencement Date. If Tenant does not agree with such determination, Tenant shall notify Landlord of such objection within ten (10) days after receiving such written notice from Landlord. Tenant’s written notice of objection to the rentable square footage of the Service Area should include Tenant’s determination of the rentable square footage of the same. Tenant shall be deemed to have

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approved of Landlord’s determination of the rentable square footage of the Service Area unless Tenant notifies Landlord, in writing, of such objection (along with Tenant’s determination of the rentable square footage of the Service Area) within such ten (10) day period. If Landlord and Tenant are unable to agree upon the rentable square footage of the Service Area, after Landlord receives Tenant’s determination of the same, then Landlord and Tenant shall mutually select an independent third party space measurement professional to field measure the rentable square feet of the Service Area. Such third party independent measurement professional’s determination shall be conclusive and binding on Landlord and Tenant. Landlord and Tenant shall each pay one-half (¹/2) of the fees and expenses of the independent third party space measurement professional. If such determination is made, it will be confirmed in a writing signed by Landlord to Tenant.

     The Service Area Minimum Monthly Rent is the minimum monthly rent associated with the Service Area, which during the first one year period after the Commencement Date shall be equal to the rentable square footage of the Service Area times 70/100ths Dollars ($.70) per rentable square foot. On each annual anniversary of the Commencement Date, the Service Area Minimum Monthly Rent shall increase by three percent (3%) from the prior year’s Service Area Minimum Monthly Rent.

6.0 OPERATING EXPENSES

     6.1 Payment. Tenant shall pay as additional rent, the Operating Expenses (Sections 6.2 — 6.5) for the Premises from the date of Substantial Completion of the Building Shell. Except as otherwise specified herein, Tenant shall pay Landlord, on a monthly basis after the date of Substantial Completion of the Building Shell, the estimated amount of the Operating Expenses specified in Section 1.8 above; provided, however, that Landlord shall have the right to adjust the estimated amount of Operating Expenses to be paid by Tenant by delivering written notice to Tenant of the new estimated amount, in which case, the estimated amount to be paid by Tenant thereafter shall be the new estimated monthly amount set forth in such written notice from Landlord. Landlord shall provide Tenant with a statement of the actual amount of such expenses within 120 calendar days following the end of each calendar year. Tenant shall pay to Landlord the amount by which such actual expenses exceeds Tenant’s Operating Expense payments for such year and any excess amounts paid by Tenant shall be credited to reduce Tenant’s payments for the next ensuing period, or paid to Tenant if the Lease Term has expired. If Tenant disputes any amount set forth in the statement of expenses to be delivered by Landlord pursuant to this Section 6.1, Tenant shall have the right by written notice delivered to Landlord within thirty (30) days following receipt of such statement to cause Landlord’s books and records with respect to the preceding calendar year to be audited, which audit shall be completed within forty-five (45) days following Tenant’s receipt or access to the materials required for such audit, which shall be performed by an accountant mutually acceptable to Landlord and Tenant; provided that Tenant’s right to perform such audit shall be conditioned on Tenant first paying to Landlord all such disputed amounts. The amounts payable by Landlord to Tenant or Tenant to Landlord, as the case may be, shall be appropriately adjusted on the basis of such audit. Access to such materials will be made available at the office of Landlord or its property manager. If such audit discloses a liability for a refund by Landlord to Tenant in excess of ten percent (10%) of the payments previously made by Tenant for such calendar year, the cost of such audit shall be borne by Landlord; otherwise the cost of such audit shall be borne by Tenant. If Tenant does not exercise its audit right for any year during the term (or any renewal term) of this Lease in accordance with the provisions of this Section, then such statement shall be conclusively binding for such year; provided, however, that a waiver by Tenant of its audit rights in any one year shall not be deemed a waiver of audit rights under this Section for any subsequent year.

     Moreover, the parties acknowledge that management of the Premises may, at Landlord’s sole and absolute discretion, be included with other properties in the vicinity of the Premises owned by Landlord or its affiliates to be commonly managed by Landlord, in which case, Landlord shall have the right to commonly manage the entire project as long as such common management does not result in increased Operating Expenses in excess of those amounts that would have been otherwise payable under this Lease had Landlord not commonly managed the Premises and such adjacent Premises. If the Premises are commonly managed with other properties, “Tenant’s Proportionate Share” shall mean the rentable square footage of the Premises divided by the rentable square footage of all buildings located on the properties commonly managed by Landlord. If the Premises are not commonly managed with other properties, “Tenant’s Proportionate Share”, for purposes of this Lease, shall be equal to 100%. For example, based on the fact that the Premises will be newly constructed as of the Commencement Date, Tenant shall have no liability for the cost of restoring or replacing worn or obsolete improvements that do not benefit the Premises (and that are located on adjacent properties) as part of such Operating Expenses.

     6.2 Taxes. Tenant shall pay all real property and other taxes on the Premises, which shall include any form of assessment, license, fee, commercial rental tax, levy or tax (other than net income, franchise, inheritance or estate taxes) imposed by any authority having the power to tax or levy assessments on the Premises and the reasonable cost of contesting any tax assessment, whether such tax is (i) upon any legal or equitable interest of Landlord in the Premises; (ii) upon this Lease, the Rent payable hereunder or the value thereof; (iii) with respect to any right to occupancy, use, leasing, operation, management, maintenance, alteration, or repair of the Premises or any part thereof; or (iv) imposed in substitution for, or in addition to, existing or additional taxes against any part of the Premises whether or not now customary or within the contemplation of the parties. If any governmental authority should pass any law or regulation after the effective date of this Lease, which shall make it unlawful for Tenant to reimburse Landlord for any of the taxes covered by this Section 6, the Minimum Monthly Rent payable to Landlord under the terms of this Lease shall be increased so as to net to Landlord the amount that would have been received by Landlord if such tax had not been imposed. Tenant shall pay prior to delinquency all taxes assessed against and levied upon its trade fixtures, furnishings, equipment, and other personal property, and any increase in real property taxes resulting from any alterations, Initial Tenant Improvements, or any other improvements placed in or on the Premises.

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     6.3 Insurance

          6.3.1 Property. Landlord shall obtain and maintain on Landlord’s Work, prior to the Commencement Date, and on the Landlord’s Work and the Initial Tenant Improvements, as of the Commencement Date and throughout the Term, and Tenant shall pay to Landlord, as an Operating Expense, the cost of, an “all risk” policy of property casualty insurance (including, at Landlord’s option, earthquake and flood coverage, inflation endorsement, and sprinkler leakage endorsement) covering the full replacement cost of the improvements located on the Real Property, excluding coverage of all Tenant’s personal property on the Premises and excluding any Tenant alterations or improvements to the Premises other than the Initial Tenant Improvements. Landlord shall have the right to provide such insurance in the form of a blanket policy covering the Premises and all buildings owned or managed by Landlord and its affiliates in the vicinity of the Premises, with Tenant’s liability for the costs thereof limited to an equitable share based on the replacement cost of the Building as compared to the replacement cost of all buildings covered by such blanket policy. In addition, such insurance shall include a lender’s loss payable endorsement in favor of Landlord’s lender. Notwithstanding anything to the contrary contained herein, in the event of earthquake damage, Tenant shall pay Landlord Tenant’s Equitable Share of the deductible associated with such earthquake policy up to a maximum amount of $100,000, amortized over a period of four (4) years, which amounts shall be payable in monthly installments for the portion of the amortization period remaining in the Term (i.e. with payments thereon in any 12 month period not exceeding $25,000). “Tenant’s Equitable Share” of the earthquake policy deductible shall mean the deductible amount multiplied by a fraction, the numerator of which is the cost of restoration associated with items included in Landlord’s Operating Expense Repair Obligations (as defined below), and the denominator of which is the sum of all restoration costs, including Landlord’s Non-Compensated Repair Obligations and Landlord’s Operating Expense Repair Obligations. Tenant agrees not to engage in any activities (i) that will increase the cost of such insurance, unless such actions by Tenant are consistent with its normal business operations as set forth in Section 1.10 of the Lease, or (ii) that will prevent Landlord from procuring policies reasonably satisfactory to Landlord. Tenant shall pay any increases in insurance premiums resulting from the nature of Tenant’s occupancy or any act or omission of Tenant within ten (10) business days after receiving an invoice from Landlord for the same.

          6.3.2 Tenant’s Obligation. Tenant shall maintain in full force and effect at all times during the term of the Lease, at its own expense, for the protection of Tenant and Landlord, as their interests may appear, (a) “all risk” property insurance on any alterations (but excluding the Initial Tenant Improvements) to the Premises in the amount of the replacement cost thereof, (b) commercial general liability insurance with limits of liability for bodily injury and property damage of not less than $2,000,000 per occurrence and $3,000,000 in the aggregate, insuring Landlord and Tenant against any liability arising out of the use, occupancy or maintenance of the Premises (provided that such insurance coverage for more than $2,000,000 in the aggregate and in excess of the per occurrence limit may be covered by an umbrella policy meeting the requirements of Section 6.3.3 below), and (c) worker’s compensation insurance as required by any applicable law or regulation. The proceeds of this insurance will be payable to Tenant. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. Notwithstanding anything to the contrary in Section 6.3.3 below, neither Landlord nor Landlord’s lender shall be named as an additional insured with respect to Tenant’s personal property or worker’s compensation insurance.

          6.3.3 Terms. All insurance policies required to be carried by Tenant hereunder shall conform to the following requirements: (a) at Landlord’s request, shall carry a lender’s loss payee endorsement in favor of Landlord’s lender; (b) an executed copy of each insurance policy, including renewals (or a certificate thereof), as well as any required endorsements associated therewith, shall be delivered to Landlord; (c) each certificate of insurance shall require that the applicable insurer or insurance broker shall endeavor to notify Landlord in writing at least thirty (30) days prior to any cancellation or expiration of such policy, or any reduction in the amounts of insurance carried, provided, however, that Tenant shall provide written notice to Landlord of any such cancellation or expiration or reduction in amounts at least fifteen (15) days prior to the effective date of such cancellation, expiration or reduction; (d) each policy shall be primary, not contributing with any insurance that Landlord may carry; (e) the commercial general liability policy shall state that Landlord is entitled to recovery for the negligence of Tenant even though Landlord is an additional insured; (f) the commercial general liability policy shall name Landlord as an additional insured, by endorsement; and (g) shall be issued by companies having a Best’s financial category minimum rating of Class “A-/VIII” or better in the most recent edition of Best’s Insurance Report or as otherwise reasonably approved by Landlord in the event such rating system shall be modified or discontinued.

          6.3.4 Waiver. Each of the parties hereto hereby releases the other, to the extent of the releasing party’s insurance coverage required to be maintained hereunder (with Landlord’s liability coverage deemed to be at least equivalent to the minimum limits on Tenant’s commercial general liability policy required to be maintained under Section 6.3.2 above), and regardless of any vitiation of the releasing party’s insurance coverage caused by the releasing party, each party releases the other party from any and all liability for any loss or damage covered by such insurance which may be inflicted upon the property of such releasing party even if such loss or damage shall be brought about by the fault or negligence of the other party, its agents or employees; provided, however, that this release shall be effective only with respect to loss or damage occurring during such time as the appropriate policy of insurance shall contain a clause to the effect that this release shall not affect said policy or the right of the insured to recover thereunder. If any policy does not permit such a waiver, and if the party to benefit therefrom requests that such a waiver be obtained, the other party agrees to obtain an endorsement to its insurance policies permitting such waiver of subrogation if it is available. If an additional premium is charged for such waiver, the named insured under such policy agrees to pay the amount of such additional premium.

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6.4 Repairs and Maintenance; Building Management

          6.4.1 Landlord’s Maintenance and Repair Obligations.

               6.4.1.1 Landlord’s Maintenance and Repair Obligations / Non-Operating Expenses. Landlord, at its sole cost and expense and without reimbursement from Tenant, shall maintain, repair, and if necessary, replace all footings, foundations, load bearing walls, roofs (exclusive of the roof membrane), structural steel columns and girders forming a part of the Building located on the Premises (“Landlord’s Non-Compensated Repair Obligations”).

               6.4.1.2 Landlord’s Maintenance and Repair Obligations / Operating Expenses. Subject to Landlord’s obligations with respect to Construction Defects and Punch List Items (which Landlord shall perform without reimbursement from Tenant), Landlord shall, with reimbursement from Tenant for the costs associated therewith as an Operating Expense, perform all necessary maintenance and repairs to (a) all exterior glass and other exterior surfaces of the Building, and all exterior walls (other than load bearing walls included in Landlord’s obligations under Section 6.4.1.1 above), (b) the basement parking structure (including but not limited to all striping, exhaust systems, and lighting systems contained within the basement parking structure), (c) all outdoor parking facilities and driveways and all exterior sidewalks, (d) all exterior landscaping, exterior irrigation systems, exterior drainage systems, and exterior lighting of the Premises, (e) all drainage systems on the exterior portions of the Building, (f) the roof membrane, (g) all utility lines (outside the Building) servicing the Premises up to their point of connection to the Building (including but not limited to all backflow devices), and (h) the elevators within the Building, as necessary to maintain the same in good condition and repair, subject to reasonable wear and tear, throughout the Term (“Landlord’s Operating Expense Repair Obligations”). As part of Landlord’s Operating Expense Repair Obligations for which Tenant shall reimburse Landlord for the costs thereof as an Operating Expense, Landlord shall also be responsible for cleaning the exterior side of all exterior windows of the Building, as necessary to maintain the same in good condition and repair, subject to reasonable wear and tear, throughout the Term.

               6.4.1.3 Landlord’s Repair Obligations — Generally. Notwithstanding the foregoing, Landlord’s repair obligations specified herein are limited to those repairs that would be commercially reasonable to repair under common property management standards applicable to buildings that are similar in type and quality to the Building. In addition, Landlord agrees to promptly perform its repair obligations set forth herein after receiving written notice from Tenant to perform the same.

               6.4.1.4 Landlord’s Failure to Commence Repairs. If Landlord fails to commence any repairs required by this Section 6.4 within fifteen (15) days of notice thereof (as such time period may be extended for Force Majeure Delays), and thereafter fails to diligently prosecute such repair to completion, then Tenant may perform such work on Landlord’s behalf; provided, however, that Tenant first notifies Landlord, in writing, at least three (3) days prior to commencing such repairs on Landlord’s behalf, that Tenant will be commencing such repairs within three (3) days unless Landlord commences such repairs and diligently prosecutes the same to completion. If Landlord commences and diligently works towards completing such repairs within three (3) days after receiving written notice from Tenant, then Tenant shall have no right to perform such repairs on Landlord’s behalf. Landlord shall deliver written notice to Tenant of any Force Majeure delays that are delaying Landlord’s commencement or the completion of the repairs. Notwithstanding the foregoing, in the event of an emergency situation that threatens damage to Tenant’s personnel or property, Tenant shall have the right to make repairs that are required by Landlord herein, on Landlord’s behalf, provided, however, that Tenant first provides notice to Landlord of the emergency situation, and provided Landlord fails to commence and diligently prosecute the repair within 24 hours after receiving such notice of repair or such shorter period as is reasonable under the circumstances.

               6.4.1.5 Reimbursement to Tenant for Work Performed On Landlord’s Behalf. If Tenant, on Landlord’s behalf, repairs or replaces any item specified herein as being repaired or replaced by Landlord, either at Landlord’s sole cost and expense or as an Operating Expense, then Landlord shall reimburse Tenant for any such repair work performed by Tenant on Landlord’s behalf within thirty (30) days after Landlord receives Tenant’s written request for payment of the same, provided, however, that Tenant has first allowed Landlord to complete such repairs in accordance with Section 6.4.1.5; and further provided that Landlord shall be permitted to include as an Operating Expense for which Tenant shall be required to pay Tenant’s Proportionate Share of those amounts paid by Landlord to Tenant as reimbursement under this Section 6.4.1.5 to the extent that such repairs or replacements could have been included as an Operating Expense had Landlord (and not Tenant) performed the same.

               6.1.4.1.6 Casualties. To the extent covered under Article 10, repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall, to the extent covered under Article 10, be subject to Article 10.

          6.4.2 Tenant’s Performance Obligations. Subject to any maintenance or repair obligations under this Lease that are specifically required to be performed by Landlord, Tenant shall, at its sole cost and expense, be responsible for maintaining the Premises, including all improvements constructed thereon, in good order, condition and repair, and Tenant shall promptly make all repairs necessary to maintain such condition. Except as otherwise expressly set forth herein, Tenant shall be solely responsible for all costs of maintaining and repairing the Premises, including, without limitation, (1) maintenance and repair of all interior glass and interior and exterior doors of the Building, and the interior of the Building, including, without limitation, maintenance and repair of the interior walls and interior surfaces of exterior walls and all interior electrical systems and lighting, (2) maintenance and repair of the HVAC system(s) serving the Building (in accordance with the manufacturer’s

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recommendations); and (3) maintenance and repair of the Building fire, safety, and security systems, and all other equipment, plumbing, wiring, conduits and cables within the Building, and (4) any and all generators on the Premises (including but not limited to all emergency generators). Notwithstanding anything to the contrary in this Lease, Tenant shall, reimburse Landlord for all reasonable costs incurred by Landlord to repair any damage to the Building or the Premises, beyond reasonable wear and tear, caused by Tenant or its Agents (as defined in Section 10.3). Tenant hereby waives the benefit of any applicable statutory provision that requires a landlord to maintain leased property. All repairs made by Tenant shall utilize materials and equipment that are comparable to those originally used in constructing the Premises. Tenant shall notify Landlord, in writing, prior to making any repairs to any portion of the Premises that are reasonably expected to cost in excess of $25,000; provided, however, that Tenant shall have no obligation to so notify Landlord of any repairs to be made pursuant to a preventive maintenance program established under a contractual arrangement with Tenant and a third party maintenance provider. Tenant’s repair and replacement obligations set forth in this Section 6.4.2 shall not include any repairs or replacements arising as a result of any Construction Defects to the extent covered by Landlord’s Warranty. Furthermore, Tenant shall be reimbursed by Landlord for Tenant’s costs incurred in complying with Tenant’s maintenance obligations set forth herein, (a) to the extent such maintenance and repair arises from the negligence or willful misconduct of Landlord or Landlord’s agents, employees, invitees or licensees; or (b) to the extent such repairs or replacements are covered by Landlord’s insurance (unless due to the gross negligence or willful misconduct of Tenant).

          6.4.3 Operating Expenses. Operating Expenses shall include (i) all sums expended by Landlord for the supervision, maintenance, repair, replacement and operation of the Premises, and a reasonable management and administrative fee (not to exceed three and one-quarter percent (3.25%) of the net rent (i.e. the Minimum Monthly Rent payable over the year in question) plus the Operating Expenses for the year), exclusive of those sums expended by Landlord for the supervision, maintenance, or repair of Landlord’s Non-Compensated Repair Obligations, and (ii) any costs of capital improvements made by Landlord to the Building or the Premises (x) to maintain the Building and the Premises in a good, working condition and state of repair, or (y) that are required by any governmental authority after the original construction of the Building. The portion of such capital costs to be included each year as an Operating Expense shall be that amount allocable to the year in question calculated by amortizing the costs thereof over the useful life of such improvement, as reasonably determined by Landlord, with interest on the unamortized balance at the rate of the Federal Reserve Bank of San Francisco, plus one percent (1%). However, if the capital expense is less than Ten Thousand Dollars ($10,000), it shall be expensed in the year in which it was incurred, and it shall not be amortized, provided that the aggregate amount of such capital expenses that are less than $10,000 that are so expensed in any 12-month period of the Term shall not exceed Thirty Thousand Dollars ($30,000), and if such aggregate amount is exceeded, then Thirty Thousand Dollars ($30,000) of such capital expenses shall be proportionately allocated among such capital expenses and expensed for the year in question, and the remainder shall be allocated proportionately among the corresponding capital items, and amortized over the respective useful lives. Notwithstanding the foregoing, operating expenses shall not include: (a) depreciation, interest and principal payments on the Premises or Building; (b) the cost to complete the Landlord’s Work or the Initial Tenant Improvements (but may include repair and maintenance costs for the same in accordance with the requirements of this Article 6); (c) real estate broker commissions; (d) repairs and maintenance costs paid to Landlord by proceeds of insurance or by third parties; (e) legal fees incurred in connection with the development of the Project or leasing of the Premises or any legal disputes arising from such leasing activities; (f) reserves for Operating Expenses, taxes, insurance or any other costs for which Tenant is responsible under this Lease; (g) costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Premises; (h) any fines, penalties or interest due to Landlord’s late payments; (i) any amounts paid as ground rental by Landlord; (j) any recalculation of or additional Operating Expenses incurred more than two (2) years prior to the year in which Landlord proposes that such costs be included; (k) payments to Landlord or to subsidiaries or affiliates of Landlord for services in the Building to the extent the same exceeds the costs of such services rendered by unaffiliated comparable third parties on a competitive basis, except for the management and administrative fee set forth above; (l) costs arising from Construction Defects in Landlord’s Work for which Landlord is responsible under Landlord’s Warranty; (m) costs (such as property manager salary and property management office expenses), for which Landlord is compensated by the management and administrative fee; (n) capital expenses not included in clauses (ii)(x) or (ii)(y) above; and (o) any costs related to any governmental, quasi-governmental, utility company or similar program or plan for water, traffic, hazardous waste, environmental or handicapped access management, mitigation, enhancement or remediation in which participation is voluntary, except to the extent such participation results in a net reduction in Operating Expenses.

     Landlord and Tenant acknowledge that two other properties (200 Oyster Point and 230 Oyster Point) share common driveway access rights (with the Premises) over a portion of the Premises (and over such other properties) by way of easement agreements setting forth such access rights and the maintenance costs and responsibilities associated with such common driveway. Tenant agrees to pay Landlord, as part of the Operating Expenses, the Premises’ allocable share of maintenance costs associated with such common driveway (based on the terms of such easement agreements).

          6.4.4 Landlord’s Right to Repair On Tenant’s Behalf. If Tenant fails to maintain the Premises in good order, condition and repair, Landlord may give Tenant notice to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to commence such work within ten (10) days following receipt of such notice and thereafter diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work, in which case, Tenant shall pay such amounts to Landlord within thirty (30) days after receiving an invoice for the same from Landlord. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises as a result of Landlord’s performance of any such work.

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          6.4.5 Landlord’s Right to Make Repairs. Landlord shall have the right, in its reasonable discretion, to close temporarily (for a reasonable duration and following reasonable notice) any portion of the Premises to the extent required for Landlord to perform its maintenance rights and obligations specified herein; provided that Landlord shall reasonably cooperate with Tenant to schedule any such closure and work at times and in a manner which mitigates the impact thereof on Tenant’s business operations in the Premises. Tenant’s obligation to pay the Minimum Monthly Rent shall not abate as a result of such temporary closure, nor shall Landlord be responsible or liable to Tenant for any interference with Tenant’s use of the Premises as a result of any such temporary closure.

     6.5 Utilities, Telecommunications; Backup Generator. Tenant shall pay for water, gas, heat, sewer, power, telephone services and any other utility supplied to or consumed in or on the Premises, and shall insure that each utility provider transfers the applicable accounts into Tenant’s name on or before the Commencement Date. Landlord shall not be responsible or liable for any interruption in utility service, nor shall such interruption affect the continuation or validity of this Lease; provided, however, that Landlord shall use reasonable efforts to remedy any interruption in the supply of such utilities or services if such interruption is caused by Landlord or Landlord’s employees, agents or contractors. If such interruption arises from the act of a third party, Tenant and Landlord shall cooperate with each other to seek to remedy the interruption. Tenant shall maintain and regularly test, at its sole cost and expense, the emergency power generators (if any) installed on the Premises in accordance with the manufacturer’s recommendations. Tenant shall be responsible at its sole cost for the installation, maintenance and repair of any phone, data or other communications cable from the demarcation point supplied by the local regulated public utility to and within the Premises. Any alterations, installations or modifications of such cable shall be subject to the provisions of this Lease, including Articles 7 and 8.

     Tenant shall have the exclusive right during the Term, subject to Landlord’s Reserved Rights, to install, maintain and operate on the roof of the Building, for the purpose of Tenant’s business, telecommunications antennae, satellite dishes and other devices that make use of the electromagnetic spectrum (“Telecommunications Devices”) and related wires, cables, conduits between such equipment and the Premises, subject to the following requirements, (a) compliance with all covenants or restrictions of record (as of the date hereof), applicable laws, building codes, regulations and ordinances, (b) compliance with the terms and provisions of the Work Letter, but only to the extent that such devices are installed prior to the Substantial Completion of Landlord’s Work (as such terms are defined in the Work Letter), and (c) compliance with the terms and provisions of Sections 7 and 8 hereof, but only to the extent that such devices are installed after the Substantial Completion of Landlord’s Work.

     Notwithstanding anything to the contrary contained herein or in the Work Letter, prior to installing any Telecommunications Devices outside of the Building or on the exterior of the Building, including but not limited to on any roof of any building within the Premises, Tenant shall provide Landlord with written notice of Tenant’s desire to install such Telecommunications Devices, together with plans and specifications for the installation of such Telecommunications Devices. Landlord shall review such plans and specifications within ten (10) business days after receiving the same, and within such period notify Tenant if Landlord approves the installation of such Telecommunications Devices or disapproves the installation of such Telecommunication Devices, and if Landlord disapproves the installation of such Telecommunication Devices, the reasons therefore. Landlord’s failure to provide notice of its disapproval and the reasons therefore within such ten (10) business day period shall be deemed Landlord’s approval of such installation request. Landlord shall not unreasonably withhold approval of the installation of such Telecommunications Devices; provided, however, that Landlord shall have the right to withhold such approval, in its sole and absolute discretion, if (a) Tenant fails to provide Landlord with sufficient documentation with respect to the installation of the Telecommunication Devices so as to allow Landlord to fully review and evaluate the same, (b) the installation of such Telecommunication Devices is reasonably likely to cause damage to the physical integrity of the Building, or (c) the installation of such Telecommunication Devices will adversely affect the appearance of the Building from surrounding areas, as reasonably determined by Landlord. Tenant shall install screening materials in conformance with all applicable laws and restrictions of record, and the appearance, size and location of any screening materials shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld. Tenant shall be responsible for any installation and maintenance costs of any such Telecommunication Devices, as well as any damage to the Building, including without limitation the roof, arising out of or related to the installation or use by Tenant of any such Telecommunications Device. Tenant shall not be obligated to pay any license fee for the use of the roof of the Building pursuant to this Section during the Term of this Lease or any extension thereof.

     Notwithstanding anything to the contrary contained herein, should the installation of the Telecommunications Devices affect the engineered elements of Landlord’s Work or the roof of the Building (including but not limited to the roof membrane), or should such installation potentially affect any warranty provided to Landlord by Landlord’s Contractor or its material suppliers (including but not limited to any roof warranty), then Tenant shall either (a) have Landlord perform any work affecting Landlord’s Work, on Tenant’s behalf, pursuant to a Change Request in accordance with Section 1.11 of the Work Letter (provided such request is made prior to the Substantial Completion of Landlord’s Work, as such terms are defined in the Work Letter), in which case, Landlord’s performance of such work on Tenant’s behalf shall comply with all terms and requirements of the Work Letter, or (b) utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor or material supplier who originally installed such portion of Landlord’s Work, at Tenant’s sole cost and expense, as necessary, for the design and construction of that portion of Landlord’s Work affected thereby in order to maintain all contractual warranties provided to Landlord by Landlord’s Contractor or its material suppliers with respect to such Landlord’s Work, and to maintain all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work.

     Tenant may, through the Change Request process specified in the Work Letter, have a trench (with cables and conduit installed therein) constructed within the boundaries of the Real Property for purposes of “hard wiring”

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for voice, data and power transmissions between and among the buildings occupied by Tenant in the vicinity of the Premises. Landlord shall not unreasonably withhold its approval of such Change Request, unless such trenching poses a material risk to the physical integrity of the Building. Tenant is hereby advised that such trenching work must be performed through the Change Request process prior to the Substantial Completion of Landlord’s Work, since any subsequent installation of the same may be all but impossible due to site configuration. If such trenching and cabling work is installed within the Premises, Tenant shall not be obligated to remove the installed conduit upon the expiration or earlier termination of the Lease, but Tenant shall strip all cabling from such conduit at its sole cost and expense upon expiration or earlier termination of this Lease. Tenant shall not be obligated to pay any license fee for the use of the conduits installed in the Real Property pursuant to this Section during the Term of this Lease or any extension thereof.

     Landlord grants Tenant the license and right to use a portion of the Service Area for the installation, operation and maintenance of a backup power generator and associated fuel tank, which includes the passage of related wires, cables and conduit between Tenant’s electrical room and the backup power generator. However, any such improvements to be installed in the Service Area shall be subject to the terms and provisions of Section 7 and 8 of this Lease, unless Tenant is installing the same as part of the Initial Tenant Improvements, in which case, such improvements shall be installed subject to the terms and provisions of the Work Letter. Subject to Landlord’s rights herein, Tenant shall have access to the Service Area on a 24 hour per day/7 day per week basis. Tenant shall be solely responsible for the repair and maintenance of Tenant’s improvements and equipment within the Service Area, and Tenant agrees to maintain the same in a good state of condition and repair. Tenant has advised Landlord that if and when it installs a backup generator in the Service Area, it intends to run that backup generator on a regular basis in order to comply with maintenance specifications and requirements of law and that such operation may be as often as one (1) thirty (30) minute period per week. Except in cases of emergency, when no prior approval shall be required, Tenant shall propose for Landlord’s reasonable approval the schedule for operation of the backup generator to reasonably mitigate any interference with the use of adjacent properties by other tenants.

7.0 ALTERATIONS, ADDITIONS AND FIXTURES

     7.1 Installation and Removal. Subject to the terms of this Section 7 and Section 8 below, Tenant shall have the right to install its trade fixtures in the Building (and subject to Section 6.5 above, Tenant shall have the right to install any Telecommunication Devices on the exterior of the building or within any other portions of the Premises outside the Building, or any backup generator or associated fuel tank) during the term of this Lease; provided, however, that no such installation or removal thereof shall affect the structural portion of the Building or the engineered elements of Landlord’s Work, and that Tenant shall repair any damage to the Building or the Premises caused by the installation, use or removal of any of Tenant’s furniture, fixtures, equipment or other property; and provided however, that Tenant shall only be obligated to make such repairs necessary to restore the Premises to its condition prior to such installation or removal, ordinary wear and tear excepted. Notwithstanding the foregoing, Tenant shall not place a load upon the floor or roof of the Premises that exceeds the load per square foot which such floor or roof was designed (or is modified) to carry, as set forth in the Work Letter or the Plans for Landlord’s Work. Tenant shall not install business machines or mechanical equipment which causes noise or vibration to such a degree as to be reasonably objectionable to Landlord or other neighboring owners or tenants. Further, except as otherwise provided in Section 6.5 above, and except for those items of equipment (but not fixtures) that may be installed in the Service Area from time to time by Tenant, Tenant shall not install, nor allow to be installed any equipment on or outside the exterior of the Building without Landlord’s prior written consent, which consent shall not be unreasonably withheld. For purposes of Section 6.1 and this Section 7.1, the term “structural” shall refer to the footings, foundations, structural steel columns, girders, bearing walls, exterior walls, and roof.

     7.2 Tenant’s Rights. Tenant shall not make or permit to be made any alterations or improvements to the Premises without Landlord’s prior written consent. Notwithstanding the foregoing, Landlord’s prior written consent shall not be needed for any alterations or improvements to the premises that do not: (a) cost more than $25,000, (b) affect the exterior appearance of the Premises or the Building, or (c) affect the structural portions of the Premises or the engineered elements of Landlord’s Work. For purposes of determining the costs of the alterations or improvements for purposes of clause (a) above, such costs normally associated with such alterations and/or improvements must be included, and Tenant shall not be allowed to segregate alterations or improvements in parts in order to allow Tenant to perform such work without Landlord’s prior written consent. Any proposed alterations/improvements that do not require Landlord’s consent pursuant to clauses (a), (b) or (c) above shall be referred to herein as a “Minor Changes.” On a quarterly basis, Tenant shall deliver to Landlord a copy of the “as-built” plans for any Minor Changes performed during the prior quarter that are of a type for which “as-built” plans would customarily be prepared for such alteration, additions or improvements or such other reasonable information to show such alterations, additions or improvements if as-built plans are not customarily prepared for such work given the type, nature and scope of the alteration, addition or improvement. Additionally, as a condition to Tenant’s right to make Minor Changes, Tenant shall act reasonably to keep Landlord aware of the status of Tenant’s alterations and improvement work in the Premises by means of quarterly meetings with Landlord to review the status of work performed during the previous calendar quarter and work planned for the current calendar quarter.

     Notwithstanding the foregoing, in making any alterations or improvements of any magnitude or cost whatsoever, whether or not a Minor Change, Tenant shall comply with Section 8.

     7.3 Obtaining Landlord’s Consent. When seeking the Landlord’s consent to any alterations for which such consent is required under this Article 7, Tenant shall provide to Landlord, for Landlord’s review and approval, City approved plans and specifications for such changes, to the extent City approval of the plans and specifications is required for such alterations. Notwithstanding anything to the contrary contained herein, should

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any proposed alterations affect the engineered elements of Landlord’s Work or the roof of the Building (including but not limited to the roof membrane), or should such installation potentially affect any warranty provided to Landlord by Landlord’s Contractor or its material suppliers (including but not limited to any roof warranty), and if Landlord consents to such alterations, then, as required to prevent invalidation of such warranty, Tenant shall utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor or material supplier who originally installed such portion of Landlord’s Work, at Tenant’s sole cost and expense, for the design and construction of that portion of Landlord’s Work covered by the affected warranty or warranties, or as required to maintain all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work. If for some reasons Landlord’s Architect, Landlord’s Contractor, or Landlord’s subcontractors and material suppliers are unavailable to design and/or construct such alterations, then Landlord shall not unreasonably withhold its consent to Tenant’s architect and contractors performing the design and/or construction of such alterations.

     7.4 Tenant’s Construction Obligations.

          7.4.1 Performance of Tenant’s Work. Should any proposed alterations to be performed by Tenant hereunder conflict with Landlord’s exercise of its rights, or its performance of its obligations, set forth herein, then Tenant agrees to reasonably cooperate with Landlord in Landlord’s exercise of such rights and its performance of such obligations. Should any alterations require Landlord’s consent, and if such alterations involve the sprinkler, plumbing, mechanical, electrical power, lighting or fire safety systems within the Premises, such alterations shall be performed by subcontractors approved by Landlord in its reasonable judgment. For any work subject to Landlord’s consent or approval, Tenant shall provide Landlord with written notice, not less than fifteen (15) calendar days prior to the date Tenant desires to commence such Work, setting forth or accompanied by all of the following:

               7.4.1.1 A description and schedule for the work to be performed;

               7.4.1.2 The names and addresses of all contractors and subcontractors who, as of the date of such notice, will perform such alterations;

               7.4.1.3 A complete set of all plans, specifications, and calculations developed by or for Tenant, including all plans which are required by the applicable governmental authorities for the issuance of any permits or approvals or for the commencement of any of Tenant’s Work;

               7.4.1.4 Certificates of insurance evidencing that Tenant’s contractors and subcontractors (a) carry workers compensation insurance covering all of their respective workers as required by law, and (b) carry commercial general liability insurance with limits, in form and with companies as are required to be carried pursuant to the following paragraph, and the certificate of insurance shall contain a provision that the insurance carrier or broker shall endeavor to notify Landlord at least 30 days’ prior written notice of any cancellation, modification or lapse or reduction in the amounts of such insurance, provided, however, that Tenant shall provide written notice to Landlord of any such cancellation or expiration or reduction in amounts at least fifteen (15) days prior to the effective date of such cancellation, expiration or reduction.

     Tenant’s contractor shall carry commercial general liability insurance covering Premises damage, personal injury, death, and products and completed operations coverage, in an amount not less than $3,000,000 per occurrence, and $5,000,000 in the aggregate with deductibles of no more than $10,000, naming Landlord and its affiliates, employees and agents as additional insureds, by endorsement (on an ISO form 2010 11 85), with an insurance company with a minimum of an A-VIII rating. All subcontractors shall carry such insurance as well, except that subcontractors shall only be required to carry such insurance in an amount of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate; provided that the insurance coverage of any of the applicable subcontractors required under this Section may be provided, in whole or in part, through a blanket policy of such insurance coverage maintained by Tenant’s contractor which expressly provides that the insured’s subcontractors are covered thereunder. Such insurance shall be maintained at all times during the construction of the alterations or improvements, except for the products and completed operation coverage, which coverage is to be maintained during construction of the work and thereafter in accordance with standard industry practice in the Bay Area of San Francisco, California. Furthermore, such insurance shall preclude or waive subrogation claims by the insurer against Landlord, its affiliates, or their agents, employees, or representatives. Such insurance shall also provide that it is primary insurance with respect to the Landlord and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder.

     Notwithstanding the foregoing, for any Minor Change, the limits of the commercial general liability policy referenced above shall be $1,000,000 per occurrence and $1,000,000 annual aggregate.

               7.4.1.5 Notwithstanding anything to the contrary contained herein, at least three (3) days prior to the commencement of any such Tenant alterations, Tenant shall deliver to Landlord copies of all licenses and permits that are required in connection with the performance of such alterations.

     For any work not subject to Landlord’s consent or approval, Tenant shall provide Landlord with the documents set forth in Sections 7.4.1.1 through 7.4.1.5 above prior to the commencement of any such work.

     With respect to the design and construction of any such Tenant alterations, Tenant at its sole cost and expense, shall comply with all laws, codes and regulations (including the Americans with Disabilities Act and all other accessibility laws and regulations) relating to any alterations or improvements, including obtaining any necessary permits with respect thereto, and, upon completion, shall provide Landlord with as-built plans (in “CAD” (computer assisted design) form) detailing such alterations and improvements, together with a certificate of

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occupancy or the comparable municipal approval (such as a signed-off building permit) issued upon completion and approval of alterations and improvements in the municipality. Tenant shall be responsible for the accuracy of the as-built plans, and shall have Tenant’s contractor certify the accuracy of the same, in writing, which certification shall be delivered to Landlord at the same time the as-built CAD plans are delivered to Landlord.

     Additional rules and regulations regarding the design and construction of alterations (other than Minor Changes), to which Tenant is bound, are attached hereto as Exhibit K (the “Rules and Regulations Governing Alterations”), and is expressly incorporated herein.

          7.4.2 Damages due to Tenant’s Work. If any contractor or worker performing Tenant’s Work performs any work which does impair, or demonstratively threatens to impair the quality, integrity or performance of any portion of the Premises, Landlord shall give notice to Tenant and immediately thereafter, Tenant shall cause such contractor or worker immediately to remove all of its tools, equipment and materials and to cease working in the Premises. As additional rent under the Lease, Tenant shall reimburse Landlord for any reasonable repairs or corrections to any portion of the Premises made necessary as a result of the actions or omissions of anyone performing Tenant’s Work.

          7.4.3 Tenant’s Indemnity Obligations. Tenant shall defend, protect, indemnify and hold Landlord harmless against all liens, claims, actions, damages, liability, costs, attorneys’ fees and other expenses incurred as a result of any additions, alterations or improvements performed by Tenant or any person claiming under Tenant, or incurred on account of claims by any person performing work or furnishing materials or supplies for Tenant or any person claiming under Tenant.

     7.5 Removal of Alterations. All alterations and improvements to the Premises that are made by Tenant shall be the property of Tenant until the expiration or earlier termination of this Lease; at that time all such alterations and improvements shall remain on the Premises and become the property of Landlord without payment therefor, unless Landlord gives written notice to Tenant to remove the same at the time Landlord consents to such alterations (unless no Landlord consent is required prior to the installation of such alterations, in which case, Tenant shall seek Landlord’s determination, in writing, prior to the expiration of the Term, as to whether any such alterations are to be removed prior to the expiration or earlier termination of the Term, which determination shall be made by Landlord, in Landlord’s sole and absolute discretion, within ten (10) days after Landlord receives written notice from Tenant requesting that Landlord make such determination). Notwithstanding anything to the contrary herein, (a) Tenant shall not be required to remove any Initial Tenant Improvements performed pursuant to the Work Letter, unless otherwise required in accordance with the terms and conditions thereof, (b) Tenant’s removable trade fixtures and personal property, as well as Tenant’s Telecommunication Devices and Tenant’s back-up generator, shall be and remain Tenant’s property, and shall be removed by Tenant from the Premises, at Tenant’s sole cost, on or before the expiration or earlier termination of this Lease. If Tenant is required per the terms of this Lease to remove any alterations and improvements, Tenant shall remove the same and repair any damage resulting therefrom, normal wear and tear excepted.

     7.6 Inapplicability this Section 7 to the Initial Tenant Improvements. Notwithstanding anything to the contrary contained herein, the terms and provisions of this Section 7 shall not apply to those Initial Tenant Improvements to be performed by Tenant pursuant to the terms of any Work Letter attached hereto (which improvements are subject to the terms and provisions of such Work Letter).

     7.7 Tenant’s Construction Obligations. Landlord and Tenant agree that the obligations of Tenant under this Section 7 shall not apply to any maintenance or repair work performed by Tenant pursuant to its maintenance and repair obligations under this Lease.

     7.8 Security Interests in Tenant’s Personal Property and Trade Fixtures. Tenant shall have the right, from time to time, to lease and to grant and assign security interests in that portion of Tenant’s removable trade fixtures and personal property located in or at the Premises, which may be subject to vendor financing, equipment leases and other means of personal property financing (the “Tenant’s Lien Property”). Landlord agrees to execute, at Tenant’s cost and expense, commercially-reasonable waiver forms releasing Landlord’s interest in those items of Tenant’s Lien Property for which such a waiver is requested in favor of any purchase money seller, lessor or lender who has an ownership or security interest in any of the Tenant’s Lien Property, as long as such requested waiver specifically describes the equipment subject to such waiver, and is not a general waiver. Without limiting the effectiveness of the foregoing, provided that no default shall have occurred and be continuing, Landlord shall, upon the request of Tenant, and at the Tenant’s sole cost and expense, execute and deliver any instruments reasonably necessary or appropriate to confirm any such grant, release, dedication, transfer, annexation or amendment to any person or entity permitted under this paragraph including Landlord waivers with respect to any of the foregoing, and such acknowledgment shall include, if requested by the person holding such ownership or security interest, the right to enter upon the Premises following a Tenant default for a period not to exceed thirty (30) days, for the limited purpose of removing that portion of the Tenant’s Lien Property subject to such person’s ownership or security interest, provided that the lessor or secured party agrees to repair any damages resulting from the exercise of such right. Tenant shall indemnify and hold Landlord harmless from and against any and all losses due to damages to the Premises caused by the removal of any of Tenant’s Lien Property.

8.0 MECHANIC’S LIENS

     8.1 Tenant’s Obligations. Landlord shall have the right to post or keep posted on the Premises, or in the immediate vicinity thereof, any notices of non-responsibility for any construction, alteration or repair of the Premises by Tenant. Tenant shall promptly pay and discharge all claims for work or labor done, supplies furnished or services rendered by Tenant’s its agents, employees, contractors, licensees, or invitees (collectively, “Agents”),

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and Tenant shall keep the Premises free and clear of any liens arising out of work done by or for Tenant or Tenant’s Agents. Should any such lien or notice of lien be filed, Tenant shall bond against or discharge the same within twenty (20) days after such filing. If Tenant fails to bond or discharge such lien within said twenty (20) day period, then Landlord shall have the right, but not the obligation, to take any action or pay such amount as may be necessary to remove such lien, and Tenant shall pay to Landlord as Additional Rent any such amounts expended by Landlord within five (5) business days after notice is received from Landlord of the amount expended by Landlord as a result thereof.

9.0 ENTRY BY LANDLORD

     9.1 Entry by Landlord. Tenant shall permit Landlord, its lenders, and their Agents to enter the Premises at all reasonable times, subject to Tenant’s reasonable safety and security requirements, for the purpose of inspection, maintenance, making repairs, alterations or additions to any portion of the Building or the Premises, conducting environmental tests, inspections and audits (including review of Tenant’s records relating to hazardous materials), serving or posting notices as well as to exhibit the Premises for sale, mortgage or lease, and, during the last one hundred eighty (180) calendar days prior to the expiration of this Lease, placing “For Lease” signs, without any rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment thereby occasioned.

     Landlord understands that all utilities are critical to Tenant’s business operations and will use its best efforts to make sure that these sources are not interrupted at any time without providing advance notice to Tenant. Landlord shall exercise its rights of entry hereunder for (i) purposes reasonably relating to the management of the Premises or the performance of its obligations under the Lease, (ii) assuring, Tenant’s compliance with its obligations under the Lease to the extent that Landlord reasonably believes that Tenant is not complying with its obligations under the Lease, (iii) for purposes associated with any environmental testing or compliance required by any governmental authority, or (iv) purposes related to the sale or financing of the Premises, including but not limited to appraisals, property inspections, etc. In entering the Premises for such purposes, Landlord shall conduct its activities with due and proper concern for Tenant’s interests in safety and security, in being free from unreasonable interference with its business operations, and in guarding the confidentiality of its business operations.

     Any proprietary or confidential information relating to Tenant’s operation of its business shall not be disclosed to third parties by Landlord or anyone under Landlord’s control, unless (a) such information is or becomes publicly available through means other than disclosure by Landlord, or anyone under Landlord’s control, (b) the disclosure of such information is reasonably necessary for Landlord or anyone under Landlord’s control to carry out Landlord’s obligations under this Lease, (c) the disclosure of such information is reasonably necessary for Landlord to assert a claim against Tenant for a breach of this Lease, or (d) the disclosure of such information is required to be disclosed by law or by court order; provided, however, that if Landlord receives a request, pursuant to the terms of a subpoena, order, civil investigative demand or similar process issued by a court of competent jurisdiction or by governmental body, to disclose such confidential information, Landlord agrees to promptly notify Tenant of such request so that Tenant may seek such a protective order prohibiting or limiting such disclosure as Tenant shall deem appropriate. Notwithstanding the foregoing, Landlord shall have the right to disclose such confidential information to (x) prospective buyers of the Real Property, (y) prospective lenders of the Premises, and to (z) its employees, agents, attorneys, accountants, and representatives for purposes associated with this Lease, provided, however, that (i) Landlord assures Tenant that such parties maintain the confidentiality of such information to the same extent that Landlord is required to maintain the confidentiality of such information as set forth herein, or (ii) in no case shall Landlord disclose (nor shall Landlord allow any party receiving any such confidential information from Landlord to disclose) any such confidential information to a business competitor of Tenant (or an affiliate of such competitor), and (iii) such information is reasonably required or necessary for the legitimate business purposes of the person requesting such information as it relates to this Lease. The parties agree that damages would be an inadequate remedy for the breach of this provision, and Tenant shall have the right to seek specific performance of the confidentiality covenant of Landlord and to seek injunctive relief to prevent its breach.

10.0 DAMAGE BY FIRE OR OTHER CASUALTY

     10.1 Damage by Fire or Other Casualty. If the Premises shall be damaged or destroyed by fire or other casualty, Tenant shall promptly notify Landlord, and Landlord, subject to the conditions set forth in this Section 10, shall repair such damage and restore the Premises to substantially the same condition in which it was immediately prior to such damage or destruction; provided funds are reasonably available to Landlord (from insurance proceeds) for Landlord to restore the same. Landlord’s restoration shall not include the repair, restoration or replacement of Tenant’s fixtures, improvements, alterations, furniture or any other of its property; provided, however, that Tenant’s Initial Tenant Improvements constructed pursuant to the Work Letter shall be included in Landlord’s property insurance carried as an Operating Expense pursuant to Section 6.3.1. If a substantial casualty occurs during the last 12 months of the Term or any extension thereof, Landlord or Tenant may cancel this Lease unless Tenant has at least one Renewal Term remaining under this Lease, and has exercised the Renewal Option relating to such term, prior to such casualty in accordance with Section 30.1 below, or does so within thirty (30) calendar days after the date of the casualty. If in Landlord’s reasonable opinion (and through no failure of Landlord to maintain the insurance described in this Section 6.3.1 in the full replacement cost of the building), the cost of completing such restoration exceeds the proceeds of such insurance (without reduction for any amounts to be paid to Landlord’s lender) by more than Two Hundred Fifty Thousand Dollars ($250,000), then Landlord may terminate this Lease by giving Tenant written notice that specifies a termination date no less than thirty (30) calendar days after its transmission; provided, however, that Tenant may elect to preserve this Lease by committing in writing to Landlord to pay for any shortfall of insurance proceeds in excess of the Landlord’s $250,000 limit set forth above

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no later than fifteen (15) days following Tenant’s receipt of Landlord’s termination notice, which amount shall be deposited with Landlord within ten (10) business days following Landlord’s written notice to Tenant setting forth the amount required to cover such shortfall, which funds shall be used by Landlord solely for the cost of repairing and restoring Landlord’s Work and the Initial Tenant Improvements.

     The proceeds of Landlord’s casualty insurance shall be used for restoration of the Building and the tenant improvements covered by such insurance as provided above unless (i) this Lease is terminated as provided above due to a casualty occurring during the last 12 months of the Term, or any extension thereof, or a shortfall of insurance proceeds, or (ii) due to the casualty and resulting damage to the Premises, where there is an impairment of the security under any loan obtained by Landlord that is secured by a Security Instrument (as defined in Section 15.1), other than an impairment of the security due solely to a default by Landlord under such Security Instrument, that permits such lender to apply such insurance proceeds towards the repayment of such loan and not to the restoration of the damage to the Premises (herein referred to as a “Landlord’s Loan Default”). If the proceeds of Landlord’s casualty insurance are not used for restoration of the Premises and the tenant improvements covered by Landlord’s insurance due solely to a Landlord’s Loan Default permitting such lender to apply such insurance proceeds towards the repayment of such loan and not to the restoration of the damage to the Premises, then Landlord shall indemnify and hold Tenant harmless from the cost of replacing the damaged tenant improvements covered by Landlord’s casualty insurance to the extent any insurance proceeds attributable to the replacement cost thereof is not available for the restoration of such tenant improvements and provided that (a) Tenant is not in default under this Lease (after notice and the expiration of the applicable cure period), and (b) Tenant is occupying and conducting business in a majority of the Lab Space (as defined in Exhibit B) at the Premises prior to the date of the casualty. Tenant agrees to cooperate with Landlord and its lender if Landlord’s lender requires the insurance proceeds be deposited in a construction escrow account and disbursed during the construction of the restoration work.

          In the event any judgment, order, decree or similar directive from any applicable governmental authority (the “Order”) is issued in connection with any toxic material clean up, monitoring program or other similar problem in or about the Building, and such problem was not caused by Tenant, or its agents, contractors, invitees or employees, and the Order unreasonably interferes with Tenant’s use of the Premises, then Rent shall be abated, proportionately while the Order is in effect on the basis of that percentage of Tenant’s overall use of the Premises which is unreasonably interfered with by the terms and conditions of the Order as jointly determined by Landlord and Tenant. Landlord and Tenant shall meet within the ten (10) business day period commencing on the date the Order is issued, and negotiate in good faith to attempt to agree upon the percentage of the Premises which Tenant is unable to use. In the event that Landlord and Tenant are unable to agree on the percentage of the Premises which Tenant is unable to use within that ten (10) business day period, then the dispute shall be resolved by Judicial Reference in accordance with Section 19.1 below.

     10.2 Tenant’s Right to Terminate. Landlord within thirty (30) days after the date of destruction shall notify Tenant if the Building cannot be fully repaired within one hundred fifty (150) days after the date of destruction. In such event Tenant may terminate this Lease as of the 40th day after the date of destruction by giving Landlord written notice within ten (10) days after Tenant’s receipt of Landlord’s notice.

     10.3 Rent Abatement. The Minimum Monthly Rent, Operating Expenses and any other amounts payable by Tenant to Landlord hereunder (other than amounts which are accrued and unpaid) shall abate to the extent that the Premises are rendered unusable by such damage or the repair thereof, and are not used due to such damage or repair, in the proportion that the area of the Premises that Tenant is prevented from using (and does not use) bears to the total area of the Premises, as reasonably determined by Landlord and Tenant, taking into consideration such factors as the use of, and the location of, the damaged portion and the effect of the damage to Tenant’s operations; provided, however, that such Rent shall not abate to the extent that such interference with Tenant’s use of the Premises arises from the acts or omissions of Tenant or its agents, employees, contractors, licensees, or invitees (collectively, “Agents”). Such abatement shall commence with the damage or destruction and end upon restoration of the Premises. Tenant shall not be entitled to any compensation or damages from Landlord for loss of use of the Building or Premises, damage to Tenant’s personal property or any inconvenience occasioned by such damage, repair or restoration. Notwithstanding the foregoing, in the event Landlord’s rent abatement insurance provides coverage to Landlord for any abatement of Tenant’s rent as a result of any acts or omissions of Tenant or its Agents, then Tenant’s rent shall abate to the extent that Landlord is actually reimbursed by such insurance as a result of Tenant’s inability to use the Premises.

     Notwithstanding the provisions of this Section 10.3, subject to Sections 6.3.4 and 11.1, Landlord shall be liable for loss of use of the Premises or damage to Tenant’s personal property occasioned by Landlord’s repair or restoration to the extent such loss or damage is caused by the negligence or willful misconduct of Landlord, its employees or agents.

11.0 INDEMNIFICATION

     11.1 Indemnity Obligations. Subject to Section 6.3.4 above and except as otherwise expressly provided herein, Tenant shall hold harmless, indemnify, and defend Landlord against all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) (collectively, “Claims”) in connection with loss of life, personal injury or damage to property in or about the Premises or arising out of the occupancy or use by Tenant of the Premises or occasioned wholly or in part by any act or omission of Tenant or its Agents, except to the extent such Claims arise from the negligence or willful misconduct of Landlord and/or its Agents. Subject to Section 6.3.4 above, and except as otherwise expressly provided herein, Landlord shall indemnify and hold Tenant harmless from and against all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) in connection with loss of life, personal

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injury or damage to property in or about the Premises resulting from the negligence or willful misconduct of Landlord, or its employees, agents or contractors. Without limiting the foregoing, Tenant will forever release and hold Landlord and its Agents harmless from all Claims arising out of damage to Tenant’s property, except to the extent such Claims arise as a result of Landlord’s failure to make repairs that Landlord is required to make under this Lease after the expiration of any cure period specified in the Lease to repair the same after having received written notice of the need for such repair. In no event shall either party be liable to the other for indirect or consequential damages, including without limitation, any claims for lost profits or business opportunities, arising from any cause whatsoever, including without limitation any negligence of either party, excepting only that Tenant shall be fully liable for (a) all damages arising out of a breach of Tenant’s obligations under Section 15 of the Lease caused by Tenant’s willful failure to comply with any Landlord request, and (b) any damages, including without limitation, any claims for lost profits or business opportunities, arising out of the continued occupancy by Tenant of the Premises after the expiration or earlier termination of this Lease or any renewal thereof (as the expiration date of the Lease may be extended subject to Section 16 of this Lease), without Landlord’s written consent, except to the extent such holding over after the expiration or earlier termination is due to a cause beyond the reasonable control of Tenant when such cause would affect any person similarly situated (such as a casualty or governmental preemption of priorities or other controls in connection with a national or other public emergency) but an event or occurrence shall not be beyond the reasonable control of Tenant when peculiar to Tenant (such as financial inability or delay in ordering materials requiring a long lead time, or a delay making requests for governmental approvals or permits).

12.0 CONDEMNATION

     12.1 Permanent Taking. If (i) all of the Premises is covered by a condemnation, (ii) any part of the Premises is covered by a condemnation and the remainder thereof is insufficient for the reasonable operation therein of Tenant’s business, or (iii) any of the Premises is covered by a condemnation and, in Landlord’s opinion, it would be impractical to restore the remainder thereof, then this Lease shall terminate and all obligations hereunder shall cease as of the date upon which possession is taken by the condemnor. If there is a condemnation and this Lease has not been terminated pursuant to this Section, the obligations of Landlord and Tenant shall be unaffected by such condemnation except that Rent shall abate in proportion to the area, if any, of the Building covered by such condemnation. Statutory provisions with respect to termination upon a partial taking of leased property shall not be applicable to this Lease.

     12.2 Condemnation Award. In the event of a condemnation affecting Tenant, Tenant shall have the right to make a separate claim against the condemnor for loss of Tenant’s property and for relocation expenses. Except as aforesaid, Tenant hereby assigns to Landlord all other claims against the condemnor.

     12.3 Temporary Taking. No temporary taking of the Premises or any part thereof shall terminate this Lease or give Tenant any right to any abatement of Rent. Any award made to Tenant by reason of such temporary taking shall belong entirely to Tenant and the Landlord shall not be entitled to share therein. For the purpose of this Section 12.3, a taking shall be considered temporary only if it is one hundred twenty (120) calendar days or less in duration.

13.0 QUIET ENJOYMENT

     13.1 Tenant’s Rights. Landlord covenants that Tenant, upon performing the terms, conditions and covenants of this Lease shall have quiet and peaceful possession of the Premises as against any person claiming the same by, through or under Landlord, subject, however, to the exceptions, reservations and conditions of this Lease.

14.0 ASSIGNMENT AND SUBLETTING

     14.1 Limitation. Tenant shall not transfer this Lease, voluntarily or by operation of law, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. For purposes of this Section 14, “transfer” shall include any sublease, assignment, license or concession agreement, mortgage or hypothecation of this Lease or Tenant’s interest therein or in all or a portion of the Premises, but shall not include any Permitted Transfer or Permitted Concession (as such terms are defined below). For purposes of this Lease, the term “transfer” shall also include (i) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant resulting in a change of control of Tenant or (B) the sale, transfer, pledge or hypothecation by Tenant of all or substantially all of its assets or all or substantially all of its stock; or (ii) if Tenant is a publicly traded corporation, a merger of Tenant with another corporation or a sale or other disposition of ten percent (10%) or more of its stock within a twelve (12)-month period or a sale of substantially all its assets. “Control,” as used in this Article 14, shall mean the possession of the power to direct or cause the direction of the management or policies of an entity, whether through ownership or voting securities, or by contract or otherwise. Landlord shall not consent to any transfer which provides for a rental or other payment based in whole or in part on the net income or profits derived by a user or occupant of the Premises from its use or occupancy of the Premises (other than an amount based on a fixed percentage or percentages of receipts or sales). A consent to one transfer shall not be deemed to be a consent to any subsequent transfer. Notwithstanding the foregoing, Tenant may assign this Lease or sublet the Premises, or any portion thereof, with at least fifteen (15) calendar days prior written notice to Landlord, but without Landlord’s consent, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from a merger or consolidation with Tenant, or to any person or entity which acquires all or substantially all of the assets of Tenant’s business (or all or substantially all of the equity interests in Tenant) as a going concern (each, a “Permitted Transferee”). Any transfer without Landlord’s consent (excluding any transfer that does not require Landlord’s consent pursuant to this Section 14.1), shall be void at the option of Landlord, giving Landlord the right to exercise any or all of its rights under Section

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17 hereof. None of the foregoing shall be interpreted to preclude Tenant permitting the use or occupancy of the Premises by representatives or employees of any entity which is then performing services related to Tenant’s business operations in the Premises (as long as the use or occupancy of the Premises by such representatives or employees is not otherwise a subterfuge to avoid Tenant’s assignment and subletting obligations under this Article 14), including, but not limited to vendors providing outsourced services, such as employee travel services or food and beverage services at the Premises (a “Permitted Concession”).

     Notwithstanding the foregoing, as a condition to Tenant’s right to transfer to a Permitted Transferee, (i) if the transfer is an assignment of Tenant’s entire interest in this Lease, the Permitted Transferee shall assume, in full and in writing, the obligations of Tenant under this Lease, and Tenant shall provide to Landlord written documentation, signed by such Permitted Transferee, evidencing the same, (ii) if the transfer is a sublease of a portion of Tenant’s interest in the Lease, the Permitted Transferee shall assume, to the extent applicable to the portion of the Premises subleased, and in writing, the obligations of Tenant under this Lease, and Tenant shall provide to Landlord written documentation, signed by Permitted Transferee, evidencing the same, (iii) Tenant shall remain fully liable under the Lease, and (iv) the use of the Premises shall be permitted under this Lease. Furthermore, within ten (10) days after any transfer to a Permitted Transferee, Tenant shall provide Landlord with reasonable documentation and information, as reasonably requested by Landlord, evidencing that the transferee is sufficiently financially responsible to perform its obligations in connection with the proposed transfer of this Lease

     14.2 Offer to Landlord. Tenant acknowledges that the terms of this Lease, including Rent, have been based on the understanding that Tenant shall physically occupy the Premises for the entire Term. Therefore, upon Tenant’s request for Landlord’s consent to a transfer (if required pursuant to Section 14.1) of all or a portion of the Premises, Landlord shall be entitled to sublease from Tenant for Landlord’s own account the portion of the Premises proposed to be transferred by Tenant by written notice given to Tenant within twenty (20) days of Landlord’s receipt of such request, upon the same terms as those proposed but otherwise upon the form of this Lease; provided that Tenant may elect to avoid such sublease by rescinding the transfer request within twenty (20) days following receipt of Landlord’s election; provided, however, that Tenant’s right to rescind shall be limited to once every five (5) years (i.e. should Tenant rescind a transfer request, Tenant shall have no right to rescind again for a period of five years after the date that Tenant rescinds the transfer request). If Landlord so subleases for its own account, Landlord shall have the further right to transfer such portion of the Premises to any person or entity who is not a business competitor of Tenant, and Tenant shall be relieved of any liability with respect to such portion of the Premises so subleased by Landlord until the term of such sublease expires or is terminated.

     14.3 Conditions. Notwithstanding the above, the following shall apply to any proposed transfer:

          (a) No transfer shall relieve Tenant of its obligation to pay Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any transfer.

          (b) Any consideration received by Tenant as a result of a sublease or assignment (other than from a Permitted Transferee or pursuant to a Permitted Concession) which exceeds the total sums which Tenant is obligated to pay Landlord under this Lease, or the prorated portion thereof if only a portion of the Premises is transferred, shall be payable to Landlord as additional rent under this Lease without affecting or reducing any other obligation of the Tenant hereunder. Notwithstanding the above, Tenant shall be entitled to deduct from such excess consideration its reasonable expenses associated with such sublease or assignment (e.g., leasing commissions and cost of alterations, attorneys’ fees, architectural fees, engineering fees and all other similar costs normally associated with subletting or assigning), along with a reasonable return on all amounts contributed by Tenant to the purchase and/or installation of the Initial Tenant Improvements (in accordance with the Work Letter) and any alterations made by Tenant to the Premises associated with the portion of the Premises being subleased or assigned, exclusive of any Tenant Improvement Allowance paid by Landlord (and equitably allocated to the portion of the Premises being subleased or assigned), at the initial book value of such Initial Tenant Improvements and alterations less depreciation and any asset write-off, as reasonably agreed upon by Landlord and Tenant. Furniture and equipment paid for and installed in the Premises by Tenant (based on the initial book value less depreciation) shall be subject to such reasonable return to the extent such furniture and equipment remains with the Premises as part of such sublease or assignment. Items of repair, replacement, or maintenance which Tenant is required to perform by law or under the terms of this Lease and items for which Tenant is in some other manner reimbursed or compensated, shall not be subject to such return. Tenant’s return shall be an annualized rate of return of seven percent (7%) of all amounts so contributed by Tenant (“Tenant’s Return”). Tenant’s Return may be retained by Tenant at any time amounts in excess of applicable Minimum Monthly Rent, Operating Expenses and any and all other amounts payable to Landlord by Tenant hereunder (“Excess Consideration”) are paid by a subtenant or assignee. Tenant’s deductions shall be supported by documentation provided to Landlord upon Landlord’s request, such as invoices, purchase orders, receipts and construction contracts, detailing the amounts actually paid by Tenant for those improvements as to which Tenant seeks to deduct such rate of return. Notwithstanding anything to the contrary set forth above, (i) Tenant’s Return shall accrue continuously from the date of commencement of any permitted sublease or assignment, (ii) Tenant shall be entitled to receive 100% of all Excess Consideration until it is reimbursed the full amount of its subleasing or assignment expenses as described above and has received 100% of Tenant’s Return. Thereafter, Landlord shall be entitled to 92% of all Excess Consideration.

          (c) Each transfer to which Landlord has consented shall be by an instrument in writing in a form satisfactory to Landlord, and shall be executed by Tenant and the transferee. Tenant shall reimburse Landlord for Landlord’s reasonable costs and attorneys’ fees incurred in conjunction with the processing and documentation of any such request.

15.0 SUBORDINATION; ESTOPPEL CERTIFICATES

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     15.1 Subordination. Landlord represents that as of the date of this Lease, the Property is not encumbered by a ground lease or a mortgage or deed of trust to which Landlord or any affiliates of Landlord is a party. Nevertheless, this Lease shall, unless otherwise elected by Landlord’s first mortgagee, lender, or ground lessor, be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security (collectively, a “Security Instrument”) now or hereafter placed upon the Premises and to any and all advances made on the security thereof and to all modifications, replacements and extensions thereof. Notwithstanding such subordination, this Lease shall not be terminated, nor shall the rights and possession of Tenant hereunder be disturbed if Tenant shall not be in default under the terms of this Lease, and upon such new landlord’s request, Tenant shall attorn to the new landlord or shall enter into a new lease for the balance of the original or extended term hereof upon the same terms and provisions contained in this Lease. In the event of a foreclosure of any such mortgage or deed of trust or any other action or proceeding for the enforcement thereof, or any sale thereunder, this Lease likewise will not be terminated, nor will the rights and possession of Tenant hereunder be disturbed if Tenant shall not then be in default under the terms of this Lease, provided that Tenant shall, at the new owner’s request, attorn to the new owner of the Premises. Tenant agrees to execute and deliver upon demand such further instruments or documents as may reasonably be required by Landlord evidencing the subordination of this Lease as set forth above; provided, however, that Tenant’s covenant to subordinate the Lease is conditioned upon each senior mortgagee under any senior mortgage executed after the date hereof providing a commercially reasonable subordination and nondisturbance agreement to Tenant containing the nondisturbance commitment specified above. This Lease shall, at the election of Landlord’s first mortgagee, lender or ground lessor, be superior to any such Security Instrument. In any event, Tenant shall execute any documents required to effectuate the subordination of this Lease or any Security Instrument within ten (10) business days after Tenant’s receipt of the written request. Tenant shall attorn to any purchaser at any foreclosure sale, or to any grantee or transferee designated in any deed given in lieu of foreclosure.

     15.2 Condition of Lease. Within ten 10 business days after Tenant receives Landlord’s written request, Tenant shall provide a written statement acknowledging the commencement and termination dates of this Lease, that it is in full force and effect, has not been modified (or if it has, stating such modifications), and providing any other pertinent factual information as Landlord reasonably requests.

     15.3 Tenant’s Failure. If Tenant fails to execute and deliver to Landlord any document requested by Landlord pursuant to Section 15.1 and 15.2 above within the time required therein, and thereafter, if Landlord delivers a second written notice to Tenant requesting that Tenant execute and deliver the same to Landlord, then if Tenant fails to execute and deliver such documents to Landlord within five (5) business days after receiving such written notice from Tenant, then Tenant hereby irrevocably appoints Landlord as Tenant’s attorney in fact to execute such documents on Tenant’s behalf, and all statements made in such documents shall be deemed true and binding upon Tenant, and Landlord’s mortgagee(s) and/or purchaser(s) may rely on said statements. If Landlord requests more than two such certificate in any one calendar year, Landlord shall pay Tenant’s actual attorney’s fees associated with reviewing all documents relating to such additional requests, to the extent such attorney’s fees are reasonable, not to exceed Five Hundred Dollars ($500.00) per request.

     15.4 Financial Statements. Tenant shall deliver to Landlord such financial statements of Tenant and its guarantor as may be reasonably requested by Landlord for any purpose, including, but not limited to Landlord’s efforts to finance, refinance or sell the Premises or any part thereof (provided that Tenant shall not be required to provide audited financial statements if unaudited financial statements are prepared in the ordinary course of Tenant or its guarantor’s business). Landlord acknowledges that such financial information is to be kept confidential and Landlord agrees to limit the distribution of any financial statements of Tenant or Tenant’s guarantor to its lender(s), joint venturers, partners, and prospective purchasers, unless Tenant’s prior consent has been obtained for further distribution. Any distribution shall be limited to the purposes agreed to by Tenant in granting its consent to such distribution. Landlord shall require its lender and any other distributees to maintain the confidentiality of such financial information as a condition of its release of the information. Tenant represents and warrants that all financial information provided by Tenant or its guarantor to Landlord on behalf of Tenant or its guarantor prior to execution by Landlord of this Lease is true and complete and fairly represents the actual financial condition of Tenant and its guarantor, as applicable, as of the date of such financial information (as indicated in the financial statement), and that there has been no material adverse change in the financial condition, statements or information provided on behalf of Tenant or its guarantor, from the date of such financial information to and including the date of execution of this Lease. Upon Landlord’s request, Tenant shall furnish Landlord with Tenant and its guarantor’s most recent periodic or annual reports. As long as the common stock (or American Depository Receipts or any other equity security) of Tenant or its guarantor (or any affiliate consolidated with Tenant or its guarantor for financial reporting purposes) is publicly-traded on a United States national stock exchange, and such information is available as part of Tenant’s or its guarantor’s (as applicable) periodic filings on the SEC’s Edgar website, and such materials are current per SEC filing requirements, then Tenant may satisfy such submittal requirement by notifying Landlord that such information is available at the SEC website, and indicating the company filer of the pertinent information; provided, however, that at Landlord’s written request, Tenant must satisfy such submittal requirement by delivering a PDF copy of such filing, via e-mail, to President: e-mail address Legal@Chamb.com. Landlord shall have the right to change the name and e-mail address of the person identified in the preceding sentence by delivering written notice of such name and e-mail address change to Tenant, in writing, which name and e-mail address changes shall be effective upon delivery. Tenant agrees that any material misrepresentation to Landlord as to Tenant’s or its guarantor’s financial condition, or any failure to provide financial information required to be provided by Tenant or its guarantor on behalf of Tenant hereunder, shall constitute a default under this Lease.

16.0 SURRENDER AND HOLDOVER

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     16.1 Condition at End of Term. Subject to the terms of Articles 7 and 10, at the expiration or earlier termination of the Term, Tenant shall promptly yield up, in the same condition, order and repair in which they are required to be kept during the Term, the Premises and all alterations thereto, and all fixtures and equipment servicing the Building and/or the Premises, ordinary wear and tear excepted.

     16.2 Holdover Terms. If Tenant, or any person rightfully claiming through Tenant, shall continue to occupy the Premises after the expiration or earlier termination of the Term or any renewal thereof, with Landlord’s written consent, such occupancy shall be deemed to be under a month-to-month tenancy under the same terms set forth in this Lease; except that the Minimum Monthly Rent during such continued occupancy shall be any amount which Landlord may specify in a written notice to Tenant. Any holding over by Tenant without Landlord’s prior written consent shall constitute a default hereunder and shall be subject to all the remedies set forth in Section 17. Notwithstanding the above, the minimum monthly rent during any holdover period, with Landlord’s consent, shall not exceed one hundred fifty percent (150%) of the Minimum Monthly Rent in effect during the last month of the Lease term, as it may be extended. Notwithstanding the foregoing, if Tenant, at the time the term of this Lease expires, as well as at the time the Holdover Notice (as defined below) is delivered to Landlord, is not in default under this Lease, then provided that Tenant provides Landlord with written notice at least sixty (60) days (and no more than 120 days) in advance of the expiration date of this Lease stating that Tenant will be unable to vacate the entire Premises in the condition required by the Surrender Plan on or before such expiration date due to reasons outside of Tenant’s reasonable control or because of Tenant’s reasonable business requirements (the “Holdover Notice”), then Landlord shall be deemed to have consented in writing to a twenty-one (21) day holdover by Tenant after the expiration of the term of this Lease (the “Permitted Holdover Period”), and Tenant’s holdover occupancy during such twenty-one day period shall be subject to all terms and provisions of this Lease, provided, however, that the Minimum Monthly Rent during such Permitted Holdover Period shall be based on an accrual of the same on a weekly basis in an amount equal to One Hundred Ten percent (110%) of the Minimum Monthly Rent payable during the last full month of the Lease prior to the Permitted Holdover Period.

17.0 DEFAULT AND REMEDIES UPON DEFAULT

     17.1 Events. The occurrence of any of the following shall constitute a material default and breach of this lease by Tenant:

          (a) Any failure by Tenant to pay Rent or to make any other payment required to be made by Tenant hereunder when due (each occurrence thereof being referred to herein as a “Rent Default”); provided, however, that Landlord shall exercise no remedies provided in Sections 17.2 and 17.3 unless Tenant fails to cure such Rent Default within ten (10) calendar days after Landlord gives Tenant written notice of such Rent Default. Notwithstanding the foregoing, should Landlord deliver to Tenant written notice of a Rent Default, then with respect to any subsequent Rent Default occurring within one (1) year after the previously noticed Rent Default, Tenant will only have five (5) calendar days after Landlord gives Tenant written notice of such subsequent Rent Default to cure the same, provided, however, that the subsequent notice of a Rent Default within specifies that Tenant only has five (5) calendar days to cure such Rent Default (should such notice fail to specify that Tenant only has five (5) calendar days to cure such Rent Default, then Tenant shall have ten (10) calendar days to cure such Rent Default);

          (b) A failure by Tenant to observe and perform any other provision of this Lease (each occurrence thereof being referred to herein as a “Non-Rent Default”), where such failure continues for thirty (30) calendar days after written notice thereof by Landlord to Tenant; provided, however, that if the default cannot reasonably be cured within thirty (30) calendar days, Tenant shall not be deemed to be in default if Tenant shall, within such thirty (30) calendar day period, commence to cure and thereafter diligently prosecute the same to completion;

          (c) With respect to Tenant (or if Tenant is a limited liability company or partnership, any member of or partner in Tenant) or any guarantor of Tenant’s obligations under this Lease (collectively, with Tenant, a “Tenant Party”), either (1) the appointment of a receiver (except a receiver appointed at Landlord’s request) to take possession of all or substantially all of the assets of any Tenant Party, or (2) a general assignment by any Tenant Party for the benefit of creditors, or (3) any action taken by any Tenant Party or by any other person against any Tenant Party under any insolvency or bankruptcy act. In the event any of these actions has not been withdrawn or dismissed within sixty (60) calendar days of the date of filing, Landlord may, at its option, declare this Lease terminated and forfeited by Tenant in a written notice to Tenant, and Landlord shall be entitled to immediate possession of the Premises; provided, that Tenant shall not have such cure right with respect to any of such actions instituted, consented to or taken voluntarily by Tenant.

     Tenant agrees that any notice given by Landlord pursuant to this Section 17.1(c) which is served in compliance with Section 21 of this Lease shall be adequate notice for the purpose of Landlord’s exercise of the remedies specified in Section 17.2 or any other remedies provided by law. Therefore, any statutory provision relating to the manner of giving notice shall not be applicable to this Lease.

     17.2 Landlord’s Rights. In the event of any material default by Tenant (as outlined above), Landlord, in addition to all other remedies provided by law or in equity, shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. If Landlord shall elect to so terminate this Lease, Landlord may recover from Tenant all damages suffered by Landlord as a result of Tenant’s material default, including, but not limited to, the worth at the time of award (computed in accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the California Civil Code) of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided. If Landlord does not elect to terminate this Lease, Landlord shall have the

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remedy described in Section 1951.4 of the California Civil Code (Landlord may continue the Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations). In addition, if Landlord elects to continue the Lease in effect, Landlord may relet the Premises or any part thereof for such term and at such rent and upon such other terms and conditions as Landlord in its reasonable discretion may deem advisable with the right to make alterations and repairs to the Premises. Any Rent received by Landlord from a reletting shall be applied to the payment of (a) any indebtedness other than Rent due hereunder; (b) the cost of such reletting; (c) the cost of any alterations and repairs to the Premises; (d) Rent due and unpaid hereunder; and (e) the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. If the Rent received from such reletting is less than the Rent payable by Tenant, then Tenant shall pay such deficiency to Landlord immediately upon demand therefore by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord as soon as ascertained, any expenses incurred by Landlord that are not covered by the Rent received from such reletting.

     17.3 Late Charge & Interest. Tenant shall pay a one time administrative fee (“Late Fee”) for any Rent that is not paid within five (5) days after the date when due in an amount equal to the greater of $100 or three percent (3%) of the amount due. Such late fee shall be due and payable when incurred. In addition, all Rent (including all Late Fees) that are not paid when due shall bear interest at the rate of ten percent (10%) per annum, or the maximum legal rate, whichever is less. Landlord and Tenant agree that the Late Fee and interest set forth in this Section 17.3 represents a reasonable estimate of Landlord’s loss of the use of the money owed, and the costs and expenses incurred by Landlord as a result of the non payment and is fair compensation to Landlord for the loss suffered from Tenant’s nonpayment. Acceptance of any interest and/or late payment penalty shall not constitute a waiver of Tenant’s default with respect to such nonpayment by Tenant nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease. Notwithstanding the foregoing, after the second late payment by Tenant, Landlord may require Tenant make advance payments of Rent on a quarterly basis or by wire transfer.

     17.4 Termination. No re-entry or taking possession of the Building or the Premises or any other action under this Section shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a Court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of any material default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such material default.

     17.5 No Waiver. No waiver by either party of any breach by the other party shall be a waiver of any subsequent breach, nor shall any forbearance by one party to seek a remedy for any breach by the other party constitute a waiver by the non-breaching party of any rights and remedies with respect to such or any subsequent breach. Efforts by either party to mitigate the damages caused by the other party’s default shall not constitute a waiver by the non-breaching party to recover damages hereunder.

     17.6 Cure of Tenant’s Default. Except as otherwise provided in Section 6.4.4, should Tenant fail to perform any obligation imposed by this Lease, Landlord may perform or contract for the performance of Tenant’s obligation after having given Tenant reasonable notice of the failure(s) and a reasonable opportunity, which in no case shall exceed ten (10) calendar days, to remedy the failure, and Tenant shall pay Landlord for all costs incurred by Landlord in connection therewith. The exercise of one right or remedy by Landlord shall not in any way impair its right to any other right or remedy. Should Tenant consist of more than one person or entity, they shall be jointly and severally liable on this Lease.

     17.7 Waiver. Tenant waives (for itself and all persons claiming under Tenant) any right of redemption or reinstatement of Tenant under Civil Code Sections 1179 and 3275 in the event that Tenant is dispossessed from the Premises for any reason.

     17.8 Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the amounts owed to Landlord in this Lease shall be deemed to be other than on account of the earliest due amounts owed, nor shall any endorsement or statement on any check or letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of the Rent or pursue any other remedy provided for in this Lease. In connection with the foregoing, Landlord shall have the absolute right in its sole discretion to apply any payment received from Tenant to any account or other payment of Tenant then not current and due or delinquent under the terms of this Lease.

18.0 LIABILITY OF LANDLORD

     18.1 Landlord’s Right to Cure; Limitations on Liability. In the event of any actual or alleged failure, breach or default by Landlord hereunder pertaining to the Building or the Premises, Tenant shall give Landlord written notice thereof and Landlord shall not be deemed in default unless it fails to diligently commence to cure such default within thirty (30) calendar days after its receipt of such notice. Landlord’s (which term includes Landlord’s partners, co-venturers, co-tenants, officers, directors, employees, agents (including any property manager for the Premises), or representatives, all of whom have the authority to act on Landlord’s behalf) liability to Tenant for any such default shall be limited to its ownership interest in the Premises or the proceeds of a public sale of such interest pursuant to foreclosure of a judgment against Landlord, plus any insurance proceeds actually received by Landlord with reference to the Premises and not expended on the Premises or to pay claims covered by such proceeds. Landlord shall not be liable for any deficiency beyond its interest in the Premises and the amount of such insurance proceeds.

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     18.2 Release or Transfer; Successor Liability. If Landlord shall transfer its interest in the Building or the Premises, then from and after the effective date of the transfer, Landlord shall be released from all obligations under this Lease, except for those already accrued. If Landlord transfers the Security Deposit to the transferee, then upon the written acceptance of Landlord’s obligations under said lease regarding the return thereof to Tenant by said transferee, Landlord shall be discharged from any further liability in reference to such Security Deposit.

19.0 JUDICIAL REFERENCE/ ATTORNEY FEES

     19.1 JUDICIAL REFERENCE. EXCEPT FOR THOSE CLAIMS AND/OR ACTIONS THAT ARE SUBJECT TO RESOLUTION PURSUANT TO STATUTORY UNLAWFUL DETAINER PROVISIONS SET FORTH IN THE CALIFORNIA CIVIL CODE AND CODE OF CIVIL PROCEDURE, WHICH CLAIMS AND/OR ACTIONS LANDLORD SHALL HAVE THE RIGHT TO PURSUE IN ANY MANNER PERMITTED BY LAW, ANY CONTROVERSY, BREACH OR DISPUTE ARISING OUT OF THIS LEASE, OR RELATING TO THE INTERPRETATION OF ANY TERM OR PROVISION OF THIS LEASE SHALL BE HEARD BY A REFEREE PURSUANT TO THE PROVISION OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, SECTIONS 638-645.1 INCLUSIVE. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS HEREOF. THE PARTIES AGREE THAT THE REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS/HER DECISION THEREON, AND TO ISSUE ALL LEGAL AND EQUITABLE RELIEF APPROPRIATE UNDER THE CIRCUMSTANCES BEFORE HIM/HER. THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO SHALL BE A RETIRED JUDGE OF A CALIFORNIA SUPERIOR COURT WHO SHALL THEN TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT THEREON. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE WITHIN TEN (10) DAYS OF A WRITTEN REQUEST TO DO SO BY ANY PARTY, THEN ANY PARTY MAY THEREAFTER SEEK TO HAVE A REFEREE APPOINTED PURSUANT TO THE CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 AND 640.

BY PLACING THEIR INITIALS BELOW, THE PARTIES AGREE TO RESOLVE ALL DISPUTES OF LAW AND FACT THAT ARE SUBJECT TO THE JUDICIAL REFERENCE AS SET FORTH HEREIN BY A GENERAL REFERENCE TO A RETIRED CALIFORNIA SUPERIOR COURT JUDGE.

LANDLORD TENANT

     19.2 Venue. Except for those disputes between Landlord and Tenant that are subject to judicial reference, which judicial reference proceedings shall take place in the County where the Premises are located, The parties to this Lease consent and agree that jurisdiction, venue and forum shall be had only in a state or federal court located in the County of San Mateo, California, with respect to any action which, in whole or in part, arises under or relates to this Lease.

     19.3 Attorney Fees. The prevailing party in any dispute between Landlord and Tenant that is subject to the statutory unlawful detainer provisions specified in the California Code of Civil Procedure and/or California Civil Code shall be entitled to recover from the losing party, costs of suit and reasonable attorneys’ fees.

20.0 INTERPRETATION

     20.1 Captions. The captions in this Lease are for convenience only and are not a part of this Lease and do not in any way define, limit, describe or amplify the terms and provisions of this Lease or the scope or intent thereof.

     20.2 Entire Agreement. This Lease represents the entire agreement between the parties hereto and there are no collateral or oral agreements or understandings between Landlord and Tenant with respect to the Premises. No right, easements or licenses are acquired in the Premises or any land adjacent to the Premises by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease. Tenant agrees to make such changes to this Lease as are required by any mortgagee, provided such changes do not substantially affect Tenant’s rights or obligations hereunder. This Lease shall not be modified in any manner except by an instrument in writing executed by the parties. The masculine (or neuter) pronoun and the singular number shall include the masculine, feminine and neuter genders and the singular and plural number.

     20.3 Exhibits. Each writing or plan referred to herein as being attached hereto as an Exhibit or otherwise designated herein as an Exhibit hereto is hereby made a part hereof.

     20.4 Severability; Governing Law. If any provision of this Lease shall be declared unenforceable in any respect, such unenforceability shall not affect any other provision of this Lease, and each such provision shall be deemed to be modified, if possible, in such a manner as to render it enforceable and to preserve to the extent possible the intent of the parties as set forth herein. This Lease shall be construed and enforced in accordance with the laws of the State of California.

     20.5 Authority. If Tenant is a corporation, partnership or any other form of business association or entity, each individual executing this Lease on behalf of Tenant represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said entity in accordance with its corporate bylaws, statement of

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partnership, certificate of limited partnership or other appropriate organizational documents, as the case may be, and that this Lease is binding upon said entity in accordance with its terms. At the time of execution of this Lease, Tenant shall provide Landlord with corporate resolutions or other appropriate written authorization, in a form acceptable to Landlord, authorizing the execution, delivery and performance of this Lease. The failure of Tenant to deliver the same to Landlord within five (5) business days of Landlord’s request therefor shall be deemed a default under this Lease. (If more than one party comprises Tenant, then the obligations of such parties hereunder shall be joint and several.)

     20.6 Rules and Regulations. Landlord shall have the right to establish, modify and enforce reasonable rules and regulations (“Rules and Regulations”) with respect to the care and orderly management of the Premises and Tenant shall abide by the same. Tenant acknowledges the Rules and Regulations expressly set forth in Exhibit C hereto do not deprive Tenant of any material rights under this Lease. Whenever the Rules and Regulations conflict with this Lease, this Lease shall control and be deemed the prevailing document for purposes of resolving the conflict.

21.0 NOTICES

     21.1 Notices of Default. All notices of default hereunder shall be in writing and shall only by made by either (a) personal delivery, in which case, such notice shall be deemed to have been received on the date of delivery, (b) by certified mail, postage prepaid, return receipt requested, in which such notice is effective on receipt if delivery is confirmed by a return receipt, or (c) by a professional courier company with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service. Notices of default may not be given by facsimile or by electronic mail. If a representative is not generally available during normal business hours to accept delivery or receipt of a notice, then a notice of default or other notice may be sent by first class mail to the last address of the recipient known to the party giving the notice, in which case notice is effective on delivery or leaving such notice at such last known address.

     21.2 Notices for Other Purposes. Except as otherwise expressly set forth in this Lease, all notices or other communications under this Lease by either party to the other may be served and delivered (a) in the manner set forth in Section 21.1 above, or (b) by facsimile, with a copy via e-mail, provided receipt of confirmation of transmission thereof is obtained (in which case, such notice shall be deemed to have been received on receipt of confirmation of both transmissions).

     21.3 General Provisions Regarding Notices. The Landlord’s and Tenant’s addresses for written notices required to be given hereunder shall be the addresses set forth on page 3 of this Lease, or at such other place designated by advance written notice delivered in accordance with the foregoing. Any correctly addressed notice that is refused, unclaimed, or undeliverable because of an act or omission of the party to be notified shall be considered to be effective as of the first date that the notice was refused, unclaimed or considered undeliverable by the courier service, messenger or postal authority. If a notice is received on a Saturday, Sunday or legal holiday, or after 5:00 p.m. (and before 12:00 a.m.), it shall be deemed received on the next business day.

22.0 LETTER OF CREDIT

     22.1 Requirements. Within fifteen (15) days following Tenant’s receipt of written notice from Landlord that Landlord has received all permits required for construction of the Landlord’s Work, Tenant shall deliver to Landlord, as protection for the full and faithful performance by Tenant of all of its obligations under this Lease and for all losses and damages Landlord may suffer (or that Landlord reasonably estimates it may suffer) as a result of any breach or default by Tenant under this Lease, an irrevocable and unconditional negotiable standby Letter of Credit (“Letter of Credit”), in a form reasonably acceptable to Landlord, payable at an office in the San Francisco Bay Area, California, running in favor of Landlord and issued by a solvent, nationally recognized bank with a long term rating of BBB or higher, under the supervision of the Superintendent of Banks of the State of California, or a national banking association, in the amount of Six Million Dollars (the “Letter of Credit Amount”). The Letter of Credit Amount is subject to reduction from time to time pursuant to the terms of Exhibit H to this Lease. Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining the Letter of Credit. The Letter of Credit shall (1) be “callable” at sight, irrevocable, and unconditional; (2) be maintained in effect, whether through renewal or extension, for the period from the Lease Commencement Date and continuing until the date (the “Letter of Credit Expiration Date”) that is one hundred twenty (120) after the expiration of the Term, and will either be automatically extended upon any extension of the initial Term or Tenant shall deliver a new Letter of Credit or certificate of renewal or extension to Landlord at least forty-five (45) days before the expiration of the Letter of Credit then held by Landlord, without any action whatsoever on the part of Landlord; (3) be fully assignable by Landlord, its successors, and assignees of its interest in the Premises; (4) permit partial draws and multiple presentations and drawings; and (5) be otherwise subject to the Uniform Customs and Practices for Documentary Credits (1993-Rev), International Chamber of Commerce Publication #500, or the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590. In addition, the form and terms of the Letter of Credit and the bank issuing the same (the “Bank”) shall be acceptable to Landlord, in Landlord’s reasonable discretion. Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the Letter of Credit if any of the following shall have occurred or be applicable: (a) Landlord certifies that such amount is due to Landlord under the terms and conditions of this Lease, and that Tenant is in default beyond all cure periods applicable thereto, provided that if Landlord is prevented from delivering a notice of default to Tenant for any reason, including, without limitation, because Tenant has filed a voluntary petition, or an involuntary petition has been filed against Tenant, under the Bankruptcy Code (hereinafter defined), then no such notice and cure period shall be required; (b) Tenant or any guarantor of Tenant’s obligations under this Lease has filed a voluntary petition under any chapter of the U.S. Bankruptcy Code or any similar state law (collectively, the “Bankruptcy Code”); (c) Tenant or any guarantor of Tenant’s obligations under this Lease has assigned any or

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all of its assets to creditors in accordance with any federal or state laws; (d) an involuntary petition has been filed against Tenant or any guarantor of Tenant’s obligations under this Lease under any chapter of the Bankruptcy Code, which petition is not dismissed within sixty (60) days after the date it is filed; provided, however, that if Tenant is still operating its business in the Premises and this Lease has not been terminated, Landlord may draw upon the Letter of Credit only to the extent such amount is due Landlord under the terms of this Lease or the guaranty of this Lease; or (e) the Bank has notified Landlord that the Letter of Credit will not be renewed or extended through the Letter of Credit Expiration Date. The Bank will honor the Letter of Credit regardless of whether Tenant disputes Landlord’s right to draw on the Letter of Credit.

     22.2 Transfers. The Letter of Credit shall also provide that Landlord, its successors, and assigns, may, at any time and without notice to Tenant and without first obtaining Tenant’s consent, transfer (one or more times) all or any portion of its interest in and to the Letter of Credit to another party, person, or entity, provided such transferee is the assignee of the Landlord’s rights and interests in and to this Lease, or to any lender providing financing to Landlord. In the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part, to the transferee and Landlord shall then (provided such transferee assumes all of Landlord’s obligations under this Lease), be released by Tenant from all liability therefor, and it is agreed that the provisions of this Section shall apply to every transfer or assignment of the whole or any portion of the Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord, Tenant shall execute and submit to the Bank such applications, documents, and instruments as may be necessary to effectuate such transfer, and Landlord shall be responsible for paying the Bank’s transfer and processing fees in connection with any such transfer.

     22.3 Restoration. If, as a result of any drawing by Landlord on the Letter of Credit, the amount of the Letter of Credit shall be less than the Letter of Credit Amount, Tenant shall, within ten (10) business days after the drawdown by Landlord, take such actions as are required to restore the Letter of Credit Amount as security for Tenant’s obligations under this Lease, which may include, but is not limited to, providing Landlord with additional letter(s) of credit in an amount equal to the deficiency, provided such additional letter(s) of credit comply with the applicable requirements of the this Section 22. If Tenant fails to comply with this requirement, such failure shall be deemed a Rent Default under Section 17.1(a) of this Lease, provided that if Landlord is prevented from delivering a notice of default to Tenant for any reason, including, without limitation, because Tenant has filed a voluntary petition, or an involuntary petition has been filed against Tenant, under the Bankruptcy Code, then no such notice of default and cure period shall be required for a Rent Default under Section 17.1(a) of this Lease.

     22.4 Renewals. Tenant covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part of it and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment, or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the Letter of Credit Expiration Date, Landlord will accept a renewal of the letter of credit (such renewal letter of credit to be in effect and delivered to Landlord, as applicable, not later than forty-five (45) days before the expiration of the Letter of Credit), which shall be irrevocable and automatically renewable as required in section 22.1 through the Letter of Credit Expiration Date on the same terms as the expiring Letter of Credit or such other terms as may be acceptable to Landlord in its sole discretion. However, if the Letter of Credit is not timely renewed, or if Tenant fails to maintain the Letter of Credit in the amount and in accordance with the terms set forth in section 22.1, Landlord shall have the right to present the Letter of Credit to the Bank in accordance with the terms of section 22.1, and the proceeds of the Letter of Credit may be applied by Landlord against any Rent payable by Tenant under this Lease that is not paid when due and to pay for all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach or default by Tenant under this Lease. Any unused proceeds shall be deemed held by Landlord as security in accordance with applicable laws, but need not be segregated from Landlord’s other assets. Landlord agrees to pay to Tenant within thirty (30) days after the Letter of Credit Expiration Date the amount of any proceeds of the Letter of Credit received by Landlord and not applied against any Rent payable by Tenant under this Lease that was not paid when due or used to pay for any losses and damages suffered by Landlord (or reasonably estimated by Landlord that it will suffer) as a result of any breach or default by Tenant under this Lease; provided, however, that if before the Letter of Credit Expiration Date a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed.

     22.5 Draws. Tenant acknowledges and agrees that Landlord is entering into this Lease in material reliance on the ability of Landlord to draw on the Letter of Credit on the occurrence of any breach or default on the part of Tenant under this Lease. If Tenant shall breach any provision of this Lease or otherwise be in default under this Lease, Landlord may, but without obligation to do so, and without notice to Tenant, draw on the Letter of Credit, in part or in whole, to cure any breach or default of Tenant and to compensate Landlord for any and all damages of any kind or nature sustained or which Landlord reasonably estimates that it will sustain resulting from Tenant’s breach or default, including any damages that accrue upon termination of the Lease under the Lease and/or Section 1951.2 of the California Civil Code or any similar provision. The use, application, or retention of any proceeds of the Letter of Credit, or any portion of it, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by this Lease or by any applicable law, it being intended that Landlord shall not first be required to proceed against the Letter of Credit, and shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, following a draw properly made by Landlord of any portion of the Letter of Credit. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing on such Letter of Credit in a timely manner. Tenant agrees and acknowledges that (1) the Letter of Credit constitutes a separate and independent contract between Landlord and the

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Bank; and (2) Tenant is not a third party beneficiary of such contract (3) Tenant has no property interest whatsoever in the Letter of Credit; and (4) if Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant’s bankruptcy estate shall have any right to restrict or limit Landlord’s claim or rights to the Letter of Credit by application of Section 502(b)(6) of the U.S. Bankruptcy Code or otherwise.

     22.6 Replacement. Tenant may, from time to time, replace any existing Letter of Credit with a new Letter of Credit if the new Letter of Credit:

          (a) Becomes effective at least 30 days before expiration of the Letter of Credit that it replaces;

          (b) Is in the required Letter of Credit amount;

          (c) Is issued by a Letter of Credit bank acceptable to Landlord; and

          (d) Otherwise complies with the requirements of Section 22 and all subsections thereof.

     22.7 Reduction Schedule. The Letter of Credit Amount is subject to reduction as provided in Exhibit H to the Lease. Provided that, as of each date of reduction of the Letter of Credit Amount set forth in Exhibit H, Tenant (or the guarantor of its Lease obligations, as applicable) complies with the requirements for reduction as provided in Exhibit H, and provided further that, on or before the applicable date of such reduction, Tenant tenders to Landlord a replacement Letter of Credit or a certificate of amendment to the existing Letter of Credit, conforming in all respects to the requirements of this Section 22 and all subsections hereof as modified by Exhibit H, in the applicable Letter of Credit Amount as of such date of reduction, Landlord shall exchange the Letter of Credit then held by Landlord for the replacement or amended Letter of Credit tendered by Tenant.

     22.8 Not a Security Deposit. Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal of it or any proceeds applied by Landlord as provided in this Lease be (1) deemed to be or treated as a “security deposit” within the meaning of California Civil Code Section 1950.7, (2) subject to the terms of Section 1950.7, or (3) intended to serve as a “security deposit” within the meaning of Section 1950.7. Landlord and Tenant (1) agree that Section 1950.7 and any and all other laws, rules, and regulations applicable to security deposits in the commercial context (“Security Deposit Laws”) shall have no applicability or relevancy to the Letter of Credit, and (2) waive any and all rights, duties, and obligations either party may now or in the future have relating to or arising from the Security Deposit Laws.

23.0 BROKERS

     23.1 Indemnity. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent occurring by, through, or under the indemnifying party.

24.0 SIGNAGE

     24.1 Identification Sign. Tenant shall, subject to Landlord’s written approval, which approval shall not be unreasonably withheld, conditioned or delayed, be entitled to (a) all Building signage permitted by applicable law, including but not limited to one or more building-top parapet identification signs (in locations reasonably agreed to by Landlord), and (b) other exterior signs in and about the Premises permitted by applicable law; provided, however, that with respect to all such signage referenced in clauses (a) and (b) above, (i) Landlord approves the design and location of such signage, which approval shall not be unreasonably withheld, conditioned or delayed, (ii) the City of South San Francisco approves the same, if required by law, (iii) such signage is in keeping with the master signage program for the Gateway Business Park, and (iv) such signage does not affect the parking at the Premises. Moreover, Tenant shall have the use of the monument sign being installed on the Premises by Landlord as part of Landlord’s Work, provided, however that the requirements of clauses (i) through (iv) above are satisfied. The cost of all of Tenant’s signage, its installation, maintenance and ultimate removal expense shall be at Tenant’s sole expense. At the expiration or earlier termination of this Lease, Tenant shall, at its sole cost, cause its signage to be removed and shall restore the area upon which such signage was affixed to the condition existing prior to installation, normal wear and tear excepted. Except as otherwise expressly set forth to the contrary in this Section 24, the design, installation, and construction of all signs shall be subject to the terms and provisions of this Lease (and in the Work Letter, if applicable) governing alterations and/or the Initial Tenant Improvements, as applicable.

25.0 PARKING

     25.1 Parking. Tenant shall be provided with the exclusive right to use the parking spaces of the Premises, which shall be not less than 291 automobile parking spaces on the Premises except for the parking spaces on the Adjacent Parking Area as hereinafter described; provided, however, that if the number of parking spaces on the Premises are reduced below such minimum requirement as a result of changes beyond Landlord’s reasonable control, Landlord may satisfy the parking requirements through non-exclusive parking spaces on properties in the vicinity of the Premises as hereinafter provided. The parking stalls and the location of the same at the Premises as of the date hereof are shown on the Final Building/Parking/Service Area Plan attached hereto as Exhibit F. Notwithstanding the foregoing, Landlord may provide up to thirty-eight (38) non-exclusive use parking stalls on

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adjacent parcels commonly known as 1000 Gateway Boulevard, 200 Oyster Point Boulevard and/or 900 Gateway Boulevard (collectively, the “Adjacent Parking Area”) to satisfy (in equivalent numbers) the number of exclusive use parking stalls required on the Premises, provided that (a) Tenant is granted the right to utilize such parking stalls under a reciprocal parking easement or license agreement that is binding on the Premises and the adjacent property (the "Reciprocal Parking Easement Agreement”), (b) such parking spaces shall be without cost to Tenant (except for the maintenance costs associated with such parking areas that are allocated to the Premises under the Reciprocal Parking Easement Agreement, and (c) any restrictions on Tenant’s use of such parking stalls shall be no less favorable than those imposed on other persons using such parking spaces. Notwithstanding anything to the contrary contained herein, Landlord and Tenant acknowledge that Landlord and the Adjacent Parking Area owner may not have executed the Reciprocal Parking Easement Agreement as of the date of execution of this Lease. Provided the Reciprocal Parking Easement complies with clauses (b) and (c) of this Section 25, Landlord shall have the right to execute and record such Reciprocal Parking Easement Agreement, and to bind the Premises to the terms of the Reciprocal Parking Easement Agreement. All parking spaces shall be available for Tenant’s use seven (7) days per week, and twenty-four (24) hours per day, subject to (a) Landlord’s exercise of its rights and obligations specified herein, (b) the terms of this Lease, including but not limited to the Rules and Regulations attached as Exhibit C, (c) all matters of record as of the date of this Lease, and (d) all the terms and provisions of the Reciprocal Easement Agreement (with respect to Tenant’s rights in the Adjacent Parking Area only). Tenant shall be entitled, at its sole cost and expense, to cause an access control system (card key activated or otherwise) to be installed at the point of entry into the garage parking areas (the “Access Control System”).

26.0 MEMORANDUM OF LEASE

     26.1 Memorandum of Lease. Upon the request of either party, the other party shall execute and acknowledge and deliver to the requesting party a Memorandum of Lease in form and substance reasonably satisfactory to the requesting party. The requesting party shall have the right to record the Memorandum of Lease in the Official Records of San Mateo County. If such Memorandum of Lease is recorded, Tenant agrees to execute and acknowledge a quitclaim deed in favor of Landlord at the expiration or earlier termination of this Lease.

27.0 CROSS-DEFAULT

     27.1 Cross-Default. So long as the Landlord under this Lease and the landlord under the following leases including the 700 Gateway Boulevard Lease dated April 14, 1997 (the “700 Lease”), the 750/800/1000 Gateway Boulevard Lease dated April 14, 1997 (the “750/800/1000 Lease”), the 750G Gateway Boulevard Lease dated September 21, 2004 (the “750G Lease”), or the 750R Gateway Boulevard Lease dated September 29, 2006 (the “750R Lease”) are affiliated, any default by Tenant under Section 17.1(a) or 17.1(d), or any material default by Tenant under Section 17.1(c) that is not being diligently contested in good faith by Tenant, of the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease (subject to all applicable cure periods) shall, at Landlord’s election, constitute a default under this Lease, and any default by Tenant under Section 17.1(a) or 17.1(c), or any material default by Tenant under Section 17.1(b) that is not being diligently contested in good faith by Tenant, of this Lease (in each case, subject to all applicable cure periods) shall, at the election of the landlord under the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease, constitute a default by Tenant under the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease. For purposes hereof, Landlord and the landlord of the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease shall be deemed affiliated so long as both entities are controlled by, or under common control with, Stephen W. Chamberlin and/or Stephen Chamberlin Associates, Inc. and/or affiliated entities.

28.0 LANDLORD’S INDEMNITY

     28.1 Landlord’s Indemnity. Landlord shall indemnify and hold Tenant harmless against all claims, actions, damages and liability (i) caused by any release of hazardous substances requiring remediation caused by Landlord on the Premises or any real property in the vicinity of the Premises owned or managed by Landlord or any person or entity affiliated with Landlord; or (ii) which arise as a result of hazardous substances existing upon the Premises or any real property in the vicinity of the Premises owned or managed by Landlord or any person or entity affiliated with Landlord prior to the execution of this Lease. The foregoing indemnity shall not apply to any contamination or release or any claims, actions, damages or liability relating to hazardous substances arising from acts or occurrences caused, wholly or in part, permitted or subject to the control of Tenant, its agents, employees, contractors, sublessees, assignees, licensees or invitees. This paragraph shall survive the expiration or earlier termination of this Lease.

29.0 TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

     29.1 Transportation Demand Management Program Requirements. Tenant shall comply with the Transportation Demand Management Program Requirements that are attached hereto as Exhibit E, and are expressly incorporated herein. Any penalties incurred by Tenant’s non-compliance shall be paid by Tenant.

30.0 OPTION TO RENEW

     30.1 Grant of Option. Landlord hereby grants to Tenant an option (the “Renewal Option”) to extend this Lease for an additional term of five (5) years (the “Renewal Term”) commencing upon the expiration of the original Term. However, such Renewal Option shall be null and void, at Landlord’s sole and absolute discretion, if Tenant is in material default beyond all applicable notice and cure periods under this Lease at the time the Renewal Option is exercised and at any time from Tenant’s exercise of the Renewal Option to the commencement date of the Renewal Term. The Renewal Option must be exercised by written notice to Landlord not later than two hundred seventy (270) calendar days prior to the expiration of the original Term. The Minimum Monthly Rent for the

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Renewal Term shall be equal to the Fair Market Rent for the Premises (determined as provided below), but in no event shall the Minimum Monthly Rent during any year of the Renewal Term be less than the Minimum Monthly Rent payable during the last full month of the original Term. The Renewal Option shall be terminated and of no further force and effect if, at any time provided herein for exercise of the Renewal Option by Tenant, any federal, state, or local law or regulation invalidates the Renewal Option. Landlord shall have no responsibility for payment of any brokerage commission with respect to this Renewal Option, and Tenant shall indemnify, defend and hold Landlord harmless from and against any claims (and any expenses, including attorney’s fees, incurred by Landlord in connection therewith) made by any broker, agent or finder claiming the right to a fee or compensation on account of dealings with Tenant in connection therewith. The Renewal Option described in this Section 30.1 shall be personal to Tenant (or its Permitted Transferee) and may not be exercised or be assigned voluntarily or involuntarily by or to any person or entity other than the original Tenant under this Lease (or its Permitted Transferee) and shall be exercisable by the original Tenant (or its Permitted Transferee) only if the original Tenant under this Lease (or its Permitted Transferee) is then in occupancy of the Premises and the Lease is then in full force and effect.

     30.2 Determination of Fair Market Rent. After Landlord receives written notice from Tenant of the exercise of the Renewal Option, Landlord and Tenant shall have thirty (30) days in which to agree on the initial Fair Market Rent for such Renewal Term. In the event that Landlord and Tenant cannot mutually agree upon such Fair Market Rent within such thirty (30) day period, then Landlord and Tenant shall, within fifteen (15) days after the expiration of such thirty (30) day period or the date they acknowledge that they cannot agree on an applicable Fair Market Rent, whichever is earlier, each provide to the other (by simultaneous exchange) their determination of the appropriate Fair Market Rent in writing (hereinafter, “Landlord’s Determination” and “Tenant’s Determination”), and thereafter, the issue of the Fair Market Rent shall be submitted to arbitration. Within fifteen (15) days after Landlord and Tenant exchange their determination of the appropriate Fair Market Rent, Landlord and Tenant shall mutually agree on an arbitrator (the "Arbitrator”), who shall be a California licensed real estate broker who has been active over the five (5) year period ending on the date of such appointment in the leasing of office/laboratory properties in San Mateo County, California; provided, however that if Landlord and Tenant are unable to agree upon any such arbitrator within such fifteen (15) day period, then Landlord and Tenant shall have another ten (10) days to mutually agree upon a licensed professional MAI appraiser (with experience in the appraisal of office/laboratory properties in San Mateo County, California) to serve as the Arbitrator. The determination of the Arbitrator shall be limited solely to the issue of whether Landlord’s Determination or Tenant’s Determination is the closest to the actual Fair Market Rent as determined by the Arbitrator. Neither Landlord nor Tenant may directly or indirectly consult with the Arbitrator prior to, or subsequent to, his or her appointment.

          30.2.1 The Arbitrator shall within thirty (30) days of appointment reach a decision as to Fair Market Rent and determine whether the Landlord’s Determination or Tenant’s Determination is closest to Fair Market Rent as determined by the Arbitrator and simultaneously publish a ruling (“Award”) indicating whether Landlord’s Determination or Tenant’s Determination is closest to the Fair Market Rent as determined by the Arbitrator, which shall become the then applicable Fair Market Rent. The Award issued by the Arbitrator shall be binding upon Landlord and Tenant.

          30.2.2. If Landlord and Tenant fail to appoint an Arbitrator within fifteen (15) days after Landlord and Tenant exchange their determination of the appropriate Fair Market Rent, either party may petition the presiding judge of the Superior Court of San Mateo County to appoint such Arbitrator, subject to the criteria of this Section 30.2, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint the Arbitrator.

          30.2.3 The Fair Market Rent shall not include the value of the improvements and equipment which Tenant is entitled to remove under this Lease.

          30.2.4 The cost of arbitration shall be paid (i) by Landlord if Tenant’s Determination is determined by the Arbitrator to be closest to the Fair Market Rent, or (ii) by Tenant if Landlord’s Determination is determined by the Arbitrator to be closest to the Fair Market Rent.

     30.3 Terms of Lease. During the Renewal Term, Tenant shall occupy the Premises upon all of the terms and conditions set forth in this Lease except (a) the Minimum Monthly Rent for the Renewal Term shall be as determined above, and (b) Tenant shall have no right to extend the term of this Lease beyond the Renewal Term.

31.0 TERMINATION RIGHT

     31.1 Termination Right. Tenant shall have one (1) option (the “Termination Option”) to terminate this Lease on the last day of the One Hundred Twentieth (120th) month after the Commencement Date. The Termination Option must be exercised, if at all, by written notice (“Termination Election Notice”) from Tenant to Landlord given not less than three hundred and sixty five (365) calendar days prior to the intended effective date of such termination (“Early Termination Date”). As a condition to the effectiveness of Tenant’s Termination Notice, Tenant must pay Landlord the “Termination Fee” (as defined below) in accordance with the terms of this Section 31. As used herein, the term “Termination Fee” shall mean and refer to an amount equal to (x) the unamortized portion of any tenant improvement costs incurred by Landlord in connection with the original build-out and delivery of the Premises, plus (y) the unamortized portion of all leasing commissions applicable to Tenant’s Lease of the Premises, plus (z) nine (9) month’s of Rent at the monthly rental rate in effect for the month in which the Early Termination Date occurs. Such unamortized balances shall be determined by using a fifteen (15) year amortization period commencing on the day following the first anniversary of the Commencement Date, utilizing an eight and one-half percent (8.5%) per annum interest rate. One third (1/3) of the Termination Fee shall be paid by Tenant to Landlord within thirty (30) calendar days after Tenant delivers the Termination Election Notice to Landlord, another one third (1/3) of the Termination Fee shall be paid by Tenant to Landlord at least One Hundred Eighty (180)

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calendar days prior to the Early Termination Date, and the remaining one-third (1/3) shall be paid by Tenant to Landlord at least thirty (30) calendar days prior to the Early Termination Date.

32. GUARANTY

     32.1 Guaranty. This Lease shall not become effective unless and until the duly executed Guaranty of Lease attached hereto as Exhibit G is delivered to Landlord.

33.0 RULES AND REGULATIONS

     33.1 Rules and Regulations. The Rules and Regulations attached hereto as Exhibit C are expressly incorporated herein.

34.0 BUSINESS DAYS

     34.1 Business Day. A “business day” is a day other than a Saturday, a Sunday or a legal holiday as recognized by the Superior Court in the County in which the Premises are located. Unless expressly defined as a “business day”, all references to the term “day” shall mean a “calendar day.”

[the balance of this page has been intentionally left blank; signature page follows]

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     IN WITNESS WHEROF, Landlord and Tenant have executed this Lease as of the date first above written.

LANDLORD: CHAMBERLIN ASSOCIATES 180 OYSTER POINT BLVD., LLC, a California limited liability company
By:	Chamberlin Properties I Limited Partnership, a California limited partnership, Its Member

By:   Stephen Chamberlin Associates, Inc.,
a California corporation,
Its General Partner  

By:	/s/ Anne L. Hoffman
	Name:	Anne L. Hoffman
	Title:	President

TENANT: ELAN PHARMACEUTICALS, INC., a Delaware Corporation
By:	/s/ G. Kelly Martin
	Name:	G. Kelly Martin
	Title:	President and Chief Executive Officer

29

EXHIBIT A

LEGAL DESCRIPTION

(LEASE SECTIONS 1.3 AND 2.1)

The Real Property described below is subject to a lot line adjustment to include certain additional property in the vicinity of the north and western boundary of the Real Property described in paragraph No. 1 below. After the lot line adjustment is completed, the legal description of the Real Property will be as described in Section 1 below.

LEGAL DESCRIPTION BEFORE THE LOT LINE ADJUSTMENT:

All that real property situate in the City of South San Francisco, County of San Mateo, State of California, described as follows:

Parcel 2, as shown on the Parcel Map of the Resubdivision of Lands of E. H. Edwards Company, filed in the office of the Recorder of San Mateo County, California on April 30, 1971, in Book 12 of Parcel Maps, at page 29.

JPN: 014-002-022-04A

APN: 015-023-090

LEGAL DESCRIPTION AFTER THE LOT LINE ADJUSTMENT:

EXHIBIT B

WORK LETTER FOR SHELL CONSTRUCTION
AND TENANT IMPROVEMENTS

THIS WORK LETTER (this “Work Letter”) sets forth the agreement of Landlord and Tenant with respect to the improvements to be constructed in the Premises, as defined in the Lease to which this Work Letter is attached as an exhibit. In the event of any inconsistency between the terms of this Work Letter and the terms of the Lease, the terms of this Work Letter shall control. All defined terms used herein shall have the meanings set forth in the Lease, unless otherwise defined in this Work Letter.

ARTICLE 1. LANDLORD’S WORK

     1.1. General Provisions. Landlord shall, at its sole cost and expense, plan, design and construct those certain improvements described in Schedule B-1 in accordance with the building specifications set forth therein, and with the other provisions of this Article 1, and the other terms and conditions of the Lease. The planning, design and construction of such improvements by Landlord are referred to collectively herein as “Landlord’s Work.” Except as otherwise specified herein, Landlord’s Work shall materially comply with those certain Design Documents attached hereto as Schedule B-3, and shall include the underground and surface parking facilities of the Premises as required to provide the parking spaces required under the Lease.

     1.2. Costs of Landlord’s Work. “Costs of Landlord’s Work” shall mean and include all of the following costs incurred by Landlord with respect to Landlord’s Work: (a) architect’s, engineer’s and consultants’ fees and costs for those architects, engineers and consultants retained by Landlord; (b) deposits, fees and costs for building and other permits, licenses and approvals; (c) tests and inspections; (d) security; (e) insurance and bond premiums; (f) utilities; (g) all amounts payable to any contractors, subcontractors, suppliers and vendors retained by Landlord for Landlord’s Work; and (h) all other charges, fees, expenses and other costs incurred or arising in connection with Landlord’s Work. As of the date of the Lease, all of the Costs of Landlord’s Work have not been bid by Landlord’s Contractor (as defined in Section 1.7.1.2 of this Exhibit) or any subcontractor. In recognition that Tenant’s base rent payment obligations are directly tied to the Costs of Landlord Work, as provided in Exhibit D to the Lease, Tenant shall have the right to participate in the negotiations over the Costs of Landlord’s Work with Landlord’s Contractor as provided in Section 1.7.1.2 of this Exhibit and will provide updated cost information to Tenant throughout the period that Landlord is to perform Landlord’s Work as provided in Section 4 of Exhibit D to the Lease. Landlord agrees not to unilaterally materially increase the Cost of Landlord’s Work without Tenant’s prior approval, except as otherwise provided in Exhibit D to the Lease or this Work Letter (e.g., increase costs due to any Tenant Delay, change requests, or changes or work required by any governmental authority). Tenant’s approval shall not be unreasonably withheld and its review is to confirm that the changes are permissible Costs of Landlord’s Work.

     1.3. Building Shell. The “Building Shell” shall mean that portion of Landlord’s Work identified in Exhibit B-1 as being part of the Building Shell (and not specified in Exhibit B-1 as lagging behind the Substantial Completion of the Building Shell), provided, however, that the Building Shell expressly excludes any exterior improvements to the Building podium, exterior parking areas, exterior landscaping and other improvements outside the Building and the Building podium, except for the underground utilities to the Building included as part of Exhibit B-1, which shall be stubbed to the Building. Notwithstanding the foregoing, as part of the Building Shell, Landlord shall provide for at least two pass-through window locations on each of the second and third floors of the Building in order for Tenant to install its furnishings and equipment on the upper floors of the building; provided that Tenant may after reasonable prior notice to Landlord elect to have the work of the pass-through windows excluded from Landlord’s Work as Change Request Work (as defined in Section 1.11.1 below), with the costs savings, if any, of such exclusion to reduce the cost of the Landlord’s Work in accordance with Exhibit D of this Lease.

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     1.4. Substantial Completion.

          1.4.1 Definition of Substantial Completion.

               1.4.1.1 Substantial Completion of the Building Shell. For purposes of this Work Letter, the term “Substantial Completion” or “Substantially Complete” shall mean, with respect to the Building Shell, that Landlord’s Work on the Building Shell is complete to the point where: (i) Landlord’s work associated with the Building Shell is complete in accordance with the Design Documents for the Building Shell, but for minor Building Shell Punch List work that is capable of completion within 30 days following the Walk-Through Date, (ii) Tenant can safely, effectively, and completely install all of its furnishings and equipment therein with minimal risk of loss or damage due to exposure of the interior of the Building Shell to the elements, and (iii) Tenant can have uninterrupted access to the roof and all interior areas of the Building Shell for purposes of installing its furnishings and equipment within the Building Shell, with sufficient parking available on-site or on adjacent properties for Tenant’s contractors and subcontractors performing the work of the Initial Tenant Improvements. Notwithstanding the foregoing, for purposes of determining the date of Substantial Completion of the Building Shell, as long as Landlord has completed all material construction work associated with any elevators included as part of the Building Shell, then the fact that all applicable governmental authorities have not approved or permitted such elevators for use or occupancy shall not delay the date that the Building Shell is determined to be Substantially Complete. If, as a result of any such governmental authorities having not approved such elevators, it is not legally permissible for Tenant to utilize the elevators for Tenant’s construction of the Initial Tenant Improvements, then Landlord shall provide an alternative exterior service elevator for purposes of allowing Tenant reasonable access to the upper floors of the Building Shell for purposes of installing furnishings and equipment and for performing the Initial Tenant Improvements, the cost of which shall be included in the Cost of the Landlord’s Work and considered in the calculation of base rent under Exhibit D to the Lease, and which shall not require a separate agreement with Landlord’s contractor or any subcontractor, notwithstanding the requirements of Section 2.4.3 hereof.

               1.4.1.2 Substantial Completion of Landlord’s Work. For purposes of this Work Letter, the term “Substantial Completion” or “Substantially Complete” shall mean, with respect to Landlord’s Work, that Landlord’s Work has been completed in accordance with the design and specifications of the Construction Documents, except for any minor Landlord’s Work Punch List items which are reasonably capable of completion within a 30-day period following the date of Substantial Completion of Landlord’s Work, as such 30-day period may be extended as provided in Section 1.4.6.1 hereof.

          1.4.2 Walk Through at Substantial Completion. At least five (5) business days prior to the Substantial Completion of the Building Shell and Landlord’s Work, respectively, Landlord shall notify Landlord’s Contractor (defined in Section 1.7.1.2), Landlord’s Architect, Tenant and Tenant’s Architect of the date and time of the inspection of the Building Shell or Landlord’s Work, as applicable, for purposes of determining whether the Building Shell or Landlord’s Work, as applicable, is Substantially Complete. Such scheduled date and time for the walk-through is referred to herein as the “Walk-Through Date.” Landlord, Tenant, Landlord’s Contractor, as well as Landlord’s Architect and (if desired by Tenant) Tenant’s Architect, shall meet at the Project site on the Walk-Through Date to determine whether the Building Shell or Landlord’s Work, as applicable, is Substantially Complete. If Tenant’s desired representative(s) is/are not available on the Walk-Through Date, Tenant shall notify Landlord of the same, in writing, at least two (2) days prior to the Walk-Through Date, in which case, the parties shall coordinate another date and time for the walk-through, which shall be no later than five (5) days after the originally scheduled Walk-Through Date. Both Landlord and Tenant shall have the right to attend the walk-through inspections.

          1.4.3 Determination of Date of Substantial Completion.

               1.4.3.1 Building Shell. If during the walk-through inspection of the Building Shell, Landlord and Tenant agree that the corresponding work is Substantially Complete, then (a) Tenant and Landlord shall document such fact in writing (the “Substantial Completion Notice”) (but any delay or failure to document such notice shall not delay the date of Substantial Completion), which writing shall specify the date of Substantial Completion of the Building Shell, shall be signed by Landlord and Tenant, and (b) Landlord’s Architect shall identify, in writing, those items of Landlord’s Work that are in need of repair, or that have yet to

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be completed, and that Landlord agrees to repair (the “Building Shell Punch List”); provided, however, that any Building Shell Punch List work shall be minor in nature, and shall not unreasonably interfere with or delay the work of the Initial Tenant Improvements, and shall, in any case, be reasonably capable of completion within thirty (30) days after the Walk-Through Date, as provided in Section 1.4.6.1. Should Tenant disagree with the items on the Building Shell Punch List, Tenant shall notify Landlord, in writing, within two (2) business days following receipt of the proposed Building Shell Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the Building Shell Punch List. If the parties are unable to agree upon the Building Shell Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2. The date for the Substantial Completion of the Building Shell accurately set forth in the Substantial Completion Notice shall be binding on Landlord and Tenant (but is subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein).

               1.4.3.2 Landlord’s Work. If during the walk-through inspection of Landlord’s Work, Landlord and Tenant agree that the corresponding work is Substantially Complete, then within two (2) days following the Walk-Through Date associated with such walk-through inspection: (a) Landlord’s Architect shall identify, in writing, those items of Landlord’s Work that are in need of repair, or that have yet to be completed, and that Landlord agrees to repair (the “Landlord’s Work Punch List”), and (b) Landlord, Landlord’s Architect, and Landlord’s Contractor shall complete and execute a Certificate of Substantial Completion substantially in the form of the American Institute of Architects document G704, as modified to reflect the definition of Substantial Completion provided in this Work Letter, with the Landlord’s Work Punch List attached; provided, however, that any Landlord’s Work Punch List items shall be minor in nature and shall not adversely affect the exterior appearance of the Building or the exterior improvements of the Premises, and shall, in any case, be reasonably capable of completion within thirty (30) days after the applicable Walk-Through Date as provided in Section 1.4.6.1. Should Tenant disagree with the items on the Landlord’s Work Punch List, Tenant shall notify Landlord, in writing, within two (2) business days following receipt of the proposed Landlord’s Work Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the Landlord’s Work Punch List. If the parties are unable to agree upon the Landlord’s Work Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2. The date for the Substantial Completion of the Landlord’s Work accurately set forth in the Certificate of Substantial Completion shall be binding on Landlord and Tenant (but is subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein).

          1.4.4 Disagreement As To Whether The Work Is Substantially Complete. If Landlord considers the work Substantially Complete, but Tenant does not agree that the corresponding work is Substantially Complete, then Tenant shall notify Landlord’s Architect, and Landlord, in writing, on the Walk-Through Date of the reasons for withholding such confirmation. Thereafter, Keith Lundquist, of Lundquist Construction, or if Keith Lundquist is unavailable, then Dan Hipple of Theravance, (the applicable person being referred to herein as the “Third Party Inspector”) shall be notified of the dispute, and shall be instructed to immediately visit the site to determine whether such work is Substantially Complete. The determination of the date of Substantial Completion by the Third Party Inspector shall be binding on the parties (but shall be subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein). Moreover, the costs of such Third Party Inspector shall be split equally by the parties. In the event that no Third Party Inspector is reasonably available, Landlord and Tenant shall use commercially reasonable efforts to immediately agree upon another Third Party Inspector, and if Landlord and Tenant cannot immediately agree upon such a Third Party Inspector, then either Landlord or Tenant may apply to the American Arbitration Association in San Mateo, California, for an appointment of an arbitrator to select the neutral Third Party Inspector.

          1.4.5 Delay in Determining Date of Substantial Completion. If for some reason there is a delay in determining the date of Substantial Completion, then date of Substantial Completion shall be the date when the corresponding work would have been Substantially Complete, but for the delays. For instance, if there is a delay in the selection of the Third Party Inspector, the Third Party Inspector will not only determine whether the work is Substantially Complete, but also, the date the work would have been Substantially Complete but for the delays

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in determining the same (which date may precede the date that such Third Party Inspector is selected).

          1.4.6 Punch List Items.

               1.4.6.1 Completion of Punch List Items. Landlord shall complete any Building Shell Punch List or Landlord’s Work Punch List work within thirty (30) calendar days of the applicable Walk-Through Date, unless such Punch List work cannot reasonably be completed within such thirty (30) day period, in which case, Landlord shall have whatever time is reasonably necessary to complete such Punch List work, provided Landlord is diligently prosecuting the same to completion.

               1.4.6.2 Disagreement Re Punch List Items. If the parties disagree on the applicable Punch List scope of work (for instance, if Landlord alleges it is not responsible for an item requested to be included in the applicable Punch List), then any such dispute shall be resolved by binding arbitration with the San Mateo, California office of the American Arbitration Association, pursuant to the commercial rules of the American Arbitration Association; provided, however, that such proceedings shall not delay the performance of the Landlord’s Work or the Initial Tenant Improvements and if the failure to perform the Punch List work is reasonably likely to cause a delay in the performance of the Landlord’s Work or the Initial Tenant Improvements, then Landlord shall perform the work subject to resolution of any such dispute, and arbitration shall be used to determine the parties’ respective liability for the cost thereof, either as a Cost of the Landlord’s Work or as a cost of the Initial Tenant Improvements.

     1.5. Possession of the Premises. Upon the Substantial Completion of the Building Shell, Tenant shall have possession and control of the Building Shell, subject to the rights of Landlord and Tenant set forth in this Exhibit and the Lease. Upon the Substantial Completion of all Landlord’s Work, Tenant shall have full possession and control of the Premises, including the exterior parking facilities, loading areas and equipment yards of the Building, subject to the terms and provisions of the Lease, and the rights of the Parties under the Lease.

     1.6. Anticipated Schedule, Delays and Adjustment of Commencement Date. Landlord’s Work shall be constructed by Landlord in accordance with this Work Letter diligently following the execution of the Lease.

          1.6.1 Anticipated Development Schedule. The preliminary development and delivery schedule for the Building Shell and for the entirety of Landlord’s Work, is attached hereto as Schedule B-2, and is expressly incorporated herein (the “Landlord’s Preliminary Development and Delivery Schedule”). Tenant and Landlord shall use their respective commercially reasonable, good faith, efforts and all due diligence to cooperate with the architects, engineers, and each other to complete all phases of the Construction Documents, general contractor selection and the permitting process, the Landlord’s Work and the Initial Tenant Improvements in accordance with the Landlord’s Preliminary Development and Delivery Schedule, and, in that regard, Landlord and Tenant shall meet on a scheduled basis to discuss progress in connection with the same.

          1.6.2 Building Permit for Landlord’s Work. Landlord shall use commercially reasonable and diligent efforts to obtain a building permit for Landlord’s Work in accordance with the time deadlines set forth in Landlord’s Preliminary Development and Delivery Schedule. If despite such efforts, Landlord is unable to obtain a building permit on or before August 1, 2007, then either party may terminate this Agreement by delivering thirty (30) days written notice of termination to the other party (anytime after August 1, 2007), provided, however, that the building permit is not issued within said thirty (30) day period. If the building permit is issued prior to the expiration of that thirty (30) day period, then this Agreement shall remain in full force and effect and such termination notice shall be of no force or effect. Conversely, if the building permit is not issued within said thirty (30) day period, this Agreement shall terminate on the expiration of said thirty (30) day period, whereupon, this Agreement shall be of no further force and effect, Landlord shall return all sums deposited by Tenant with Landlord, including but not limited to any letters of credit, and neither party shall have any obligation to the other under this Agreement. The date that the building permit has been issued and pulled for Landlord’s Work is defined herein as the “Building Permit Date.”

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          1.6.3 Early Access.

               1.6.3.1 Commencement of Early Access Period. Landlord shall provide Tenant with reasonable access to the Building Shell (to allow Tenant to commence the construction of the Initial Tenant Improvements (as defined in Section 2.1 below)) for a period of not less than sixty (60) days within a period that is seventy-five (75) days prior to the Substantial Completion of the Building Shell (the “Early Access Period”). The start of the Early Access period shall be referred to as the “Early Access Commencement Date.” Notwithstanding the foregoing, interruption of Tenant’s access to the Building Shell as required for performance of the Landlord’s Work shall be permitted without affecting the Early Access Commencement Date (“Permitted Interruptions”), provided that Landlord gives reasonable advance notice of any such Permitted Interruption to Tenant and the total days of Permitted Interruptions does not exceed fifteen (15) days during the Early Access Period so that Tenant will have not less than sixty (60) days of access to the Building within the Early Access Period. Landlord shall provide Tenant with at least twenty (20) days notice prior to the date that Landlord will provide Tenant with such early access, and Landlord and Tenant shall document the Early Access Commencement Date in writing promptly following such date. Tenant’s entering the Premises for such purposes shall be at Tenant’s own risk, and under no circumstances shall Tenant enter the Premises until all insurance required pursuant to the terms of this Lease are in place. Landlord shall have control of those portions of the Premises where the Landlord’s Work is being performed during the Early Access Period, but shall endeavor to cooperate with Tenant to make those portions of the Premises and the other portions of the Premises available to Tenant’s Contractor (hereinafter defined) and subcontractors throughout the Early Access Period subject to Landlord’s right to interrupt Tenant’s access for Permitted Interruptions. In performing any work resulting in a Permitted Interruption, Landlord shall also act to mitigate the duration and extent of such Permitted Interruption as is reasonable under the circumstances, and shall coordinate such mitigation efforts with Tenant.

               1.6.3.2 Landlord’s Failure to Provide Tenant with Reasonable Access. If Tenant does not have reasonable access to the Building Shell for purposes of constructing the Initial Tenant Improvements for a period of at least sixty (60) days during the Early Access Period, then the date of Substantial Completion of the Building Shell (as accelerated for any Tenant Delays), for purposes of determining the commencement date of Tenant’s obligation to pay CAM Charges (defined in Section 1.6.3.5), shall be extended by the difference (as long as such difference is a positive number) between (a) 60 days, and (b) the number of days that Tenant has reasonable access to the Building Shell within the 75-day period prior to Substantial Completion of the Building Shell for purposes of constructing the Initial Tenant Improvements (defined as “Tenant’s Access Delay”), in accordance with Section 1.6.3.5 below.

               1.6.3.3 Scheduling of the Initial Tenant Improvements During the Early Access Period. Tenant acknowledges that the exterior glass of the Building Shell may not be installed upon the Early Access Commencement Date, and that Landlord anticipates that the exterior glass of the Building Shell will be installed on a floor by floor basis. As such, Tenant agrees to schedule its work so that it can continue to construct the Initial Tenant Improvements without the exterior glass being installed on a particular floor and/or to allow the Initial Tenant Improvements within a certain floor to be constructed before proceeding with the Initial Tenant Improvements on another floor that does not have exterior glass installed (if such work would be impacted by not having the exterior windows on that floor installed); provided, however, that all exterior building glass (exclusive of any pass-through windows) must be installed by the date of Substantial Completion of the Building Shell. Moreover, if the internal elevators within the Building Shell are not available for use during the Early Access Period, then Landlord shall provide an alternative exterior service elevator for purposes of giving Tenant reasonable access throughout the Early Access Period to the second and third floors of the building for purposes of staging Tenant’s construction materials and equipment, commencing construction of the Initial Tenant Improvements, installing furnishings and equipment, and the costs for such alternative service elevator shall be included as part of Landlord’s Costs of Work and considered in the calculation of Tenant’s base rent under Exhibit D to the Lease.

               1.6.3.4 Interference with Landlord’s Work. During the Early Access Period, Tenant shall schedule its entry, installation and other work with Landlord so as not to interfere with Landlord’s Work. Tenant shall comply with all reasonable instructions from Landlord and Landlord’s Contractor during such Early Access Period, subject to the limitations

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on Permitted Interruptions set forth in Section 1.6.3.1 above. Moreover, during the Early Access Period, Landlord shall provide a reasonable location within or adjacent to the Premises so Tenant and its construction personnel can stage construction operations, store materials and equipment, and park vehicles.

               1.6.3.5 Tenant’s Lease Obligations During Early Access Period. During the Early Access Period, all terms and conditions of the Lease (including all insurance and indemnity provisions) shall apply, except for payment of Minimum Monthly Rent, and utility costs, Operating Expenses, real estate taxes, and/or other standard triple net expenses (collectively, “CAM Charges”). Tenant’s obligations to pay CAM Charges shall commence on the date of Substantial Completion of the Building Shell (as such date may be accelerated for any Tenant Delays (in accordance with Section 1.6.11.2) and extended for Tenant’s Access Delay (in accordance with Section 1.6.3.2)). Under no circumstances shall the date of Substantial Completion of the Building Shell (as adjusted pursuant to this Section 1.6.3.5) occur any earlier than September 1st, 2008.

               1.6.3.6 Responsibility During Early Access Period. During the Early Access Period, except to the extent attributable to the gross negligence or willful misconduct of Landlord or any of its agents, employees, contractors or invitees, Landlord shall have no responsibility for, and Tenant shall be fully responsible for, the security for Tenant’s property, activities and operations thereon. Each of Landlord’s Contractor and Tenant’s Contractor shall look to its respective Builder’s Risk policy of liability insurance for any loss or damage to work being performed by such contractor or its subcontractors, unless such loss or damage is attributable to the gross negligence or willful misconduct of the other contractor or any of the other contractor’s subcontractors.

               1.6.3.7 No Waiver of Condition. The fact that Tenant may, with Landlord’s consent, enter into the Building prior to the date of Substantial Completion of Landlord’s Work for the purpose of performing any Initial Tenant Improvements shall not be deemed an acceptance by Tenant of possession of the Premises for the purposes of establishing the condition thereof upon Tenant’s acceptance.

          1.6.4 Landlord’s Responsibility for Delay in the Substantial Completion of Building Shell. If Landlord fails to Substantially Complete the Building Shell in accordance with the time deadlines set forth in Landlord’s Preliminary Development and Delivery Schedule, as the same shall be adjusted due to Tenant Delays and Force Majeure Delays, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except as provided in Section 1.6.6.1 below, and except for the Landlord’s obligation of repairing, correcting or replacing any design or construction defects in Landlord’s Work in accordance with the requirements set forth elsewhere in the Lease and this Work Letter.

          1.6.5 Responsibility After Substantial Completion of the Building Shell.

               1.6.5.1 Tenant’s Responsibility. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, (a) Tenant shall schedule its work in the areas of the Premises outside the Building Shell with Landlord, (b) Tenant shall cooperate with all reasonable instructions from Landlord and Landlord’s Contractor with respect to any such construction work outside the Building Shell, and (c) Tenant shall cooperate with Landlord in making those areas of the Premises within the Building Shell reasonably available to Landlord so Landlord can complete Landlord’s Work.

               1.6.5.2 Landlord’s Responsibility. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, (a) Landlord shall schedule its work within the Building Shell with Tenant, (b) Landlord shall cooperate with all reasonable instructions from Tenant and Tenant’s Contractor with respect to any such construction work within the Building Shell, (c) Landlord shall cooperate with Tenant in making those areas of the Premises outside the Building Shell in the designated Service Area (as defined in Section 2.1 of the Lease) reasonably available to Tenant so Tenant can complete the Initial Tenant Improvements outside the Building Shell, and (d) Landlord shall provide a reasonable location within or adjacent to the Premises (and outside the Building Shell) so Tenant and its construction personnel can stage construction operations, store materials and equipment, and park vehicles; provided, however, that Landlord’s providing such location to Tenant shall be at

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Tenant’s sole risk, and Tenant shall be responsible for the security of all equipment and materials so stored.

          1.6.6 Substantial Completion of Landlord’s Work.

               1.6.6.1 Substantial Completion of Building Shell. Landlord shall Substantially Complete the Building Shell on or before November 30, 2008, as adjusted for Tenant Delays and Force Majeure Delays (the “Adjusted Outside Shell Completion Date”). To the extent that the Building Shell is not Substantially Complete, and the Premises are not delivered to Tenant, on or before the Adjusted Outside Shell Completion Date, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except Tenant shall, as Tenant’s sole remedy, be entitled to (a) defer payment of CAM Charges until Substantial Completion of the Building Shell; and (b) a credit towards Tenant’s Minimum Monthly Rent obligation equal to two (2) days for each day that Landlord’s Work is Substantially Complete after the Adjusted Outside Completion Date, provided, however, that the Landlord Delays during such period adversely impact Tenant’s ability to complete the Initial Tenant Improvements or to conduct its business operations on the Premises.

               1.6.6.2 Substantial Completion of Landlord’s Work. Landlord shall Substantially Complete all of Landlord’s Work on or before December 31, 2008, as adjusted for Tenant Delays and Force Majeure Delays and as extended by the length of any delay in the Adjusted Outside Shell Completion Date under Section 1.6.6.1 above (the “Adjusted Outside Final Completion Date”). To the extent that Landlord’s Work is not Substantially Complete, and the Premises are not delivered to Tenant, on or before the Adjusted Outside Final Completion Date, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except Tenant shall, as Tenant’s sole remedy, be entitled to a credit towards Tenant’s Minimum Monthly Rent obligation equal to two (2) days for each day that Landlord’s Work is Substantially Complete after the Adjusted Outside Final Completion Date, provided, however, that the Landlord Delays during such period adversely impact Tenant’s ability to complete the Initial Tenant Improvements or to conduct its business operations on the Premises. A delay or extension of the Adjusted Outside Shell Completion Date shall cause the Adjusted Outside Final Completion Date to be extended for the same number of days as the Adjusted Outside Shell Completion Date is delayed or extended

          1.6.7 Tenant Delays. For purposes of this Exhibit and the Lease, “Tenant Delays” shall mean any delay of Landlord’s Work caused by Tenant which actually causes the Substantial Completion of the Building Shell or Substantial Completion of Landlord’s Work to be delayed (unless such delay can reasonably be avoided by Landlord without an increase in the costs of Landlord’s Work) and is attributable to: (a) Tenant’s unreasonable rejection of all or any portion of the Landlord’s Work Construction Documents (as defined in Section 1.7.2 below) or the modified Construction Documents; (b) Tenant’s failure to provide Landlord with a reasonably detailed statement of the reasons for rejecting all or any portion of the Construction Documents or the modified Construction Documents or other approval required under this Exhibit within the time period provided in this Exhibit; (c) Change Requests (as defined in Section 1.11 below); or (d) any other delay caused by Tenant of which Tenant has received notice as hereinafter provided (and has failed to timely cure if permitted under this Section 1.6.7). Landlord shall notify Tenant of any Tenant Delay within twenty-four (24) hours after Landlord’s receipt of notice from Landlord’s Contractor of the Tenant Delay or when Landlord otherwise has received actual knowledge of the Tenant Delay; provided, however, that if Landlord does not notify Tenant of the Tenant Delay within such twenty-four (24) hour period of the Tenant Delay, then the Tenant Delay shall not be deemed to have commenced until Landlord notifies Tenant of the Tenant Delay (and if Tenant cures the cause of any Tenant Delay attributable to clause (d) of the preceding sentence within twenty-four (24) hours after receipt of such notice, no Tenant Delay shall accrue, but Tenant’s right to cure Tenant Delays shall not exceed five (5) days over the course of Landlord’s Work). Such written notice shall be delivered in accordance with Section 1.6.10 below and shall state in reasonable detail the nature of such event and the reasons that such event constitutes a Tenant Delay.

          1.6.8 Landlord Delays. For purposes of this Lease, “Landlord Delays” shall mean any delay of the work of the Initial Tenant Improvements caused by Landlord which actually causes the work of the Initial Tenant Improvements to fall behind the schedule for their completion in violation of Section 2.4.4.1 below (unless such delay can reasonably be avoided

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by Tenant without an increase in the cost of the Initial Tenant Improvements), and is attributable to: (a) Landlord’s unreasonable rejection of Tenant’s plans or the modified plans; (b) Landlord’s failure to provide Tenant with a reasonably detailed statement of the reasons for rejecting all or any portion of the plans for the Initial Tenant Improvements or the modified plans for the Initial Tenant Improvements; or (c) any other delay caused by Landlord of which Landlord has received notice as hereinafter provided (and has failed to timely cure as permitted in this Section 1.6.8). Tenant shall notify Landlord of any Landlord Delay within twenty-four (24) hours after Tenant’s receipt of notice from the Tenant’s Contractor of the Landlord Delay or when Tenant otherwise has received actual knowledge of the Tenant Delay; provided, however, that if Tenant does not notify Landlord of the Landlord Delay within such twenty-four (24) hour period, then the Landlord Delay shall not be deemed to have commenced until Tenant notifies Landlord of the Landlord Delay (and if Landlord cures the cause of such Landlord Delay attributable to clause (c) of the preceding sentence within twenty-four (24) hours after receipt of such notice, no Landlord Delay shall accrue, but Landlord’s right to cure Landlord Delays shall not exceed more than five (5) days over the course of the work of the Initial Tenant Improvements). Such written notice shall be delivered in accordance with Section 1.6.10 below and shall state in reasonable detail the nature of such event and the reasons such event constitutes a Landlord Delay.

          1.6.9 Force Majeure Delay.

               1.6.9.1 Definition of Force Majeure Delay. “Force Majeure Delay” means any delay in Landlord’s Work or the work of the Initial Tenant Improvements due to fire or other casualty, strikes or labor disputes (except as otherwise set forth in Section 1.6.9.2 below), embargo, unavailability of power or supplies, war or violence, acts of terrorism, any moratorium pursuant to any legal requirement of any governmental agency (subject to Section 1.6.9.3 below), or any other occurrence or similar event beyond the reasonable control of the party claiming such Force Majeure Delay, except for those occurrences caused by the actions of such party, which such party knows or should reasonably know will result in any occurrence otherwise characterized as a force majeure event. Each party shall use its commercially reasonable and diligent efforts to notify the other party, in writing, of any event claimed by such party as a Force Majeure Delay, which notice shall state in reasonable detail the nature of such event and the reason(s) that such event constitutes a Force Majeure Delay.

               1.6.9.2 Strikes & Labor Disputes. Notwithstanding anything to the contrary contained herein, Force Majeure Delays shall not include strikes or labor disputes that arise solely due to Landlord’s or Tenant’s, as the case may be, negligent decisions, made directly by such party claiming a Force Majeure Delay, in the hiring of non-union contractors.

               1.6.9.3 Work Stoppage By Government Order. Notwithstanding anything to the contrary contained herein, any moratorium or stoppage of either party’s work under this Work Letter due to its intentional acts or omissions of known (or which would be known to an owner, tenant or developer of real property, having similar resources and experience as the personnel employed by such party) regulations or requirements may not be claimed by such party as a Force Majeure Delay.

          1.6.10 Notice of Delays.

               1.6.10.1 Landlord’s Notice. Landlord shall notify Tenant, in writing, of any Tenant Delay or any Force Majeure Delays within the applicable time period provided in Section 1.6.7 or Section 1.6.9.1. Such written notice shall state the cause of the delay.

               1.6.10.2 Tenant’s Notice. Tenant shall notify Landlord, in writing, of any Landlord Delay or any Force Majeure Delay in the work of the Initial Tenant Improvements within the applicable time period provided in Section 1.6.8 or Section 1.6.9.1. Such written notice shall state the cause of the delay; provided, however, that no Force Majeure Delay shall delay the commencement of the term of the Lease or the date by which Tenant must commence paying rent or other sums under the Lease.

               1.6.10.3 Delivery of Notice Of Delay. Notwithstanding anything to the contrary contained herein, such notice of delay may be personally delivered, sent by overnight mail (FedEx or another carrier that provides receipts for all deliveries), sent by certified mail, postage prepaid, return receipt requested, or sent by e-mail transmission (provided that a successful electronic confirmation is provided) to the persons set forth below. Each of the

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parties shall, using commercially reasonable and good faith efforts, provide telephonic notice to the other party that a notice of delay has been sent and the cause thereof.

If to Landlord:	c/o Chamberlin Associates 5880 West Las Positas Blvd., Suite 34 Pleasanton, CA 94588-8552 Attention: Anne Hoffman Office Phone: 925-227-0707 Fax: 925-227-0277 Email: Anne@chamb.com
With a copy to:	c/o Chamberlin Associates 5880 West Las Positas Blvd., Suite 34 Pleasanton, CA 94588-8552 Attention: Rahn Verhaeghe AND                     Jennifer Von der Ahe Office Phone: 925-227-0707 Fax: 925-227-0277 Email: Rahn@Chamb.com Email: Jennifer@Chamb.com
If to Tenant:	Elan Pharmaceuticals, Inc. 800 Gateway Blvd. South San Francisco, CA 94080 Attention: Brian Oppendike Office Phone: 650-794-4238 Cell Phone: 650-267-0695 Email: brian.oppendike@elan.com
With a copy to:	Elan Pharmaceuticals, Inc. 7475 Lusk Blvd. San Diego, CA 92121 Attention: Rick Smith Office Phone: 858-784-6701 Cell Phone: 858-864-3128 Email: charles.smith@elan.com

Such notices shall be effective upon delivery. Notice of change of address shall be given by written notice in the manner set forth in this Section. Rejection or other refusal to accept or the inability to deliver any notice due to changed address or e-mail address of which no notice in accordance with this Section was given shall not effect the delivery date. Any operational failure of a notice recipient’s e-mail system shall not effect the delivery date of such notice, unless electronic notice thereof is received in response to any attempt to deliver such notice.

          1.6.11 Damages for Delays.

               1.6.11.1 Landlord Delay Damages. To the extent that any Landlord Delays cause a delay to Tenant in the substantial completion of the Initial Tenant Improvements, then Landlord shall be responsible for the actual additional out-of-pocket costs incurred by Tenant in constructing the Initial Tenant Improvements as a result thereof, it being acknowledged that Landlord shall not be responsible to Tenant for any consequential damages as a result of such delays.

               1.6.11.2 Tenant Delay Damages. To the extent that Tenant Delays cause a delay to Landlord in the Substantial Completion of the Building Shell or Landlord’s Work, then (a) Tenant shall be responsible for the actual damages incurred by Landlord as a result thereof, it being acknowledged that Tenant shall not be responsible to Landlord for any consequential damages as a result of such delays, (b) the date of Substantial Completion of the Building Shell shall be adjusted to the date that the Building Shell would have been substantially completed but for such Tenant Delays, and (c) the date of Substantial Completion of Landlord’s Work shall be adjusted to the date the Landlord’s Work would have been Substantially Complete but for such Tenant Delays.

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     1.7. Plans & Permits

          1.7.1 Architects, Consultants and Contractors.

               1.7.1.1 Landlord and Tenant hereby acknowledge and agree that: (a) Randall Dowler and Karen Lin of Dowler-Gruman Architects shall be the architect (“Landlord’s Architect”) for the Building Shell, and (b) Dowler-Gruman Architects shall be the architect (“Tenant’s Architect”) for the Initial Tenant Improvements. Notwithstanding the foregoing, Landlord and Tenant shall have the right at any time, but subject to the approval of the other party (which shall not be unreasonably withheld, conditioned or delayed) to designate a different architect.

               1.7.1.2 The general contractor for Landlord’s Work shall be J.M. O’Neil, Inc. (“Landlord’s Contractor”), who shall perform Landlord’s Work pursuant to a guaranteed maximum price contract (the “Construction Contract”) approved by Tenant (which approval shall not be unreasonably withheld as long as it is consistent with the scope of work set forth in Exhibit B-1 of the Lease and this Exhibit B). The Construction Contract shall contain, at a minimum, terms and provisions requiring that Landlord’s Contractor name Tenant as an additional insured on Landlord’s Contractor’s commercial general liability insurance policy and naming Tenant as an additional indemnitee with the same rights of the owner set forth in any indemnity contained therein, and as a third-party beneficiary with respect to any warranties contained therein; provided, however that Tenant will not interfere with Landlord’s enforcement of any such warranties during Landlord’s warranty period as provided in Section 1.7.2 below, as long as Landlord is diligently pursuing enforcement of a warranty. Landlord shall allow Tenant to participate in Landlord’s negotiations with the Landlord’s Contractor relating to the cost of the Landlord’s Work. The Construction Contract shall also require, to the extent negotiable, that Tenant and Landlord be named as third-party beneficiaries under all construction and equipment warranties (including without limitation, the roof and any mechanical, electrical and plumbing equipment installed as part of the Landlord’s Work, which Landlord’s Contractor shall endeavor to obtain for a minimum warranty term of ten (10) years from the date of Substantial Completion of the Building Shell, with the right to enforce such warranties directly against the obligor named therein; provided, however, that there are no assurances that Landlord’s Contractor will be able to obtain such extended warranties. The cost of causing the construction and equipment warranties to have terms in excess of one (1) year shall be at Tenant’s sole cost and expense; provided, however, that Tenant shall have sole discretion with respect to the decision to obtain any warranty exceeding a term of one (1) year if Tenant is to be liable for the cost thereof.

          Landlord shall have the right to replace Landlord’s Contractor from time to time, provided that such change shall not result in any increase in the cost of constructing Landlord’s Work or the Initial Tenant Improvements, or the rights of Tenant under the construction agreement (including, without limitation, the extended warranty periods negotiated with the Landlord’s Contractor), unless such change is required as a result of a default by Landlord’s Contractor under the construction agreement approved by Tenant, in which case, Landlord and Tenant shall cooperate in the selection of the replacement general contractor for Landlord’s Work in order to mitigate the increased cost of Landlord’s Work that is incorporated into Tenant’s base rent obligations under the Lease. Tenant shall have the right to pre-approve all subcontractors retained by the Landlord’s Contractor for the major trades, which approval shall not be unreasonably withheld, conditioned or delayed. Attached hereto as Schedule B-4 is a list of those major trade subcontractors that are pre-approved by Tenant (the “Pre-Approved Major Trade Subcontractors”). Notwithstanding anything to the contrary contained herein, Tenant shall have the right to retain any of the Pre-Approved Major Trade Subcontractors for the Initial Tenant Improvements, provided, however, that Tenant or Tenant’s Contractor enters into a written contract with such Pre-Approved Major Trade Subcontractor(s), that Tenant and/or Tenant’s Contractor pay all amounts owed to such Pre-Approved Major Trade Subcontractors under such contracts, and that under no circumstances shall Tenant or its contractor have any right to direct the Pre-Approved Major Trade Subcontractors with respect to Landlord’s Work.

          1.7.2 Construction Documents for Landlord’s Work. Landlord shall cause to be prepared the plans and specifications for the construction of Landlord’s Work (the “Landlord’s Work Construction Documents”) based on the design documents attached hereto as Schedule B-3, as the same may be modified from time to time as provided in this Work Letter (the “Design Documents”), and upon its completion, Landlord shall deliver copies of the Landlord’s Work Construction Documents to Tenant. Landlord warrants to Tenant, for a period of one year

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after Substantial Completion of the Building Shell, except for Landlord’s Work Punch List and the portion of the Building Shell that may lag Substantial Completion of the Building Shell as provided in Exhibit B-1 where the warranty period shall be one year from completion of such portions of the work (the “Landlord’s Warranty Period”), (A) the Landlord’s Work shall be constructed in accordance with the Plans (as defined in Section 1.7.3 below); (B) the Landlord’s Work shall comply with all applicable laws and regulations, including but not limited to the California Uniform Building Code; and (C) there shall be no Hazardous Materials introduced or generated in, on, or about the Premises as part of Landlord’s Work in violation of applicable law. For such warranty to be effective, Tenant must notify Landlord of the violation within one (1) year after Substantial Completion of the Building Shell.

          1.7.3 Tenant’s Acceptance of Landlord’s Construction Documents. Subject to Section 1.7.2 above, Tenant shall either accept or reasonably reject the Landlord’s Work Construction Documents, in writing, within ten (10) business days after Tenant’s receipt of the Landlord’s Work Construction Documents. Tenant shall not have the right to reject any improvements or details specified in the Landlord’s Work Construction Documents if such improvements or details are specified or contemplated in the Design Documents. If Tenant rejects the Landlord’s Work Construction Documents, Tenant’s written notice of rejection shall reasonably detail the reasons for such rejection. If Tenant does not accept or reasonably reject, in writing, all or any portion of the Landlord’s Work Construction Documents within said ten (10) business day period, it shall have no further right to review such Landlord’s Work Construction Documents and Landlord may use the Landlord’s Work Construction Documents as if they had been accepted. If Tenant timely and reasonably rejects the Landlord’s Work Construction Documents, Landlord shall modify the Landlord’s Work Construction Documents and provide modified Landlord’s Work Construction Documents to Tenant. Thereafter, for each set of modified Landlord’s Work Construction Documents, Tenant shall either accept or reasonably reject, in writing, the modified Landlord’s Work Construction Documents by providing Landlord with a notice of acceptance, or a reasonably detailed statement of the reasons for the rejection, within five (5) business days after Tenant’s receipt of the modified Landlord’s Work Construction Documents. If Tenant does not accept or reasonably reject the modified Landlord’s Work Construction Documents, in writing, within said five (5) business day period, it shall have no further right to review such modified Landlord’s Work Construction Documents, it shall be deemed to have accepted the modified Landlord’s Work Construction Documents, and Landlord may use the modified Landlord’s Work Construction Documents as if they had been accepted. Conversely, if Landlord decides, in its sole discretion, to revise the Landlord’s Work Construction Documents or modified Landlord’s Work Construction Documents pursuant to an untimely request from Tenant, Tenant shall be responsible for all actual delays to the Substantial Completion of Landlord’s Work associated with such revision, and the Commencement Date shall be subject to adjustment as a result thereof in accordance with the provisions of Section 1.6.7 above. The final Landlord’s Work Construction Documents are referred to herein as the “Plans.”

     1.8. Landlord’s Permits. Landlord shall, at Landlord’s sole cost and expense, procure all permits, licenses, consents, notices and other approvals necessary to commence and complete Landlord’s Work from all public and quasi-public authorities with jurisdiction (collectively, the “Permits”). Landlord agrees to use reasonable diligent efforts to obtain such Permits. If prior to obtaining the Permits for Landlord’s Work, any governmental authority having jurisdiction over the construction of Landlord’s Work or any portion thereof shall impose terms or conditions upon the construction thereof which: (i) are materially inconsistent with the project envisioned in the February 1^st, 2007 Planning Department Approval, (ii) materially increase the cost of constructing Landlord’s Work over what was reasonably envisioned in the February 1^st 2007 Planning Department Approval, or (iii) substantially delay the construction of Landlord’s Work beyond the Outside Completion Date (each of the foregoing, a “Material Project Change”), Landlord and Tenant shall reasonably, diligently, and in good faith seek means by which to mitigate or eliminate any such adverse terms and conditions. If the parties are unable to agree upon such mitigation prior to August 1, 2007, then this Agreement shall be subject to termination pursuant to Section 1.6.2 above. Any terms and provisions required by a governmental authority that do not result in a Material Project Change shall not give either party the right to terminate this Agreement.

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     1.9. Construction Requirements for Landlord’s Work.

          1.9.1 Selection of Contractor. Landlord has selected the general contractor identified in Section 1.7.1.2 above to be Landlord’s Contractor to construct Landlord’s Work.

          1.9.2 Landlord’s Design Changes.

               1.9.2.1 Changes Requested by Government. Landlord shall have the authority, without the consent of Tenant, but with notice to Tenant and Tenant’s Architect, which notice may take the form of a copy of a Landlord Change Directive, as defined in Section 1.10.1.2 below, to order any changes to Landlord’s Work required by, or in order to comply with, applicable Laws, Governmental Regulations, or any building officials; provided that such changes do not materially affect Tenant’s Permitted Use or occupancy of the Premises. Landlord agrees to cooperate with Tenant in connection with such changes to attempt to mitigate any additional Costs of Landlord’s Work in connection therewith, but Landlord makes no assurances that such mitigation may be achieved, nor shall Tenant be entitled to terminate the Lease or have any abatement in rent.

               1.9.2.2 Minor Changes. Landlord shall have the authority, without Tenant’s consent, but with notice to Tenant and Tenant’s Architect, which notice may take the form of a copy of a Landlord Change Directive, as defined in Section 1.10.1.2 below, to order any work that is necessary in order to complete Landlord’s Work as contemplated herein, or to order minor changes in Landlord’s work that do not adversely and materially affect the cost of Landlord’s Work, the quality of Landlord’s Work, or the schedule for the completion of the same; provided that such changes do not materially affect Tenant’s Permitted Use or occupancy of the Premises, nor materially increase (x) Tenant’s Costs of the Work (as defined in Section 2.6.5 hereof), (y) the cost of installing Tenant’s furnishings and equipment, or (z) the costs associated with Tenant’s use or occupancy of the Premises.

               1.9.2.3 Other Design Changes. Subject to the limitations on any material increases in the Costs of Landlord’s Work in this Work Letter and in Exhibit D to the Lease, Landlord shall also have the right, with Tenant’s prior written consent in accordance with Section 1.10.1.2 below, which consent shall not be unreasonably withheld, conditioned or delayed, to order Landlord Change Directives for any other reasons not covered under Section 1.9.2.1 or 1.9.2.2 above; provided, however, that if the Landlord Change Directive proposed by Landlord will increase Tenant’s Costs of the Work, Tenant shall notify Landlord of the same, in writing, at the time Tenant consents to such Landlord Change Directive. Such written notice from Tenant shall also specify the estimated increase in Tenant’s Costs of the Work resulting from such Landlord Change Directive. Should Landlord decide to proceed with such Landlord Change Directive, notwithstanding such notice from Tenant, then Landlord shall be responsible for all additional Tenant’s Costs of the Work incurred by Tenant as a result of such Landlord Change Directive.

     1.10. Coordination of Changes

          1.10.1 Landlord’s Obligation to Coordinate Changes to Landlord’s Work.

               1.10.1.1 Landlord’s Coordination Obligations. Landlord shall cause Landlord’s Architect to coordinate the development of any material change in the design of Landlord’s Work with Tenant’s Architect, and Tenant shall cause Tenant’s Architect to coordinate with Landlord’s Architect so Landlord’s Architect can coordinate such design change with the design of the Initial Tenant Improvements, and so Tenant’s Architect can provide information to Landlord’s Architect in order to allow Landlord’s Architect to mitigate Tenant’s damages as a result of such changes. No approval of Tenant’s Architect to any design change shall be binding on Tenant unless Tenant has also provided such approval in writing to Landlord to the extent the approval of Tenant is required under Sections 1.9.2.1 through 1.9.2.3 of this Exhibit.

               1.10.1.2 Landlord’s Change Directives. Landlord shall have Landlord’s Contractor copy Tenant on any requests for information (“RFI’s”) submitted by Landlord’s Contractor. In addition, Landlord shall copy Tenant on any (a) responses to RFI’s, (b) change orders, and (c) any plan clarifications sent to Landlord’s Contractor (collectively, “Landlord Change Directives”). It shall be Tenant’s responsibility to review that information, and to

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object to the same within three (3) business days after receiving Landlord’s Change Directives, if the same will impact the design or construction of the Initial Tenant Improvements. Should Tenant fail to deliver written notice to Landlord, within three (3) business days after receiving a Landlord Change Directive, then all directions to Landlord’s Contractor set forth in any such Landlord Change Directive shall be deemed to have no impact on the design or construction of the Initial Tenant Improvements.

               1.10.1.3 Landlord’s Obligation to Maintain As-Built Drawings. Landlord agrees to reasonably cooperate with Tenant in order to allow Tenant (and Tenant’s Architect) to obtain the most recent information regarding the Premises and the status and condition of Landlord’s Work, which cooperation shall include requiring Landlord’s Contractor to keep an updated set of “As-Built” drawings on site, and to make its “As-Built” drawings available for review by Landlord, Landlord’s Architect, Tenant, and Tenant’s Architect.

          1.10.2 Tenant’s Obligation to Coordinate Changes to Tenant’s Work.

               1.10.2.1 Incorporation of Design Information. Tenant shall require that Tenant’s Architect incorporate into the design of the Initial Tenant Improvements any information that it receives from Landlord or Landlord’s Contractor regarding Landlord’s Work, including but not limited to any Landlord Change Directive, and that it coordinate the design of the Initial Tenant Improvements with Landlord’s Work.

               1.10.2.2 Tenant’s Obligation to Incorporate Changes Into its Design. At Landlord’s request, Tenant shall attend (or shall cause Tenant’s Architect to attend) job site meetings for purposes of discussing the progress of Landlord’s Work, the coordination of Landlord’s Work with the Initial Tenant Improvements, and for purposes of reviewing the “As-Built” drawings prepared by Landlord’s Contractor. If Tenant or Tenant’s Architect believes that the incorporation of any such information into the plans for the Initial Tenant Improvements will increase the Tenant’s Costs of the Work (as defined in Section 2.6.5 hereof), Tenant and/or Tenant’s Architect must notify Landlord of the same, in writing, within three (3) business days after such meeting. Should Tenant or Tenant’s Architect fail to notify Landlord of the same within said three (3) business day period, then such information shall be deemed to have no effect on the Tenant’s Costs of the Work. Should Tenant or Tenant’s Architect notify Landlord, in writing, that such information will increase the Tenant’s Costs of the Work if such information is incorporated into the plans for the Initial Tenant Improvements, then Landlord and Tenant shall meet informally in an attempt to resolve the matter. Should the parties fail to resolve the matter during the meeting, any dispute regarding the same shall be resolved by binding arbitration with the San Francisco, California office of the American Arbitration Association, pursuant to the Commercial Rules of the American Arbitration Association.

               1.10.2.3 Tenant’s Obligation to Have Subcontractors Take Measurements. Tenant shall require that (a) Tenant’s Contractor take field measurements of Landlord’s Work before installing any work affected by Landlord’s Work, and that (b) Tenant’s Contractor immediately notify Landlord and Tenant, in writing, of any material discrepancies between such field measurements and the plans for the Initial Tenant Improvements. Should it be determined that the material discrepancies resulted from the negligence of Landlord’s Architect or Landlord’s Contractor, then Landlord shall be responsible for all additional Tenant’s Costs of the Work and any delays incurred by Tenant as a result of such material discrepancies, but only to the extent of such additional costs could not have been reasonably avoided (i) by Tenant’s contractor immediately notifying Landlord, in writing, of any such material discrepancies after it was discovered, or would have been discovered by Tenant or Tenant’s Contractor if it took field measurements as required above, or (ii) by Tenant incorporating any information contained within a Landlord Change Directive into its Tenant’s Final Plans (defined in Section 2.3.1) or any addendum or plan clarification to Tenant’s Final Plans.

     1.11. Change Requests. Tenant shall have the right to request changes to the Landlord’s Work Construction Documents as set forth herein (each a “Change Request”), and Landlord agrees not to unreasonably withhold approval of any such Change Request; provided, however, that (a) Tenant first complies with all other terms and provisions of this Exhibit regarding such Change Requests; (b) the Change Request is of a similar character to the other elements of Landlord’s Work being constructed by Landlord’s Contractor; (c) such Change Request does not negatively affect the market value of the completed Premises; (d) such Change Request does not negatively affect the structural integrity of the building or the quality or the

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integrity of the other engineered elements of Landlord’s Work; (e) such Change Request will not have an adverse effect on the exterior appearance of either (1) the Building or (2) that portion of the Premises outside the boundaries of the Building (as reasonably determined by Landlord); and (f) Tenant provides Landlord with all reasonable and necessary information to implement the Change Request.

          1.11.1 Change Request Procedure. Tenant shall submit all proposed Change Requests to Landlord in writing, along with all necessary plans and specifications that may be necessary for Landlord to review and approve the Change Request. Landlord will either approve or disapprove of the Change Request, in writing, within ten (10) business days after receiving Tenant’s proposed Change Request. If Landlord disapproves of a Change Request, such notice of disapproval shall specify in reasonable detail the basis for Landlord’s disapproval. Landlord shall be deemed to have approved of Tenant’s proposed Change Request unless Landlord delivers written notice disapproving of the Change Request within said ten (10) business day period. If Landlord approves or is deemed to have approved of the Change Request, then Landlord shall have Landlord’s Architect prepare plans and/or specifications with respect to such Change Request (the “Change Request Plans”) based upon the information provided to Landlord in Tenant’s proposed written Change Request. Notwithstanding the foregoing, if Landlord determines, in its reasonable discretion, that Change Request Plans are not necessary to implement the Change Request, then Landlord shall not be required to cause Change Request Plans to be prepared for such Change Request. All reasonable costs associated with the design, permitting, implementation and construction of the Change Request (the “Change Request Work") that increase the Cost of Landlord’s Work shall be Tenant’s responsibility, and any cost savings resulting from Change Request Work shall be factored into Minimum Monthly Rent calculations made pursuant to Exhibit D to the Lease.

          1.11.2 Approval of Change Request Plans. Subject to Section 1.11.1, upon completion of any Change Request Plans, Landlord shall submit such plans to Tenant for Tenant’s review and approval. Tenant shall approve or reasonably reject such Change Request Plans, in writing, within five (5) business days after Tenant’s receipt of the same. If Tenant timely rejects such Change Request Plans, Tenant shall notify Landlord of the requested revisions to such Plans at the time Tenant’s notice of rejection is given to Landlord. Thereafter, Landlord shall proceed with the modifications to the Change Request Plans and shall submit the modified Change Request Plans to Tenant for Tenant’s approval or reasonable rejection. If Tenant fails to deliver written notice of approval or rejection within said five (5) business day period, Tenant will be deemed to have abandoned the Change Request. Landlord shall continue to make revisions and submit such Change Request Plans to Tenant for Tenant’s approval until (a) Tenant provides written notice of acceptance, or (b) Tenant fails to provide timely written notice of its rejection of the revised Change Request Plans. Landlord will have no obligation to modify the Change Request Plans after an untimely response by Tenant.

          1.11.3 Cost of Change Request. If Tenant gives Landlord timely written notice of its acceptance of any Change Request Plans (or if Landlord notifies Tenant, in writing, that Change Request plans are not necessary to implement the Change Request), then within ten (10) business days after Landlord receives such written notice of acceptance of any Change Request Plans from Tenant (or at the time that Landlord notifies Tenant that Change Request plans are not necessary to implement the Change Request), Landlord shall notify Tenant, in writing (the “Change Request Cost Notice”), of the cost of the Change Request (the “Change Request Cost”) and of the impact the Change Request will have on the date of Substantial Completion of the Building Shell and/or Landlord’s Work (the “Change Request Delay”). The Change Request Cost and the Change Request Delay shall be reasonably determined by Landlord. If after receiving such Change Request Cost Notice, Tenant elects to proceed with the Change Request, Tenant shall notify Landlord of the same, in writing, within five (5) business days after receiving the Change Request Cost Notice, and shall concurrently deliver to Landlord the Change Request Cost specified in Landlord’s Change Request Cost Notice. Conversely, Tenant may utilize any remaining amounts of the Tenant Improvement Allowance to pay such Change Request Cost, provided Tenant notifies Landlord of such election at the time Tenant notifies Landlord that it is electing to proceed with the Change Request. Landlord shall not be obligated to commence any Change Request work until Tenant pays Landlord the Change Request Cost, or notifies Landlord, in writing, that it is utilizing the Tenant Improvement Allowance to pay for such Change Request Cost. Furthermore, if Tenant elects to proceed with the Change Request, Tenant and Landlord shall be bound by Landlord’s determination as to the Change Request Cost

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and the Change Request Delay. In the event that Tenant does not elect to proceed with the Change Request work, Tenant shall nonetheless be obligated to pay all of the Costs of Landlord’s Work reasonably incurred by Landlord in processing the Change Request and preparing the Change Request Plans, including all out-of-pocket design fees incurred by Landlord, within thirty (30) calendar days after receiving Landlord’s written request for payment of the same. Conversely, Tenant may, by delivering written notice to Landlord within said thirty (30) day period, utilize any remaining amounts of the Tenant Improvement Allowance to pay for such Change Request Cost.

ARTICLE 2. TENANT’S WORK

     2.1. Initial Tenant Improvements. Tenant shall plan, design and construct certain improvements (the “Initial Tenant Improvements”) in accordance with (a) the terms and provisions of this Article 2, (b) the other terms and conditions of the Lease, and (c) all applicable laws, statutes, ordinances, building codes and regulations (collectively, “Applicable Laws”). Landlord and Tenant acknowledge and agree that the Building will be improved by Tenant with “Office Space” and “Lab Space.” “Lab Space” is defined as areas within the Building that are to be primarily equipped for scientific experimentation, research, observation, or testing that may include equipment and fixtures, such as hoods and casework, used to support work conducted within the lab, but which may include incidental offices for research personnel, which may comprise up to 40% of the Lab Space. “Office Space” is defined as all other areas within the Building (including but not limited to the cafeteria and gymnasium) that are not Lab Space, exclusive of any subterranean garage parking or subterranean storage areas. Notwithstanding the foregoing, however, a portion of the Service Area (as defined in the Lease and outlined in Exhibit J to the Lease) may be designated by Tenant, from time to time, and in Tenant’s sole discretion, as storage space, which space shall not be added to the Rentable Square Footage of the Building, and Tenant shall not receive any additional Tenant Improvement Allowance for such space, but such space shall be subject to the Service Area Minimum Monthly Rent as further described in the Lease.

     2.2. Definitions. For purposes of this Article 2, each of the following terms shall have the following meaning:

          2.2.1 Tenant’s Contractor: The general contractor selected by Tenant and approved by Landlord, in writing, which approval shall not be unreasonably withheld, to construct the Initial Tenant Improvements (herein referred to as “Tenant’s Contractor”). The Tenant’s Contractor must be licensed and bondable in the State of California. Landlord shall provide written notice of such approval or disapproval within ten (10) business days after Tenant’s request for such approval.

          2.2.2 Construction Contract. The construction contract entered into between Tenant and the Tenant’s Contractor for the Initial Tenant Improvements, which shall be approved by Landlord, in writing, prior to execution, which approval shall not be unreasonably withheld, conditioned or delayed, and if Landlord’s written approval or disapproval, accompanied by a written detailed description of changes required by Landlord to satisfy its concerns relating to the proposed contract, is not received within ten (10) business days after such contract is submitted to Landlord for Landlord’s approval, then Landlord’s approval of the proposed construction contract shall be deemed to have been received (provided it contains the required provisions of subparagraphs 2.2.2.1 — 2.2.2.6 below). Such Construction Contract shall require, in addition to any other provisions reasonably requested by Landlord, that:

               2.2.2.1 Tenant’s Contractor carry workers compensation insurance as required by law, and employers liability insurance in an amount equal to $1,000,000, and shall require that all subcontractors carry such insurance as well.

               2.2.2.2 Tenant’s Contractor carry comprehensive general liability or commercial general liability insurance, covering Premises damage, personal injury, death, and products and completed operations coverage, in an amount not less than $3,000,000 per occurrence, and $5,000,000 in the aggregate with deductibles of no more than $10,000, naming Landlord and its affiliates, employees and agents as additional insureds, by endorsement (on an ISO form 2010 11 85), with an insurance company with a minimum of an A-VIII rating. The Construction Contract shall also require that all of Tenant’s Contractor’s subcontractors carry such insurance as well, except that subcontractors under subcontracts for less than ten percent

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(10%) of the cost of the Initial Tenant Improvements shall only be required to carry such insurance in an amount of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate; provided that the insurance coverage of any of Tenant’s subcontractors required under this Section may be provided, in whole or in part, through a blanket policy of such insurance coverage maintained by Tenant’s Contractor which expressly provides that the insured’s subcontractors are covered thereunder. Such insurance shall be maintained at all times during the construction of the Initial Tenant Improvements, except for the products and completed operation coverage, which coverage is to be maintained for ten (10) years following completion of the work. Furthermore, such insurance shall preclude or waive subrogation claims by the insurer against Landlord, its affiliates, or their agents, employees, or representatives. Such insurance shall also provide that it is primary insurance with respect to the Landlord and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder.

               2.2.2.3 Tenant’s Contractor deliver to Tenant and Landlord certificates of insurance, with endorsements, evidencing the insurance requirements set forth in the Construction Contract prior to Tenant’s Contractor’s entering the Premises.

               2.2.2.4 Tenant’s Contractor (to the greatest extent allowed by law) shall protect, defend, indemnify, and hold harmless Landlord and its agents, employees, and representatives, for all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Contractor or any of its subcontractors, suppliers, subcontractors, consultants, agents, or representatives, or anyone directly or indirectly employed by any of them, with respect to the Initial Tenant Improvements.

               2.2.2.5 Landlord be named as a third party beneficiary with respect to the Tenant’s Contractor’s insurance and indemnity provisions of the Construction Contract.

          2.2.3 Construction Costs: Except as otherwise expressly set forth herein, any and all costs, expenses, fees, taxes and charges relating to or associated with the Initial Tenant Improvements and the design and/or construction of the same, shall be borne solely by Tenant.

     2.3. Plans for Initial Tenant Improvements.

          2.3.1 Preliminary Plans. Except as otherwise set forth herein, Tenant shall submit to Landlord, and obtain Landlord’s approval of, any architectural floor plan of the initial Tenant Improvements to the Premises (“Proposed Preliminary Plans”). Landlord shall not unreasonably withhold its approval of such Proposed Preliminary Plans, provided, however, that (a) Tenant first complies with all other terms and provisions of this Lease regarding the submittal of such Proposed Preliminary Plans, (b) the design set forth in the Proposed Preliminary Plans does not negatively affect the structural integrity of the Building Shell or the quality or the integrity of the other engineered elements of Landlord’s Work; (c) the design set forth in the Proposed Preliminary Plans will not have an adverse effect on the exterior appearance of the Building (as reasonably determined by Landlord) or the portion of the Premises outside the Building, and (d) Tenant provides Landlord will all reasonable and necessary information necessary to evaluate the Proposed Preliminary Plans. After receiving such Proposed Preliminary Plans, Landlord shall notify Tenant in writing whether (i) Landlord approves of such Proposed Preliminary Plans, or whether (ii) Landlord disapproves of such Proposed Preliminary Plans. If Landlord disapproves of such Proposed Preliminary Plans, Landlord’s disapproval notice shall specify the basis for such disapproval. If Landlord fails to notify Tenant, in writing, of its disapproval of such Proposed Preliminary Plans, along with the written description of the reasons for such disapproval, within ten (10) business days after receiving the same, Landlord shall be deemed to have approved of such Proposed Preliminary Plans. If Landlord disapproves of such Proposed Preliminary Plans, Tenant shall cause the Proposed Preliminary Plans to be revised as required to address Landlord’s specified concerns, and shall submit the revised preliminary plans to Landlord for its review and approval as provided in this Section, and such procedure shall continue until Landlord has approved of (or is deemed to have approved of) the revised preliminary plans submitted by Tenant. After Landlord’s approval of the Proposed Preliminary Plans as provided above, such preliminary plans shall be referred to in this Article 2 as “Tenant’s Preliminary Plans.”

          2.3.2 Final Plans. After Landlord’s approval or deemed approval of Tenant’s Preliminary Plans, Tenant shall submit to Landlord, for Landlord’s review and approval, the

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plans and specifications for the Initial Tenant Improvements, which shall be consistent with Tenant’s Preliminary Plans(“Tenant’s Construction Documents”), and which shall be compatible with the Landlord’s Construction Documents previously provided to Tenant by Landlord. After receiving the Tenant’s Construction Documents, Landlord shall notify Tenant in writing whether (i) Landlord approves of Tenant’s Construction Documents, which approval shall not be unreasonably withheld, conditioned or delayed by Landlord, or (ii) Landlord reasonably disapproves of Tenant’s Construction Documents. If Landlord reasonably disapproves of Tenant’s Construction Documents, Landlord’s disapproval notice shall specify the basis for such disapproval. If Landlord fails to notify Tenant, in writing, of its disapproval of Tenant’s Construction Documents, along with the written description of the reasons for such disapproval, within ten (10) business days after receiving the same, Landlord shall be deemed to have approved of Tenant’s Construction Documents. If Landlord reasonably disapproves of Tenant’s Construction Documents and provides the written description of the reasons for such disapproval as required, Tenant shall cause Tenant’s Construction Documents to be revised as required to address Landlord’s specified concerns, and shall submit the revised Tenant’s Construction Documents to Landlord for its review and approval as provided in this Section, and such procedure shall continue until Landlord has approved Tenant’s Construction Documents submitted by Tenant. After approval of Tenant’s Construction Documents as provided above, such Tenant’s Construction Documents shall be referred to as “Tenant’s Final Plans.” Tenant shall submit a copy of Tenant’s Final Plans to Landlord for its records prior to commencing the construction of the Initial Tenant Improvements. Notwithstanding the foregoing, where more than one type of material or structure is indicated on Tenant’s Final Plans approved by Landlord and Tenant, the determination shall be made by Tenant in Tenant’s reasonable discretion.

          2.3.3 Landlord Information. Except for the Plans and other Construction Documents provided by Landlord with respect to Landlord’s Work, all other information provided to Tenant by Landlord is being made without any representation or warranty by Landlord, it being acknowledged by Tenant that such information was furnished to Landlord by third parties, and Landlord shall not have any liability or responsibility for the same; provided, however, that Landlord shall promptly notify Tenant if Landlord discovers that any of the information furnished to Tenant by Landlord is not materially true and correct. Tenant may look to the source of any reports for representations or liabilities associated with any inaccuracies contained therein.

          2.3.4 Coordination With Landlord’s Work. Tenant shall require its Architect to coordinate its design of the Initial Tenant Improvements, and any changes to the Initial Tenant Improvements, with Landlord’s Architect. Such coordination includes, but is not limited to, reviewing Landlord Change Directives as more fully described in Section 1.10.2 above. In addition, Tenant shall require that Tenant’s Contractor (a) take field measurements of Landlord’s Work before installing any work affected by Landlord’s Work, and (b) immediately notify Landlord and Tenant, in writing, of any material discrepancies between such field measurements and the plans for the Initial Tenant Improvements, as further set forth in Section 1.10.2 above.

          2.3.5 General. It is the responsibility of Tenant to assure that Tenant’s Final Plans and the Initial Tenant Improvements constructed thereunder conform to all of the Applicable Laws. Landlord’s acceptance or approval of any plan, drawing or specification, including, without limitation, Tenant’s Preliminary Plans, Tenant’s Final Plans, or any changes thereto, shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency of such plans and material, and Tenant shall be solely responsible therefor. Tenant agrees and understands that the review by Landlord of all plans pursuant to the Lease or this Exhibit B is to protect the interests of Landlord in the Building and the Premises, and Landlord shall not be the guarantor of, nor responsible for, the correctness, completeness or accuracy of any such plans or compliance of such plans with Applicable Laws. Notwithstanding the foregoing, when requesting Landlord’s approval of any change to Tenant’s Final Plans, then to the extent such change effects the engineered elements of the Initial Tenant Improvements, Tenant shall provide certification from Tenant’s Architect and the applicable engineers that the requested change has been reviewed and approved by such party.

          2.3.6 Changes.

               2.3.6.1 Non-Material Changes. After Landlord’s approval of Tenant’s Final Plans, any changes to Tenant’s Final Plans that are not “material” (as defined in Section 2.3.6.3 below) shall not require Landlord’s prior written consent. However, Tenant shall cause

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Tenant’s Contractor, promptly after the implementation of such change, to update the as-built drawings to reflect such changes to Tenant’s Final Plans.

               2.3.6.2 Material Changes. After Landlord’s Approval of Tenant’s Final Plans, any changes to Tenants Final Plans that are “material” (as defined in Section 2.3.6.3 below) shall require Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

               2.3.6.3 Definition of a Material Change. For purposes of Section 2.3.6.1 and 2.3.6.2 above, a “material” change is one that (a) will substantially change the character of the design of the Initial Tenant Improvements contemplated in the Preliminary Plans, (b) will materially and adversely affect the market value of the Premises (exclusive of the Initial Tenant Improvements), (c) will have a material adverse effect on the exterior appearance of the Building or the appearance of the portion of the Premises outside the Building, or (d) will adversely and materially affect the design or construction of the Landlord’s Work. For example, but without limitation, a change in the number of offices on a floor of the Building Shell is not considered a material change.

          2.3.7 Requirements when the Initial Tenant Improvements Affect Landlord’s Work. Notwithstanding anything to the contrary contained herein, should any design for the Initial Tenant Improvements (or any changes to the Initial Tenant Improvements) result in any change to the design or specifications of the engineered elements of Landlord’s Work, or is reasonably likely to have an adverse effect on any warranty provided to Landlord by Landlord’s Contractor or its material suppliers with respect to Landlord’s Work, then Tenant shall either (a) have Landlord perform such work, on Tenant’s behalf, pursuant to a Change Request in accordance with Section 1.11 above, or (b) utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor of Landlord’s Contractor as necessary, for the design and construction of that portion of Landlord’s Work affected thereby in order to maintain all contractual warranties provided to Landlord by Landlord’s Contractor or its material suppliers with respect to such Landlord’s Work, and to maintain all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work. The decision as to whether Tenant shall comply with clauses (a) or (b) above shall be made by Landlord in Landlord’s sole and absolute discretion. Notwithstanding anything to the contrary contained herein, should Tenant fail to retain such parties for such work, Tenant shall be responsible for the cost of any repairs that would have been covered by any warranty that is invalidated as a result of such failure.

          2.3.8 Change Order Review Costs. Tenant shall reimburse Landlord for its reasonable out of pocket costs incurred in third-party engineering review of any “material” changes (as defined in Section 2.3.6.3) to Tenant’s Final Plans. Landlord agrees not to request any such third party review unnecessarily. Tenant shall pay Landlord such amounts within thirty (30) days after receiving a written invoice from Landlord requesting payment for the same.

          2.3.9 Tenant’s Obligation to Remove Initial Tenant Improvements. All Initial Tenant Improvements shall be the property of Tenant until the expiration or earlier termination of this Lease; at that time all such Initial Tenant Improvements shall remain on the Premises and become the property of Landlord without payment therefor, unless Landlord gives written notice to Tenant to remove the same at the time Landlord approves Tenant’s Final Plans, in which event Tenant shall remove such Initial Tenant Improvements at the expiration or earlier termination of the Lease and repair any damage resulting therefrom, normal wear and tear excepted; provided that Tenant’s removable trade fixtures and personal property (such as case work, laboratory fixtures and other personal properties) shall be and remain Tenant’s property, and shall be removed by Tenant from the Premises, at Tenant’s sole cost, on or before the expiration or earlier termination of this Lease, and Tenant shall repair all damage to the Premises resulting from such removal, normal wear and tear excepted. Landlord’s right to require removal shall be limited to only those Initial Tenant Improvements that are not normally found in a combined administrative office and wet and dry laboratory facility (for example, fitness areas) or that are not of a scale appropriate to the size of the building (for instance, if a cafeteria seating capacity is designed to accommodate a population greater than that which can be housed in the building then Landlord shall have the right to require that Tenant remove (or, at Tenant’s election, downsize) those improvements designed for a population greater than that housed in the building).

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     2.4. Construction of Initial Tenant Improvements.

          2.4.1 Pre-Construction Submittals to Landlord. At least ten (10) business days prior to the commencement of construction of the Initial Tenant Improvements, Tenant shall submit the following items to Landlord:

               2.4.1.1 A written statement setting forth the proposed commencement date and the estimated completion date for the Initial Tenant Improvements;

               2.4.1.2 Certificates of insurance (and endorsements) from Tenant, Tenant’s Contractor, and all other Tenant parties (exclusive of Tenant’s Contractor’s subcontractors) intending to enter the Premises for purposes of constructing the Initial Tenant Improvements, evidencing the insurance required to be maintained by such parties pursuant to the terms of this Lease;

               2.4.1.3 Copies of all building permits, and all other permits and approvals required by governmental agencies to construct the Initial Tenant Improvements; and

               2.4.1.4 A copy of the fully executed Construction Contract with Tenant’s Contractor.

Notwithstanding the foregoing, at least ten (10) business days prior to the commencement of work by any subcontractor hired by Tenant’s Contractor to perform (in whole or in part) the Initial Tenant Improvements, Tenant shall provide Landlord with written notice of the name and address of such subcontractor, the scope of work of such subcontractor, and certificates of insurance from such subcontractor, evidencing the insurance required to be maintained by such subcontractor (or by Tenant’s Contractor on behalf of such subcontractor) under Section 2.2.2.2 of this Work Letter.

          2.4.2 Conduct of Work. Tenant shall cause Tenant’s Contractor to perform the work of the Initial Tenant Improvements in an orderly manner, removing trash and debris generated by Tenant’s Contractor and its subcontractors from the Premises as required to maintain a safe and orderly worksite, and Tenant shall not permit any pipes, wires, boards or other construction materials brought into the Premises by Tenant’s Contractor or any of its subcontractors to cross public areas in a manner constituting a nuisance. All construction work of the Initial Tenant Improvements shall be undertaken in material compliance with all Applicable Laws and Landlord’s reasonable rules and regulations. If Tenant fails to comply with these requirements, Landlord shall have the right, but not the obligation, in addition to all other remedies available to Landlord due to Tenant’s default, to cause remedial action (at Tenant’s cost) as reasonably deemed necessary by Landlord to protect the public. Tenant shall complete construction of the Initial Tenant Improvements free and clear of all liens, security interests and encumbrances of any kind, and (subject to Tenant’s right under Section 2.4.4.2 below) Tenant shall remove from title (by bonding or otherwise) any mechanic’s liens filed against the Building and/or the Premises within fifteen (15) business days following Tenant’s notice thereof. If Tenant fails to post such bond or otherwise remove such lien of record within said time period, Landlord shall have the right, but not the obligation, in addition to all other rights and remedies available under the Lease and the applicable requirements of Section 2.4.4.2 below, to pay the claim for such lien or obtain a bond to remove the lien as a lien against property, in which event Tenant shall reimburse Landlord in full, including attorneys’ fees, for any such expense, within fifteen (15) days after notice from Landlord.

          2.4.3 Use of Equipment. Landlord and Tenant acknowledge that during the sixty (60) day Early Access Period, and thereafter while Landlord is completing the Landlord’s Work and any Punch List work associated with Landlord’s Work, it is anticipated that Landlord and Tenant will both be performing work within the Premises concurrently, and that Landlord’s Contractor or any subcontractor of Landlord’s Contractor may have equipment on the Premises for the performance of Landlord’s Work that Tenant (or Tenant’s Contractor or any subcontractor of Tenant’s Contractor) is desirous of using for the construction of the Initial Tenant Improvements. Should Tenant be desirous of using any such equipment for the performance of the Initial Tenant Improvements, Tenant must obtain the prior written consent of Landlord (which will not be unreasonably withheld provided the use of such equipment will not delay the completion of Landlord’s Work or increase the costs of Landlord’s Work) and Landlord’s Contractor or any subcontractor that owns, rents or has control over such equipment

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to use such equipment, provided, however, that Tenant’s Contractor and any subcontractor of Tenant’s Contractor shall be able to use the elevator or other alternative exterior service elevator for access to the upper floors of the Building and the temporary electrical power source to the Building. Landlord will cooperate with Tenant at no additional cost or liability to Landlord in Tenant’s efforts to obtain the consent of Landlord’s Contractor or any subcontractor, as the case may be, for the use by Tenant or Tenant’s Contactor of such equipment. Tenant shall be solely responsible for payment of any additional costs, fees and charges required by Landlord’s Contractor or the subcontractor for such use of the equipment. If such additional costs, fees or charges are assessed to Landlord, then Tenant shall pay Landlord for such costs, fees or charges within thirty (30) days after written request from Landlord. Tenant shall be responsible for any damage to person or property, including any damage to any equipment of Landlord or Landlord’s Contractor or subcontractor as a result of use of such equipment by Tenant or Tenant’s Contractor or any subcontractor of Tenant’s Contractor. Tenant shall protect defend, indemnify, and hold Landlord, and its agents, representatives, consultants, contractors, and affiliated entities harmless from and against any and all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) in connection with loss of life, personal injury or damage to property in or about the Premises as a result of the use of any such equipment by Tenant or anyone under Tenant’s control.

          2.4.4 Establishment of Escrow Account / Posting of Bonds.

               2.4.4.1 Schedule for Tenant’s Initial Tenant Improvements. With respect to the schedule for the construction of the Initial Tenant Improvements, based on Tenant’s current business projections, Tenant currently intends to (a) substantially complete the offices and related amenities (the “Office Work”) within four (4) months after Substantial Completion of the Building Shell and to (b) substantially complete the Labs (the “Lab Work”) within six (6) months after the Substantial Completion of the Building Shell. If, at any time after that date which is sixty (60) days following Substantial Completion of the Building Shell, Tenant is more than thirty (30) days behind schedule with respect to the construction of the Office Work and the Lab Work, subject to Force Majeure Delays and Landlord Delays, Landlord shall have the right, by delivering written notice of the same to Tenant, and if Tenant does not remedy such failure within thirty (30) days following receipt of such written notice, then Tenant shall be obligated to comply with the terms and provisions of Section 2.4.4.3 below. At the time the Tenant’s Final Plans are submitted, Tenant shall provide Landlord with a schedule for construction of the Initial Tenant Improvements (with separate schedules for the Office Work and the Lab Work) which shall be reflected in the Tenant’s Construction Documents and be the basis for Landlord’s rights under Section 2.4.4.3 below. Landlord acknowledges that Tenant’s business requirements for the Building are subject to change during the one-year period following the date of the Lease, and agrees that if any changes to Tenant’s intended use of the Premises result in Initial Tenant Improvements which will reasonably require more time for construction than those periods set forth in this Section 2.4.4.1 above, then Landlord will not unreasonably withhold its approval of a construction schedule that reasonably requires longer periods for completion of the Office Work and/or the Lab Work; provided, however, that any additional time provided for construction of such work shall not postpone or delay the date for the commencement of the Term of the Lease or the date by which Tenant must commence paying rent or any other sums under the Lease.

               2.4.4.2 Failure to Obtain Mechanic’s Lien Releases. As a condition to paying any contractor, subcontractor, material supplier, or design professional (that has served or filed pre-lien notices with Landlord) providing labor, material, equipment or services with respect to the Initial Tenant Improvements, Tenant agrees to obtain conditional and unconditional lien releases from such contractors, subcontractors, material suppliers, or design professionals in accordance with California law, and agrees to promptly deliver the latest copies of the same to Landlord on a monthly basis; provided, however, that the foregoing shall not prohibit Tenant from engaging in good faith disputes, from time to time, with such persons relating to the cost and/or performance of their goods and services; in which case, Tenant shall not be required to provide conditional or unconditional lien releases from persons who are engaged with Tenant in such disputes as long as (i) Tenant removes, whether by posting a bond or otherwise paying a claim, any mechanic’s lien filed against the property even if Tenant is in good faith disputing such claim or lien, and (ii) the aggregate amount of all disputed claims outstanding at any time is not more than $100,000. If the aggregate amount of the disputed claims are more than $100,000.00, then Tenant shall be required to deposit in escrow that

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amount in excess of $100,000.00, which amount shall be held in escrow until either (a) the amount in dispute is equal to or less than $100,000.00, or (b) Tenant provides a surety bond resulting in the unbonded amount of disputed claims being equal to or less than $100,000.00. Such escrow account shall be established in accordance with the requirements set forth in Section 2.4.4.3.1 below. If a mechanic’s lien for a disputed claim for which funds have been deposited in escrow by Tenant is bonded off by Tenant, then funds deposited in escrow for such disputed claim may be withdrawn from escrow. If as a result of such bonding, the amount of the bonded claims are less than or equal to $100,000.00, then the entire escrowed amount shall be refunded to Tenant. Should Tenant fail to provide Landlord with evidence that Tenant has made timely payment to such contractors, subcontractors, material suppliers or design professionals of undisputed funds in accordance with the procedures set forth in Section 2.6.3 below and removed (or bonded off) any lien against the property, then provided that Tenant does not remedy such failure within fifteen (15) business days after Landlord notifies Tenant, in writing, to do the same, then Landlord shall have the right, by delivering written notice of the same to Tenant, to require that Tenant comply with the terms and provisions of Section 2.4.4.3 below.

               2.4.4.3 Adequate Assurance of Completion. Should Tenant fail to timely cure any failure to comply with its obligations under Section 2.4.4.1 or 2.4.4.2 above, then Tenant shall immediately thereafter, do one of the following:

                    2.4.4.3.1 Escrow Account. Tenant shall place that portion of Tenant’s Over Allowance Amount that is reasonably necessary for Tenant to fund the remaining Tenant’s Costs of the Work (as defined in Section 2.6 below), as reasonably determined by Landlord and Tenant, into an escrow account established by Landlord for the benefit of both Landlord and Tenant. Said escrow account shall be used to fund all amounts remaining payable to the contractors, subcontractors, engineers, designers, material suppliers and all other parties entitled to payment for the design or construction of the Initial Tenant Improvements at the time such escrow is to be funded. Money may only be withdrawn from such escrow account for purposes of paying the contractors, subcontractors, engineers, designers, material suppliers and all other parties entitled to payment for the design and/or construction of the Initial Tenant Improvements. In addition, the withdrawal of funds from such escrow account shall only be made with either (a) a certification for payment from Tenant’s Architect that the parties entitled to payment have performed the work associated with such withdrawal request, or (b) written authorization from both Landlord and Tenant; and under no circumstances shall money be withdrawn from such account unless all corresponding conditional and unconditional lien releases are provided by the parties to be paid from such escrow account. Landlord and Tenant agree to timely execute any escrow instructions that are reasonably necessary in order to carry out the intent of this Section 2.4.4.3.1.

                    2.4.4.3.2 Bonds. Tenant shall provide Landlord, at Tenant’s sole cost and expense, with a completion bond, a performance bond, and/or other bond requested by Landlord as may be necessary to complete the Initial Tenant Improvements and to protect Landlord’s interest in the Building, the Premises, and/or the Project. The amount of such bond(s) shall be reasonably determined by Landlord and Tenant, but shall be based on that portion of Tenant’s Over Allowance Amount that is reasonably necessary for Tenant to fund the remaining Tenant’s Costs of the Work.

          2.4.5 Notice of Completion; Copy of Record-Set of Plans. Within ten (10) calendar days after completion of construction of the Initial Tenant Improvements, Tenant shall cause a notice of completion (or the equivalent notice required under applicable local law to provide notice to all contractors, subcontractors and materialmen that the work is completed and the time for filing any mechanic’s lien is running) to be recorded in the Official Records of the County in which the Building is located, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the conclusion of construction: (a) Tenant shall cause Tenant’s Contractor and Tenant’s Architect, as applicable (i) to update Tenant’s Final Plans as necessary to reflect all changes made to Tenant’s Final Plans during the course of construction, (ii) to certify to the best of their knowledge that the “record-set” of as-built drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (iii) to deliver to Landlord two (2) sets of printed copies of “as-built” drawings (in computer assisted design format (“CAD”)), as well as an electronic formatted copy, within ninety (90) calendar days following issuance of a certificate of occupancy for the

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Premises; and (b) Tenant shall deliver to Landlord a copy of all signed building permits and certificates of occupancy, and all warranties, guaranties, and operating manuals and information relating to the Initial Tenant Improvements. Further, after the expiration of the Term or the earlier termination of the Lease, Tenant shall, at Landlord’s written request, promptly assign to Landlord all of Tenant’s remaining rights, title and interest in and to any and all Plans, contracts, warranties, guarantees and other documents associated with those Initial Tenant Improvements remaining on the Premises after Tenant’s surrender thereof.

          2.4.6 Correction of Work. As a condition to the payment of each progress payment of the Tenant Improvement Allowance, Landlord may notify Landlord’s Architect, Tenant and Tenant’s Architect of Landlord’s decision to perform a walk-through inspection of the Initial Tenant Improvements on a day that is not later than five (5) business days following Landlord’s receipt of the Draw Request for each progress payment and the date and time (during normal business hours) for such walk-through inspection of the Initial Tenant Improvements for purposes of determining whether there are any patent defects in the construction of the Initial Tenant Improvements (the “Progress Payment Walk-Through Inspection”). Such scheduled date and time for a Progress Payment Walk-Through Inspection is referred to herein as a “Progress Payment Walk-Through Date.” Landlord, Tenant and Tenant’s Contractor, as well as Tenant’s Architect (if desired by Tenant), shall meet at the Premises at the designated time on the inspection date. If Tenant’s desired representative(s) is/are not available on the applicable Progress Payment Walk-Through Date, Tenant shall notify Landlord of the same, in writing, at least two (2) days prior to the applicable Progress Payment Walk-Through Date, in which case, the parties shall coordinate another date and time for the walk-through, which shall be no later than five (5) days after the originally scheduled Progress Payment Walk-Through Date. If during the Progress Payment Walk-Through Inspection, Landlord and Tenant agree that the corresponding work is free of material defects and in substantial conformance with the Tenant’s Final Plans, then (a) Landlord and Tenant shall document such fact in writing (the “TI Completion Notice”), and (b) Landlord shall identify, in writing, those items of the Initial Tenant Improvements that are in need of repair, or that have yet to be completed, and that Tenant agrees to repair (the “TI Punch List”); provided, however, that any TI Punch List work shall be minor in nature, and shall not interfere with the continued construction of the Initial Tenant Improvements or occupancy of the Premises for the Permitted Uses set forth in the Lease in connection with the Final Scheduled Payment, and shall, in any case, be reasonably capable of completion within thirty (30) days after the applicable Progress Payment Walk-Through Date. Should Tenant disagree with the items on the TI Punch List, Tenant shall notify Landlord, in writing within two (2) business days following receipt of the proposed TI Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the TI Punch List. If the parties are unable to agree upon the TI Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2; provided that the applicable Progress Payment shall be made by Landlord net of the reasonably estimated cost of correcting the TI Punch List items disputed by Tenant. The TI Completion Notice shall be binding on Landlord and Tenant, subject to resolution of any disagreement relating to the scope of work of the TI Punch List. TI Punch List items that are determined to be defective or not in substantial conformity with Tenant’s Final Plans (as may be amended in accordance with the requirements set forth herein) shall be promptly corrected by Tenant. Landlord’s failure to require a Progress Payment Walk-Through Inspection by timely delivery of the written notice required above shall be deemed Landlord’s waiver of such inspection rights for such Progress Payment.

     2.5. Indemnity/Insurance.

          2.5.1 Indemnity. Tenant’s obligation to defend, indemnify, and hold Landlord harmless as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities (collectively, “Claims”) related in any way to the Initial Tenant Improvements, or any act or omission of Tenant or any contractor, subcontractor, material supplier, architect, engineer, consultant or any other party employed, directly or indirectly, by Tenant with respect to the Initial Tenant Improvements, or in connection with Tenant’s non-payment of any amount arising out of the Initial Tenant Improvements that Tenant is required to pay pursuant to the terms of this Lease; provided, however, that Tenant shall not be obligated to defend, indemnify, and hold Landlord harmless from and against any such Claims to the extent the same arise directly due to Landlord’s intentional failure to timely pay Tenant any portion of the Tenant Improvement Allowance that is then due, payable, and undisputed under this Work Letter.

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          2.5.2 Insurance Requirements. In addition to the insurance requirements set forth in the Lease, until the Final Scheduled Payment is received by Tenant in accordance with Section 2.6.3.2 below, Tenant shall carry, or shall cause its Contractor to carry, “Builder’s All-Risk” insurance for the full replacement cost of the Initial Tenant Improvements, and otherwise in the form required in Section 2.2.2.2 of this Work Letter. Such “Builder’s All-Risk” insurance coverage shall preclude or waive subrogation claims by the insurer against Landlord, or its agents, employees, or representatives, and contain a provision that the company writing said policy will give Landlord thirty (30) calendar days’ prior written notice of any cancellation or lapse of the policy or any reduction in the amounts of such insurance. In the event that the Initial Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense, subject to Landlord’s obligation to repair any damages to the Landlord’s Work covered by Landlord’s insurance. Prior to Substantial Completion of Landlord’s Work, Landlord shall carry, or cause Landlord’s Contractor to carry, “Builder’s All Risk” insurance for the full replacement cost of Landlord’s Work, excluding costs for footings and excavation and any off-site work, as an expense included in the cost of Landlord’s Work prior to Substantial Completion of the Building Shell, and in CAM Charges thereafter. Landlord shall cause such “Builder’s All-Risk” insurance coverage on the Landlord’s Work to preclude or waive subrogation claims by the insurer against Tenant, or its agents, employees or representatives, and contain a provision that the company writing such policy will give Tenant thirty (30) calendar days prior written notice of any cancellation or lapse of the policy or any reduction in the amounts of such insurance prior to the Substantial Completion of Landlord’s Work. Upon Substantial Completion of the Landlord’s Work, the “Builder’s All-Risk” insurance coverage shall be replaced by an “all risk” policy of property insurance covering the replacement cost of Landlord’s Work (exclusive of the Initial Tenant Improvements) in accordance with the requirements of Section 6.3.1 of the Lease. Following Landlord’s receipt of a Draw Request satisfying the conditions for the Final Scheduled Payment, Landlord shall cause the Landlord’s “all risk” policy of insurance on the Premises to include the full replacement cost of the Initial Tenant Improvements, and delivery of the Final Scheduled Payment shall be deemed Landlord’s assumption of property insurance coverage for the Initial Tenant Improvements. In the event that the Landlord’s Work is damaged by any cause during the course of construction thereof, Landlord shall immediately repair the same at Landlord’s sole cost and expense, subject to Tenant’s obligation to repair any damages to the Initial Tenant Improvements covered by Tenant’s insurance. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under the Lease or this Work Letter.

     2.6. Tenant’s Costs of the Work and Tenant Improvement Allowance.

          2.6.1 Tenant Improvement Allowance. Landlord agrees to reimburse Tenant One Hundred Dollars ($100) per square foot of Lab Space (of which 40% can be office/support space without reducing the Lab Space allowance), up to a maximum equal to the total rentable square footage of one entire floor of the Building, and Fifty Dollars ($50) per square foot of the remainder of the Rentable Square Footage of the Building (as defined in Section 2.1 of the Lease) (collectively, the “Tenant Improvement Allowance”) for Tenant’s Costs of the Work (defined in Section 2.6.5 below) incurred by Tenant for the construction of the Initial Tenant Improvements. Before the Initial Payment toward the cost of the Initial Tenant Improvements, Landlord and Tenant shall agree on (a) the total square footage of the Lab Space within the Building, based on Landlord’s and Tenant’s Architects’ confirmation of the as-built construction of the Building and Tenant’s Final Plans, and (b) on the total amount of the Tenant Improvement Allowance. Such square footage determination, as well as such Tenant Improvement Allowance determination, shall be binding on Landlord and Tenant throughout the Lease Term.

          2.6.2 Tenant’s Responsibility for Costs; Distribution of Allowance. Tenant shall bear the cost of Initial Tenant Improvements, including, without limitation, costs in connection with design, engineering, plan checking, special inspections and testing, Tenant’s consultants, and permits and fees for the Initial Tenant Improvements Work. After Landlord’s approval of Tenant’s Final Plans, Tenant shall deliver to Landlord (for Landlord’s review and approval, which approval shall not be unreasonably withheld, conditioned, or delayed) a detailed breakdown of the estimated costs to be incurred for the design and construction of the Initial Tenant Improvements (the “Total Estimated Costs of Tenant’s Initial Improvements”). Tenant shall incorporate any reasonable requested changes from Landlord with respect to such estimated costs. Tenant shall update such estimate from time to time to reflect any increases in

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the costs of constructing the Initial Tenant Improvements. After Landlord’s approval of the Total Estimated Costs of Tenant’s Initial Improvements, Tenant shall provide Landlord with a detailed breakdown of the estimated final costs to be incurred, and that have been incurred, in connection with the Initial Tenant Improvements, setting forth the estimated cost of the construction of the Initial Tenant Improvements in excess of the Tenant Improvement Allowance (the “Over Allowance Amount”).

          2.6.3 Distribution of Tenant Improvement Allowance. During the construction of the Initial Tenant Improvements, the Tenant Improvement Allowance (to the extent payable to Tenant) shall be disbursed by Landlord in three payments to Tenant as follows:

               2.6.3.1 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 33% of the Total Estimated Costs of Tenant’s Initial Improvements (as modified by any changes thereto as permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are at least 33% complete, Tenant shall have the right to request a draw on the Tenant Improvement Allowance in an amount equal to the product of the Tenant Improvement Allowance times 33%, minus any portion of the Tenant Improvement Allowance previously paid by Landlord for any Change Request Costs as provided in Section 1.11.3 above, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below (“Initial Payment”).

               2.6.3.2 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 66% of the Total Estimated Costs of Tenant’s Initial Improvements (as modified by any changes thereto as permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are at least 66% complete, Tenant shall have the right to request an additional draw down on the Tenant Improvement Allowance in an amount equal to the product of the Tenant Improvement Allowance times 66%, minus any portion of the Tenant Improvement Allowance previously paid by Landlord at Tenant’s request, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below.

               2.6.3.3 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 100% of the Total Estimated Costs of the Work for Tenant’s Initial Improvements (as modified by any changes thereto as permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are 100% complete (except for any TI Punch List items), Tenant shall have the right to request an additional draw down on the remaining balance of the Tenant Improvement Allowance, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below (the “Final Scheduled Payment”) provided, however, that under no circumstances shall such draw down amount cause the total amount withdrawn from the Tenant Improvement Allowance to exceed the Tenant’s Costs of the Work (as defined in Section 2.6.5 below).

               2.6.3.4 Notwithstanding anything to the contrary contained herein, as of the Commencement Date, if any portion of the Tenant Improvement Allowance has yet to be paid to Tenant, Tenant shall be allowed to draw down the entire remaining unpaid balance of the Tenant Improvement Allowance to reimburse Tenant for a portion of the Over Allowance Amount previously paid by Tenant.

          2.6.4 Draw Request for Payment of Allowance.

               2.6.4.1 Any request to draw on the Tenant Improvement Allowance (each, a “Draw Request”) shall include the following items, the delivery of which are a condition to Landlord’s obligation to pay Tenant the Tenant Improvement Allowance hereunder: (a) a copy of all design, consultant, construction, and material supplier contracts for the Initial Tenant Improvements (the “Tenant Construction Contracts”), that have been entered into by Tenant prior to the date of the Draw Request (which shall cover all work for which Tenant seeks payment under the Draw Request) and any change orders associated therewith (each contract and change order need be submitted only once and may be in the form of Tenant’s corporate form of purchase orders for change orders and supplier contracts); (b) a copy of the latest request for payment from Tenant’s Contractor, approved by Tenant, in a form reasonably acceptable to

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Landlord,showing the percentage of completion of the Tenant Improvements in the Premises, and detailing the portion of the work completed, and the portion not completed, as well as a copy of the corresponding executed conditional and unconditional mechanic’s lien release associated with such invoice from Tenant’s Contractor meeting the requirements of California law; (c) copies of the latest up to date executed conditional and unconditional mechanic’s lien releases, in accordance with California law, from all engineers, subcontractors, and material suppliers that have served or filed pre-lien notices with Landlord, in the statutory form; (f) a certificate from Tenant’s Architect certifying the requisite percentage of completion of the work associated with the Initial Tenant Improvements has been completed so as to entitle Tenant to draw on the Tenant Improvement Allowance, and (g) evidence showing that the Tenant’s Costs of the Work paid for by Tenant as of the date that such Draw Request is submitted to Landlord equal or exceed the requisite percentage of Tenant’s Estimated Costs of Tenant’s Improvements. Notwithstanding the foregoing, if Tenant has paid any portion of the Tenant’s Costs of the Work to Tenant’s Contractor or any subcontractors, engineers, design professionals or material suppliers, but pursuant to any unresolved dispute, such persons shall fail to deliver an unconditional lien waiver, then as long as Tenant provides reasonably satisfactory security against the enforcement of any mechanics’ lien not waived unconditionally pursuant to the requirements in Sections 2.4.4 (and all subsections thereof), Tenant shall receive reimbursement of the amount paid by Tenant from the Tenant Improvement Allowance.

               2.6.4.2 Thereafter, Landlord shall deliver a check made payable to Tenant for the amount requested by Tenant from the Tenant Improvement Allowance within twenty (20) days following receipt of a Draw Request including the information required pursuant to Section 2.6.4.1. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s Draw Request.

               2.6.4.3 Tenant shall cooperate in a commercially reasonable manner (and as long as such disbursement schedule does not result in any increased costs to Tenant due to late fees or interest payable to its contractors or suppliers) with the disbursement schedule of Landlord’s construction lender and Landlord shall use reasonable efforts to insure that such amounts are paid promptly in accordance with Section 2.6.4.2 above.

     Notwithstanding anything to the contrary contained herein, Landlord shall have no obligation to pay Tenant, and Tenant shall waive its right to collect from Landlord, any portion of the Tenant Improvement Allowance that is not invoiced to Landlord, in accordance with the requirements set forth herein within eighteen (18) months after the Commencement Date.

          2.6.5 Tenant’s Costs of the Work. For purposes of this Article 2.6, the “Tenant’s Costs of the Work” shall mean and include all of the following costs incurred by Tenant with respect to the design and construction of the Initial Tenant Improvements: (a) all design fees, engineering fees and plan check fees, (b) all deposits, fees and costs for building and other permits, licenses and approvals; (c) tests and inspections; (d) insurance and bond premiums; and (e) all amounts payable to architects, engineers, designers, contractors, and subcontractors retained by Tenant or Tenant’s Contractor for the Initial Tenant Improvements, and all suppliers and vendors providing materials and services as part of the work of the Initial Tenant Improvements. Tenant’s Costs of the Work expressly excludes the costs of (i) Tenant’s furniture, and (ii) any Tenant equipment that Tenant may remove from the Premises in its sole discretion at the expiration of the Term or the earlier termination of the Lease, pursuant to the terms and provisions of the Lease.

     2.7. Transfer/Assignment of Lease. Notwithstanding anything to the contrary contained herein, to the extent that the Landlord originally named in the Lease (the “Original Landlord”) assigns or otherwise transfers its interest in the Premises prior to (a) the substantial completion of Landlord’s Work, or (b) Landlord’s distribution of the entire Tenant Improvement Allowance which Tenant is entitled to receive under this Work Letter (collectively, the “Original Landlord Requirements”), then the Original Landlord shall remain responsible for, and shall warrant the completion of such Original Landlord Requirements, notwithstanding such conveyance, unless the new owner has expressly agreed to assume the obligation to perform the Original Landlord Requirements.

     2.8. Temporary Facilities During Construction. Until the Substantial Completion of the Building Shell, storage of Tenant’s Contractor’s and subcontractors’ construction material,

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tools, equipment and debris shall be confined to those areas that are reasonably designated for such purposes by Landlord; provided, however that the location of such storage areas will not interfere with Tenant’s completion of the Initial Tenant Improvements. Tenant shall not be responsible for any loss or damage to Landlord, Landlord’s Contractor, or their agents, representatives, subcontractors, consultant’s or employees’ equipment (each a “Landlord Party”), unless such loss or damage arising from the gross negligence or willful misconduct of Tenant or Tenant’s Contractor or any of their respective agents, representatives, subcontractors or employees so long as such loss or damage is covered by insurance carried by the applicable Landlord Party; provided, however, that this Section shall be subject to any agreement that Tenant may have with such Landlord Party as required under Section 2.4.3. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, storage of Landlord’s Contractor’s and Tenant’s Contractor’s construction material, tools, equipment and debris outside the Building Shell shall be confined to those areas outside the Building Shell that may be designated for such purposes by Landlord, and storage of same within the Building Shell shall be confined to those areas within the Building Shell reasonably designated by Tenant, provided, however that the location of such storage areas will not interfere with Landlord’s completion of Landlord’s Work. Landlord shall not be responsible for any loss or damage to Tenant, Tenant’s Contractor, or their agents, representatives, subcontractors, consultant’s or employees’ equipment (each, a “Tenant Party”), unless such loss or damage arising from the gross negligence or willful misconduct of Landlord or Landlord’s Contractor or any of their respective agents, representatives, subcontractors or employees so long as such loss or damage is covered by insurance carried by the applicable Tenant Party.

ARTICLE 3. MISCELLANEOUS

     3.1. Business Day. A “business day” is a day other than a Saturday, a Sunday or a legal holiday as recognized by the Superior Court in the County in which the Premises are located. Unless expressly defined as a “business day”, all references to the term “day” shall mean a “calendar day.”

     3.2. Time of the Essence. Time is of the essence in this Work Letter, and unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

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SCHEDULE B-1
THE BUILDING SHELL
(LANDLORD’S WORK)

Building Specifications

“*” indicates Landlord’s Work that may lag
behind the Substantial Completion of the Building Shell.

     The developed building shell and site will reflect a high image Life Science/R&D environment per a schedule of design drawings attached. The building shell shall include the following:

Building Structure, Foundation and Floors

•	One three (3) story steel braced frame building over grade level and sub-grade parking.
•	Structural components for a shell building, including foundations, footings, columns, beams, joints, purlins, girders, headers and other structural members as required to support the building structure.
*	Podium and surface parking on south side of Building
•	Fireproofing of structure as required by code.
•	Seismic importance factor of structure to be 1.0 per code.
•	PSE stated that the vibration were 6000-8000 MIPs at the 2nd and 3rd floors and 5000 MPS at the 1st floor over garage level.
•	Exterior façade will be a curtain wall system consisting of double insulated glass and GFRC, or precast concrete, or metal panels. Interior walls will be unfinished and will not include insulation, drywall, studs, etc.
•	Typical floor to floor heights to be sixteen (16) feet.
•	Typical elevated floors to have vented metal deck with concrete topping slab. The floor ratings are as follows:
	Garage to 1st floor: 3 hour
	1st to 2nd floor:      2 hour
	2nd to 3rd floor:     2 hour
	Roof:                       1 hour
•	Waterproof membrane on podium floor under landscape panel and surface parking.
•	Parking levels 1 & 2 to have reinforced concrete slab-on-grade with capillary moisture break or waterproofing.
•	Main building entrances to include double (narrow style aluminum) doors and canopy; design and installation of vestibule, custom doors, door security, specialty hardware or modifications to be a part of tenant improvement.
•	Two stairs assemblies with enclosures as required by code.

Schedule B-1
Page 1

• Exterior and/or basement level service area with location and size to be determined.

• One loading area with loading door.

Roof

• Roof floor: Vented metal deck with insulated roof deck and structural support for mechanical area.

• Roof system: Four ply built-up roof or single ply EPDM or PVC systems with insulation to meet Title 24 requirements.

• Roof screen design: Landlord to design roof screen with support system to support future penthouse; supports for major rooftop equipment and davit pedestals of window washing will be stubbed through roof membrane; roof screen installation to be part of tenant improvement.

• Ladder and roof hatch for roof access.

Elevators

• Installation of one hydraulic freight elevator, 5,000 lbs. rated, 150 fpm capacity in lieu of 4,000 lbs. rated (per CA RFI #1)

• Installation of two traction passenger elevators, 3,500 lbs. Rate, 350 fpm capacity, in lieu of one hydraulic elevator rated 2,500 lbs (per CA RFI #1)

• *May be pending State of California inspection/licensing of elevators

Sewer, Drainage and Plumbing

• Sanitary sewer system to consist of one domestic line and one industrial waste line. Any monitoring requirements to be part of the tenant improvement.

• The sanitary sewer laterals (domestic) will be piped up through each floor. All distribution to be part of the tenant improvement. Industrial waste line to terminate at garage.

• Domestic and irrigation water mains connected to the city water main in the street. Domestic line to be brought to the building with all distribution to be part of the tenant improvement.

• Roof drain leaders and roof overflows piped and draining onto paved areas or connected to the site storm drainage system.

• Underground site storm drainage systems shall be connected to the city storm system main.

• Service hook-up and meter fees at cost of Tenant.

Utilities and Electrical

• The electrical service is anticipated to be 3,000 to 4,000 amps of 277/480 volt, three phase, four wire power. The electrical service will include underground conduit, wire feeders, transformers, transformer pads, as well as secondary conduits and secondary feeders from transformer pads into the building’s electrical room.

• Underground pull section and house panel for exterior lighting, landscaping, and garage ventilation system. *Meter may be part of the

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Landlord’s Work to be done after Building Shell completion if the City does not permit a temporary meter and electricity is being provided from a neighboring property (provided that the Building Shell work shall not be substantially complete if Tenant is required to provide electricity for the work of the Initial Tenant Improvements by means of an on-site generator). However, Tenant must request and apply to PG&E for the installation of the meter and the establishment of the account in Tenant’s name before the meter can be installed.

• * An electrically operated landscape irrigation system, with controller, such that it is a complete and functioning system.

• Underground conduit from the building to the main fire protection system shut-off valve (PIV) for installation of supervisory alarm wiring.

• Telephone service conduits from the street to a designated location in the building.

• * Gas line connected to the public utility main and run to gas meter location.

Mechanical

• Mechanical exhaust fans as needed for parking garage.

Fire Protection (Sprinklers)

• A complete and fully functional overhead shell building system of ordinary hazard density distributed throughout the building.

• System shall include all upright pendant sprinkler heads (“uppers”) with future sprinkler head drops to be part of the tenant improvement.

Sitework and Landscaping

• *Landlord’s Work will include site work outside the building and shall include grading, asphalt concrete, paving, landscaping, landscape irrigation, curbs, gutters, sidewalks, specialty paving (if any), retaining walls, and trash enclosures.

• *Paving sections for automobile and truck access shall be according to the Geologic Soils Report.

• *All parking lot striping, including handicap signage wheel stops and spaces.

• *Basic exterior directional signage

• *Site lighting

Structural Design Criteria: Gravity

The Building will be designed for the gravity loads listed below. The designation of “Mechanical penthouse” is intended to apply to a specific area above the third floor roof; the area designated “Roof screened area” is that area outside of the Mechanical penthouse, bounded by the roof screen; and the area designated as “roof” is the area outside the roof screen.

Area	Live Load	Dead Load
Mechanical penthouse roof	20 psf1	10 psf suspended5
Roof	20 psf2	10 psf suspended5
Roof screened area	50 psf2	10 psf suspended5

Schedule B-1
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Penthouse floor	100 psf3	20 psf suspended6
Third floor	100 psf4	20 psf suspended6
Second floor	100 psf4	20 psf suspended6
First floor	100 psf4	20 psf suspended6
Podium level	250 psf4	5 psf suspended5
Parking level 1	50 psf4	5 psf suspended5
Parking level 2	50 ps4	NA

*** Additional weight load requirements to 250 psi (per CA RFI #1):

Floor One: Grid 3-4 / B-C            Grid 7-8 / B-C
Floor Three: Grid 3-4 / B-C            Grid 7-8 / B-C

	Footnotes:
1	With no allowable area reduction
2	With provision for 5k point load anywhere on joist
3	With provision for 10k point load anywhere on joist
4	With no allowable area reduction in vertical loading on horizontal framing members
5	With provision for 2k point load
	1 With provision for 5k point load

Schedule B-1
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SCHEDULE B-2

PRELIMINARY DEVELOPMENT AND DELIVERY SCHEDULE
FOR THE BUILDING SHELL AND LANDLORD’S WORK

Phase	Lease Benchmark Date
Outside Date to Secure Building Permit (Section 1.6.2)	August 1, 2007
Earliest Date of Early Access for Commencement of Initial Tenant Improvements (Section 16.3.1)	July 1, 2008
Earliest Date of Substantial Completion of Building Shell (Section 1.6.3.1)	September 1, 2008
Probable Date of Substantial Completion of Building Shell (informational only)	October 15, 2008
Substantial Completion of Building Shell or Penalties Accrue, subject to Tenant Delays and/or Force Majeure (Section 1.6.6.1)	November 30, 2008
Substantial Completion of Landlord’s Work or Or Penalties Accrue, Subject to Tenant Delays and/or Force Majeure (Section 1.6.6.2)	December 31, 2008

Schedule B-2

SCHEDULE B-3

DESIGN DOCUMENTS
FOR LANDLORD’S WORK

The following list of Design Documents attached to this cover sheet is based on plans and specifications submitted to the local governmental authority for plan checking. The Design Documents show work that is beyond the scope of Landlord’s Work as described in Exhibit B-1 to Exhibit B. However, the scope of Landlord’s Work is limited to the work described in Exhibit B-1.

Schedule B-3

SCHEDULE B-4

PRE-APPROVED MAJOR TRADE SUBCONTRACTOR
(see list attached to this cover sheet)

Schedule B-4

EXHIBIT C

RULES AND REGULATIONS

1. No awning, shade, sign, placard, picture, advertisement, name, or notice shall be inscribed, painted, installed or displayed on or outside the Building without written consent of Landlord. Landlord shall have the right to remove any such unapproved item without notice and at Lessee’s expense. All approved signs or lettering on doors and facia shall be printed, painted, affixed or inscribed at the expense of Tenant by a person chosen by Landlord in accordance with Landlord’s standard signage policy. All requests for listing on the Building directory shall be submitted to the office of Landlord in writing and shall be subject to Landlord’s approval, not to be unreasonably refused. Any change requested by Tenant of Landlord of the name or names posted on directory, after initial posting, will be charged to Tenant.

2. Tenant, its employees, agents, contractors and invitees shall comply with all parking regulations promulgated by Landlord from time to time for the orderly use of the vehicle parking areas, including without limitation the following: Parking shall be limited to automobiles, passenger or equivalent vans, motorcycles, light four wheeled pickup trucks, and (in designated areas) bicycles. No vehicles shall be left in the parking lot overnight; provided however that (i) occasional overnight parking by Tenant’s employees shall be permitted, and (ii) the full-time parking of Tenant-owned maintenance and other vehicles in the basement of the parking structure shall be permitted. Parked vehicles shall not be used for vending or any other business or other activity while parked in the parking areas. Vehicles shall be parked only in striped parking spaces, except for loading and unloading, which shall occur solely in zones marked for such purpose, and be so conducted as to not unreasonably interfere with traffic flow within the Project or with loading and unloading areas of other tenants. Employee and tenant vehicles shall not be parked in spaces marked for visitor parking or other specific use. All vehicles entering or parking in the parking areas shall do so at owner’s sole risk, and Landlord assumes no responsibility for any damage, destruction, vandalism or theft. Tenant shall cooperate with Landlord in any measures implemented by Landlord to control abuse of the parking areas, including without limitation access control programs, tenant and guest vehicle identification programs, and validated parking programs, provided that no such validated parking program shall result in Tenant being charged for spaces to which it has a right to free use under its Lease. Each vehicle owner shall promptly respond to any sounding vehicle alarm or horn, and failure to do so may result in temporary or permanent exclusion of such vehicle from the parking areas. Any vehicle which violates the parking regulations may be cited, towed at the expense of the owner, temporarily or permanently excluded from the parking areas, or subject to other lawful consequence.

3. Tenant will not install or use any window coverings except those provided by Landlord. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Building.

4. Tenant shall not use or keep in the Building or on the Premises any kerosene, gasoline or flammable or combustible fluid or material (collectively, “Combustible Materials”) other than (i) those limited quantities necessary for the maintenance of office equipment, and (ii) those Combustible Materials that are necessary to and used in the ordinary course of Tenant’s business, including those associated with Tenant’s back-up generator, provided the same are used in full compliance with all applicable laws, rules and regulations pertaining to such use, and provided that Tenant shall be solely responsible for the same. Tenant shall not use or permit to be used in the Building or on the Premises any foul or noxious gas or substance, or permit or allow the Building or the Premises to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors or vibrations.

5. Tenant shall not alter any lock or install any new locks or bolts on any door on the Premises without the prior consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. All re-keying of office doors, after occupancy, shall be at the expense of Tenant. Tenant, upon termination of its tenancy, shall deliver to Landlord the keys of all locks for doors on the Premises, and in the event of loss of any keys furnished by Landlord, shall pay Landlord therefor.

6. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Project are prohibited, and Tenant shall cooperate to prevent same.

7. Landlord reserves the right to exclude or expel from the Premises any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of the Rules and Regulations of the Premises.

8. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. No person shall go on the roof without Landlord’s permission, except that Tenant may go upon the roof in order to fulfill Tenant’s maintenance obligations.

9. Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Building closed. Landlord shall have no obligation to secure the Building or the Premises, and Tenant hereby releases Landlord, to the greatest extent allowed by law, from any responsibility for protecting the Building or the Premises from theft, robbery and pilferage. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with Landlord’s instructions in their installation. Tenant shall make provision for prompt termination of any sounding alarm and failure to do so shall constitute grounds for Landlord to require that Tenant’s alarm be modified as reasonably directed by Landlord or removed. Unless specifically permitted under its Lease, Tenant

shall not install any radio or television antenna, loudspeaker or other devices on the roof or exterior walls of the Building. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere.

10. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building, to such a degree as to be objectionable to Landlord, shall be placed and maintained by Tenant at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration.

11. All goods, including material used to store goods, delivered to Tenant at the Premises shall be immediately moved into the Building and shall not be left in parking or receiving areas overnight. Tenant shall not use or permit the use of any portion of the Premises for outdoor storage without the prior written consent of Landlord.

12. Tenant shall store all its trash and garbage within the Building or in the designated areas of the Premises established or consented to by Landlord. Tenant shall not allow refuse, garbage or trash to accumulate outside of the Building except on the day of scheduled scavenger pick-up services, and then only in areas designated for that purpose by the Landlord. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal within the Premises. Tenant shall notify Landlord in advance of any unusually large amount of trash to be disposed of in the designated trash areas, including without limitation, trash associated with any permitted construction by Tenant on the Premises, Tenant’s moving in or out of the Building or delivery to Tenant at the Premises of furniture, fixtures and equipment, and Tenant shall bear the expense of any special trash pick up necessary to remove such trash.

13. Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Building or any part thereof except that pictures, certificates, licenses and similar items normally used in Tenant’s business may be carefully attached to the walls by Tenant. The cost of any special electrical circuits for items such as copying machines, computers, microwave, etc., shall be borne by Tenant unless the same are part of the Building standard improvements. Tenant shall not cut or bore holes for wires. Tenant shall not affix any floor covering to the floor of the Building, in any manner except as approved by Landlord. Tenant shall repair or be responsible for the cost of repair of any damage resulting from noncompliance with this rule.

14. Tractor trailers which must be unhooked or parked with dolly wheels beyond the concrete loading areas must use steel plates or wood blocks under the dolly wheels to prevent damage to the asphalt paving surfaces. No parking or storing of such trailers will be permitted in the auto parking areas of the Premises or on streets adjacent thereto.

15. Forklifts which operate on asphalt paving areas shall not have solid rubber tires and shall only use tires that do not damage the asphalt.

16. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violations of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused same.

17. The sidewalks, parking lots, driveways and entrances shall be used only as a means of ingress and egress and shall remain unobstructed at all times. Loitering on any part of the Premises or obstruction of any means of ingress or egress shall not be permitted.

18. Landlord may from time to time waive any one or more of these Rules and Regulations for the benefit of Tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations nor prevent Landlord from thereafter enforcing any such Rules and Regulations.

19. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition to its occupancy of the Premises.

EXHIBIT D
Calculation of the Building Minimum Monthly Rent During First Year of Term

This Exhibit D forms a part of that certain Lease (the “Lease”) by and between Chamberlin Associates 180 Oyster Point Blvd., LLC, as Landlord, and Elan Pharmaceuticals, Inc., as Tenant, to which this Exhibit is attached. All capitalized terms referred to in this Exhibit shall have the same meaning provided in the Lease, except where expressly provided to the contrary in this Exhibit. This Exhibit D establishes the means of determining Minimum Monthly Rent only, and shall not modify the respective rights and obligations of Landlord and Tenant under the Lease or Work Letter; and in the event of any discrepancy between this Exhibit D and any contrary provision of the Lease or Work Letter (except for the Minimum Monthly Rent payable under the Lease), the terms and conditions of the Lease and Work Letter shall prevail.

The Building Minimum Monthly Rent for the first one year period after the Commencement Date (the "Initial Year”) shall be calculated as set forth in this Exhibit D.

1. Definitions:

     A. The “Actual Total Project Costs” is an amount per rentable square foot (“RSF”)¹ equal to (1) the Total Project Cost per RSF as shown in the Project Budget Summary attached hereto as Schedule 1 (which is $432.49 per RSF), plus (2) the Sum of the Cost Factor Adjustments; with each Cost Factor thereof comprising the “Actual Project Cost Factor” of each such category of Cost Factor.

     B. The “Adjusted Return Rate” is defined as the sum of the Landlord’s Actual Financing Interest Rate and the Rate of Return Spread.

     C. The “Baseline Cost Factor” is defined as the baseline amount for each Cost Factor (defined in Section 1.D below) per RSF. The baseline amount for each Cost Factor is set forth below:

(1) Baseline Loan Finance Cost:2	$30.12 per RSF
(2) Baseline Entitlement and Permit Fees:	$13.50 per RSF
(3) Baseline Shell and Site Construction Cost:	$155.48 per RSF

     D. The “Cost Factors” consist of the following (without duplication):

          i. The “Loan Finance Costs” is defined as all out of pocket financing costs, fees, and interest charges associated with any permanent loan or construction loan (per actual RSF) that are incurred by Landlord pursuant to Landlord’s financing of the acquisition of the Real Property for the period from the acquisition of the Real Property by Landlord until the Commencement Date, and such financing costs, fees and charges incurred by Landlord to finance the construction and development of the Landlord’s Work and/or the payment of the Tenant Improvement Allowance.

          ii. The “Entitlement and Permit Fees” is defined as all out of pocket costs incurred by the Landlord (per actual RSF) for any and all entitlements and permits necessary for, or associated with, the development of Landlord’s Work. Such costs include, but are not limited to, all consultant fees, engineering fees, design fees, and building permit, mitigation, water quality control, city planning and entitlement fees. Notwithstanding anything to the contrary contained herein, for purposes of determining the Actual Project Cost Factor for the Entitlement and Permit Fees, such Actual Project Cost Factor shall not exceed the amount of the Capped Entitlement and Permit Fees described in Section 4 below.

          iii. The “Shell and Site Construction Costs” is defined as all other out of pocket costs (exclusive of the Loan Finance Costs and the Entitlement and Permit Fees) incurred by Landlord (per actual RSF) for the design, construction and/or development of the Landlord’s Work, including, but not limited to, any associated off-site costs for signalization and median modification required as a condition to the building permit or entitlement approvals for the

1	For purposes of this Exhibit D, the term “RSF” means the rentable square foot of Building
2	Based on Construction Loan Interest of $21.07, plus Financing Fees & Costs of $9.05, for a total of $30.12.

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Landlord’s Work, including, but not limited to, all labor costs, construction costs, material costs, bond costs, and insurance costs to the extent associated therewith; provided, however, that the foregoing shall not result in the payment of any Entitlement and Permit Fees as part of the Shell and Site Construction Costs. Notwithstanding anything to the contrary contained herein, for purposes of determining the Actual Project Cost Factor for the Shell and Site Construction Costs, such Actual Project Cost Factor shall not exceed the amount of the Capped Shell and Site Construction Costs as described in Section 4 below.

     E. The “Landlord’s Actual Financing Interest Rate” is defined as the actual interest rate that the Landlord obtains for the permanent financing of the Real Property and all improvements constructed and to be constructed thereon (collectively, the “Project”), which financing Landlord shall obtain after the Effective Date and prior to the Commencement Date. Landlord’s long term financing will be secured from a reputable institutional lender such as a regional or national bank, life insurance company or comparable source.

     F. The “Landlord’s Baseline Financing Interest Rate” is Landlord’s assumed financing interest rate for the Project, as set forth in the Project Budget Summary, which is an amount equal to Seven percent (7%).

     G. The “Landlord’s Budgeted Rate of Return” is equal to .093, which was determined by dividing the Landlord’s budgeted Initial Year Rent for a 12 month period, equal to $40.20 per RSF per year ($3.35/month times 12 months), by the budgeted amount for the Landlord’s Total Project Costs per RSF, as shown in the Project’s Budget Summary set forth in Schedule 1 attached hereto (initially estimated to be equal to $432.49 per RSF).

     H. The “Project Budget Summary” shall mean the initial schedule of Total Project Cost set forth in Schedule 1 attached hereto.

     I. The “Rate of Return Spread” is equal to .023 and is determined by taking the difference between the Landlord’s Budgeted Rate of Return (.093) and Landlord’s Baseline Financing Interest Rate (.07).

     J. The “Sum of the Cost Factor Adjustments” is an amount calculated as follows for each Cost Factor: (i) determine the difference between the actual costs incurred by Landlord with respect to such Cost Factor (but without including any amount of Entitlement and Permit Fees or Shell and Site Construction Costs in excess of the Capped Entitlement and Permit Fees and Shell and Site Construction Costs) and the amount of the Baseline Cost Factor for such Cost Factor as set forth in Section 1.C of this Exhibit D; and (ii) sum all such Cost Factor differences; however, if any such Cost Factor difference is a negative number, then subtract the absolute value of that difference.

2. Calculating the Building Minimum Monthly Rent for the Initial Year. The Building Minimum Monthly Rent for the Initial Year shall be calculated as follows:

     A. Add the Rate of Return Spread to the Landlord’s Actual Financing Interest Rate, to determine the “Adjusted Return Rate”, however, under no circumstances shall Landlord’s Adjusted Return Rate be less than .083; and

     B. Determine the Building Minimum Monthly Rate for the Initial Term by multiplying the Actual Total Project Costs (per actual RSF) by the Adjusted Return Rate, and dividing by 12.

3. Example of the Calculation of the Building Minimum Monthly Rent During the Initial Year. The following is an example of how the Building Minimum Monthly Rent during the Initial Year is to be calculated.

Assuming
Landlord’s Actual Financing Interest Rate	= 7.0 %
Actual Loan Finance Cost	= $40.39 per RSF
Actual Entitlement and Permit Fees	= $13.89 per RSF
Actual Shell and Site Construction Costs	= $225.62 per RSF

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Step 1: Calculate the difference between the Actual Project Cost Factors and the Baseline Cost Factors.

Actual Loan Finance Cost:	$40.39 per RSF
Baseline Loan Finance Cost:	$30.12 per RSF
Difference:	$10.27 per RSF
Actual Entitlement and Permit Fees:	$13.89 per RSF
Landlord’s Capped Entitlement and Permit Fees3:	$13.95 per RSF
Baseline for Entitlement and Permit Fees:	$13.50 per RSF
Difference	$0.39 per RSF
Actual Shell and Site Construction Cost:	$225.62 per RSF
Landlord’s Capped Shell and Site Construction Cost4:	$219.35 per RSF
Baseline for Shell and Site Construction Cost:	$155.48 per RSF
Difference:	$63.87 per RSF

Step 2: Calculate the Sum of Cost Factor Adjustments:

Sum of the Differences (a + b + c): $74.53 per RSF

Step 3: Calculate the Actual Total Project Costs:

Add the Sum of Cost Factor Adjustments to $432.49 $507.02 per RSF

Step 4: Determine the Adjusted Return Rate:

Rate of Return Spread + Landlord’s Actual Financing Interest Rate

= .023 + .07 = .093

Step 5: Determine the Building Minimum Monthly Rent for the Initial Year:

[Actual Total Project Costs x Adjusted Return Rate)/12]	=	[$507.02 x.093]/12
	=	$3.93 per RSF/month

3	For calculation purposes, the Actual Entitlement and Permit Fees shall not exceed the Capped Entitlement and Permit Fees pursuant to Section 4.
4	The Actual Shell and Site Construction Costs shall not exceed the Capped Shell and Site Construction Costs pursuant to Section 4.

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4. Capped Cost Factors: Entitlement and Permit Fees and Shell and Site Construction Costs. Landlord will provide updated cost information to Tenant throughout the period that Landlord is performing Landlord’s Work (see Exhibit B, Work Letter). On or before December 1, 2007, Landlord shall deliver to Tenant updated projections for Entitlement and Permit Fees and the Shell and Site Construction Costs based on the latest known costs, as well as on the reasonably anticipated Entitlement and Permit Fees and Shell and Site Construction Costs, as may be reasonably determined by Landlord (the “Capped Cost Factors ”). If the Rentable Square Footage of the Building (as defined in the Lease) is still undetermined by the date Landlord provides the Capped Cost Factors, the amount of the Capped Cost Factors will only be disclosed in total dollar amounts (and not based on RSF). The Capped Cost Factors on a RSF basis will be made when the Square Footage of the Building is determined as provided in the Lease. Tenant shall have ten (10) business days after Landlord delivers such Capped Cost Factors to Tenant to review and approve. If Tenant does not provide written notice of any objections (which shall include a reasonable basis for the objection) within such ten (10) business day period, Landlord shall provide a second written notice to Tenant requesting Tenant’s approval of the Capped Cost Factors; and if Tenant fails to provide written notice to Landlord of any objections (including a reasonable basis for the objection) to the Capped Cost Factors within five (5) business days following such second notice, Tenant shall be deemed to have approved the Capped Cost Factors.. If Tenant approves, or is deemed to have approved, the Capped Cost Factors, then Landlord and Tenant agree that the actual costs of the Entitlement and Permit Fees and Shell and Site Construction Costs for purposes of determining the Building Minimum Monthly Rent for the Initial Year, shall not exceed the Capped Cost Factors for Entitlement and Permits Fees and the Shell and Site Construction Costs set forth for each category. Should Tenant object to one or both of the Capped Cost Factors, and should Landlord and Tenant be unable to resolve any disagreement regarding the same informally, then the dispute shall be resolved by binding arbitration with the San Francisco, California office of the American Arbitration Association, pursuant to the commercial rules of the American Arbitration Association. Upon the final resolution of any such disagreement, the finally determined budget shall be considered the Capped Cost Factors for purposes of this Exhibit D.

5. Payment of Building Minimum Monthly Rent for the Initial Year

     a. Landlord’s Determination of Building Minimum Monthly Rent During Initial Term. Not more than six (6) months after Landlord’s completion of Landlord’s Work, Landlord shall (a) calculate the Actual Total Project Costs for all Cost Factors (utilizing the Capped Cost Factors, as set forth in their respective definitions), and (b) deliver written notice to Tenant of the Actual Total Project Costs, along with reasonable evidence of the amounts incurred by Landlord for the Cost Factors and Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year (“Landlord’s Initial Year Minimum Monthly Rent Notice”). If Landlord has not delivered Landlord’s Initial Year Minimum Monthly Rent Notice prior to the Commencement Date, then Tenant shall pay as Minimum Monthly Rent until the first day of the month after Landlord delivers, to Tenant, Landlord’s Initial Year Minimum Monthly Rent Notice, an estimated amount for the Minimum Monthly Rent (based on the Landlord’s latest updated cost information), which amount shall be set forth in a written notice from Landlord to Tenant (the “Estimated Initial Year Minimum Monthly Rent Notice”); provided, however that if Landlord does not deliver such written notice to Tenant prior to the Commencement Date, Tenant shall pay, as the estimated amount of Minimum Monthly Rent, an amount equal to Three and 93/100ths Dollars ($3.93) per RSF of Building per month. On the first day of the month following Landlord’s Delivery of Landlord’s Initial Year Minimum Monthly Rent Notice, there shall be an adjustment made to the Minimum Monthly Rent payment then due for the difference between the amount of Minimum Monthly Rent Tenant has paid to Landlord since the Commencement Date and the amount that Tenant would have paid if the Minimum Monthly Rent as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice had been in effect as of the Commencement Date.

     b. Tenant’s Right to Object to Landlord’s Determination. After receiving Landlord’s Initial Year Minimum Monthly Rent Notice, if Tenant wishes to object to Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year, Tenant must deliver written notice to Landlord objecting to the same, which shall include an explanation of the objection and a statement of Tenant’s determination of the Building Minimum Monthly Rent for the Initial Year, within fifteen (15) business days after receiving Landlord’s Initial Year

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Minimum Monthly Rent Notice. If Tenant does not deliver such written notice to Landlord within such fifteen (15) business day period, Landlord shall provide a second written notice of Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year; and if Tenant fails to provide written notice (including an explanation of the objection and a statement of Tenant’s determination of the Building Minimum Monthly Rent for the Initial Year) to Landlord of any objections to the Minimum Monthly Rent during the Initial Year as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice within five (5) business days following such second notice, Tenant shall be deemed to have approved of Landlord’s determination of the Minimum Monthly Rent during the Initial Year as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice, which determination shall be final and binding on Landlord and Tenant. If Tenant delivers written notice to Landlord objecting to Landlord’s determination, then Landlord and Tenant shall, within fifteen (15) business days after Tenant’s delivery of such written notice, agree upon an accounting firm to review Landlord’s records in order to determine the Minimum Monthly Rent during the Initial Year. If Landlord and Tenant cannot agree upon an accounting firm for purposes of determining the Minimum Monthly Rent during the Initial Year, then an accounting firm shall be appointed by a referee under the Judicial Reference procedures of Section 19.1 of the Lease. Any and all costs of such accounting firm that are incurred in reviewing Landlord’s records and/or determining the Minimum Monthly Rent for the Initial Year shall be split evenly by Landlord and Tenant, and shall not be included in Operating Expenses or as part of the Landlord’s Actual Total Project Costs. However, in the event such accounting firm ultimately determines that (a) Landlord’s calculation of the Minimum Monthly Rent for the Initial Year is more than five percent (5%) greater than the accounting firm’s determination, and Tenant’s calculation of the Minimum Monthly Rent for the Initial Year is within five percent (5%) of the accounting firm’s determination, Landlord shall reimburse Tenant for all such accounting firm costs that are paid by Tenant; or (b) Tenant’s calculation of the Minimum Monthly Rent for the Initial Year is more than five percent (5%) less than the accounting firm’s determination, and Landlord’s calculation of the Minimum Monthly Rent for the Initial Year is within five percent (5%) of the accounting firm’s determination, Tenant shall reimburse Landlord for all such accounting firm costs that are paid by Landlord.

     c. Tenant’s Obligation to Pay Landlord’s Determination of the Minimum Monthly Rent subject to Resolution of Any Tenant Objection. Notwithstanding anything to the contrary contained herein, if Tenant delivers written notice to Landlord objecting to Landlord’s determination of the Minimum Monthly Rent, Tenant shall be required to pay Landlord, as Minimum Monthly Rent, and until such time that the amount of the Minimum Monthly Rent has been finally determined in accordance with Section 5.b above, Tenant shall pay, as the estimated amount of Minimum Monthly Rent, an amount equal to Three and 93/100ths Dollars ($3.93) per RSF of Building per month. However, on the first day of the month following the applicable accounting firm’s final determination of the Minimum Monthly Rent for the Initial Year, there shall be an adjustment made to the Minimum Monthly Rent payment then due for the difference between the amount of Minimum Monthly Rent Tenant has paid to Landlord since the Commencement Date and the amount that Tenant would have paid if the Minimum Monthly Rent as determined pursuant to Section 5.b above had been in effect as of the Commencement Date.

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SCHEDULE 1
Project Budget Summary

Chamberlin Associates
180 Oyster Point: Project Budget Summary
Tenant: ELAN

PROJECT INFORMATION
Estimated Building Size:	100,000
Land Area (acres):	2.36

PROJECT BUDGET

		Percent Total			Cost/RSF		Cost
	Land:		24.57	%	$	106.25	$	10,625,000
++	Shell, Site, Offsite		35.95	%	$	155.48	$	15,548,474
	Finish Allowance		15.26	%	$	66.00	$	6,600,000
++	Financing Fees,Costs,Interest		6.97	%	$	30.12	$	3,012,500
	Interest On Equity		2.94	%	$	12.70	$	1,269,688
++	Entitlement, Permit Fees		3.12	%	$	13.50	$	1,350,000
*	Direct Expense		7.73	%	$	33.44	$	3,344,078
	General And Admin		3.47	%	$	15.00	$	1,500,000
	Total Project Cost		100	%	$	432.49	$	43,249,740

OPERATING BUDGET
Net Rent	$	3.35
Annual Rent	$	40.20

++	baseline cost factors
*	Includes architectural engineering, entitlements and permits, utility hookups, taxes/exp, contingency

EXHIBIT E
TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

Tenant agrees to comply with the Transportation Demand Management (“TDM”) measures as outlined in the 180 Oyster Point Boulevard TDM Program report (“the TDM Report”), dated October 2006 and published by Ferh & Peers, an independent transportation consultant. The purpose of the TDM program is to develop a set of strategies, measures and incentives to encourage Tenant to walk, bicycle, use public transportation, carpool or use other alternatives to driving alone when traveling to and from work, and is required by the City of South San Francisco.

a) TDM Coordinator: Tenant will designate a TDM coordinator for the site. The TDM coordinator will promote the TDM program, activities, and features to all employees, and will conduct the monitoring/reporting process. The TDM coordinator will develop an on-site transportation information center with SamTrans, BART, and CalTrain schedules and maps. The TDM coordinator will provide information via new employee orientation packets, flyers, posters, email, and educational programs. The TDM coordinator’s role will also include actively marketing alternative mode use, administering the carpool and vanpool matching program, promoting special programs such as Bike-to-Work Day or Carpool Week, and overseeing the guaranteed ride home program (working with a local taxi service or rental car agencies). The TDM coordinator will also conduct biannual employee commute surveys to identify the need for mode specific promotional material and educational programs.

b) Carpool/Vanpool Matching Services: The TDM coordinator will provide an internet link to the 511.org Rideshare website to access ride matching services, from its intranet website, if available. The TDM coordinator will also administer an on-site carpool and vanpool matching service for employees and maintain a list of available vanpools that provide service between the Oyster Point offices and various points in the Bay Area.

c) Guaranteed Ride Home Program: Tenant will participate in the Peninsula Traffic Congestion Relief Alliance’s (the “Alliance”) Guaranteed Ride Home program, which will be managed by the TDM coordinator.

d) Information Boards and Kiosks: The TDM coordinator will be responsible for maintaining an up-to-date display for the TDM Program located within the lobby of the building. The display will include shuttle maps and schedules, transit maps and schedules, bicycle facility maps, information regarding carpool and vanpool matching services, and information regarding alternative commute subsidies.

e) Promotional Programs: The TDM coordinator will manage promotional programs that include new employee orientation packets, flyers, posters, email, educational programs, and the Guaranteed Ride Home program.

f) Shuttle Bus Service: The TDM coordinator will coordinate with the Alliance to help fund their shuttle program and to identify on-site shuttle stops, if possible. The TDM coordinator will also manage participation in the Alliance’s mid-day service on the Dasher Shuttle to downtown South San Francisco.

g) TMA Membership: The TDM coordinator will participate in a local transportation management association and work with the Alliance to create a Transportation Action Plan.

		City of South
		San Francisco
TDM Measure	Description	Municipal Code
Required Measures
Bicycle Racks and Lockers	Six bicycle racks and four bicycle lockers will be provided on-site.	20.120.040 (A, B)
Carpool/Vanpool Matching Services	The TDM coordinator will provide ride-matching services for carpools and vanpools users thorough 511.org and an internal program.	20.120.040 (C)
TDM Coordinators	The tenants of the building will designate a TDM coordinator.	20.120.040 (D)
Guaranteed Ride Home Program	Employees will be able to utilize the Alliance’s free guaranteed ride home program for emergencies via taxicabs or rental cars.	20.120.040 (G)
Information Boards and Kiosks	The building lobby will include a permanent display of commute alternative information.	20.120.040 (H)
Promotional Programs	The TDM coordinator will provide new employee orientation packets, flyers, posters, email, and educational programs.	20.120.040 (L)
Showers and Changing Rooms	Two shower facilities with ten lockers will be provided on-site.	20.120.040 (M)
Shuttle Bus Service	The tenants will be able to use the Oyster Point BART, Gateway Area Caltrain, and the Oyster Point Caltrain Shuttles.	20.120.040 (N)
TMA Membership	The tenants will join the Peninsula Traffic Congestion Relief Alliance.	20.120.040 (O)

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		City of South
		San Francisco
TDM Measure	Description	Municipal Code
Additional Required Measures
Subsidized Transit Tickets	The tenants will subsidize transit tickets with Commuter Checks.	20.120.050 (A)
Flex-Time	Ten percent of all employees will be allowed flexible work hours.	20.120.050 (D)
On-Site Vanpool Program	The TDM coordinator will provide an on-site ride-matching service for carpools and vanpools.	20.120.050 (J)
Pay for Park and Ride Lots	The tenants will subsidize park and ride costs at transit stations.	20.120.050 (J)
Downtown Dasher	The tenants will be able to use the Downtown Dasher service.	20.120.050 (J)

Additional Required Measures may be substituted with alternate additional measures, so long as the programmatic credits from the alternate measures meet or exceed the programmatic credits of the measures identified in the 180 Oyster Point Boulevard TDM Program, dated October 2006.

Monitoring

The TDM coordinator will monitor the program by conducting a statistically valid annual employee survey, beginning one year after tenant occupancy. The TDM coordinator may use information from the employee surveys to adjust existing or implement new TDM program measures. The TDM coordinator will submit a summary report presenting the findings of the annual survey to the South San Francisco Economic Development Director. The TDM coordinator will also work with South San Francisco Economic Development staff to document the effectiveness of the TDM program through triennial reporting. Independent consultants, retained by the city and paid for by Tenant, will measure, through observation, the alternative mode use achieved at 180 Oyster Point Boulevard every three years, beginning three years after Tenant’s occupancy. If the alternative mode use goals are not achieved, the TDM coordinator will provide an explanation of how and why the goal has not been reached and a detailed description of additional measures that will be adopted to attain the required mode use. The independent consultants will submit the findings of the triennial survey to the South San Francisco Economic Development Director.

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EXHIBIT F
FINAL BUILDING/PARKING/SERVICE AREA PLAN

EXHIBIT G
GUARANTY

          IN CONSIDERATION OF, and as an inducement for the execution by Chamberlin Associates 180 Oyster Point Blvd., LLC, a California limited liability company (“Landlord”), of that certain Lease dated June 1, 2007 (the “Lease”), between Landlord and Elan Pharmaceuticals, Inc., a Delaware corporation (“Tenant”), with respect to certain premises located in South San Francisco, California, commonly referred to as 180 Oyster Point (as more particularly described in the Lease, the “Premises”), the undersigned Elan Corporation, plc, a public limited company organized under the laws of Ireland (“Guarantor”) has executed and delivered this Guaranty. Guarantor acknowledges that Tenant is a subsidiary of Guarantor and therefore Guarantor will benefit when Landlord enters into the Lease. This Guaranty is given as security for the performance of Tenant’s payment and performance obligations under the Lease.

          1. Guarantor hereby guarantees to Landlord, its successors and assigns, the full and prompt payment of the rent and all other sums and charges payable by Tenant, its successors and assigns, under the Lease, and further hereby guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant, its successors and assigns, subject in each case, to the notice and cure period rights of Tenant under the Lease, if any. Guarantor hereby covenants and agrees to and with Landlord, its successors and assigns, that if default shall at any time be made by Tenant, its successors and assigns, in the payment of any such rent or any or all such other sums or charges, or in the performance and observance of any of the covenants, terms, conditions or agreements contained in the Lease, Guarantor shall forthwith pay such rent and other sums and charges, and any arrears thereof, to Landlord, its successors and assigns, and will forthwith faithfully perform and fulfill all of such terms, covenants, conditions and agreements. Guarantor shall also forthwith pay to Landlord all damages, costs and expenses that may arise in consequence of any default by Tenant, its successors and assigns, under the Lease, including without limitation all reasonable attorneys’ fees, and disbursements incurred by Landlord or caused by any such default and/or by the enforcement of this Guaranty.

               Tenant has delivered to Landlord a Letter of Credit (as defined in the Lease) as protection for the performance by Tenant of all of its obligations under the Lease and for all losses and damages Landlord may suffer, or that Landlord reasonably estimates it may suffer, as a result of any breach or default by Tenant under the Lease. Notwithstanding anything to the contrary contained in this Guaranty, although the application of the amounts drawn by Landlord under the Letter of Credit shall not reduce Guarantor’s liability under this Guaranty, the obligations and liabilities of Guarantor hereunder are nevertheless limited to the extent the amount of liability outstanding or payment due to the Landlord under the Lease (the “Deficiency”) is greater than the amount held by Landlord as part of the Letter of Credit, in which case, as long as Landlord is not prevented by law or any action by Tenant or any creditor of Tenant, either at law or in equity, including without limitation any bankruptcy or insolvency law (“Operation of Law”), from applying any funds available under the Letter of Credit to the Deficiency, no claim shall be made under this Guaranty until the amount of the Deficiency exceeds the amount held by, or immediately available to, Landlord as security for Tenant’s obligations under the Lease, except to the extent that Landlord draws less than the full amount available under the Letter of Credit and Tenant does not restore the amount drawn to the full amount of the Letter of Credit within the time period provided in the Lease, or Landlord is prevented by Operation of Law from demanding or collecting such amount, then Guarantor’s obligation under this Guaranty shall include the amount drawn and properly expended by Landlord toward the Tenant’s defaulted obligation, and Landlord shall have the right at any time to make a claim against Guarantor for such drawn and expended amount.

          2. This Guaranty is an absolute and unconditional guaranty of payment and of performance. The obligations of Guarantor under this Guaranty are independent of the obligations of Tenant under the Lease. This guaranty shall be enforceable against guarantor without the necessity of any suit or proceedings on Landlord’s part of any kind or nature whatsoever against Tenant, its successors and assigns, or any other guarantor of all or any portion of Tenant’s obligations to Landlord under the Lease, or any security for Tenant’s obligations under the Lease, and without the necessity of any notice of nonpayment, nonperformance or nonobservance, or any notice of acceptance of this Guaranty, or any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor’s obligations hereunder shall in no way be terminated, affected, diminished or impaired by reason of Landlord’s assertion of, or failure to assert, against Tenant or against Tenant’s successors and assigns, any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease, or by relief of Tenant from any of Tenant’s obligations under the Lease or otherwise by (a) the release or discharge of Tenant in any creditors’ proceedings, receivership, bankruptcy or other proceedings, (b) the impairment, limitation or modification of the liability of Tenant or the estate of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant’s said liability under the Lease, resulting from the operation of any present or future provision of the United States Bankruptcy Code or other statute or from the decision in any court, or (c) the rejection or disaffirmance of the Lease in any such proceedings.

          3. Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) Sections 2787 to 2855, inclusive, of the California Civil Code; (ii) any disability or other defense of Tenant or any other person; (iii) the cessation or limitation from any cause whatsoever, other than payment or performance in full, of the obligations of Tenant under the Lease; (iv) any lack of authority of any officer, director, partner, agent or other person acting or purporting to act on behalf of Tenant if a corporation, partnership or any other type of entity, or any defect in the formation of such Tenant; (v) any act or omission by Landlord which directly or indirectly results in or aids the discharge of Tenant or any portion of the Tenant’s obligations under the Lease by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Landlord against Tenant; or (vi) any modification of the Lease. Guarantor further waives all rights and defenses Guarantor may have arising out

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of (A) any election of remedies by Landlord, even though that election of remedies destroys Guarantor’s rights of subrogation or Guarantor’s rights to proceed against Tenant for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of Tenant’s obligations under the Lease now or at any time hereafter being secured by real property, or by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Tenant’s obligations under the lease, including, but not limited to, any rights or defenses based upon Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure.

          4. This Guaranty shall be a continuing guaranty and the liability of Guarantor shall in no way be affected, modified or diminished by reason of any assignment, amendment, renewal, supplement, modification or extension of the Lease or by reason of any modification or waiver of, or change in, any of the terms, covenants, conditions or provisions of the Lease, or by reason of any extension of time that may be granted by Landlord to Tenant, its successors or assigns or a changed or different use of the Premises consented to in writing by Landlord, or by reason of any dealings or transactions or matters or things occurring between Landlord and Tenant, its successors or assigns, whether or not notice thereof is given to Guarantor.

          5. Guarantor shall be fully bound by any consents, waivers or releases granted by Tenant in favor of Landlord, made either with or without notice to or the consent of Guarantor.

          6. Landlord’s consent to any assignment or assignments, and successive assignments by Tenant and Tenant’s assigns of the Lease, made either with or without notice to Guarantor, shall in no manner whatsoever release Guarantor from any liability as Guarantor.

          7. The assignment by Landlord of the Lease and/or the avails and proceeds thereof, made either with or without notice to Guarantor, shall in no manner whatsoever release Guarantor from any liability as Guarantor. Landlord may without prior notice to Guarantor assign this Guaranty to the grantee of Landlord’s interest in the Premises pursuant to any conveyance thereof, or to any lender pursuant to a loan secured by Landlord’s interest in the Premises. Landlord shall use reasonable efforts to provide notice to Guarantor of any such assignment, provided that such notice may be given after the occurrence of any such assignment, and provided further that in any event the failure of Landlord to provide any notice shall not affect the validity or enforceability of this Guaranty.

          8. All of the Landlord’s rights and remedies under the Lease or under this Guaranty are intended to be distinct, separate and cumulative, and no such right or remedy therein or herein mentioned is intended to be in exclusion of, or a waiver of, any of the others. The obligations of Guarantor hereunder shall not be released by Landlord’s receipt, application or release of security given for the performance and observance of covenants and conditions required to be performed and observed by Tenant under the Lease, nor shall Guarantor be released by the maintenance of or execution upon any lien which Landlord may have or assert against Tenant and/or Tenant’s assets.

          9. Until all the covenants and conditions in the Lease on Tenant’s part to be performed and observed are fully performed and observed, Guarantor (a) shall have no right of subrogation against Tenant by reason of any payments or acts of performance by Guarantor in compliance with the obligations of Guarantor hereunder, (b) waives any right to enforce any remedy which Guarantor now or hereafter shall have against Tenant by reason of any one or more payments or acts of performance in compliance with the obligations of Guarantor hereunder, and (c) subordinates any liability or indebtedness of Tenant now or hereafter held by Guarantor to the obligations of Tenant to Landlord under the Lease, subject, however, to the limitations set forth in Paragraph 1 above relating to the application of the Security Deposit to any Deficiency amount.

          10. Guarantor hereby irrevocably appoints as its agents for the service of process in any action or proceeding arising out of or in connection with this Guaranty any and all of the following: (a) Tenant, or if Tenant is more than one person, then any one of them, or if Tenant is a corporation, trustee or partnership all persons authorized to accept service on behalf of Tenant under California law, or (b) if Tenant is not available for receipt of service on behalf of Guarantor in accordance with the notice provisions of the Lease, C T Corporation System, 818 West Seventh Street, Los Angeles, CA 90017; provided, however, that Guarantor shall have the right to change its address for notice under this Guaranty from time to time upon reasonable advance written notice to Landlord, provided that the changed address shall be a company or party in the State of California. This provision does not affect any right to serve process upon Guarantor in any other manner permitted by law.

          11. The parties agree that Landlord may, at its election, bring an action or actions in the state or federal courts located in the County of San Mateo and/or the City and County of San Francisco, or commence an arbitration or arbitrations in the County of San Mateo, to enforce this Guaranty and/or to resolve any disputes arising out of or in connection with this Guaranty, and Guarantor hereby irrevocably consents to the jurisdiction of such courts and arbitration tribunals.

               If Landlord elects to commence an arbitration, the matter shall be determined by final and binding arbitration conducted in the County of San Mateo, California, and administered by and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”), provided that all proceedings and any decision shall be presided over and rendered by one sole arbitrator. The arbitrator shall be a retired California or federal judge selected in accordance with the Rules. The sole arbitrator will decide the matter. The arbitrator will be directed to: (1) require all testimony to be transcribed; (2) require any award or decision to be accompanied by findings of fact and a statement of reasons for such award or decision; (3) allow reasonable discovery; and (4) render its award or decision within thirty (30) days of being appointed.

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               The prevailing party, as determined by the court in the event an action is commenced as provided herein, or the arbitrator, in the event an arbitration is commenced as provided herein, shall be entitled to recover its reasonable attorneys’ fees and costs expended in any action or arbitration proceeding, including court fees and the fees of the American Arbitration Association, as appropriate, as well as in any subsequent proceeding required to enforce the judgment, ruling or arbitration award.

               Any judgment, award, relief or remedy obtained by Landlord in connection with this Guaranty shall be recognized and may be entered and enforced against Guarantor in any jurisdiction, court, tribunal or body in the United States and abroad, including, without limitation, any court of Ireland (including the High Court). Any judgment, award, relief or remedy obtained by Guarantor in connection with this Guaranty shall be recognized and may be entered and enforced against Landlord in the state or federal courts located in the County of San Mateo and/or the City and County of San Francisco.

          12. As used herein, the term “Tenant” shall mean Elan Pharmaceuticals, Inc., a Delaware corporation, and any successor to its interest under the Lease, whether by assignment, operation of law or otherwise (including, without limitation, any receiver, trustee, liquidator or assignee for the benefit of creditors). This Guaranty shall continue in full force and effect notwithstanding any sale or other disposition of Guarantor’s financial interest, whether direct or indirect, in Tenant, or Tenant’s disposition of its interest, whether direct or indirect, in the Lease. Guarantor acknowledges that any such disposition of Guarantor’s financial interest in Tenant or of Tenant’s interest in the Lease will result in a benefit to Guarantor.

          13. This Guaranty shall be governed by and construed in accordance with California law. The terms, covenants, agreements and conditions herein contained shall apply to and bind the heirs, successors, executors, administrators and assigns of Guarantor. If any provision of this Guaranty shall be determined to be illegal or unenforceable, such determination shall not affect any other provision of this Guaranty and all such other provisions shall remain in full force and effect.

          14. Guarantor hereby represents and warrants to Landlord that the persons signing and delivering this Guaranty on behalf of Guarantor are fully authorized to do so; that Guarantor has the full right, power and authority to enter into, deliver and perform this Guaranty; that all requisite action necessary to authorize Guarantor to enter into, deliver, and perform its obligations hereunder have been taken; that this Guaranty is a valid and binding obligation of Guarantor enforceable in accordance with its terms; and that this Guaranty does not conflict with or violate any of Guarantor’s organizational documents, or any provision of any agreement or judicial order to which Guarantor is subject.

     IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of the 1^st of June, 2007.

GUARANTOR: Elan Corporation, plc, a public limited company organized under the laws of Ireland
By:	/s/ Shane Cooke
	Name:	Shane Cooke
	Title:	Executive Vice President and Chief Financial Officer A CEO, President or any Vice President
By:	/s/ Liam Daniel
	Name:	William Daniel
	Title:	Secretary A Secretary, any Assistant Secretary, the Chief Financial Officer or any Assistant Treasurer

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EXHIBIT H

TERMS UNDER WHICH THE LETTER OF CREDIT MAY BE REDUCED

This Exhibit H forms a part of that certain Lease (the “Lease”) by and between Chamberlin Associates 180 Oyster Point Blvd., LLC, as Landlord, and Elan Pharmaceuticals, Inc., as Tenant, to which this Exhibit is attached. All capitalized terms referred to in this Exhibit shall have the same meaning provided in the Lease, except where expressly provided to the contrary in this Exhibit.

     1. Pursuant to Sections 1.2 and 22 of the Lease, Tenant is obligated to deliver to Landlord a Letter of Credit in the initial face amount of Six Million Dollars ($6,000,000.00). During the Term of the Lease, the amount of the Letter of Credit may be reduced in accordance with the terms of this Exhibit H and Section 22 of the Lease, provided that no uncured event of default by Tenant exists under the Lease (following the expiration of the applicable cure period, if any) at the time that Tenant is eligible (and requests) such reduction. Moreover, any fees and costs incurred by Tenant pursuant to any reductions in the Letter of Credit in accordance with this Exhibit H or Section 22 of the Lease shall be paid by Tenant at its sole cost and expense.

     2. If Tenant is entitled to reduce the Letter of Credit in accordance with this Exhibit H and Section 22 of the Lease, Tenant shall deliver written notice to Landlord stating that Tenant is entitled to reduce the Letter of Credit as set forth herein, certifying that the applicable conditions of reduction have been satisfied and stating the reduced amount of the Letter of Credit. Landlord shall, within ten (10) business days following receipt of such written notice from Tenant, authorize the reduction of the Letter of Credit in the form reasonably required by the issuing bank. If Landlord fails to respond to such written request by Tenant within such ten business day time period, Tenant shall provide a second written request to Landlord for such reduction in the Letter of Credit and if Landlord fails to respond within three (3) business days after receipt of such second written request, Tenant shall have the right to authorize such reduction on behalf of Landlord, as Landlord’s agent for such limited purpose. Upon receiving such authorization from Landlord (or deemed authorization if Landlord fails to respond as provided above), Tenant may obtain either a new reduced Letter of Credit or certificate of amendment to the existing Letter of Credit, stating that the amount of the Letter of Credit has been reduced as permitted by this Exhibit H and Section 22 of the Lease, and provide such new Letter of Credit or certificate of amendment to Landlord. Upon receipt of a new reduced Letter of Credit in accordance with this Section 2, Landlord shall, within ten (10) business days following the receipt thereof, deliver the previously issued Letter of Credit to the issuing bank or Tenant in accordance with Tenant’s instructions. Similarly, if the Letter of Credit is reduced and if Tenant is thereafter obligated to increase the Letter of Credit as required herein, Tenant shall, within ten (10) business days after Tenant’s actual knowledge of the occurrence of the event giving rise to the obligation (which may be in the form of a written notice from Landlord notifying Tenant of the occurrence of such event), apply to the issuing bank for either a new Letter of Credit or a certificate of amendment to the existing Letter of Credit in the increased amount, and provide such new Letter of Credit or certificate of amendment to Landlord within five (5) business days following the issuance thereof by the issuing bank. Within ten (10) business days after receiving a new Letter of Credit from Tenant, Landlord shall deliver the previously issued Letter of Credit to the issuing bank or to Tenant in accordance with Tenant’s instructions.

     3. Subject to the terms of the Lease and this Exhibit H, Tenant shall be permitted to reduce the Letter of Credit (a) in two separate reductions occurring after the fifth (5^th) and after the tenth (10^th) anniversary of the Lease Commencement Date; and (b) in annual reductions at anytime after the third (3^rd) anniversary of the Lease Commencement Date that the Bond Criteria (as defined in Section 3(b) below) has been satisfied, as determined on an annual basis. However, under no circumstances shall the total balance of the Letter of Credit be less than Two Million Dollars ($2,000,000).

     (a) Reduction of Letter of Credit Five (5) and Ten (10) Years After the Lease Commencement Date. Tenant shall have the right to reduce the amount of the Letter of Credit as follows:

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          (i) Upon the fifth (5^th ) anniversary of the Lease Commencement Date, or at such time thereafter (if the Reduction Requirements are not satisfied on such anniversary date) that Tenant has satisfied the Reduction Requirements (as defined below), Tenant shall be allowed to reduce the Letter of Credit by twenty percent (20%) from the original Letter of Credit amount; and

          (ii) Upon the tenth (10^th ) anniversary of the Lease Commencement Date, or at such time thereafter (if the Reduction Requirements are not satisfied on such anniversary date) that Tenant has satisfied the Reduction Requirements, Tenant shall be allowed to reduce the Letter of Credit by an additional twenty percent (20%) from the original Letter of Credit amount.

     The “Reduction Requirements” for Tenant’s right to reduce the Letter of Credit as set forth in paragraphs (i) and (ii) of this Section 3(a) shall consist of the following: (A) no uncured default by Tenant shall exist under the Lease, (B) Elan Corporation, plc, a public limited company organized under the laws of Ireland (“Guarantor”) and Tenant each is in compliance with all financing (including loan, bond and note) covenants at the eligible reduction date, and (C) Guarantor has completed four (4) consecutive quarters of profit from operations with an operating income of fifty million dollars ($50,000,000) or greater on an annualized basis. As a condition to any such reduction, Tenant shall provide Landlord with written documentation evidencing that Tenant and Guarantor are in compliance with the applicable requirements of clauses (B) and (C) above.

     (b) Reduction of Letter of Credit Based On Bond Rating for at Least 24 Consecutive Months.

     In addition to the reductions permitted under Section (a) above, and provided the total balance of the Letter of Credit does not drop below Two Million Dollars ($2,000,000), Tenant shall also be allowed to reduce the Letter of Credit on an annual basis beginning on the third (3^rd) anniversary of the Lease Commencement Date (along with each subsequent anniversary date, an “LC Reduction Date”), if Guarantor’s bond rating meets the following criteria (the “Bond Criteria”) on such LC Reduction Date, or at such time following the LC Reduction Date that such Bond Criteria are satisfied:

• If Guarantor at no time in the twenty-four (24) months preceding the applicable LC Reduction Date has received bond ratings by any of the following agencies below the specified rate: “A2” by Moody’s, “A” by Standard & Poor’s or Fitch, then Tenant shall have the right to reduce the Letter of Credit in an amount equal to five percent (5%) of the original required amount of the Letter of Credit. Furthermore, for each consecutive year that Guarantor is able to satisfy the requirements of the preceding sentence, Tenant shall be entitled to an additional reduction of five percent (5%) of the originally required amount of the Letter of Credit on or after each subsequent LC Reduction Date when such preceding requirements have been satisfied. As a condition to any such reduction, Tenant shall provide Landlord with written documentation evidencing that Guarantor has satisfied the Bond Criteria during the applicable period.

• If Guarantor’s bond rating drops below the Bond Criteria specified above, Tenant will not be eligible for further reductions until two (2) consecutive years of such ratings are again achieved, in which case, Tenant shall have the right to reduce the Letter of Credit by five percent (5%) of the original required amount on each subsequent LC Reduction Date, or at such time following the LC Reduction Date that such ratings are again achieved, as set forth above.

• Should Guarantor’s bond rating fall below “Baa3” by Moody’s or “BBB-” by Standard & Poor’s or Fitch for four (4) consecutive quarters, Tenant shall restore the Letter of Credit to the full amount that Tenant would have been required to maintain had Tenant not been allowed to reduce the Letter of Credit based on the Bond Criteria otherwise set forth in this Section (b).

• All reductions are contingent upon Guarantor and Tenant being in compliance with all forms of financing covenants at the time of such reduction, and upon there being no uncured default by Tenant under the Lease or by Guarantor under its guaranty of the Lease (following the expiration of the applicable cure period, if any) at the time that Tenant is eligible for (and requests) such reduction.

• The reduction in the Letter of Credit based on the Bond Criteria in this Section 3(b) may be combined with the reduction in the Letter of Credit pursuant to Section 3(a) above,

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provided that under no case shall the minimum amount of the Letter of Credit be reduced below Two Million Dollars ($2,000,000). Subject to the foregoing, the maximum Letter of Credit reduction in any one year will occur when the reduction of the Letter of Credit based on the Bond Criteria is combined with the twenty percent (20%) reduction based on the Reduction Requirements specified in Section (a) above.

Below is an example of the Letter of Credit reduction over the term of the Lease:

Reduction Periods (Years from Lease Commencement)

Example of reductions with all factors achieved, but no appropriate Bond Ratings achieved

Lease Year(1)	1			2			3			4			5			6			7			8			9			10
% Reduction (2):		0	%		0	%		0	%		0	%		20	%		0	%		0	%		0	%		0	%		20	%
$ Reduction:	$	0		$	0		$	0		$	0		$	1,200,000		$	0		$	0		$	0		$	0		$	1,200,000
Balance Remaining:	$	6,000,000		$	6,000,000		$	6,000,000		$	6,000,000		$	4,800,000		$	4,800,000		$	4,800,000		$	4,800,000		$	4,800,000		$	3,600,000

Example of reductions with all factors achieved, with earlier reductions resulting from appropriate Bond Ratings

Lease Year	1	2	3			4			5			6			7			8			9			10		11		12		13
% Reduction:				5	%		25	%		5	%		5	%		5	%		5	%		16.67	%
$ Reduction:			$	300,000		$	1,500,000		$	300,000		$	300,000		$	300,000		$	300,000		$	1,000,000
Balance Remaining:			$	5,700,000		$	4,200,000		$	3,900,000		$	3,600,000		$	3,300,000		$	3,000,000			2,000,000	(3)	$	2,000,000	$	2,000,000	$	2,000,000	$	2,000,000
Assumption:		rating	rating			rating			rating			rating			rating			rating			rating			rating		rating		rating		rating
		achieved	maintained			maintained			maintained			maintained			maintained			maintained			maintained			maintained		maintained		maintained		maintained

Footnote 1: Number of years after Lease Commencement

Footnote 2: Applied to initial $6,000,000 deposit

Footnote 3: Minimum Letter of Credit amount achieved in Year 13 after Lease Commencement

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EXHIBIT I
LIST OF BASELINE ENVIRONMENTAL REPORTS

TITLE	PREPARED BY	DATE
Soil and Groundwater Management Plan	Golder Associates	March-07
First Quarter 2007 Groundwater Monitoring Report	Golder Associates	February-07
Soil and Light Non-Aqueous Phase I Liquid Remedial Evacuation	Golder Associates	June-06
Revision to the Work Plan for Light Non-Aqueous Phase Liquid Remediation	Golder Associates	February-06
Phase I Environmental Site Assessment	Piers Environmental Svcs	December-05
Alternative Evaluation and Work Plan for Light Non-Aqueous Remediation	Golder Associates	November-05
Supplemental Site Characterization Report	Golder Associates	November -05
Additional Site Characterization and Second Quarter 2004 Ground water Monitoring Report	Conor Pacific/EFW	August-04
Phase I Environmental Site Assessment	Treadwell & Rollo	May-00
Level Two Environmental Site Assessment	Lumina Technologies	February-00
Report of Preliminary Hydrocarbon Investigations	Connor Pacific/EFW	August-99

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EXHIBIT J
DEPICTION OF SERVICE AREA

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Exhibit K
Rules and Regulations Governing Alterations

These Rules and Regulations Governing Alterations set forth those rules and regulations to be observed by Tenant pursuant to any alterations, improvements or modifications which may be made by or for Tenant following the commencement of the Lease, but shall not apply to the completion of any initial tenant improvements in process as of the commencement date of the Lease. In the event of any inconsistency between the terms of this Exhibit and the terms of the Lease, the terms of the Lease shall prevail. All capitalized terms in this Exhibit shall have the meanings set forth in the Lease.

General Requirements:

1. Prior to the commencement of any work in the Building, an orientation meeting is required between the General Contractor, Landlord, and the Tenant in order to outline and identify the general parameters and requirements for the work involved.

2. Tenant must provide Landlord in writing a complete schedule for the work, including start date, demolition time frame (if applicable), material delivery schedule, critical project dates, and standard working hours, which will be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. This communication and approval will help to ensure the quickest possible access to construction areas.

3. Insurance certificates, in compliance with the contractor insurance requirements section referenced in the Lease must be in possession of the Landlord prior to the commencement of the work.

4. Tenant is required to submit home, mobile, and office telephone numbers for the Tenant’s project manager (or if none, General Contractor) to Landlord prior to construction in the event that Tenant or General Contractor must be contacted regarding the project after hours or on weekends.

5. Smoking is not permitted in any area of the Building.

6. During break time the contractors’ and subcontractors’ employees will not congregate in any exterior parking area of the Building.

7. Tenant will provide Landlord with periodic updates regarding the status of the Tenant’s work, in accordance with the work schedule approved by Landlord as required above, and if reasonably requested by Landlord, Tenant will coordinate status meetings between those individuals involved in the Tenant finish process and Landlord. If the Premises are part of a multi-tenant building, the purpose of this meeting is to keep all interested parties advised of upcoming plans, problems and/or anticipation of changes in work scheduling.

Rules & Regulations Governing Alterations	Page 1
Elan Exhibit K 5-30

8. If the Premises are part of a multi-tenant building, then prior to the commencement of the work or delivery of any materials to the Premises, Tenant and Landlord will perform a walk-through inspection, including the space proposed for construction, the entrance and each and every passage of travel between the two points (including elevators, lobby, hallways, restroom, elevator cores, etc.) and identify any and all existing damage that is present prior to the start of construction. Immediately after the completion of construction, General Contractor, and Landlord will perform a post construction walk-through and identify all areas of damage. Costs to repair any such damage will be paid by Tenant.

9. General Contractor shall ensure that any portion of the work area and project site that are visible from the exterior of the Premises are clean of all litter left by construction crews on a daily basis.

10. If the Premises are part of a multi-tenant building, General Contractors’ and Subcontractors’ employees shall park in the areas agreed to by Landlord and Tenant and Tenant understands that any vehicle parked in unauthorized areas may be towed at automobile owner’s or contractor’s expense.

11. It is understood that all Sub-Contractors performing services at the Building are experienced and professional in their particular field of expertise and are solely under the direction of the General Contractor. It is the responsibility of Tenant to be certain that these Rules and Regulations are distributed to, understood and complied with by General Contractor and by every individual under the direction of the General Contractor.

12. General Contractor and their Sub-Contractors are responsible for the safekeeping of their own equipment, supplies and tools. The Landlord will not be responsible for any missing items.

13. If the Premises are part of a multi-tenant building: no supplies, tools, etc., are to be placed outside the construction area; doors into common area corridors are to remain closed at all times; and if an entry door to the Premises from a common area corridor has to be installed, a plastic curtain must be hung to stop dust from entering public areas.

14. If the Premises are part of a multi-tenant building, any direct dust, paint debris tracked into corridors or damage, which in the opinion of the Landlord is over and above normal, minimal limits, must be cleaned or corrected immediately by the Contractor. Should the Contractor, after notification, not correct the situation, Landlord or Tenant shall correct it at the Tenant’s sole expense.

15. If the Premises are part of a multi-tenant building, no radios, tape players or like, may be operated within the Premises during normal hours if such devices are audible outside the Premises.

16. No sign, placard, picture, name, advertisement or notice visible from the exterior of the Premises will be inscribed, painted, affixed or otherwise displayed by Tenant or General

Rules & Regulations Governing Alterations	Page 2
Elan Exhibit K 5-30

Contractor in any part of the Building or Premises without prior written consent of the Landlord or Tenant. In the event of the violation of this rule by Tenant or General Contractor, Landlord or Tenant may remove the violating items without liability and may charge the expense incurred by such removal to the Tenant or Contractors violating this rule.

Building Specific Requirements:

1. Building Access: All contractors will enter the building through the loading dock doors and will use the freight elevator to access all construction floors.

2. After Hour’s Access and Cost: All access required outside of normal business hours, (7:00 A.M. to 5:00 P.M.) or any time on weekends would require prior authorization by the Tenant. It will be the General Contractor’s responsibility to grant access to any and all Sub-Contractors. If the Premises are part of a multi-tenant building and a Building Engineer is required to be present after normal business hours, the costs will be billed to the General Contractor.

3. Loading/Unloading Area:

a.	All large deliveries to the Building should be scheduled in advance by Tenant for arrival outside of the normal working hours if possible. If deliveries cannot be completed after hours, Tenant should schedule such deliveries with Landlord to avoid interference with the operational activities of any other tenants of the Building.
b.	All deliveries must be delivered through the loading dock entrance. Masonite, plywood boards, planks and like protection must be utilized wherever materials are to be rolled across carpeted or finished floor.

4. Freight Elevators: All contracted personnel must use the freight elevator for all construction work. Passenger elevators are for Tenant and its guests only and are NOT to be used by contractors for travel between floors

5. Demolition: The following rules and regulations apply:

a.	Building trash dumpsters are not to be utilized for construction debris of any kind.
b.	Prior approval of the location by the Tenant and Landlord is necessary for the placement of General Contractor’s dumpster.
c.	If the Premises are part of a multi-tenant building, the opening and/or removal of any medium pressure supply ducts must be scheduled for after hours, and must be immediately capped so when the system starts it can maintain static pressure.

Rules & Regulations Governing Alterations	Page 3
Elan Exhibit K 5-30

d.	Thermostats in the construction area of a multi-tenant floor of the Building are usually servicing zones in occupied suites and corridors. Therefore, such thermostats must not be turned off, removed, capped or remounted in a different location than the drawing identifies. All pneumatic lines are to be capped immediately should changes be required. Replacement thermostats or additional thermostats are required to match the building standard.
e.	All doors, frames, lights, sidelights, carpet pieces or any other material permanently fixed to the Premises and installed by Landlord or at Landlord’s expense are the property of the Building. Arrangements must be made to transport these items to the Building’s designated storage area.
f.	All construction debris must be transported during prescheduled time frames in Rubbermaid type container so as to not damage walls, floors, etc. If the Premises are part of a multi-tenant building, the staging of construction debris outside the construction area is strictly prohibited. General Contractor shall take special care to cover and protect all walls and outside corners.

6. Fire and Life Safety Systems: General Contractor and all associated Sub-Contractors must ensure with the Landlord’s designated representative that the fire system is off-line each day before the commencement of work. Any time reasonably required by Landlord’s personnel to respond to false alarms caused by an employee, agent or contractor of General Contractor or an associated Sub-Contractor will be charged back to Tenant. Persistent offenders will be removed from the approved Contractor list and no longer be permitted access to the Premises. Proposed fire detection equipment should be submitted to and reviewed by Landlord’s designated engineer before starting any work (including smoke detectors, flow switches, pull stations, fire dampers, duct detectors, etc.). The General Contractor will be required to bag each detector at the beginning of each day and is required to unbag all detectors at the end of each workday. Any troubles on the fire system that are caused by the General Contractor or any Sub-Contractors will be required to be corrected the same business day and any costs associated with said repairs will be the Tenant’s responsibility.

7. Alarm System Modification: Any change to the existing Building Fire Alarm System, including but not limited to relocation of horns, speakers, magnetic hold opens, Card Access System interface, etc., shall be planned and coordinated with Landlord. Any and all Work on these systems must be performed by the Building’s approved Contractor, specifically licensed and empowered to make changes to the existing system. All cost associated with modifications are to be made a part of General Contractor’s overall budget and the designated Contractor, identified by Landlord, shall become an additional Sub-Contractor to the General Contractor.

8. Scheduled walk-through: General Contractor should expect and anticipate that at a minimum, once each week, a representative from the Building’s Management or Engineering department shall schedule a walk-through inspection of the Premises in order to assess construction progress, assure compliance with these Rules and Regulations and/or inform the General Contractor of any special circumstances that may impact the construction progress.

Rules & Regulations Governing Alterations	Page 4
Elan Exhibit K 5-30

9. Disturbance to the Normal Course of Business: If the Premises are part of a multi-tenant building, any project or operation causing a potential disturbance to other tenants of the Building, such as but not limited to demolition, core drilling, powder actuated tools, etc. would typically only be permitted during non-business hours and must be scheduled in advance with Landlord. All costs associated with having the Landlord’s designated representative present after hours is the sole responsibility of Tenant and will be billed by the Landlord.

10. Use of Hazardous Substances: General Contractor shall use the Hazardous Substance Control Form any time hazardous substances are used on the facility required to be reported under OSHA requirements. This control form is to be turned into Landlord prior to the utilization of hazardous substances in conjunction with construction.

11. No kerosene, gasoline or other similar flammable liquid used in construction is permitted on the Premises except when in use and must never be left unattended; provided that bottled flammable gases typically utilized in construction activities may be stored in a safe and secure manner in locations approved by Landlord.

12. Core Drilling: Tenant must coordinate all core drilling locations with Landlord; and once such locations are approved, core drilling in any multi-tenant building may only take place outside of normal business hours. If Landlord reasonably requires x-raying of floor slabs for core drills and floor slab penetrations, such x-raying activities in multi-tenant buildings must be performed during non-business hours. The cost for any repairs to conduit or wiring that is damaged by core drilling shall be the sole responsibility of the Tenant.

13. Painting: If the Premises are part of a multi-tenant building, no painting, spraying or other work, which involves noxious fumes, is permitted during working hours of the Building, Monday through Friday (7:00 A.M. to 6:00 P.M.), and such work will have to be scheduled after hours or on weekends and will require the Building Engineer to set up the ventilation system to provide positive ventilation of the floor that these activities are taking place.

14. Cabling: The cabling contractor will be required to submit to Tenant the proposed mapping of the cabling through the building’s riser space as well as plenums. Prior Landlord and Tenant approval is required before cabling installation begins.

15. Ceiling. Electrical, plumbing or other services, which require access to the ceiling in the occupied tenant space, must be performed professionally, neatly and as quickly as possible. Fingerprints, dirt, construction debris, as well as replacement of any damaged ceiling tiles etc., shall be performed at Tenant’s cost and expense. If the Premises are part of a multi-tenant building, then in some cases, it may be necessary to schedule this work outside the Tenant’s normal business hours.

16. Janitorial Closets. Slop sinks are provided in the janitorial closets and this is the only water source available to the General Contractor and Sub-Contractors. If the Premises are part of a multi-tenant building, access to janitorial closets will be obtained through the Building

Rules & Regulations Governing Alterations	Page 5
Elan Exhibit K 5-30

Engineer. No debris is to be disposed of at janitors’ sinks (including, but not limited to, painting and drywall tool clean up).

17. Door Locks. All Tenant interior and exterior door locks must match the Building master system; therefore, all keying requirements must be coordinated by Tenant with Landlord.

18. Amendments. Landlord reserves the right at any time to reasonably change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s reasonable judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises and Building, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein.

Rules & Regulations Governing Alterations	Page 6
Elan Exhibit K 5-30

CONTRACTOR INSURANCE REQUIREMENTS

     Contractor shall maintain in full force and effect, during the time frame services are provided, insurance coverage of the types and in the amounts as required in the Lease.

Rules & Regulations Governing Alterations	Page 7
Elan Exhibit K 5-30

HAZARDOUS SUBSTANCE CONTROL FORM

Building Address:                                                             

Contractor Name:                                                             

Tenant Name:                                                             

Floor Number(s):                                                             

•	Hazardous Substances to be used during construction:
	(Attachment of MSDS is required)
•	Quantities to be stored on site during construction:
•	Intended use of hazardous substances:

Rules & Regulations Governing Alterations	Page 8
Elan Exhibit K 5-30

HAZARDOUS SUBSTANCE CONTROL (cont.)

Control measures that could be implemented in order to limit the exposure of hazardous fumes, over spray and airborne material as they affect the health and safety of Tenants, workers and employees.

Please indicate with yes (y) or no (n):

* Physical enclosure of construction zone	(y)	(n)
* Dilution of ventilation required	(y)	(n)
* Outside exhaust	(y)	(n)
* Off-site lacquer spraying	(y)	(n)
* Use of alternate products with lower hazardous effect characteristics	(y)	(n)
* Other (please state)

GENERAL CONTRACTOR IS RESPONSIBLE FOR THE REMOVAL OF ALL REMAINING CONSTRUCTION MATERIALS FROM THE SITE, ALSO INSURING THE PROPER HANDLING OF ANY HAZARDOUS SUBSTANCES.

EX-4.(B)(2)

Exhibit 4(b)(2)

STANDARD SINGLE-TENANT NET LEASE

CHAMBERLIN ASSOCIATES 200 OYSTER POINT, L.P.,
A California limited liability company,
As Landlord

AND

ELAN PHARMACEUTICALS, INC.,
A Delaware corporation,
As Tenant

SUMMARY OF EXHIBITS AND AMENDMENTS TO LEASE FORM

EXHIBIT A — LEGAL DESCRIPTION

EXHIBIT B — WORK LETTER

EXHIBIT C — RULES AND REGULATIONS

EXHIBIT D — CALCULATION OF BUILDING MINIMUM
MONTHLY RENT DURING FIRST YEAR OF TERM

EXHIBIT E — TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

EXHIBIT F — FORM OF LETTER OF CREDIT

EXHIBIT G — GUARANTY

EXHIBIT H — Intentionally Deleted

EXHIBIT I — LIST OF BASELINE REPORTS

EXHIBIT J — Intentionally Deleted

EXHIBIT K — RULES AND REGULATIONS GOVERNING ALTERATIONS

     1.1. DATE. This lease is dated for reference purposes only December 17, 2007.

     1.2. PARTIES AND NOTICE ADDRESSES

          1.2.1 LANDLORD: Chamberlin Associates 200 Oyster Point, L.P.

               1.2.1.1 ADDRESS FOR NOTICES TO LANDLORD

c/o Chamberlin Associates
5880 West Las Positas Boulevard, Suite 34
Pleasanton, CA 94588-8552
Attention: Anne Hoffman AND Rahn Verhaeghe
E-Mail: Legal@Chamb.com
             Rahn@Chamb.com

With a copy to:

Law Offices of Glenn M. Feeley
1660 Olympic Blvd., Suite 350
Walnut Creek, CA 94596
Attention: Glenn M. Feeley
E-Mail: glenn@gfeeley.com

          1.2.2 TENANT: Elan Pharmaceuticals, Inc.

               1.2.2.1 ADDRESS FOR NOTICES TO TENANT

Elan Pharmaceuticals, Inc.
800 Gateway Boulevard
South San Francisco, CA 94080
Attn: Rick Smith
E-Mail: charles.smith@elan.com

With a copy to:

Elan Pharmaceuticals, Inc.
800 Gateway Boulevard
South San Francisco, CA 94080
Attn: Vice President, Corporate Legal
E-Mail: legal_corporate@elan.com

     1.3. PREMISES.

     (Section 2.1) The entire parcel of land legally described in Exhibit A and all improvements thereto.

     1.4 BUILDING

     (Section 2.1) 200 Oyster Point Boulevard, So. San Francisco, CA 94080.

     1.5 COMMENCEMENT /EXPIRATION DATES.

     1.5(a). COMMENCEMENT DATE. Notwithstanding anything to the contrary contained herein or in the Work Letter, Landlord and Tenant acknowledge and agree that the construction of the Initial Tenant Improvements may be completed by Tenant on a floor by floor basis, with the Commencement Date occurring on the earlier of (a) four (4) months after the Substantial Completion of the Building Shell, as adjusted for any Tenant Delays such that the date of Substantial Completion of the Building Shell, for purposes of this Section 1.5, shall occur on the date that the Building Shell would have been Substantially Complete but for any Tenant Delays (the terms Initial Tenant Improvements, Landlord’s Work, Substantial Completion, Tenant Delays, and Building Shell are defined in the Work Letter attached to the Lease as Exhibit B, the “Work Letter”)), or (b) the date that Tenant occupies the first, second and third floors of the Premises and commences business operations thereon, following the date that Tenant obtains a temporary or final certificate of occupancy for the Building. If Tenant occupies one or more floors (but not all floors) of the Premises prior to the Commencement Date for the Premises (the “Early Occupancy Period”), Tenant shall be obligated to pay Minimum Monthly Rent for only the floor(s) of the Premises occupied during such Early Occupancy Period from the date that any portion of such floor is occupied by Tenant for the purposes of operating Tenant’s business therein (and not solely for the limited purpose of installing its furniture, fixtures and equipment therein); provided that such early occupancy shall also be subject to the other terms of the Lease and the Work Letter, including but not limited to Tenant’s obligation to provide Landlord with proof of Tenant’s insurance as set forth in Section 6.3.3. The Minimum Monthly Rent payable for a floor during the Early Occupancy Period shall be equal to one-third (1/3) of the Minimum Monthly Rent payable for the Premises during the first full month after the Commencement Date.

Following the Commencement Date, Landlord shall deliver written notice to Tenant of the Commencement Date (as may be adjusted herein) after finally determining the same, and unless Tenant delivers written notice of objection to Landlord within five (5) business days after receiving Landlord’s written notice of the Commencement

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Date, Tenant shall be deemed to have approved of, and shall be bound by, Landlord’s determination of the Commencement Date.

     1.5(b) EXPIRATION DATE. The last day of the calendar month in which the fifteenth (15th) anniversary of the Commencement Date occurs.

     1.6 TERM (Section 3.1) Approximately 180 months, expiring on the Expiration Date.

     1.7 RENT. The Minimum Monthly Rent for the Initial Year shall be determined in accordance with the terms and provisions of Exhibit D (the Calculation of the Building Minimum Monthly Rent During the First Year of Term).

     1.8 OPERATING EXPENSE/MONTHLY PAYMENT (See Section 6.1): Operating Expenses shall consist of those components of Tenant’s additional rent obligations that are described in (and subject to the limitations of ) Sections 6.2 — 6.5 of this Lease, the initial amount of which shall be estimated by Landlord and provided to Tenant within thirty (30) days after written request by Tenant which may be made no earlier than August 1, 2008.

     1.9 LETTER OF CREDIT. (See Section 22.0)     Six Million Dollars ($6,000,000)

     1.10 USE. Except as provided in the last sentence of this Section 1.10, the Premises shall be used solely for pharmaceutical/biotechnology research and for pharmaceutical/biotechnology manufacturing, marketing and distribution and any other use generally associated with diagnostic and pharmaceutical development and production, and for those other uses associated therewith, including but not limited to general office space, vivarium space, cold room and glass washing facilities, and radioactive material and chemical storage space, and employee amenities such as a gymnasium and a cafeteria. Notwithstanding the foregoing, any use of the Premises which is permitted by law and consistent with other activities conducted on the Premises is permissible.

     1.11 CONTENTS Included as part of this Lease are Exhibits A through K, which are attached hereto and incorporated herein by this reference.

2.0 PREMISES

     2.1 Description. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the real property described in Exhibit A (the “Real Property”), together with the entirety of the building to be constructed by Landlord along with the other improvements to be located thereon (collectively, the “Premises”) to be constructed by Landlord and Tenant, respectively, in accordance with the Work Letter, including, but not limited to, a “basement” parking structure (the “Basement Parking Structure”), a service loading dock, ramp and adjacent loading area, surface parking, and the Service Area (as defined in Section 5.2), all substantially in the size and location as will be set forth in the Plans (as defined in Section 1.7.3 of Exhibit B) , all of which are reserved for the exclusive use of Tenant and its employees, contractors, agents, invitees and guests throughout the Term of this Lease as part of Tenant’s leasehold interest in the Premises, subject to (i) any other rights of Landlord set forth herein, (ii) any matters of public record existing as of the date of this Agreement, and (iii) any other rights or matters that are reasonably necessary for Landlord’s development of the Property as contemplated herein (such as a reciprocal driveway easement or the Reciprocal Parking Easement defined in Section 25 below) (collectively, the items in clauses (i) through (iii) above are referred to herein as “Landlord’s Reserved Rights”). Landlord shall not, subject to the Landlord’s Reserved Rights, operate or make available any portion of the Premises for use by any person other than Tenant during the Term as long as Tenant is not in default under this Lease.

     The “Rentable Square Footage of the Building” is estimated to be approximately 83,420 square feet. Prior to the Commencement Date, the Building will be measured by Landlord’s Architect (as defined in the Work Letter) in accordance with BOMA measurement standards pursuant to BOMA ANSI Z65.1-1996, revised and readopted June 7, 1996; provided, however, that except as otherwise expressly set forth herein, no floor area of the Building (nor of the Basement Parking Structure or Service Area) other than (a) the first, second and third floors of the Building and (b) those portions of the upper level garage within the Building constituting a lobby area and/or used for circulation to the elevators, shall be included in the determination of the Rentable Square Footage of the Building (i.e. regardless of whether any portion of the Basement Parking Structure, Service Area or the Building roof includes any storage areas, machinery or electrical rooms or HVAC chiller facilities, such areas shall not be included in the calculation of the rentable square feet of the Building for purposes of determining Tenant’s Minimum Monthly Rent payments and Landlord’s contribution of Tenant Improvement Allowance). If such measurement results in a change in the Rentable Square Footage of the Building from the number stated above, the Minimum Monthly Rent and the other provisions of this Lease based on square footage shall be recalculated accordingly. Rentable square footage of the Service Area shall be measured in accordance with Section 5.2 below. Before commencement of the Initial Tenant Improvements, Landlord and Tenant will attempt to reach an agreement on the rentable square feet of the Building. If Landlord and Tenant are unable to mutually agree upon the rentable square footage of the Building, either Landlord or Tenant shall have the right to demand that the parties submit the dispute as to the rentable square feet of the Building to a third party space management professional jointly for resolution. Should such a demand be made, then within ten (10) days after either party delivers written notice to the other of such demand, the parties shall select an independent third party space management professional to resolve the dispute (the “Space Management Professional”). Landlord shall initially retain the Space Management Professional, but the costs and expenses of the Space Management Professional shall be split between the parties (with Tenant paying Landlord its share of such costs and expenses within thirty (30) days after receiving an invoice from Landlord requesting payment thereof). Thereafter, within ten (10) days after the parties select the Space Management Professional, each party shall deliver to such Space Management Professional, in a sealed envelope, their determination of the rentable square footage of the Building. If a party

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fails to deliver its determination of the rentable square footage of the Building to the Space Management Professional within said ten (10) day period, and thereafter, if such party fails to deliver its determination of the rentable square footage of the Building to the Space Management Professional within five (5) days after receiving written notice from the other party demanding that its determination be delivered to the Space Management Professional, then the determination of the party providing its determination of the rentable square footage of the Building to the Space Management Professional shall be binding on the parties. Should both parties timely deliver their determination of the rentable square footage of the Building to the Space Management Professional, then within forty-eight (48) hours after receiving both determinations, the Space Management Professional shall call a meeting of the parties, and during such meeting, the Space Management Professional shall open the envelopes containing the parties determinations of the rentable square footage of the Building. If such determinations differ by less than one percent (1%) of the lower number, then the rentable square footage of the Building shall be the average of those two determinations, which number shall be binding on the parties. Moreover, upon such determination, Landlord and Tenant shall set forth such rentable square footage of the Building based on such process in a writing signed by Landlord and Tenant. If such determinations are equal to or more than one percent (1%) of the lower number, then the Space Management Professional shall field measure the rentable square feet of the Building in accordance with this Section 2.1. Thereafter, the determination of the parties as to the rentable square footage of the Building (as set forth in their submittal to the Space Management Professional) that is closest to the measurement determined by the Space Management Professional shall be the Rentable Square Footage of the Building for purposes of this Lease, and shall be binding on the parties, and shall be set forth, in a writing, signed by both Landlord and Tenant. Once the Rentable Square Footage of the Building is determined as provided in this Section 2.1, the Rentable Square Footage of the Building shall not be subject to re-measurement.

     2.2 Initial Tenant Improvements. Initial Tenant Improvements to the Premises shall be completed in accordance with the terms and provisions of the Work Letter attached hereto as Exhibit B (the “Work Letter”).

     2.3 Delivery. Tenant shall accept possession of the Building Shell as of the date of Substantial Completion of the Building Shell, subject to the terms and conditions of the Work Letter and Landlord’s rights set forth therein to complete any Punch List Items, and Tenant’s taking possession of the Building Shell on that date shall be conclusive evidence that Tenant accepts the Building Shell in its then existing condition, and that the Building Shell was in good condition at the time possession was taken, subject to the Punch List items associated therewith.

     Tenant shall accept possession of the Premises as of the date of Substantial Completion of Landlord’s Work, subject to the terms and conditions of this Lease, the Work Letter and Landlord’s rights set forth therein to complete any Punch List Items, and Tenant’s taking possession of the Premises on that date shall be conclusive evidence that Tenant accepts the Premises in its then existing condition, and that the Premises were in good condition at the time possession was taken, subject to the Punch List items associated therewith.

     Tenant agrees and acknowledges that, except as expressly set forth elsewhere in this Lease and the Work Letter, neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Premises or the Real Property, and/or the suitability of the Premises or the Real Property for the conduct of Tenant’s business.

     2.4 Construction Defects. Notwithstanding anything to the contrary in Section 2.3 above, Landlord shall, at Landlord’s sole cost and expense, repair or replace any “Construction Defects” (defined below) that Tenant notifies Landlord of, in writing, during the Landlord’s Warranty Period (as defined in the Work Letter). Such repair obligation is referred to herein as "Landlord’s Warranty.” Such costs and expenses shall not be included as an Operating Expense. Moreover, if Landlord is obligated hereunder to correct a violation of Landlord’s Warranty, such corrective work shall be completed within thirty (30) days after Landlord receives notice of such Construction Defect from Tenant; provided however, if by the nature of such correction more than thirty (30) days is required to effect such correction, Landlord shall not be in default hereunder if such correction is commenced within such thirty (30) day period and is diligently pursued to completion.

     For purposes of this Lease, and the attached Work Letter, the term “Construction Defects” shall mean (a) any defect in design, workmanship or materials with respect to Landlord’s Work, (b) the failure of Landlord’s Work to be constructed in accordance with the Plans (as defined in Section 1.7.3 in the Work Letter), (c) the failure of Landlord’s Work to comply with all applicable laws and regulations, including but not limited to the California Uniform Building Code and all Environmental Laws (as defined in Section 4.3 below), restrictions of record encumbering title to the Real Property, and any other applicable governmental orders, rulings or requirements having the effect of law (collectively, “Applicable Laws”), and (c) any introduction or generation of any Hazardous Materials in, on or about the Premises by Landlord or anyone under Landlord’s control as part of Landlord’s Work in violation of any Environmental Law.

     Tenant’s taking possession of the Premises and acceptance of the Premises shall not constitute a waiver of any claims based upon warranty or defect in regard to the design, materials, or construction of the Building Shell or any other Landlord’s Work against the Landlord’s Architect, contractor, materialmen, manufacturers and other responsible party. The expense of repairs and replacements attributable to defects in design, materials or construction are payable by Tenant to the extent not covered by Landlord’s warranty obligations in this Section 2.3 and the Work Letter. Pursuant thereto, Tenant shall be entitled to receive any recovery from the Landlord’s Architect, contractor, materialmen, manufacturers and other responsible party, and from applicable insurance policies, to the extent Tenant pays such expense; otherwise, Landlord shall be entitled to any such recovery. Landlord hereby assigns to Tenant, effective as of the expiration of the Landlord’s Warranty Period (the “Warranty Assignment Date”), and Tenant shall have the benefit of, on a non-exclusive basis as of the Warranty Assignment Date, any and all warranties with respect to the design, materials and construction of the Landlord’s

3

Work, although such warranties shall revert to Landlord exclusively upon the expiration or earlier termination of this Lease.

3.0 TERM

     3.1 Period; Commencement. The Term of this Lease shall commence in accordance with Section 1.5(a) (the “Commencement Date”), and shall be for the Term specified in Section 1.6, expiring on the date specified in Section 1.5(b) (the “Expiration Date”).

4.0 USE

     4.1 Authorized. The Premises may be used and occupied only for the purposes specified in Section 1.10 hereof, and for no other purpose or purposes.

     4.2 Compliance. Subject to Landlord’s construction and repair obligations set forth herein and/or in the Work Letter, Tenant accepts the Premises by its occupancy of the Premises, and subject to all Applicable Laws, in effect during the Term regulating the Premises, with which Tenant shall comply at its sole cost as they relate to Tenant’s use of the Premises or to any improvements, alterations or installations made to the Premises by or for Tenant, or to the operation of Tenant’s business. Landlord makes no warranty that Tenant’s particular use of the Premises complies with the zoning applicable to the Premises.

     4.3 Restricted Activities. Tenant shall not cause or permit the escape, disposal or release of any biologically or chemically active or other hazardous substances or materials at or from the Premises in violation of any Environmental Laws. Tenant shall not allow the storage or use of such substances or materials in any manner which does not comply with all applicable Environmental Laws in all material respects. For purposes of this Lease, the phrases “hazardous substance,” “hazardous materials,” “hazardous substances or materials” and “hazardous substances and materials” shall mean any chemical, compound, material, mixture, living organism or substance that is now or hereafter becomes defined or listed in, or otherwise classified pursuant to any Environmental Law as a hazardous substance, hazardous material, hazardous waste, extremely hazardous waste, infectious waste, toxic substance, toxic pollutant or any other formulation intended to define, list or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity or toxicity, and shall include, without limitation, any polychlorinated biphenyls (PCBs), asbestos, lead-based paint or building materials, radon, petroleum, natural gas, natural gas liquids, liquified natural gas or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). “Environmental Law” shall mean any and all present and future federal, state and local laws, statutes, rules or regulations, or any requirements under permits issued pursuant to these laws, and other requirements of governmental authorities relating to the environment, to any hazardous substance or to any activity involving hazardous substances, and shall include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Federal Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) (“OSHA”) and all other applicable provisions of federal, state and local laws related to the environment.

     If any lender or governmental agency shall ever require testing to ascertain whether or not there has been any release of hazardous substances or materials, then the reasonable costs thereof shall be reimbursed by Tenant to Landlord upon demand as additional Rent (as defined in Section 5.1 below) if such release occurred and was caused or permitted by Tenant, or arose as a result of the business activities of Tenant. In addition, Tenant shall execute affidavits, certificates and the like from time to time at Landlord’s request concerning Tenant’s actual knowledge regarding the presence of hazardous substances or materials on the Premises. In all events, Tenant shall protect, defend, indemnify and hold harmless Landlord and its officers, members, partners, employees, agents and representatives (collectively, the “Landlord Parties”) in the manner provided in Section 11.1 of this Lease from any release of hazardous substances and/or materials on the Premises occurring while Tenant is in possession thereof. If at any time during or after the Term of this Lease, as it may be extended, Tenant becomes aware of any inquiry, investigation, or proceeding by any governmental agency related to hazardous materials on or under the Premises, Tenant shall within five (5) business days after first learning of such inquiry, investigation or proceeding give Landlord written notice of same. This section shall survive the expiration or earlier termination of the Lease.

     Tenant acknowledges receipt of those documents and reports relating to the soil and environmental conditions at the Premises that are set forth in Exhibit I, which is attached hereto and is expressly incorporated herein (collectively, the “Baseline Environmental Reports”). Landlord makes no representations or warranties as to the truth or accuracy of the Baseline Environmental Reports, or as to the contents thereof, except that Landlord hereby represents that Landlord’s Work (as described in the Work Letter) shall be constructed in accordance with the recommendations set forth in the soils report for the Real Property with respect to corrosivity (as set forth in the Geotechnical Investigation report by Treadwell & Rollo, dated January 16, 2001). Tenant shall not be obligated to remediate any pre-existing hazardous materials disclosed in the Baseline Environmental Reports unless such pre-existing contamination is exacerbated by the gross negligence or willful misconduct of Tenant or any of its subtenants or assigns. Landlord agrees to provide Tenant with copies of any and all of the environmental reports performed by or for, or received by, Landlord (at no expense to Tenant except as expressly provided in this Section 4.3) within thirty (30) days of Landlord’s receipt thereof.

     Tenant shall, prior to Tenant’s vacation and surrender of the Premises on or prior to the Expiration Date, comply with all Environmental Laws, to surrender the Premises at the expiration of the Term, free from any residual impact from the Tenant’s hazardous materials storage and use at the Premises, including, without limitation, complying with the facility closure process required by the San Mateo County Department of Health and/or Health Services Agency (“County”), and those other facility closure environmental laws, ordinances, rules, regulations, orders, restrictions of record and requirements promulgated or issued by a federal, state or local

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governmental department or agency required for the issuance of a facility closure permit, or its equivalent (the “Closure Permit”), from all applicable governmental authorities with jurisdiction over the subject matter (collectively, the “Closure Authority”). Tenant shall, within two (2) business days of Tenant’s filing or receipt of the same, provide Landlord with copies of: (a) the closure plan submitted by Tenant to the Closure Authority; and (b) the closure report or any other closure approval(s) issued by the Closure Authority. Notwithstanding anything to the contrary contained herein, Tenant shall remove from the Premises at the end of the Term all hazardous waste containers that are brought onto the Premises by or for Tenant or anyone under Tenant’s control during the Term.

     At least three (3) months prior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by the Closure Authority) to be taken by Tenant in order to surrender the Premises at the expiration of the Term, free from any residual impact from the Tenant’s hazardous materials storage and use at the Premises (the “Surrender Plan”), prepared by a third party environmental consultant hired by Tenant, at Tenant’s sole cost and expense (the “Environmental Consultant”), which Surrender Plan shall incorporate the proposed closure plan to be submitted to the Closure Authority as required for the Closure Permit. Landlord shall review such Surrender Plan and determine whether such Surrender Plan is acceptable for the purpose of satisfying the Tenant’s surrender obligations relating to hazardous substances and/or materials on the Premises. At a minimum, the Surrender Plan shall contain a listing of (i) all hazardous materials licenses and permits held by or on behalf of Tenant with respect to the Premises, and (ii) all hazardous materials used, stored, handled, treated, generated, released or disposed of from the Premises for which a hazardous materials business plan is required under Applicable Laws (e.g., excluding incidental hazardous materials in office and cleaning supplies). Landlord shall either accept or propose reasonable modifications to the Surrender Plan within thirty (30) days following Tenant’s delivery thereof to Landlord; and if Landlord does not respond to the Surrender Plan with proposed modifications within such 30-day period, then the Surrender Plan shall be deemed to be approved by Landlord. In connection with Landlord’s review of the Surrender Plan, Tenant shall provide to Landlord such additional non-proprietary information concerning Tenant’s hazardous materials use as Landlord may reasonably request. After Landlord’s approval of the Surrender Plan, Tenant shall submit to, and obtain the Closure Authority’s approval of the closure plan contained in the Surrender Plan, and after obtaining such approval, Tenant shall comply with all governmental requirements indicated by the Closure Authority as conditions to issuance of the Closure Permit. Upon Tenant’s vacating the Premises, and as a condition to Tenant’s surrender of the Premises to Landlord at the expiration of the Term (subject to Tenant’s right to holdover pursuant to Section 16.2), Tenant shall deliver to Landlord, in addition to the Closure Permit, reasonable written evidence that all other actions required by the Surrender Plan have been satisfactorily completed. Under no circumstances shall Landlord’s review of the Surrender Plan, or any proposed modifications to the Surrender Plan, subject Landlord to any liability or responsibility for the contents of such Surrender Plan or for the Surrender Plan’s compliance with all Applicable Laws, nor shall Landlord’s review or proposed modifications to the Surrender Plan satisfy Tenant’s obligation to comply with all Applicable Laws with respect to Tenant’s hazardous materials storage and use at the Premises.

5.0 RENTS

     5.1 Minimum Monthly Rent. Tenant shall pay to Landlord at the place designated in Section 1.2, or at such place as Landlord may otherwise designate, without deduction, offset, counterclaim, prior notice or demand, as Minimum Monthly Rent, the sum of the “Building Minimum Monthly Rent” and the “Service Area Minimum Monthly Rent.” All such Minimum Monthly Rent Payments shall be payable in advance on the first day of each month during the Lease Term. All other costs and expenses that Tenant assumes or agrees to pay to Landlord under the Lease shall be deemed additional rent (which, together with the Minimum Monthly Rent, is sometimes referred to as the “Rent”). If the Term shall commence or end on a day other than the first day of a calendar month, then Tenant shall pay, as rent for such partial calendar month, a pro rata portion of the Minimum Monthly Rent, prorated on a per diem basis, with respect to the portions of the fractional calendar month included in the Term.

     5.2 Rents; Adjustments. The Building Minimum Monthly Rent is the minimum monthly rent associated with the Building, which during the first one year period after the Commencement Date (as defined in Section 1.5) shall be equal to the amount determined in accordance with the formula set forth in Exhibit D, which is attached hereto and is incorporated herein (the “Calculation of the Building Minimum Monthly Rent During First Year of Term”). On each annual anniversary of the Commencement Date, the Building Minimum Monthly Rent shall increase by three percent (3%) from the prior year’s Building Minimum Monthly Rent.

     The Premises will include a service area (the “Service Area”), which shall be a secured area to be used for loading, storage and distribution of Tenant’s process equipment, gas and chemicals, as well as bio-waste containers, electrical transformers generators and other service equipment. The location of the Service Area shall be reflected in Plans (as defined in Section 1.7.3 of Exhibit B) . After the Substantial Completion of the Building Shell, Landlord shall cause Landlord’s Architect to determine the rentable square footage of the Service Area, which shall mean the surface area of the Service Area measured to the internal boundary of all surrounding walls and fences, less the area of any easement or right of way in which no improvements are permitted to be constructed by Tenant and any areas occupied by equipment or structures installed by Landlord that are not a part of the Initial Tenant Improvements (except for the area upon which the PG&E transformer is located, which shall be included in the determination of the rentable square footage of the Service Area); and Landlord shall notify Tenant, in writing, of such determination prior to the Commencement Date. If Tenant does not agree with such determination, Tenant shall notify Landlord of such objection within ten (10) days after receiving such written notice from Landlord. Tenant’s written notice of objection to the rentable square footage of the Service Area should include Tenant’s determination of the rentable square footage of the same. Tenant shall be deemed to have approved of Landlord’s determination of the rentable square footage of the Service Area unless Tenant notifies Landlord, in writing, of such objection (along with Tenant’s determination of the rentable square footage of the Service Area) within such

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ten (10) day period. If Landlord and Tenant are unable to agree upon the rentable square footage of the Service Area, after Landlord receives Tenant’s determination of the same, then Landlord and Tenant shall mutually select an independent third party space measurement professional to field measure the rentable square feet of the Service Area. Such third party independent measurement professional’s determination shall be conclusive and binding on Landlord and Tenant. Landlord and Tenant shall each pay one-half (¹/2) of the fees and expenses of the independent third party space measurement professional. If such determination is made, it will be confirmed in a writing signed by Landlord to Tenant.

     The Service Area Minimum Monthly Rent is the minimum monthly rent associated with the Service Area, which during the first one year period after the Commencement Date shall be equal to the rentable square footage of the Service Area times 70/100ths Dollars ($.70) per rentable square foot. On each annual anniversary of the Commencement Date, the Service Area Minimum Monthly Rent shall increase by three percent (3%) from the prior year’s Service Area Minimum Monthly Rent.

6.0 OPERATING EXPENSES

     6.1 Payment. Tenant shall pay as additional rent, the Operating Expenses (Sections 6.2 — 6.5) for the Premises from the date of Substantial Completion of the Building Shell. Except as otherwise specified herein, Tenant shall pay Landlord, on a monthly basis after the date of Substantial Completion of the Building Shell, the estimated amount of the Operating Expenses specified in Section 1.8 above; provided, however, that Landlord shall have the right to adjust the estimated amount of Operating Expenses to be paid by Tenant by delivering written notice to Tenant of the new estimated amount, in which case, the estimated amount to be paid by Tenant thereafter shall be the new estimated monthly amount set forth in such written notice from Landlord. Landlord shall provide Tenant with a statement of the actual amount of such expenses within 120 calendar days following the end of each calendar year. Tenant shall pay to Landlord the amount by which such actual expenses exceeds Tenant’s Operating Expense payments for such year and any excess amounts paid by Tenant shall be credited to reduce Tenant’s payments for the next ensuing period, or paid to Tenant if the Lease Term has expired. If Tenant disputes any amount set forth in the statement of expenses to be delivered by Landlord pursuant to this Section 6.1, Tenant shall have the right by written notice delivered to Landlord within thirty (30) days following receipt of such statement to cause Landlord’s books and records with respect to the preceding calendar year to be audited, which audit shall be completed within forty-five (45) days following Tenant’s receipt or access to the materials required for such audit, which shall be performed by an accountant mutually acceptable to Landlord and Tenant; provided that Tenant’s right to perform such audit shall be conditioned on Tenant first paying to Landlord all such disputed amounts. The amounts payable by Landlord to Tenant or Tenant to Landlord, as the case may be, shall be appropriately adjusted on the basis of such audit. Access to such materials will be made available at the office of Landlord or its property manager. If such audit discloses a liability for a refund by Landlord to Tenant in excess of ten percent (10%) of the payments previously made by Tenant for such calendar year, the cost of such audit shall be borne by Landlord; otherwise the cost of such audit shall be borne by Tenant. If Tenant does not exercise its audit right for any year during the term (or any renewal term) of this Lease in accordance with the provisions of this Section, then such statement shall be conclusively binding for such year; provided, however, that a waiver by Tenant of its audit rights in any one year shall not be deemed a waiver of audit rights under this Section for any subsequent year.

     Moreover, the parties acknowledge that management of the Premises may, at Landlord’s sole and absolute discretion, be included with other properties in the vicinity of the Premises owned by Landlord or its affiliates to be commonly managed by Landlord, in which case, Landlord shall have the right to commonly manage the entire project as long as such common management does not result in increased Operating Expenses in excess of those amounts that would have been otherwise payable under this Lease had Landlord not commonly managed the Premises and such adjacent Premises. If the Premises are commonly managed with other properties, “Tenant’s Proportionate Share” shall mean the rentable square footage of the Premises divided by the rentable square footage of all buildings located on the properties commonly managed by Landlord. If the Premises are not commonly managed with other properties, “Tenant’s Proportionate Share”, for purposes of this Lease, shall be equal to 100%. For example, based on the fact that the Premises will be newly constructed as of the Commencement Date, Tenant shall have no liability for the cost of restoring or replacing worn or obsolete improvements that do not benefit the Premises (and that are located on adjacent properties) as part of such Operating Expenses.

     6.2 Taxes. Tenant shall pay all real property and other taxes on the Premises, which shall include any form of assessment, license, fee, commercial rental tax, levy or tax (other than net income, franchise, inheritance or estate taxes) imposed by any authority having the power to tax or levy assessments on the Premises and the reasonable cost of contesting any tax assessment, whether such tax is (i) upon any legal or equitable interest of Landlord in the Premises; (ii) upon this Lease, the Rent payable hereunder or the value thereof; (iii) with respect to any right to occupancy, use, leasing, operation, management, maintenance, alteration, or repair of the Premises or any part thereof; or (iv) imposed in substitution for, or in addition to, existing or additional taxes against any part of the Premises whether or not now customary or within the contemplation of the parties. If any governmental authority should pass any law or regulation after the effective date of this Lease, which shall make it unlawful for Tenant to reimburse Landlord for any of the taxes covered by this Section 6, the Minimum Monthly Rent payable to Landlord under the terms of this Lease shall be increased so as to net to Landlord the amount that would have been received by Landlord if such tax had not been imposed. Tenant shall pay prior to delinquency all taxes assessed against and levied upon its trade fixtures, furnishings, equipment, and other personal property, and any increase in real property taxes resulting from any alterations, Initial Tenant Improvements, or any other improvements placed in or on the Premises.

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     6.3 Insurance

          6.3.1 Property. Landlord shall obtain and maintain on Landlord’s Work, prior to the Commencement Date, and on the Landlord’s Work and the Initial Tenant Improvements, as of the Commencement Date and throughout the Term, and Tenant shall pay to Landlord, as an Operating Expense, the cost of, an “all risk” policy of property casualty insurance (including, at Landlord’s option, earthquake and flood coverage, inflation endorsement, and sprinkler leakage endorsement) covering the full replacement cost of the improvements located on the Real Property, excluding coverage of all Tenant’s personal property on the Premises and excluding any Tenant alterations or improvements to the Premises other than the Initial Tenant Improvements. Landlord shall have the right to provide such insurance in the form of a blanket policy covering the Premises and all buildings owned or managed by Landlord and its affiliates in the vicinity of the Premises, with Tenant’s liability for the costs thereof limited to an equitable share based on the replacement cost of the Building as compared to the replacement cost of all buildings covered by such blanket policy. In addition, such insurance shall include a lender’s loss payable endorsement in favor of Landlord’s lender. Notwithstanding anything to the contrary contained herein, in the event of earthquake damage, Tenant shall pay Landlord Tenant’s Equitable Share of the deductible associated with such earthquake policy up to a maximum amount of $100,000, amortized over a period of four (4) years, which amounts shall be payable in monthly installments for the portion of the amortization period remaining in the Term (i.e. with payments thereon in any 12 month period not exceeding $25,000). “Tenant’s Equitable Share” of the earthquake policy deductible shall mean the deductible amount multiplied by a fraction, the numerator of which is the cost of restoration associated with items included in Landlord’s Operating Expense Repair Obligations (as defined below), and the denominator of which is the sum of all restoration costs, including Landlord’s Non-Compensated Repair Obligations and Landlord’s Operating Expense Repair Obligations. Tenant agrees not to engage in any activities (i) that will increase the cost of such insurance, unless such actions by Tenant are consistent with its normal business operations as set forth in Section 1.10 of the Lease, or (ii) that will prevent Landlord from procuring policies reasonably satisfactory to Landlord. Tenant shall pay any increases in insurance premiums resulting from the nature of Tenant’s occupancy or any act or omission of Tenant within ten (10) business days after receiving an invoice from Landlord for the same.

          6.3.2 Tenant’s Obligation. Tenant shall maintain in full force and effect at all times during the term of the Lease, at its own expense, for the protection of Tenant and Landlord, as their interests may appear, (a) “all risk” property insurance on any alterations (but excluding the Initial Tenant Improvements) to the Premises in the amount of the replacement cost thereof, (b) commercial general liability insurance with limits of liability for bodily injury and property damage of not less than $2,000,000 per occurrence and $3,000,000 in the aggregate, insuring Landlord and Tenant against any liability arising out of the use, occupancy or maintenance of the Premises (provided that such insurance coverage for more than $2,000,000 in the aggregate and in excess of the per occurrence limit may be covered by an umbrella policy meeting the requirements of Section 6.3.3 below), and (c) worker’s compensation insurance as required by any Applicable Law. The proceeds of this insurance will be payable to Tenant. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. Notwithstanding anything to the contrary in Section 6.3.3 below, neither Landlord nor Landlord’s lender shall be named as an additional insured with respect to Tenant’s personal property or worker’s compensation insurance.

          6.3.3 Terms. All insurance policies required to be carried by Tenant hereunder shall conform to the following requirements: (a) at Landlord’s request, shall carry a lender’s loss payee endorsement in favor of Landlord’s lender; (b) an executed copy of each insurance policy, including renewals (or a certificate thereof), as well as any required endorsements associated therewith, shall be delivered to Landlord; (c) each certificate of insurance shall require that the applicable insurer or insurance broker shall endeavor to notify Landlord in writing at least thirty (30) days prior to any cancellation or expiration of such policy, or any reduction in the amounts of insurance carried, provided, however, that Tenant shall provide written notice to Landlord of any such cancellation or expiration or reduction in amounts at least fifteen (15) days prior to the effective date of such cancellation, expiration or reduction; (d) each policy shall be primary, not contributing with any insurance that Landlord may carry; (e) the commercial general liability policy shall state that Landlord is entitled to recovery for the negligence of Tenant even though Landlord is an additional insured; (f) the commercial general liability policy shall name Landlord as an additional insured, by endorsement; and (g) shall be issued by companies having a Best’s financial category minimum rating of Class “A-/VIII” or better in the most recent edition of Best’s Insurance Report or as otherwise reasonably approved by Landlord in the event such rating system shall be modified or discontinued.

          6.3.4 Waiver. Each of the parties hereto hereby releases the other, to the extent of the releasing party’s insurance coverage required to be maintained hereunder (with Landlord’s liability coverage deemed to be at least equivalent to the minimum limits on Tenant’s commercial general liability policy required to be maintained under Section 6.3.2 above), regardless of any vitiation of the releasing party’s insurance coverage caused by the releasing party, from any and all liability for any loss or damage covered by such insurance which may be inflicted upon the property of such releasing party even if such loss or damage shall be brought about by the fault or negligence of the other party, its agents or employees; provided, however, that this release shall be effective only with respect to loss or damage occurring during such time as the appropriate policy of insurance shall contain a clause to the effect that this release shall not affect said policy or the right of the insured to recover thereunder. If any policy does not permit such a waiver, and if the party to benefit therefrom requests that such a waiver be obtained, the other party agrees to obtain an endorsement to its insurance policies permitting such waiver of subrogation if it is available. If an additional premium is charged for such waiver, the named insured under such policy agrees to pay the amount of such additional premium.

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     6.4 Repairs and Maintenance; Building Management

          6.4.1 Landlord’s Maintenance and Repair Obligations.

               6.4.1.1 Landlord’s Maintenance and Repair Obligations / Non-Operating Expenses. Landlord, at its sole cost and expense and without reimbursement from Tenant, shall maintain, repair, and if necessary, replace all structural components of the Building located on the Premises consisting of all footings, foundations, load bearing walls, roofs (exclusive of the roof membrane), structural steel columns and girders forming a part thereof (“Landlord’s Non-Compensated Repair Obligations”).

               6.4.1.2 Landlord’s Maintenance and Repair Obligations / Operating Expenses. Subject to Landlord’s obligations with respect to Construction Defects and Punch List Items (which Landlord shall perform without reimbursement from Tenant), Landlord shall, with reimbursement from Tenant for the costs associated therewith as an Operating Expense, perform all necessary maintenance and repairs to (a) all exterior glass and other exterior surfaces of the Building, and all exterior walls (other than load bearing walls included in Landlord’s obligations under Section 6.4.1.1 above), (b) the basement parking structure (including but not limited to all striping, exhaust systems, and lighting systems contained within the basement parking structure), (c) all outdoor parking facilities and driveways and all exterior sidewalks, (d) all exterior landscaping, exterior irrigation systems, exterior drainage systems, and exterior lighting of the Premises, (e) all drainage systems on the exterior portions of the Building, (f) the roof membrane, (g) all utility lines (outside the Building) servicing the Premises up to their point of connection to the Building (including but not limited to all backflow devices), and (h) the elevators within the Building, as necessary to maintain the same in good condition and repair, subject to reasonable wear and tear, throughout the Term (“Landlord’s Operating Expense Repair Obligations”). As part of Landlord’s Operating Expense Repair Obligations for which Tenant shall reimburse Landlord for the costs thereof as an Operating Expense, Landlord shall also be responsible for cleaning the exterior side of all exterior windows of the Building, as necessary to maintain the same in good condition and repair, subject to reasonable wear and tear, throughout the Term.

               6.4.1.3 Landlord’s Repair Obligations — Generally. Notwithstanding the foregoing, Landlord’s repair obligations specified herein are limited to those repairs that would be commercially reasonable to repair under common property management standards applicable to buildings that are similar in type and quality to the Building. In addition, Landlord agrees to promptly perform its repair obligations set forth herein after receiving written notice from Tenant to perform the same.

               6.4.1.4 Landlord’s Failure to Commence Repairs. If Landlord fails to commence any repairs required by this Section 6.4 within fifteen (15) days of notice thereof (as such time period may be extended for Force Majeure Delays, as defined in Exhibit B), and thereafter fails to diligently prosecute such repair to completion, then Tenant may perform such work on Landlord’s behalf; provided, however, that Tenant first notifies Landlord, in writing, at least three (3) days prior to commencing such repairs on Landlord’s behalf, that Tenant will be commencing such repairs within three (3) days unless Landlord commences such repairs and diligently prosecutes the same to completion. If Landlord commences and diligently works towards completing such repairs within three (3) days after receiving written notice from Tenant, then Tenant shall have no right to perform such repairs on Landlord’s behalf. Landlord shall deliver written notice to Tenant of any Force Majeure Delays that are delaying Landlord’s commencement or the completion of the repairs. Notwithstanding the foregoing, in the event of an emergency situation that threatens damage to Tenant’s personnel or property, Tenant shall have the right to make repairs that are required to be made by Landlord herein, on Landlord’s behalf, provided, however, that Tenant first provides notice to Landlord of the emergency situation, and provided Landlord fails to commence and diligently prosecute such repairs within 24 hours after receiving such notice of repair or such shorter period as is reasonable under the circumstances.

               6.4.1.5 Reimbursement to Tenant for Work Performed On Landlord’s Behalf. If Tenant, on Landlord’s behalf, repairs or replaces any item specified herein as being repaired or replaced by Landlord, either at Landlord’s sole cost and expense or as an Operating Expense, then Landlord shall reimburse Tenant for any such repair work performed by Tenant on Landlord’s behalf within thirty (30) days after Landlord receives Tenant’s written request for payment of the same, provided, however, that Tenant has first allowed Landlord to complete such repairs in accordance with Section 6.4.1.4; and further provided that Landlord shall be permitted to include as an Operating Expense for which Tenant shall be required to pay Tenant’s Proportionate Share of those amounts paid by Landlord to Tenant as reimbursement under this Section 6.4.1.5 to the extent that such repairs or replacements could have been included as an Operating Expense had Landlord (and not Tenant) performed the same.

               6.1.4.1.6 Casualties. To the extent covered under Article 10, repairs required as the result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall, to the extent covered under Article 10, be subject to Article 10.

          6.4.2 Tenant’s Performance Obligations. Subject to any maintenance or repair obligations under this Lease that are specifically required to be performed by Landlord, Tenant shall, at its sole cost and expense, be responsible for maintaining the Premises, including all improvements constructed thereon, in good order, condition and repair, and Tenant shall promptly make all repairs necessary to maintain such condition. Except as otherwise expressly set forth herein, Tenant shall be solely responsible for all costs of maintaining and repairing the Premises, including, without limitation, (1) maintenance and repair of all interior glass and interior and exterior doors of the Building, and the interior of the Building, including, without limitation, maintenance and repair of the interior walls and interior surfaces of exterior walls and all interior electrical systems and lighting, (2) maintenance and repair of the HVAC system(s) serving the Building (in accordance with the manufacturer’s

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recommendations); and (3) maintenance and repair of the Building fire, safety, and security systems, and all other equipment, plumbing, wiring, conduits and cables within the Building, and (4) any and all generators on the Premises (including but not limited to all emergency generators). Notwithstanding anything to the contrary in this Lease, Tenant shall reimburse Landlord for all reasonable costs incurred by Landlord to repair any damage to the Building or the Premises, beyond reasonable wear and tear, caused by Tenant or its Agents (as defined in Section 10.3). Tenant hereby waives the benefit of any applicable statutory provision that requires a landlord to maintain leased property. All repairs made by Tenant shall utilize materials and equipment that are comparable to those originally used in constructing the Premises. Tenant shall notify Landlord, in writing, prior to making any repairs to any portion of the Premises that are reasonably expected to cost in excess of $25,000; provided, however, that Tenant shall have no obligation to so notify Landlord of any repairs to be made pursuant to a preventive maintenance program established under a contractual arrangement with Tenant and a third party maintenance provider. Tenant’s repair and replacement obligations set forth in this Section 6.4.2 shall not include any repairs or replacements arising as a result of any Construction Defects to the extent covered by Landlord’s Warranty. Furthermore, Tenant shall be reimbursed by Landlord for Tenant’s costs incurred in complying with Tenant’s maintenance obligations set forth herein, (a) to the extent such maintenance and repair arises from the negligence or willful misconduct of Landlord or Landlord’s agents, employees, invitees or licensees; or (b) to the extent such repairs or replacements are covered by Landlord’s insurance (unless due to the gross negligence or willful misconduct of Tenant).

          6.4.3 Operating Expenses. Operating Expenses shall include (i) all sums expended by Landlord for the supervision, maintenance, repair, replacement and operation of the Premises, and a reasonable management and administrative fee (not to exceed three and one-quarter percent (3.25%) of the net rent (i.e. the Minimum Monthly Rent payable over the year in question) plus the Operating Expenses for the year), exclusive of those sums expended by Landlord for the supervision, maintenance, or repair of Landlord’s Non-Compensated Repair Obligations, and (ii) any costs of capital improvements made by Landlord to the Building or the Premises (x) to maintain the Building and the Premises in a good, working condition and state of repair, or (y) that are required by any governmental authority after the original construction of the Building. The portion of such capital costs to be included each year as an Operating Expense shall be that amount allocable to the year in question calculated by amortizing the costs thereof over the useful life of such improvement, as reasonably determined by Landlord, with interest on the unamortized balance at the rate of the Federal Reserve Bank of San Francisco, plus one percent (1%). However, if the capital expense is less than Ten Thousand Dollars ($10,000), it shall be expensed in the year in which it was incurred, and it shall not be amortized, provided that the aggregate amount of such capital expenses that are less than $10,000 that are so expensed in any 12-month period of the Term shall not exceed Thirty Thousand Dollars ($30,000), and if such aggregate amount is exceeded, then Thirty Thousand Dollars ($30,000) of such capital expenses shall be proportionately allocated among such capital expenses and expensed for the year in question, and the remainder shall be allocated proportionately among the corresponding capital items, and amortized over the respective useful lives. Notwithstanding the foregoing, operating expenses shall not include: (a) depreciation, interest and principal payments on the Premises or Building; (b) the cost to complete the Landlord’s Work or the Initial Tenant Improvements (but may include repair and maintenance costs for the same in accordance with the requirements of this Article 6); (c) real estate broker commissions; (d) repairs and maintenance costs paid to Landlord by proceeds of insurance or by third parties; (e) legal fees incurred in connection with the development of the Project or leasing of the Premises or any legal disputes arising from such leasing activities; (f) reserves for Operating Expenses, taxes, insurance or any other costs for which Tenant is responsible under this Lease; (g) costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord’s interest in the Premises; (h) any fines, penalties or interest due to Landlord’s late payments; (i) any amounts paid as ground rental by Landlord; (j) any recalculation of or additional Operating Expenses incurred more than two (2) years prior to the year in which Landlord proposes that such costs be included; (k) payments to Landlord or to subsidiaries or affiliates of Landlord for services in the Building to the extent the same exceeds the costs of such services rendered by unaffiliated comparable third parties on a competitive basis, except for the management and administrative fee set forth above; (l) costs arising from Construction Defects in Landlord’s Work for which Landlord is responsible under Landlord’s Warranty; (m) costs (such as property manager salary and property management office expenses), for which Landlord is compensated by the management and administrative fee; (n) capital expenses not included in clauses (ii)(x) or (ii)(y) above; and (o) any costs related to any governmental, quasi-governmental, utility company or similar program or plan for water, traffic, hazardous waste, environmental or handicapped access management, mitigation, enhancement or remediation in which participation is voluntary, except to the extent such participation results in a net reduction in Operating Expenses.

     Landlord and Tenant acknowledge that two other properties (180 Oyster Point and 230 Oyster Point) share common driveway access rights (with the Premises) over a portion of the Premises (and over such other properties) by way of easement agreements setting forth such access rights and the maintenance costs and responsibilities associated with such common driveway. Tenant agrees to pay Landlord, as part of the Operating Expenses, the Premises’ equitable share of maintenance costs associated with such common driveway (based on the terms of such easement agreements).

          6.4.4 Landlord’s Right to Repair On Tenant’s Behalf. If Tenant fails to maintain the Premises in good order, condition and repair, Landlord may give Tenant notice to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to commence such work within ten (10) days following receipt of such notice and thereafter diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work, in which case, Tenant shall pay such amounts to Landlord within thirty (30) days after receiving an invoice for the same from Landlord. Landlord shall have no liability to Tenant for any damage, inconvenience or interference with the use of the Premises reasonably caused by Landlord’s performance of any such work.

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          6.4.5 Landlord’s Right to Make Repairs. Landlord shall have the right, in its reasonable discretion, to close temporarily (for a reasonable duration and following reasonable notice) any portion of the Premises to the extent required for Landlord to perform its maintenance rights and obligations specified herein; provided that Landlord shall reasonably cooperate with Tenant to schedule any such closure and work at times and in a manner which mitigates the impact thereof on Tenant’s business operations in the Premises. Tenant’s obligation to pay the Minimum Monthly Rent shall not abate as a result of such temporary closure, nor shall Landlord be responsible or liable to Tenant for any interference with Tenant’s use of the Premises to the extent reasonably required for any such temporary closure (and provided Landlord complies with its duty to cooperate with Tenant as set forth above).

     6.5 Utilities, Telecommunications; Backup Generator. Tenant shall pay for water, gas, heat, sewer, power, telephone services and any other utility supplied to or consumed in or on the Premises, and shall insure that each utility provider transfers the applicable accounts into Tenant’s name on or before the Commencement Date. Landlord shall not be responsible or liable for any interruption in utility service, nor shall such interruption affect the continuation or validity of this Lease; provided, however, that Landlord shall use reasonable efforts to remedy any interruption in the supply of such utilities or services if such interruption is caused by Landlord or Landlord’s employees, agents or contractors. If such interruption arises from the act of a third party, Tenant and Landlord shall cooperate with each other to seek to remedy the interruption. Tenant shall maintain and regularly test, at its sole cost and expense, the emergency power generators (if any) installed on the Premises in accordance with the manufacturer’s recommendations. Tenant shall be responsible at its sole cost for the installation, maintenance and repair of any phone, data or other communications cable from the demarcation point supplied by the local regulated public utility to and within the Premises. Any alterations, installations or modifications of such cable shall be subject to the provisions of this Lease, including Articles 7 and 8.

     Tenant shall have the exclusive right during the Term, subject to Landlord’s Reserved Rights, to install, maintain and operate on the roof of the Building, for the purpose of Tenant’s business, telecommunications antennae, satellite dishes and other devices that make use of the electromagnetic spectrum (“Telecommunications Devices”) and related wires, cables, conduits between such equipment and the Premises, subject to the following requirements, (a) compliance with all covenants or restrictions of record (as of the date hereof), building codes, regulations and ordinances and other Applicable Laws, (b) compliance with the terms and provisions of the Work Letter, but only to the extent that such devices are installed prior to the Substantial Completion of Landlord’s Work (as such terms are defined in the Work Letter), and (c) compliance with the terms and provisions of Sections 7 and 8 hereof, but only to the extent that such devices are installed after the Substantial Completion of Landlord’s Work.

     Notwithstanding anything to the contrary contained herein or in the Work Letter, prior to installing any Telecommunications Devices outside of the Building or on the exterior of the Building, including but not limited to on any roof of any building within the Premises, Tenant shall provide Landlord with written notice of Tenant’s desire to install such Telecommunications Devices, together with plans and specifications for the installation of such Telecommunications Devices. Landlord shall review such plans and specifications within ten (10) business days after receiving the same, and within such period notify Tenant if Landlord approves the installation of such Telecommunications Devices or disapproves the installation of such Telecommunication Devices, and if Landlord disapproves the installation of such Telecommunication Devices, the reasons therefore. Landlord’s failure to provide notice of its disapproval and the reasons therefore within such ten (10) business day period shall be deemed Landlord’s approval of such installation request. Landlord shall not unreasonably withhold approval of the installation of such Telecommunications Devices; provided, however, that Landlord shall have the right to withhold such approval, in its sole and absolute discretion, if (a) Tenant fails to provide Landlord with sufficient documentation with respect to the installation of the Telecommunication Devices so as to allow Landlord to fully review and evaluate the same, (b) the installation of such Telecommunication Devices is reasonably likely to cause damage to the physical integrity of the Building, or (c) the installation of such Telecommunication Devices will adversely affect the appearance of the Building from surrounding areas, as reasonably determined by Landlord. Tenant shall install screening materials in conformance with all Applicable Laws, and the appearance, size and location of any screening materials shall be subject to Landlord’s approval, which approval shall not be unreasonably withheld. Tenant shall be responsible for any installation and maintenance costs of any such Telecommunication Devices, as well as any damage to the Building, including without limitation the roof, arising out of or related to the installation or use by Tenant of any such Telecommunications Device. Tenant shall not be obligated to pay any license fee for the use of the roof of the Building pursuant to this Section during the Term of this Lease or any extension thereof.

     Notwithstanding anything to the contrary contained herein, should the installation of the Telecommunications Devices affect the engineered elements of Landlord’s Work or the roof of the Building (including but not limited to the roof membrane), or should such installation potentially affect any warranty provided to Landlord by Landlord’s Contractor or its material suppliers (including but not limited to any roof warranty), then Tenant shall either (a) have Landlord perform any work affecting Landlord’s Work, on Tenant’s behalf, pursuant to a Change Request in accordance with Section 1.11 of the Work Letter (provided such request is made prior to the Substantial Completion of Landlord’s Work, as such terms are defined in the Work Letter), in which case, Landlord’s performance of such work on Tenant’s behalf shall comply with all terms and requirements of the Work Letter, or (b) utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor or material supplier who originally installed such portion of Landlord’s Work, at Tenant’s sole cost and expense, as necessary, for the design and construction of that portion of Landlord’s Work affected thereby in order to maintain all contractual warranties provided to Landlord by Landlord’s Contractor or its material suppliers with respect to such Landlord’s Work, and to maintain all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work.

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     Tenant may, through the Change Request process specified in the Work Letter, have a trench (with cables and conduit installed therein) constructed within the boundaries of the Real Property and any other properties in the vicinity of the Real Property owned by Landlord or any of its affiliates for purposes of “hard wiring” for voice, data and power transmissions between and among the buildings occupied by Tenant in the vicinity of the Premises. Landlord shall not unreasonably withhold its approval of such Change Request, unless such trenching poses a material risk to the physical integrity of the Building. Tenant is hereby advised that such trenching work must be performed through the Change Request process prior to the Substantial Completion of Landlord’s Work, since any subsequent installation of the same may be all but impossible due to site configuration. If such trenching and cabling work is installed within the Premises, Tenant shall not be obligated to remove the installed conduit upon the expiration or earlier termination of the Lease, but Tenant shall strip all cabling from such conduit at its sole cost and expense upon expiration or earlier termination of this Lease. Tenant shall not be obligated to pay any license fee for the use of the conduits installed in the Real Property pursuant to this Section during the Term of this Lease or any extension thereof.

     Landlord grants Tenant the license and right to use a portion of the Service Area for the installation, operation and maintenance of a backup power generator and associated fuel tank, which includes the passage of related wires, cables and conduit between Tenant’s electrical room and the backup power generator on the Real Property or any backup generator located at any of the other buildings (located at 180 Oyster Point Blvd. and 1000 Gateway Blvd., South San Francisco) occupied by Tenant. However, any such improvements to be installed in the Service Area shall be subject to the terms and provisions of Section 7 and 8 of this Lease, unless Tenant is installing the same as part of the Initial Tenant Improvements, in which case, such improvements shall be installed subject to the terms and provisions of the Work Letter. Subject to Landlord’s rights herein, Tenant shall have access to the Service Area on a 24 hour per day/7 day per week basis. Tenant shall be solely responsible for the repair and maintenance of Tenant’s improvements and equipment within the Service Area, and Tenant agrees to maintain the same in a good state of condition and repair. Tenant has advised Landlord that if and when it installs a backup generator in the Service Area, it intends to run that backup generator on a regular basis in order to comply with maintenance specifications and requirements of law and that such operation may be as often as one (1) thirty (30) minute period per week. Except in cases of emergency, when no prior approval shall be required, Tenant shall propose for Landlord’s reasonable approval the schedule for operation of the backup generator to reasonably mitigate any interference with the use of adjacent properties by other tenants.

7.0 ALTERATIONS, ADDITIONS AND FIXTURES

     7.1 Installation and Removal. Subject to the terms of this Section 7 and Section 8 below, Tenant shall have the right to install its trade fixtures in the Building (and subject to Section 6.5 above, Tenant shall have the right to install any Telecommunication Devices on the exterior of the building or within any other portions of the Premises outside the Building, or any backup generator or associated fuel tank) during the term of this Lease; provided, however, that no such installation or removal thereof shall affect the structural portion of the Building or the engineered elements of Landlord’s Work, and that Tenant shall repair any damage to the Building or the Premises caused by the installation, use or removal of any of Tenant’s furniture, fixtures, equipment or other property; and provided however, that Tenant shall only be obligated to make such repairs necessary to restore the Premises to its condition prior to such installation or removal, ordinary wear and tear excepted. Notwithstanding the foregoing, Tenant shall not place a load upon the floor or roof of the Premises that exceeds the load per square foot which such floor or roof was designed (or is modified) to carry, as set forth in the Work Letter or the Plans for Landlord’s Work. Tenant shall not install business machines or mechanical equipment which causes noise or vibration to such a degree as to be reasonably objectionable to Landlord or other neighboring owners or tenants. Further, except as otherwise provided in Section 6.5 above, and except for those items of equipment (but not fixtures) that may be installed in the Service Area from time to time by Tenant, Tenant shall not install, nor allow to be installed any equipment on or outside the exterior of the Building without Landlord’s prior written consent, which consent shall not be unreasonably withheld. For purposes of Section 6.4.1.1 and this Section 7.1, the term “structural” shall refer to the footings, foundations, structural steel columns, girders, bearing walls, exterior walls, and roof.

     7.2 Tenant’s Rights. Tenant shall not make or permit to be made any alterations or improvements to the Premises without Landlord’s prior written consent. Notwithstanding the foregoing, Landlord’s prior written consent shall not be needed for any alterations or improvements to the premises that do not: (a) cost more than $25,000, (b) affect the exterior appearance of the Premises or the Building, or (c) affect the structural portions of the Premises or the engineered elements of Landlord’s Work. For purposes of determining the costs of the alterations or improvements for purposes of clause (a) above, such costs normally associated with such alterations and/or improvements must be included, and Tenant shall not be allowed to segregate alterations or improvements in parts in order to allow Tenant to perform such work without Landlord’s prior written consent. Any proposed alterations/improvements that do not require Landlord’s consent pursuant to clauses (a), (b) or (c) above shall be referred to herein as a “Minor Changes.” On a quarterly basis, Tenant shall deliver to Landlord a copy of the “as-built” plans for any Minor Changes performed during the prior quarter that are of a type for which “as-built” plans would customarily be prepared for such alteration, additions or improvements or such other reasonable information to show such alterations, additions or improvements if as-built plans are not customarily prepared for such work given the type, nature and scope of the alteration, addition or improvement. Additionally, as a condition to Tenant’s right to make Minor Changes, Tenant shall act reasonably to keep Landlord aware of the status of Tenant’s alterations and improvement work in the Premises by means of quarterly meetings with Landlord to review the status of work performed during the previous calendar quarter and work planned for the current calendar quarter.

     Notwithstanding the foregoing, in making any alterations or improvements of any magnitude or cost whatsoever, whether or not a Minor Change, Tenant shall comply with Section 8.

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     7.3 Obtaining Landlord’s Consent. When seeking the Landlord’s consent to any alterations for which such consent is required under this Article 7, Tenant shall provide to Landlord, for Landlord’s review and approval, City approved plans and specifications for such changes, to the extent City approval of the plans and specifications is required for such alterations. Notwithstanding anything to the contrary contained herein, should any proposed alterations affect the engineered elements of Landlord’s Work or the roof of the Building (including but not limited to the roof membrane), or should such installation potentially affect any warranty provided to Landlord by Landlord’s Contractor or its material suppliers (including but not limited to any roof warranty), and if Landlord consents to such alterations, then, as required to prevent invalidation of such warranty, Tenant shall utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor or material supplier who originally installed such portion of Landlord’s Work, at Tenant’s sole cost and expense, for the design and construction of that portion of Landlord’s Work covered by the affected warranty or warranties, or as required to maintain all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work. If, for any reason, Landlord’s Architect, Landlord’s Contractor, or Landlord’s subcontractors and material suppliers are unavailable to design and/or construct such alterations, then Landlord shall not unreasonably withhold its consent to Tenant’s architect and contractors performing the design and/or construction of such alterations.

     7.4 Tenant’s Construction Obligations.

          7.4.1 Performance of Tenant’s Work. Should any proposed alterations to be performed by Tenant hereunder conflict with Landlord’s exercise of its rights, or its performance of its obligations, set forth herein, then Tenant agrees to reasonably cooperate with Landlord in Landlord’s exercise of such rights and its performance of such obligations. Should any alterations require Landlord’s consent, and if such alterations involve the sprinkler, plumbing, mechanical, electrical power, lighting or fire safety systems within the Premises, such alterations shall be performed by subcontractors approved by Landlord in its reasonable judgment. For any work subject to Landlord’s consent or approval, Tenant shall provide Landlord with written notice, not less than fifteen (15) calendar days prior to the date Tenant desires to commence such Work, setting forth or accompanied by all of the following:

               7.4.1.1 A description and schedule for the work to be performed;

               7.4.1.2 The names and addresses of all contractors and subcontractors who, as of the date of such notice, will perform such alterations;

               7.4.1.3 A complete set of all plans, specifications, and calculations developed by or for Tenant, including all plans which are required by the applicable governmental authorities for the issuance of any permits or approvals or for the commencement of any of Tenant’s Work;

               7.4.1.4 Certificates of insurance evidencing that Tenant’s contractors and subcontractors (a) carry workers compensation insurance covering all of their respective workers as required by law, and (b) carry commercial general liability insurance with limits, in form and with companies as are required to be carried pursuant to the following paragraph, and the certificate of insurance shall contain a provision that the insurance carrier or broker shall endeavor to notify Landlord at least 30 days’ prior written notice of any cancellation, modification or lapse or reduction in the amounts of such insurance, provided, however, that Tenant shall provide written notice to Landlord of any such cancellation or expiration or reduction in amounts at least fifteen (15) days prior to the effective date of such cancellation, expiration or reduction.

     Tenant’s contractor shall carry commercial general liability insurance covering Premises damage, personal injury, death, and products and completed operations coverage, in an amount not less than $3,000,000 per occurrence, and $5,000,000 in the aggregate with deductibles of no more than $10,000, naming Landlord and its affiliates, employees and agents as additional insureds, by endorsement (on an ISO form 2010 11 85), with an insurance company with a minimum of an A-VIII rating. All subcontractors shall carry such insurance as well, except that subcontractors shall only be required to carry such insurance in an amount of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate; provided that the insurance coverage of any of the applicable subcontractors required under this Section may be provided, in whole or in part, through a blanket policy of such insurance coverage maintained by Tenant’s contractor which expressly provides that the insured’s subcontractors are covered thereunder. Such insurance shall be maintained at all times during the construction of the alterations or improvements, except for the products and completed operation coverage, which coverage is to be maintained during construction of the work and thereafter in accordance with standard industry practice in the Bay Area of San Francisco, California. Furthermore, such insurance shall preclude or waive subrogation claims by the insurer against Landlord, its affiliates, or their agents, employees, or representatives. Such insurance shall also provide that it is primary insurance with respect to the Landlord and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder.

     Notwithstanding the foregoing, for any Minor Change, the limits of the commercial general liability policy referenced above shall be $1,000,000 per occurrence and $1,000,000 annual aggregate.

               7.4.1.5 Notwithstanding anything to the contrary contained herein, at least three (3) days prior to the commencement of any such Tenant alterations, Tenant shall deliver to Landlord copies of all licenses and permits that are required in connection with the performance of such alterations.

     For any work not subject to Landlord’s consent or approval, Tenant shall provide Landlord with the documents set forth in Sections 7.4.1.1 through 7.4.1.5 above prior to the commencement of any such work.

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     With respect to the design and construction of any such Tenant alterations, Tenant at its sole cost and expense, shall comply with all laws, codes and regulations (including the Americans with Disabilities Act and all other accessibility laws and regulations) relating to any alterations or improvements, including obtaining any necessary permits with respect thereto, and, upon completion, shall provide Landlord with as-built plans (in “CAD” (computer assisted design) form) detailing such alterations and improvements, together with a certificate of occupancy or the comparable municipal approval (such as a signed-off building permit) issued upon completion and approval of alterations and improvements in the municipality. Tenant shall be responsible for the accuracy of the as-built plans, and shall have Tenant’s contractor certify the accuracy of the same, in writing, which certification shall be delivered to Landlord at the same time the as-built CAD plans are delivered to Landlord.

     Additional rules and regulations regarding the design and construction of alterations (other than Minor Changes), to which Tenant is bound, are attached hereto as Exhibit K (the “Rules and Regulations Governing Alterations”), and is expressly incorporated herein.

          7.4.2 Damages due to Tenant’s Work. If any contractor or worker performing Tenant’s Work performs any work which does impair, or demonstratively threatens to impair the quality, integrity or performance of any portion of the Premises, Landlord shall give notice to Tenant and immediately thereafter, Tenant shall cause such contractor or worker immediately to remove all of its tools, equipment and materials and to cease working in the Premises. As additional rent under the Lease, Tenant shall reimburse Landlord for any reasonable repairs or corrections to any portion of the Premises made necessary as a result of the actions or omissions of anyone performing Tenant’s Work.

          7.4.3 Tenant’s Indemnity Obligations. Tenant shall defend, protect, indemnify and hold Landlord harmless against all liens, claims, actions, damages, liability, costs, attorneys’ fees and other expenses incurred as a result of any additions, alterations or improvements performed by Tenant or any person claiming under Tenant, or incurred on account of claims by any person performing work or furnishing materials or supplies for Tenant or any person claiming under Tenant.

     7.5 Removal of Alterations. All alterations and improvements to the Premises that are made by Tenant shall be the property of Tenant until the expiration or earlier termination of this Lease; at that time all such alterations and improvements shall remain on the Premises and become the property of Landlord without payment therefor, unless Landlord gives written notice to Tenant to remove the same at the time Landlord consents to such alterations (unless no Landlord consent is required prior to the installation of such alterations, in which case, Tenant shall seek Landlord’s determination, in writing, prior to the expiration of the Term, as to whether any such alterations are to be removed prior to the expiration or earlier termination of the Term, which determination shall be made by Landlord, in Landlord’s sole and absolute discretion, within ten (10) days after Landlord receives written notice from Tenant requesting that Landlord make such determination). Notwithstanding anything to the contrary herein, (a) Tenant shall not be required to remove any Initial Tenant Improvements performed pursuant to the Work Letter, unless otherwise required in accordance with the terms and conditions thereof, (b) Tenant’s removable trade fixtures and personal property, as well as Tenant’s Telecommunication Devices and Tenant’s back-up generator, if any, shall be and remain Tenant’s property, and shall be removed by Tenant from the Premises, at Tenant’s sole cost, on or before the expiration or earlier termination of this Lease. If Tenant is required per the terms of this Lease to remove any alterations and improvements, Tenant shall remove the same and repair any damage resulting therefrom, normal wear and tear excepted.

     7.6 Inapplicability this Section 7 to the Initial Tenant Improvements. Except as expressly provided herein, the terms and provisions of this Section 7 shall not apply to those Initial Tenant Improvements to be performed by Tenant pursuant to the terms of any Work Letter attached hereto (which improvements are subject to the terms and provisions of such Work Letter).

     7.7 Tenant’s Construction Obligations. Landlord and Tenant agree that the obligations of Tenant under this Section 7 shall not apply to any maintenance or repair work performed by Tenant pursuant to its maintenance and repair obligations under this Lease.

     7.8 Security Interests in Tenant’s Personal Property and Trade Fixtures. Tenant shall have the right, from time to time, to lease and to grant and assign security interests in that portion of Tenant’s removable trade fixtures and personal property located in or at the Premises, which may be subject to vendor financing, equipment leases and other means of personal property financing (the “Tenant’s Lien Property”). Landlord agrees to execute, at Tenant’s cost and expense, commercially-reasonable waiver forms releasing Landlord’s interest in those items of Tenant’s Lien Property for which such a waiver is requested in favor of any purchase money seller, lessor or lender who has an ownership or security interest in any of the Tenant’s Lien Property, as long as such requested waiver specifically describes the equipment subject to such waiver, and is not a general waiver. Without limiting the effectiveness of the foregoing, provided that no default shall have occurred and be continuing, Landlord shall, upon the request of Tenant, and at the Tenant’s sole cost and expense, execute and deliver any instruments reasonably necessary or appropriate to confirm any such grant, release, dedication, transfer, annexation or amendment to any person or entity permitted under this paragraph including Landlord waivers with respect to any of the foregoing, and such acknowledgment shall include, if requested by the person holding such ownership or security interest, the right to enter upon the Premises following a Tenant default for a period not to exceed thirty (30) days, for the limited purpose of removing that portion of the Tenant’s Lien Property subject to such person’s ownership or security interest, provided that the lessor or secured party agrees to repair any damages resulting from the exercise of such right. Tenant shall indemnify and hold Landlord harmless from and against any and all losses due to damages to the Premises caused by the removal of any of Tenant’s Lien Property.

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8.0 MECHANIC’S LIENS

     8.1 Tenant’s Obligations. Landlord shall have the right to post or keep posted on the Premises, or in the immediate vicinity thereof, any notices of non-responsibility for any construction, alteration or repair of the Premises by Tenant. Tenant shall promptly pay and discharge all claims for work or labor done, supplies furnished or services rendered by Tenant’s agents, employees, contractors, licensees, or invitees (collectively, “Agents”), and Tenant shall keep the Premises free and clear of any liens arising out of work done by or for Tenant or Tenant’s Agents. Should any such lien or notice of lien be filed, Tenant shall bond against or discharge the same within twenty (20) days after such filing. If Tenant fails to bond or discharge such lien within said twenty (20) day period, then Landlord shall have the right, but not the obligation, to take any action or pay such amount as may be necessary to remove such lien, and Tenant shall pay to Landlord as Additional Rent any such amounts expended by Landlord within five (5) business days after notice is received from Landlord of the amount expended by Landlord as a result thereof.

9.0 ENTRY BY LANDLORD

     9.1 Entry by Landlord. Tenant shall permit Landlord, its lenders, and their Agents to enter the Premises at all reasonable times, subject to Tenant’s reasonable safety and security requirements, for the purpose of inspection, maintenance, making repairs, alterations or additions to any portion of the Building or the Premises, conducting environmental tests, inspections and audits (including review of Tenant’s records relating to hazardous materials), serving or posting notices as well as to exhibit the Premises for sale, mortgage or lease, and, during the last one hundred eighty (180) calendar days prior to the expiration of this Lease, placing “For Lease” signs, without any rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment thereby occasioned.

     Landlord understands that all utilities are critical to Tenant’s business operations and will use its best efforts to make sure that these sources are not interrupted at any time without providing advance notice to Tenant. Landlord shall exercise its rights of entry hereunder for (i) purposes reasonably relating to the management of the Premises or the performance of its obligations under the Lease, (ii) assuring, Tenant’s compliance with its obligations under the Lease to the extent that Landlord reasonably believes that Tenant is not complying with its obligations under the Lease, (iii) for purposes associated with any environmental testing or compliance required by any governmental authority, or (iv) purposes related to the sale or financing of the Premises, including but not limited to appraisals, property inspections, etc. In entering the Premises for such purposes, Landlord shall conduct its activities with due and proper concern for Tenant’s interests in safety and security, in being free from unreasonable interference with its business operations, and in guarding the confidentiality of its business operations.

     Any proprietary or confidential information relating to Tenant’s operation of its business shall not be disclosed to third parties by Landlord or anyone under Landlord’s control, unless (a) such information is or becomes publicly available through means other than disclosure by Landlord, or anyone under Landlord’s control, (b) the disclosure of such information is reasonably necessary for Landlord or anyone under Landlord’s control to carry out Landlord’s obligations under this Lease, (c) the disclosure of such information is reasonably necessary for Landlord to assert a claim against Tenant for a breach of this Lease, or (d) the disclosure of such information is required to be disclosed by law or by court order; provided, however, that if Landlord receives a request, pursuant to the terms of a subpoena, order, civil investigative demand or similar process issued by a court of competent jurisdiction or by governmental body, to disclose such confidential information, Landlord agrees to promptly notify Tenant of such request so that Tenant may seek such a protective order prohibiting or limiting such disclosure as Tenant shall deem appropriate. Notwithstanding the foregoing, Landlord shall have the right to disclose such confidential information to (x) prospective buyers of the Real Property, (y) prospective lenders of the Premises, and to (z) its employees, agents, attorneys, accountants, and representatives for purposes associated with this Lease, provided, however, that (i) Landlord assures Tenant that such parties maintain the confidentiality of such information to the same extent that Landlord is required to maintain the confidentiality of such information as set forth herein, or (ii) in no case shall Landlord disclose (nor shall Landlord allow any party receiving any such confidential information from Landlord to disclose) any such confidential information to a business competitor of Tenant (or an affiliate of such competitor), and (iii) such information is reasonably required or necessary for the legitimate business purposes of the person requesting such information as it relates to this Lease. The parties agree that damages would be an inadequate remedy for the breach of this provision, and Tenant shall have the right to seek specific performance of the confidentiality covenant of Landlord and to seek injunctive relief to prevent its breach.

10.0 DAMAGE BY FIRE OR OTHER CASUALTY

     10.1 Damage by Fire or Other Casualty. If the Premises shall be damaged or destroyed by fire or other casualty, Tenant shall promptly notify Landlord, and Landlord, subject to the conditions set forth in this Section 10, shall repair such damage and restore the Premises to substantially the same condition in which it was immediately prior to such damage or destruction; provided funds are reasonably available to Landlord (from insurance proceeds) for Landlord to restore the same. Landlord’s restoration shall not include the repair, restoration or replacement of Tenant’s fixtures, improvements, alterations, furniture or any other of its property; provided, however, that Tenant’s Initial Tenant Improvements constructed pursuant to the Work Letter shall be included in Landlord’s property insurance carried as an Operating Expense pursuant to Section 6.3.1. If a substantial casualty occurs during the last 12 months of the Term or any extension thereof, Landlord or Tenant may cancel this Lease unless Tenant has at least one Renewal Term remaining under this Lease, and has exercised the Renewal Option relating to such term, prior to such casualty in accordance with Section 30.1 below, or does so within thirty (30) calendar days after the date of the casualty. If in Landlord’s reasonable opinion (and through no failure of Landlord to

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maintain the insurance required to be maintained by Landlord in accordance with Section 6.3.1 covering the full replacement cost of the Building), the cost of completing such restoration exceeds the proceeds of such insurance (without reduction for any amounts to be paid to Landlord’s lender or any other holder of a Security Instrument, as defined in Section 15.1) by more than Two Hundred Fifty Thousand Dollars ($250,000), then Landlord may terminate this Lease by giving Tenant written notice that specifies a termination date no less than thirty (30) calendar days after its transmission; provided, however, that Tenant may elect to preserve this Lease by committing in writing to Landlord to pay for any shortfall of insurance proceeds in excess of the Landlord’s $250,000 limit set forth above no later than fifteen (15) days following Tenant’s receipt of Landlord’s termination notice, which amount shall be deposited with Landlord within ten (10) business days following Landlord’s written notice to Tenant setting forth the amount required to cover such shortfall, which funds shall be used by Landlord solely for the cost of repairing and restoring Landlord’s Work and the Initial Tenant Improvements.

     The proceeds of Landlord’s casualty insurance shall be used for restoration of the Building and the tenant improvements covered by such insurance as provided above unless (i) this Lease is terminated as provided above due to a casualty occurring during the last 12 months of the Term, or any extension thereof, or a shortfall of insurance proceeds, or (ii) due to the casualty and resulting damage to the Premises, where there is an impairment of the security under any loan obtained by Landlord that is secured by a Security Instrument (as defined in Section 15.1), other than an impairment of the security due solely to a default by Landlord under such Security Instrument, that permits such lender to apply such insurance proceeds towards the repayment of such loan and not to the restoration of the damage to the Premises (herein referred to as a “Landlord’s Loan Default”). If the proceeds of Landlord’s casualty insurance are not used for restoration of the Premises and the tenant improvements covered by Landlord’s insurance due solely to a Landlord’s Loan Default permitting such lender to apply such insurance proceeds towards the repayment of such loan and not to the restoration of the damage to the Premises, then Landlord shall indemnify and hold Tenant harmless from the cost of replacing the damaged tenant improvements covered by Landlord’s casualty insurance to the extent any insurance proceeds attributable to the replacement cost thereof is not available for the restoration of such tenant improvements and provided that (a) Tenant is not in default under this Lease (after notice and the expiration of the applicable cure period), and (b) Tenant is occupying and conducting business in a majority of the Building at the Premises prior to the date of the casualty. Tenant agrees to cooperate with Landlord and its lender if Landlord’s lender requires the insurance proceeds be deposited in a construction escrow account and disbursed during the construction of the restoration work.

          In the event any judgment, order, decree or similar directive from any applicable governmental authority (the “Order”) is issued in connection with any toxic material clean up, monitoring program or other similar problem in or about the Building, and such problem was not caused by Tenant, or its agents, contractors, invitees or employees, and the Order unreasonably interferes with Tenant’s use of the Premises, then Rent shall be abated, proportionately while the Order is in effect on the basis of that percentage of Tenant’s overall use of the Premises which is unreasonably interfered with by the terms and conditions of the Order as jointly determined by Landlord and Tenant. Landlord and Tenant shall meet within the ten (10) business day period commencing on the date the Order is issued, and negotiate in good faith to attempt to agree upon the percentage of the Premises which Tenant is unable to use. In the event that Landlord and Tenant are unable to agree on the percentage of the Premises which Tenant is unable to use within that ten (10) business day period, then the dispute shall be resolved by Judicial Reference in accordance with Section 19.1 below.

     10.2 Tenant’s Right to Terminate. Landlord within thirty (30) days after the date of destruction shall notify Tenant if the Building cannot be fully repaired within one hundred fifty (150) days after the date of destruction. In such event Tenant may terminate this Lease as of the 40th day after the date of destruction by giving Landlord written notice within ten (10) days after Tenant’s receipt of Landlord’s notice.

     10.3 Rent Abatement. The Minimum Monthly Rent, Operating Expenses and any other amounts payable by Tenant to Landlord hereunder (other than amounts which are accrued and unpaid) shall abate to the extent that the Premises are rendered unusable by such damage or the repair thereof, and are not used due to such damage or repair, in the proportion that the area of the Premises that Tenant is prevented from using (and does not use) bears to the total area of the Premises, as reasonably determined by Landlord and Tenant, taking into consideration such factors as the use of, and the location of, the damaged portion and the effect of the damage to Tenant’s operations; provided, however, that such Rent shall not abate to the extent that such interference with Tenant’s use of the Premises arises from the acts or omissions of Tenant or its agents, employees, contractors, licensees, or invitees (collectively, “Agents”). Such abatement shall commence with the damage or destruction and end upon restoration of the Premises. Tenant shall not be entitled to any compensation or damages from Landlord for loss of use of the Building or Premises, damage to Tenant’s personal property or any inconvenience occasioned by such damage, repair or restoration. Notwithstanding the foregoing, in the event Landlord’s rent abatement insurance provides coverage to Landlord for any abatement of Tenant’s rent as a result of any acts or omissions of Tenant or its Agents, then Tenant’s rent shall abate to the extent that Landlord is actually reimbursed by such insurance as a result of Tenant’s inability to use the Premises.

     Notwithstanding the provisions of this Section 10.3 or Section 6.4.4 above, but subject to Sections 6.3.4 and 11.1, Landlord shall be liable for loss of use of the Premises or damage to Tenant’s personal property occasioned by Landlord’s repair or restoration to the extent such loss or damage is caused by the negligence or willful misconduct of Landlord, its employees or agents.

11.0 INDEMNIFICATION

     11.1 Indemnity Obligations. Subject to Section 6.3.4 above and except as otherwise expressly provided herein, Tenant shall hold harmless, indemnify, and defend Landlord against all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) (collectively,

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“Claims”) in connection with loss of life, personal injury or damage to property in or about the Premises or arising out of the occupancy or use by Tenant of the Premises or occasioned wholly or in part by any act or omission of Tenant or its Agents, except to the extent such Claims arise from the negligence or willful misconduct of Landlord and/or its Agents. Subject to Section 6.3.4 above, and except as otherwise expressly provided herein, Landlord shall indemnify and hold Tenant harmless from and against all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) in connection with loss of life, personal injury or damage to property in or about the Premises resulting from the negligence or willful misconduct of Landlord, or its employees, agents or contractors. Without limiting the foregoing, Tenant will forever release and hold Landlord and its Agents harmless from all Claims arising out of damage to Tenant’s property, except to the extent such Claims arise as a result of Landlord’s failure to make repairs that Landlord is required to make under this Lease after the expiration of any cure period specified in the Lease to repair the same after having received written notice of the need for such repair. In no event shall either party be liable to the other for indirect or consequential damages, including without limitation, any claims for lost profits or business opportunities, arising from any cause whatsoever, including without limitation any negligence of either party, excepting only that Tenant shall be fully liable for (a) all damages arising out of a breach of Tenant’s obligations under Section 15 of the Lease caused by Tenant’s willful failure to comply with any Landlord request, and (b) any damages, including without limitation, any claims for lost profits or business opportunities, arising out of the continued occupancy by Tenant of the Premises after the expiration or earlier termination of this Lease or any renewal thereof (as the expiration date of the Lease may be extended subject to Section 16 of this Lease), without Landlord’s written consent, except to the extent such holding over after the expiration or earlier termination is due to a cause beyond the reasonable control of Tenant when such cause would affect any person similarly situated (such as a casualty or governmental preemption of priorities or other controls in connection with a national or other public emergency) but an event or occurrence shall not be beyond the reasonable control of Tenant when peculiar to Tenant (such as financial inability or delay in ordering materials requiring a long lead time, or a delay making requests for governmental approvals or permits).

12.0 CONDEMNATION

     12.1 Permanent Taking. If (i) all of the Premises is covered by a condemnation, (ii) any part of the Premises is covered by a condemnation and the remainder thereof is insufficient for the reasonable operation therein of Tenant’s business, or (iii) any of the Premises is covered by a condemnation and, in Landlord’s opinion, it would be impractical to restore the remainder thereof, then this Lease shall terminate and all obligations hereunder shall cease as of the date upon which possession is taken by the condemnor. If there is a condemnation and this Lease has not been terminated pursuant to this Section, the obligations of Landlord and Tenant shall be unaffected by such condemnation except that Rent shall abate in proportion to the area, if any, of the Building covered by such condemnation. Statutory provisions with respect to termination upon a partial taking of leased property shall not be applicable to this Lease.

     12.2 Condemnation Award. In the event of a condemnation affecting Tenant, Tenant shall have the right to make a separate claim against the condemnor for loss of Tenant’s property and for relocation expenses. Except as aforesaid, Tenant hereby assigns to Landlord all other claims against the condemnor.

     12.3 Temporary Taking. No temporary taking of the Premises or any part thereof shall terminate this Lease or give Tenant any right to any abatement of Rent. Any award made to Tenant by reason of such temporary taking shall belong entirely to Tenant and the Landlord shall not be entitled to share therein. For the purpose of this Section 12.3, a taking shall be considered temporary only if it is one hundred twenty (120) calendar days or less in duration.

13.0 QUIET ENJOYMENT

     13.1 Tenant’s Rights. Landlord covenants that Tenant, upon performing the terms, conditions and covenants of this Lease shall have quiet and peaceful possession of the Premises as against any person claiming the same by, through or under Landlord, subject, however, to the exceptions, reservations and conditions of this Lease.

14.0 ASSIGNMENT AND SUBLETTING

     14.1 Limitation. Tenant shall not transfer this Lease, voluntarily or by operation of law, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. For purposes of this Section 14, “transfer” shall include any sublease, assignment, license or concession agreement, mortgage or hypothecation of this Lease or Tenant’s interest therein or in all or a portion of the Premises, but shall not include any Permitted Transfer or Permitted Concession (as such terms are defined below). For purposes of this Lease, the term “transfer” shall also include (i) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant resulting in a change of control of Tenant or (B) the sale, transfer, pledge or hypothecation by Tenant of all or substantially all of its assets or all or substantially all of its stock; or (ii) if Tenant is a publicly traded corporation, a merger of Tenant with another corporation or a sale or other disposition of ten percent (10%) or more of its stock within a twelve (12)-month period or a sale of substantially all its assets. “Control,” as used in this Article 14, shall mean the possession of the power to direct or cause the direction of the management or policies of an entity, whether through ownership or voting securities, or by contract or otherwise. Landlord shall not consent to any transfer which provides for a rental or other payment based in whole or in part on the net income or profits derived by a user or occupant of the Premises from its use or occupancy of the Premises (other than an amount based on a fixed percentage or percentages of receipts or sales). A consent to one transfer shall not be deemed to be a consent to any subsequent transfer. Notwithstanding the foregoing, Tenant may assign this Lease or sublet the Premises, or any portion thereof, with at least fifteen (15) calendar days prior written notice

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to Landlord, but without Landlord’s consent, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from a merger or consolidation with Tenant, or to any person or entity which acquires all or substantially all of the assets of Tenant’s business (or all or substantially all of the equity interests in Tenant) as a going concern (each, a “Permitted Transferee”). Any transfer without Landlord’s consent (excluding any transfer that does not require Landlord’s consent pursuant to this Section 14.1), shall be void at the option of Landlord, giving Landlord the right to exercise any or all of its rights under Section 17 hereof. None of the foregoing shall be interpreted to preclude Tenant permitting the use or occupancy of the Premises by representatives or employees of any entity which is then performing services related to Tenant’s business operations in the Premises (as long as the use or occupancy of the Premises by such representatives or employees is not otherwise a subterfuge to avoid Tenant’s assignment and subletting obligations under this Article 14), including, but not limited to vendors providing outsourced services, such as employee travel services or food and beverage services at the Premises (a “Permitted Concession”).

     Notwithstanding the foregoing, as a condition to Tenant’s right to transfer to a Permitted Transferee, (i) if the transfer is an assignment of Tenant’s entire interest in this Lease, the Permitted Transferee shall assume, in full and in writing, the obligations of Tenant under this Lease, and Tenant shall provide to Landlord written documentation, signed by such Permitted Transferee, evidencing the same, (ii) if the transfer is a sublease of a portion of Tenant’s interest in the Lease, the Permitted Transferee shall assume, to the extent applicable to the portion of the Premises subleased, and in writing, the obligations of Tenant under this Lease, and Tenant shall provide to Landlord written documentation, signed by Permitted Transferee, evidencing the same, (iii) Tenant shall remain fully liable under the Lease, and (iv) the use of the Premises shall be permitted under this Lease. Furthermore, within ten (10) days after any transfer to a Permitted Transferee, Tenant shall provide Landlord with reasonable documentation and information, as reasonably requested by Landlord, evidencing that the transferee is sufficiently financially responsible to perform its obligations in connection with the proposed transfer of this Lease

     14.2 Offer to Landlord. Tenant acknowledges that the terms of this Lease, including Rent, have been based on the understanding that Tenant shall physically occupy the Premises for the entire Term. Therefore, upon Tenant’s request for Landlord’s consent to a transfer (if required pursuant to Section 14.1) of all or a portion of the Premises, Landlord shall be entitled to sublease from Tenant for Landlord’s own account the portion of the Premises proposed to be transferred by Tenant by written notice given to Tenant within twenty (20) days of Landlord’s receipt of such request, upon the same terms as those proposed but otherwise upon the form of this Lease; provided that Tenant may elect to avoid such sublease by rescinding the transfer request within twenty (20) days following receipt of Landlord’s election; provided, however, that Tenant’s right to rescind shall be limited to once every five (5) years (i.e. should Tenant rescind a transfer request, Tenant shall have no right to rescind again for a period of five years after the date that Tenant rescinds the transfer request). If Landlord so subleases for its own account, Landlord shall have the further right to transfer such portion of the Premises to any person or entity who is not a business competitor of Tenant, and Tenant shall be relieved of any liability with respect to such portion of the Premises so subleased by Landlord until the term of such sublease expires or is terminated.

     14.3 Conditions. Notwithstanding the above, the following shall apply to any proposed transfer:

          (a) No transfer shall relieve Tenant of its obligation to pay Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any person shall not be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any transfer.

          (b) Any consideration received by Tenant as a result of a sublease or assignment (other than from a Permitted Transferee or pursuant to a Permitted Concession) which exceeds the total sums which Tenant is obligated to pay Landlord under this Lease, or the prorated portion thereof if only a portion of the Premises is transferred, shall be payable to Landlord as additional rent under this Lease without affecting or reducing any other obligation of the Tenant hereunder. Notwithstanding the above, Tenant shall be entitled to deduct from such excess consideration its reasonable expenses associated with such sublease or assignment (e.g., leasing commissions and cost of alterations, attorneys’ fees, architectural fees, engineering fees and all other similar costs normally associated with subletting or assigning), along with a reasonable return on all amounts contributed by Tenant to the purchase and/or installation of the Initial Tenant Improvements (in accordance with the Work Letter) and any alterations made by Tenant to the Premises associated with the portion of the Premises being subleased or assigned, exclusive of any Tenant Improvement Allowance paid by Landlord (and equitably allocated to the portion of the Premises being subleased or assigned), at the initial book value of such Initial Tenant Improvements and alterations less depreciation and any asset write-off, as reasonably agreed upon by Landlord and Tenant. Furniture and equipment paid for and installed in the Premises by Tenant (based on the initial book value less depreciation) shall be subject to such reasonable return to the extent such furniture and equipment remains with the Premises as part of such sublease or assignment. Items of repair, replacement, or maintenance which Tenant is required to perform by law or under the terms of this Lease and items for which Tenant is in some other manner reimbursed or compensated, shall not be subject to such return. Tenant’s return shall be an annualized rate of return of seven percent (7%) of all amounts so contributed by Tenant (“Tenant’s Return”). Tenant’s Return may be retained by Tenant at any time amounts in excess of applicable Minimum Monthly Rent, Operating Expenses and any and all other amounts payable to Landlord by Tenant hereunder (“Excess Consideration”) are paid by a subtenant or assignee. Tenant’s deductions shall be supported by documentation provided to Landlord upon Landlord’s request, such as invoices, purchase orders, receipts and construction contracts, detailing the amounts actually paid by Tenant for those improvements as to which Tenant seeks to deduct such rate of return. Notwithstanding anything to the contrary set forth above, (i) Tenant’s Return shall accrue continuously from the date of commencement of any permitted sublease or assignment, (ii) Tenant shall be entitled to receive 100% of all Excess Consideration until it is reimbursed the full amount of its subleasing or assignment expenses as described above and has received 100% of Tenant’s Return. Thereafter, Landlord shall be entitled to 92% of all Excess Consideration.

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          (c) Each transfer to which Landlord has consented shall be by an instrument in writing in a form satisfactory to Landlord, and shall be executed by Tenant and the transferee. Tenant shall reimburse Landlord for Landlord’s reasonable costs and attorneys’ fees incurred in conjunction with the processing and documentation of any such request.

15.0 SUBORDINATION; ESTOPPEL CERTIFICATES

     15.1 Subordination. Landlord represents that as of the date of this Lease, the Property is not encumbered by a ground lease or a mortgage or deed of trust to which Landlord or any affiliates of Landlord is a party. Nevertheless, this Lease shall, unless otherwise elected by Landlord’s first mortgagee, lender, or ground lessor, be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security (collectively, a “Security Instrument”) now or hereafter placed upon the Premises and to any and all advances made on the security thereof and to all modifications, replacements and extensions thereof. Notwithstanding such subordination, this Lease shall not be terminated, nor shall the rights and possession of Tenant hereunder be disturbed if Tenant shall not be in default under the terms of this Lease, and upon such new landlord’s request, Tenant shall attorn to the new landlord or shall enter into a new lease for the balance of the original or extended term hereof upon the same terms and provisions contained in this Lease. In the event of a foreclosure of any such mortgage or deed of trust or any other action or proceeding for the enforcement thereof, or any sale thereunder, this Lease likewise will not be terminated, nor will the rights and possession of Tenant hereunder be disturbed if Tenant shall not then be in default under the terms of this Lease, provided that Tenant shall, at the new owner’s request, attorn to the new owner of the Premises. Tenant agrees to execute and deliver upon demand such further instruments or documents as may reasonably be required by Landlord evidencing the subordination of this Lease as set forth above; provided, however, that Tenant’s covenant to subordinate the Lease is conditioned upon each senior mortgagee under any senior mortgage executed after the date hereof providing a commercially reasonable subordination and nondisturbance agreement to Tenant containing the nondisturbance commitment specified above. This Lease shall, at the election of Landlord’s first mortgagee, lender or ground lessor, be superior to any such Security Instrument. In any event, Tenant shall execute any documents required to effectuate the subordination of this Lease or any Security Instrument within ten (10) business days after Tenant’s receipt of the written request. Tenant shall attorn to any purchaser at any foreclosure sale, or to any grantee or transferee designated in any deed given in lieu of foreclosure.

     15.2 Condition of Lease. Within ten (10) business days after Tenant receives Landlord’s written request, Tenant shall provide a written statement acknowledging the commencement and termination dates of this Lease, that it is in full force and effect, has not been modified (or if it has, stating such modifications), and providing any other pertinent factual information as Landlord reasonably requests.

     15.3 Tenant’s Failure. If Tenant fails to execute and deliver to Landlord any document requested by Landlord pursuant to Section 15.1 and 15.2 above within the time required therein, and thereafter, if Landlord delivers a second written notice to Tenant requesting that Tenant execute and deliver the same to Landlord, then if Tenant fails to execute and deliver such documents to Landlord within five (5) business days after receiving such second written notice from Tenant, then Tenant hereby irrevocably appoints Landlord as Tenant’s attorney in fact to execute such documents on Tenant’s behalf, and all statements made in such documents shall be deemed true and binding upon Tenant, and Landlord’s mortgagee(s) and/or purchaser(s) may rely on said statements. If Landlord requests more than two (2) such certificates in any one calendar year, Landlord shall pay Tenant’s actual attorney’s fees associated with reviewing all documents relating to such additional requests, to the extent such attorneys’ fees are reasonable, not to exceed Five Hundred Dollars ($500.00) per request.

     15.4 Financial Statements. Tenant shall deliver to Landlord such financial statements of Tenant and its guarantor as may be reasonably requested by Landlord for any purpose, including, but not limited to Landlord’s efforts to finance, refinance or sell the Premises or any part thereof (provided that Tenant shall not be required to provide audited financial statements if unaudited financial statements are prepared in the ordinary course of Tenant or its guarantor’s business). Landlord acknowledges that such financial information is to be kept confidential and Landlord agrees to limit the distribution of any financial statements of Tenant or Tenant’s guarantor to its lender(s), joint venturers, partners, and prospective purchasers, unless Tenant’s prior consent has been obtained for further distribution. Any distribution shall be limited to the purposes agreed to by Tenant in granting its consent to such distribution. Landlord shall require its lender and any other distributees to maintain the confidentiality of such financial information as a condition of its release of the information. Tenant represents and warrants that all financial information provided by Tenant or its guarantor to Landlord on behalf of Tenant or its guarantor prior to execution by Landlord of this Lease is true and complete and fairly represents the actual financial condition of Tenant and its guarantor, as applicable, as of the date of such financial information (as indicated in the financial statement), and that there has been no material adverse change in the financial condition, statements or information provided on behalf of Tenant or its guarantor, from the date of such financial information to and including the date of execution of this Lease. Upon Landlord’s request, Tenant shall furnish Landlord with Tenant and its guarantor’s most recent periodic or annual reports. As long as the common stock (or American Depository Receipts or any other equity security) of Tenant or its guarantor (or any affiliate consolidated with Tenant or its guarantor for financial reporting purposes) is publicly-traded on a United States national stock exchange, and such information is available as part of Tenant’s or its guarantor’s (as applicable) periodic filings on the SEC’s Edgar website, and such materials are current per SEC filing requirements, then Tenant may satisfy such submittal requirement by notifying Landlord that such information is available at the SEC website, and indicating the company filer of the pertinent information; provided, however, that at Landlord’s written request, Tenant must satisfy such submittal requirement by delivering a PDF copy of such filing, via e-mail, to President: e-mail address Legal@Chamb.com. Landlord shall have the right to change the name and e-mail address of the person identified in the preceding sentence by delivering written notice of such name and e-mail address change to Tenant, in writing, which name and e-mail address changes shall be effective upon delivery. Tenant agrees that any material misrepresentation to Landlord as

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to Tenant’s or its guarantor’s financial condition, or any failure to provide financial information required to be provided by Tenant or its guarantor on behalf of Tenant hereunder, shall constitute a default under this Lease.

16.0 SURRENDER AND HOLDOVER

     16.1 Condition at End of Term. Subject to the terms of Articles 7 and 10, at the expiration or earlier termination of the Term, Tenant shall promptly yield up, in the same condition, order and repair in which they are required to be kept during the Term, the Premises and all alterations thereto, and all fixtures and equipment servicing the Building and/or the Premises, ordinary wear and tear excepted.

     16.2 Holdover Terms. If Tenant, or any person rightfully claiming through Tenant, shall continue to occupy the Premises after the expiration or earlier termination of the Term or any renewal thereof, with Landlord’s written consent, such occupancy shall be deemed to be under a month-to-month tenancy under the same terms set forth in this Lease; except that the Minimum Monthly Rent during such continued occupancy shall be any amount which Landlord may specify in a written notice to Tenant. Any holding over by Tenant without Landlord’s prior written consent shall constitute a default hereunder and shall be subject to all the remedies set forth in Section 17. Notwithstanding the above, the minimum monthly rent during any holdover period, with Landlord’s consent, shall not exceed one hundred fifty percent (150%) of the Minimum Monthly Rent in effect during the last month of the Lease term, as it may be extended. Notwithstanding the foregoing, if Tenant, at the time the term of this Lease expires, as well as at the time the Holdover Notice (as defined below) is delivered to Landlord, is not in default under this Lease, then provided that Tenant provides Landlord with written notice at least sixty (60) days (and no more than one hundred twenty (120) days) in advance of the expiration date of this Lease stating that Tenant will be unable to vacate the entire Premises in the condition required by the Surrender Plan on or before such expiration date due to reasons outside of Tenant’s reasonable control or because of Tenant’s reasonable business requirements (the “Holdover Notice”), then Landlord shall be deemed to have consented in writing to a twenty-one (21) day holdover by Tenant after the expiration of the term of this Lease (the “Permitted Holdover Period”), and Tenant’s holdover occupancy during such twenty-one (21) day period shall be subject to all terms and provisions of this Lease, provided, however, that the Minimum Monthly Rent during such Permitted Holdover Period shall be based on an accrual of the same on a weekly basis in an amount equal to One Hundred Ten percent (110%) of the Minimum Monthly Rent payable during the last full month of the Lease prior to the Permitted Holdover Period.

17.0 DEFAULT AND REMEDIES UPON DEFAULT

     17.1 Events. The occurrence of any of the following shall constitute a material default and breach of this lease by Tenant:

          (a) Any failure by Tenant to pay Rent or to make any other payment required to be made by Tenant hereunder when due (each occurrence thereof being referred to herein as a “Rent Default”); provided, however, that Landlord shall exercise no remedies provided in Sections 17.2 and 17.3 unless Tenant fails to cure such Rent Default within ten (10) calendar days after Landlord gives Tenant written notice of such Rent Default. Notwithstanding the foregoing, should Landlord deliver to Tenant written notice of a Rent Default, then with respect to any subsequent Rent Default occurring within one (1) year after the previously noticed Rent Default, Tenant will only have five (5) calendar days after Landlord gives Tenant written notice of such subsequent Rent Default to cure the same, provided, however, that the subsequent notice of a Rent Default within specifies that Tenant only has five (5) calendar days to cure such Rent Default (should such notice fail to specify that Tenant only has five (5) calendar days to cure such Rent Default, then Tenant shall have ten (10) calendar days to cure such Rent Default);

          (b) A failure by Tenant to observe and perform any other provision of this Lease (each occurrence thereof being referred to herein as a “Non-Rent Default”), where such failure continues for thirty (30) calendar days after written notice thereof by Landlord to Tenant; provided, however, that if the default cannot reasonably be cured within thirty (30) calendar days, Tenant shall not be deemed to be in default if Tenant shall, within such thirty (30) calendar day period, commence to cure and thereafter diligently prosecute the same to completion;

          (c) With respect to Tenant (or if Tenant is a limited liability company or partnership, any member of or partner in Tenant) or any guarantor of Tenant’s obligations under this Lease (collectively, with Tenant, a “Tenant Party”), either (1) the appointment of a receiver (except a receiver appointed at Landlord’s request) to take possession of all or substantially all of the assets of any Tenant Party, or (2) a general assignment by any Tenant Party for the benefit of creditors, or (3) any action taken by any Tenant Party or by any other person against any Tenant Party under any insolvency or bankruptcy act. In the event any of these actions has not been withdrawn or dismissed within sixty (60) calendar days of the date of filing, Landlord may, at its option, declare this Lease terminated and forfeited by Tenant in a written notice to Tenant, and Landlord shall be entitled to immediate possession of the Premises; provided, that Tenant shall not have such cure right with respect to any of such actions instituted, consented to or taken voluntarily by Tenant.

     Tenant agrees that any notice given by Landlord pursuant to this Section 17.1(c) which is served in compliance with Section 21 of this Lease shall be adequate notice for the purpose of Landlord’s exercise of the remedies specified in Section 17.2 or any other remedies provided by law. Therefore, any statutory provision relating to the manner of giving notice shall not be applicable to this Lease.

     17.2 Landlord’s Rights. In the event of any material default by Tenant (as outlined above), Landlord, in addition to all other remedies provided by law or in equity, shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. If Landlord shall

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elect to so terminate this Lease, Landlord may recover from Tenant all damages suffered by Landlord as a result of Tenant’s material default, including, but not limited to, the worth at the time of award (computed in accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the California Civil Code) of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided. If Landlord does not elect to terminate this Lease, Landlord shall have the remedy described in Section 1951.4 of the California Civil Code (Landlord may continue the Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations). In addition, if Landlord elects to continue the Lease in effect, Landlord may relet the Premises or any part thereof for such term and at such rent and upon such other terms and conditions as Landlord in its reasonable discretion may deem advisable with the right to make alterations and repairs to the Premises. Any Rent received by Landlord from a reletting shall be applied to the payment of (a) any indebtedness other than Rent due hereunder; (b) the cost of such reletting; (c) the cost of any alterations and repairs to the Premises; (d) Rent due and unpaid hereunder; and (e) the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same may become due and payable hereunder. If the Rent received from such reletting is less than the Rent payable by Tenant, then Tenant shall pay such deficiency to Landlord immediately upon demand therefore by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord as soon as ascertained, any expenses incurred by Landlord that are not covered by the Rent received from such reletting.

     17.3 Late Charge & Interest. Tenant shall pay a one time administrative fee (“Late Fee”) for any Rent that is not paid within five (5) days after the date when due in an amount equal to the greater of $100 or three percent (3%) of the amount due. Such late fee shall be due and payable when incurred. In addition, all Rent (including all Late Fees) that are not paid when due shall bear interest at the rate of ten percent (10%) per annum, or the maximum legal rate, whichever is less. Landlord and Tenant agree that the Late Fee and interest set forth in this Section 17.3 represents a reasonable estimate of Landlord’s loss of the use of the money owed, and the costs and expenses incurred by Landlord as a result of the non payment and is fair compensation to Landlord for the loss suffered from Tenant’s nonpayment. Acceptance of any interest and/or late payment penalty shall not constitute a waiver of Tenant’s default with respect to such nonpayment by Tenant nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease. Notwithstanding the foregoing, after the second late payment by Tenant during any consecutive twelve month period, Landlord may require Tenant make advance payments of Rent on a quarterly basis or by wire transfer for the twelve (12) month period of the Lease Term following such second late payment.

     17.4 Termination. No re-entry or taking possession of the Building or the Premises or any other action under this Section shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a Court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of any material default by Tenant, Landlord may at any time after such reletting elect to terminate this Lease for any such material default.

     17.5 No Waiver. No waiver by either party of any breach by the other party shall be a waiver of any subsequent breach, nor shall any forbearance by one party to seek a remedy for any breach by the other party constitute a waiver by the non-breaching party of any rights and remedies with respect to such or any subsequent breach. Efforts by either party to mitigate the damages caused by the other party’s default shall not constitute a waiver by the non-breaching party to recover damages hereunder.

     17.6 Cure of Tenant’s Default. Except as otherwise provided in Section 6.4.4, should Tenant fail to perform any obligation imposed by this Lease, Landlord may perform or contract for the performance of Tenant’s obligation after having given Tenant reasonable notice of the failure(s) and a reasonable opportunity, which in no case shall exceed ten (10) calendar days, to remedy the failure, and Tenant shall pay Landlord for all costs incurred by Landlord in connection therewith. The exercise of one right or remedy by Landlord shall not in any way impair its right to any other right or remedy. Should Tenant consist of more than one person or entity, they shall be jointly and severally liable on this Lease.

     17.7 Waiver. Tenant waives (for itself and all persons claiming under Tenant) any right of redemption or reinstatement of Tenant under Civil Code Sections 1179 and 3275 in the event that Tenant is dispossessed from the Premises for any reason.

     17.8 Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the amounts owed to Landlord in this Lease shall be deemed to be other than on account of the earliest due amounts owed, nor shall any endorsement or statement on any check or letter accompanying any check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of the Rent or pursue any other remedy provided for in this Lease. In connection with the foregoing, Landlord shall have the absolute right in its sole discretion to apply any payment received from Tenant to any account or other payment of Tenant then not current and due or delinquent under the terms of this Lease.

18.0 LIABILITY OF LANDLORD

     18.1 Landlord’s Right to Cure; Limitations on Liability. In the event of any actual or alleged failure, breach or default by Landlord hereunder pertaining to the Building or the Premises, Tenant shall give Landlord written notice thereof and Landlord shall not be deemed in default unless it fails to diligently commence to cure such default within thirty (30) calendar days after its receipt of such notice. Landlord’s (which term includes Landlord’s partners, co-venturers, co-tenants, officers, directors, employees, agents (including any property manager for the Premises), or representatives, all of whom have the authority to act on Landlord’s behalf)

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liability to Tenant for any such default shall be limited to its ownership interest in the Premises or the proceeds of a public sale of such interest pursuant to foreclosure of a judgment against Landlord, plus any insurance proceeds actually received by Landlord with reference to the Premises and not expended on the Premises or to pay claims covered by such proceeds. Landlord shall not be liable for any deficiency beyond its interest in the Premises and the amount of such insurance proceeds.

     18.2 Release or Transfer; Successor Liability. If Landlord shall transfer its interest in the Building or the Premises, then from and after the effective date of the transfer, Landlord shall be released from all obligations under this Lease, except for those already accrued. If Landlord transfers the Security Deposit to the transferee, then upon the written acceptance of Landlord’s obligations under this Lease regarding the return thereof to Tenant by said transferee, Landlord shall be discharged from any further liability in reference to such Security Deposit.

19.0 JUDICIAL REFERENCE/ ATTORNEY FEES

     19.1 JUDICIAL REFERENCE. EXCEPT FOR THOSE CLAIMS AND/OR ACTIONS THAT ARE SUBJECT TO RESOLUTION PURSUANT TO STATUTORY UNLAWFUL DETAINER PROVISIONS SET FORTH IN THE CALIFORNIA CIVIL CODE AND CODE OF CIVIL PROCEDURE, WHICH CLAIMS AND/OR ACTIONS LANDLORD SHALL HAVE THE RIGHT TO PURSUE IN ANY MANNER PERMITTED BY LAW, ANY CONTROVERSY, BREACH OR DISPUTE ARISING OUT OF THIS LEASE, OR RELATING TO THE INTERPRETATION OF ANY TERM OR PROVISION OF THIS LEASE SHALL BE HEARD BY A REFEREE PURSUANT TO THE PROVISION OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, SECTIONS 638-645.1 INCLUSIVE. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS HEREOF. THE PARTIES AGREE THAT THE REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS/HER DECISION THEREON, AND TO ISSUE ALL LEGAL AND EQUITABLE RELIEF APPROPRIATE UNDER THE CIRCUMSTANCES BEFORE HIM/HER. THE PARTIES SHALL AGREE UPON A SINGLE REFEREE WHO SHALL BE A RETIRED JUDGE OF A CALIFORNIA SUPERIOR COURT WHO SHALL THEN TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT THEREON. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE WITHIN TEN (10) DAYS OF A WRITTEN REQUEST TO DO SO BY ANY PARTY, THEN ANY PARTY MAY THEREAFTER SEEK TO HAVE A REFEREE APPOINTED PURSUANT TO THE CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 AND 640.

BY PLACING THEIR INITIALS BELOW, THE PARTIES AGREE TO RESOLVE ALL DISPUTES OF LAW AND FACT THAT ARE SUBJECT TO THE JUDICIAL REFERENCE AS SET FORTH HEREIN BY A GENERAL REFERENCE TO A RETIRED CALIFORNIA SUPERIOR COURT JUDGE.

  LANDLORD   TENANT

     19.2 Venue. Except for those disputes between Landlord and Tenant that are subject to judicial reference, which judicial reference proceedings shall take place in the County where the Premises are located, The parties to this Lease consent and agree that jurisdiction, venue and forum shall be had only in a state or federal court located in the County of San Mateo, California, with respect to any action which, in whole or in part, arises under or relates to this Lease.

     19.3 Attorney Fees. The prevailing party in any dispute between Landlord and Tenant that is subject to the statutory unlawful detainer provisions specified in the California Code of Civil Procedure and/or California Civil Code shall be entitled to recover from the non-prevailing party, costs of suit and reasonable attorneys’ fees.

20.0 INTERPRETATION

     20.1 Captions. The captions in this Lease are for convenience only and are not a part of this Lease and do not in any way define, limit, describe or amplify the terms and provisions of this Lease or the scope or intent thereof.

     20.2 Entire Agreement. This Lease represents the entire agreement between the parties hereto and there are no collateral or oral agreements or understandings between Landlord and Tenant with respect to the Premises. No right, easements or licenses are acquired in the Premises or any land adjacent to the Premises by Tenant by implication or otherwise except as expressly set forth in the provisions of this Lease. Tenant agrees to make such changes to this Lease as are required by any mortgagee, provided such changes do not substantially affect Tenant’s rights or obligations hereunder. This Lease shall not be modified in any manner except by an instrument in writing executed by the parties. The masculine (or neuter) pronoun and the singular number shall include the masculine, feminine and neuter genders and the singular and plural number.

     20.3 Exhibits. Each writing or plan referred to herein as being attached hereto as an Exhibit or otherwise designated herein as an Exhibit hereto is hereby made a part hereof.

     20.4 Severability; Governing Law. If any provision of this Lease shall be declared unenforceable in any respect, such unenforceability shall not affect any other provision of this Lease, and each such provision shall be deemed to be modified, if possible, in such a manner as to render it enforceable and to preserve to the extent

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possible the intent of the parties as set forth herein. This Lease shall be construed and enforced in accordance with the laws of the State of California.

     20.5 Authority. If Tenant is a corporation, partnership or any other form of business association or entity, each individual executing this Lease on behalf of Tenant represents and warrants (in his/her representative capacity only, and without personal liability) that he/she is duly authorized to execute and deliver this Lease on behalf of said entity in accordance with its corporate bylaws, statement of partnership, certificate of limited partnership or other appropriate organizational documents, as the case may be, and that this Lease is binding upon said entity in accordance with its terms. At the time of execution of this Lease, Tenant shall provide Landlord with corporate resolutions or other appropriate written authorization, in a form reasonably acceptable to Landlord, authorizing the execution, delivery and performance of this Lease. The failure of Tenant to deliver the same to Landlord within five (5) business days of Landlord’s request therefor shall be deemed a default under this Lease. (If more than one party comprises Tenant, then the obligations of such parties hereunder shall be joint and several.)

     20.6 Rules and Regulations. Landlord shall have the right to establish, modify and enforce reasonable rules and regulations (“Rules and Regulations”) with respect to the care and orderly management of the Premises and Tenant shall abide by the same. Tenant acknowledges the Rules and Regulations expressly set forth in Exhibit C hereto do not deprive Tenant of any material rights under this Lease. Whenever the Rules and Regulations conflict with this Lease, this Lease shall control and be deemed the prevailing document for purposes of resolving the conflict.

21.0 NOTICES

     21.1 Notices of Default. All notices of default hereunder shall be in writing and shall only by made by either (a) personal delivery, in which case, such notice shall be deemed to have been received on the date of delivery, (b) by certified mail, postage prepaid, return receipt requested, in which case such notice is effective on receipt if delivery is confirmed by a return receipt, or (c) by a professional courier company with charges prepaid or charged to the sender’s account, in which case notice is effective on delivery if delivery is confirmed by the delivery service. Notices of default may not be given by facsimile or by electronic mail. If a representative is not generally available during normal business hours to accept delivery or receipt of a notice, then a notice of default or other notice may be sent by first class mail to the last address of the recipient known to the party giving the notice, in which case notice is effective on delivery or leaving such notice at such last known address.

     21.2 Notices for Other Purposes. Except as otherwise expressly set forth in this Lease, all notices or other communications under this Lease by either party to the other may be served and delivered (a) in the manner set forth in Section 21.1 above, or (b) by facsimile, with a copy via e-mail, provided receipt of confirmation of transmission thereof is obtained (in which case, such notice shall be deemed to have been received on receipt of confirmation of both transmissions).

     21.3 General Provisions Regarding Notices. The Landlord’s and Tenant’s addresses for written notices required to be given hereunder shall be the addresses set forth in Section 1.2 of this Lease, or at such other place designated by advance written notice delivered in accordance with the foregoing. Any correctly addressed notice that is refused, unclaimed, or undeliverable because of an act or omission of the party to be notified shall be considered to be effective as of the first date that the notice was refused, unclaimed or considered undeliverable by the courier service, messenger or postal authority. If a notice is received on a Saturday, Sunday or legal holiday, or after 5:00 p.m. (and before 12:00 a.m.), it shall be deemed received on the next business day.

22.0 LETTER OF CREDIT

     22.1 Requirements. Within fifteen (15) days following Tenant’s receipt of written notice from Landlord that Landlord has received all permits required for construction of the Landlord’s Work, Tenant shall deliver to Landlord, as protection for the full and faithful performance by Tenant of all of its obligations under this Lease and for all losses and damages Landlord may suffer (or that Landlord reasonably estimates it may suffer) as a result of any breach or default by Tenant under this Lease, an irrevocable and unconditional negotiable standby Letter of Credit (“Letter of Credit”), in the form attached hereto as Exhibit F, or in such other form as is reasonably acceptable to Landlord, payable at an office in the San Francisco Bay Area, California, running in favor of Landlord and issued by a solvent, nationally recognized bank with a long term rating of BBB or higher, under the supervision of the Superintendent of Banks of the State of California, or a national banking association (an “Acceptable Issuing Bank”), in the amount of Six Million Dollars ($6,000,000) (the “Letter of Credit Amount”). Tenant shall pay all expenses, points, or fees incurred by Tenant in obtaining the Letter of Credit. The Letter of Credit shall (1) be “callable” at sight, irrevocable, and unconditional; (2) be maintained in effect, whether through renewal or extension, for the period from the Lease Commencement Date and continuing until the date (the “Letter of Credit Expiration Date”) that is one hundred twenty (120) days after the expiration of the Term, and will either be automatically extended upon any extension of the initial Term or Tenant shall deliver a new Letter of Credit or certificate of renewal or extension to Landlord at least forty-five (45) days before the expiration of the Letter of Credit then held by Landlord, without any action whatsoever on the part of Landlord; (3) be fully assignable by Landlord, its successors, and assignees of its interest in the Premises; (4) permit partial draws and multiple presentations and drawings; and (5) be otherwise subject to the Uniform Customs and Practices for Documentary Credits (1993-Rev), International Chamber of Commerce Publication #500, or the International Standby Practices-ISP 98, International Chamber of Commerce Publication #590. In addition, the form and terms of the Letter of Credit and the bank issuing the same (the “Bank”) shall be subject to Landlord’s prior approval, which approval shall not be withheld by Landlord if the proposed Bank is an Acceptable Issuing Bank. Landlord, or its then managing agent, shall have the right to draw down an amount up to the face amount of the Letter of Credit if any of the following shall have occurred or be applicable: (a) Landlord certifies that such amount is due to Landlord under

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the terms and conditions of this Lease, and that Tenant is in default beyond all cure periods applicable thereto, provided that if Landlord is prevented from delivering a notice of default to Tenant for any reason, including, without limitation, because Tenant has filed a voluntary petition, or an involuntary petition has been filed against Tenant, under the Bankruptcy Code (hereinafter defined), then no such notice and cure period shall be required; (b) Tenant or any guarantor of Tenant’s obligations under this Lease has filed a voluntary petition under any chapter of the U.S. Bankruptcy Code or any similar state law (collectively, the “Bankruptcy Code”); (c) Tenant or any guarantor of Tenant’s obligations under this Lease has assigned any or all of its assets to creditors in accordance with any federal or state laws; (d) an involuntary petition has been filed against Tenant or any guarantor of Tenant’s obligations under this Lease under any chapter of the Bankruptcy Code, which petition is not dismissed within sixty (60) days after the date it is filed; provided, however, that if Tenant is still operating its business in the Premises and this Lease has not been terminated, Landlord may draw upon the Letter of Credit only to the extent such amount is due Landlord under the terms of this Lease or the guaranty of this Lease; or (e) the Bank has notified Landlord that the Letter of Credit will not be renewed or extended through the Letter of Credit Expiration Date. The Bank will honor the Letter of Credit regardless of whether Tenant disputes Landlord’s right to draw on the Letter of Credit.

     22.2 Transfers. The Letter of Credit shall also provide that Landlord, its successors, and assigns, may, at any time and without notice to Tenant and without first obtaining Tenant’s consent, transfer (one or more times) all or any portion of its interest in and to the Letter of Credit to another party, person, or entity, provided such transferee is the assignee of the Landlord’s rights and interests in and to this Lease, or to any lender providing financing to Landlord. In the event of a transfer of Landlord’s interest in the Building, Landlord shall transfer the Letter of Credit, in whole or in part, to the transferee and Landlord shall then (provided such transferee assumes all of Landlord’s obligations under this Lease), be released by Tenant from all liability therefor, and it is agreed that the provisions of this Section shall apply to every transfer or assignment of the whole or any portion of the Letter of Credit to a new landlord. In connection with any such transfer of the Letter of Credit by Landlord, Tenant shall execute and submit to the Bank such applications, documents, and instruments as may be necessary to effectuate such transfer, and Landlord shall be responsible for paying the Bank’s transfer and processing fees in connection with any such transfer.

     22.3 Restoration. If, as a result of any drawing by Landlord on the Letter of Credit, the amount of the Letter of Credit shall be less than the Letter of Credit Amount, Tenant shall, within ten (10) business days after the drawdown by Landlord, take such actions as are required to restore the Letter of Credit Amount as security for Tenant’s obligations under this Lease, which may include, but is not limited to, providing Landlord with additional letter(s) of credit in an amount equal to the deficiency, provided such additional letter(s) of credit comply with the applicable requirements of the this Section 22. If Tenant fails to comply with this requirement, such failure shall be deemed a Rent Default under Section 17.1(a) of this Lease, provided that if Landlord is prevented from delivering a notice of default to Tenant for any reason, including, without limitation, because Tenant has filed a voluntary petition, or an involuntary petition has been filed against Tenant, under the Bankruptcy Code, then no such notice of default and cure period shall be required for a Rent Default under Section 17.1(a) of this Lease.

     22.4 Renewals. Tenant covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part of it and that neither Landlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment, or attempted encumbrance. Without limiting the generality of the foregoing, if the Letter of Credit expires earlier than the Letter of Credit Expiration Date, Landlord will accept a renewal of the letter of credit (such renewal letter of credit to be in effect and delivered to Landlord, as applicable, not later than forty-five (45) days before the expiration of the Letter of Credit), which shall be irrevocable and automatically renewable as required in section 22.1 through the Letter of Credit Expiration Date on the same terms as the expiring Letter of Credit or such other terms as may be acceptable to Landlord in its sole discretion. However, if the Letter of Credit is not timely renewed, or if Tenant fails to maintain the Letter of Credit in the amount and in accordance with the terms set forth in section 22.1, Landlord shall have the right to present the Letter of Credit to the Bank in accordance with the terms of section 22.1, and the proceeds of the Letter of Credit may be applied by Landlord against any Rent payable by Tenant under this Lease that is not paid when due and to pay for all losses and damages that Landlord has suffered or that Landlord reasonably estimates that it will suffer as a result of any breach or default by Tenant under this Lease. Any unused proceeds shall be deemed held by Landlord as security in accordance with Applicable Laws, but need not be segregated from Landlord’s other assets. Landlord agrees to pay to Tenant within thirty (30) days after the Letter of Credit Expiration Date the amount of any proceeds of the Letter of Credit received by Landlord and not applied against any Rent payable by Tenant under this Lease that was not paid when due or used to pay for any losses and damages suffered by Landlord (or reasonably estimated by Landlord that it will suffer) as a result of any breach or default by Tenant under this Lease; provided, however, that if before the Letter of Credit Expiration Date a voluntary petition is filed by Tenant, or an involuntary petition is filed against Tenant by any of Tenant’s creditors, under the Bankruptcy Code, then Landlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Lease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed.

     22.5 Draws. Tenant acknowledges and agrees that Landlord is entering into this Lease in material reliance on the ability of Landlord to draw on the Letter of Credit on the occurrence of any breach or default on the part of Tenant under this Lease. If Tenant shall breach any provision of this Lease or otherwise be in default under this Lease, Landlord may, but without obligation to do so, and without notice to Tenant, draw on the Letter of Credit, in part or in whole, to cure any breach or default of Tenant and to compensate Landlord for any and all damages of any kind or nature sustained or which Landlord reasonably estimates that it will sustain resulting from Tenant’s breach or default, including any damages that accrue upon termination of the Lease under the Lease and/or Section 1951.2 of the California Civil Code or any similar provision. The use, application, or retention of any proceeds of the Letter of Credit, or any portion of it, by Landlord shall not prevent Landlord from exercising any

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other right or remedy provided by this Lease or by any Applicable Law, it being intended that Landlord shall not first be required to proceed against the Letter of Credit, and shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, following a draw properly made by Landlord of any portion of the Letter of Credit. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional to justify the issuer of the Letter of Credit in failing to honor a drawing on such Letter of Credit in a timely manner. Tenant agrees and acknowledges that (1) the Letter of Credit constitutes a separate and independent contract between Landlord and the Bank; (2) Tenant is not a third party beneficiary of such contract; (3) Tenant has no property interest whatsoever in the Letter of Credit; and (4) if Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither Tenant, any trustee, nor Tenant’s bankruptcy estate shall have any right to restrict or limit Landlord’s claim or rights to the Letter of Credit by application of Section 502(b)(6) of the U.S. Bankruptcy Code or otherwise.

     22.6 Replacement. Tenant may, from time to time, replace any existing Letter of Credit with a new Letter of Credit if the new Letter of Credit:

          (a) Becomes effective at least 30 days before expiration of the Letter of Credit that it replaces;

          (b) Is in the applicable Letter of Credit Amount;

          (c) Is issued by an Acceptable Issuing Bank or a Bank otherwise acceptable to Landlord; and

          (d) Otherwise complies with the requirements of Section 22 and all subsections thereof.

     22.7 Not a Security Deposit. Landlord and Tenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal of it or any proceeds applied by Landlord as provided in this Lease be (1) deemed to be or treated as a “security deposit” within the meaning of California Civil Code Section 1950.7, (2) subject to the terms of Section 1950.7, or (3) intended to serve as a “security deposit” within the meaning of Section 1950.7. Landlord and Tenant (1) agree that Section 1950.7 and any and all other laws, rules, and regulations applicable to security deposits in the commercial context (“Security Deposit Laws”) shall have no applicability or relevancy to the Letter of Credit, and (2) waive any and all rights, duties, and obligations either party may now or in the future have relating to or arising from the Security Deposit Laws.

23.0 BROKERS

     23.1 Indemnity. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, and that they know of no real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent occurring by, through, or under the indemnifying party.

24.0 SIGNAGE

     24.1 Identification Sign. Tenant shall, subject to Landlord’s written approval, which approval shall not be unreasonably withheld, conditioned or delayed, be entitled to (a) all Building signage permitted by Applicable Laws, including but not limited to one or more building-top parapet identification signs (in locations reasonably agreed to by Landlord), and (b) other exterior signs in and about the Premises permitted by Applicable Laws; provided, however, that with respect to all such signage referenced in clauses (a) and (b) above, (i) Landlord approves the design and location of such signage, which approval shall not be unreasonably withheld, conditioned or delayed, (ii) the City of South San Francisco approves the same, if required by law, (iii) such signage is in keeping with the master signage program for the Gateway Business Park, and (iv) such signage does not affect the parking at the Premises. Moreover, Tenant shall have the use of the monument sign being installed on the Premises by Landlord as part of Landlord’s Work, provided, however that the requirements of clauses (i) through (iv) above are satisfied. The cost of all of Tenant’s signage, its installation, maintenance and ultimate removal expense shall be at Tenant’s sole expense. At the expiration or earlier termination of this Lease, Tenant shall, at its sole cost, cause its signage to be removed and shall restore the area upon which such signage was affixed to the condition existing prior to installation, normal wear and tear excepted. Except as otherwise expressly set forth to the contrary in this Section 24, the design, installation, and construction of all signs shall be subject to the terms and provisions of this Lease (and in the Work Letter, if applicable) governing alterations and/or the Initial Tenant Improvements, as applicable.

25.0 PARKING

     25.1 Parking. Tenant shall be provided with the exclusive right to use the parking spaces of the Premises, which shall be not less than the number of parking spaces required by the local governmental authority; provided, however, that if the number of parking spaces on the Premises are reduced below such minimum requirement as a result of changes beyond Landlord’s reasonable control, Landlord may satisfy the parking requirements through non-exclusive parking spaces on properties adjacent to the Premises. The parking stalls and the location of the same at the Premises will be reflected in Plans (as defined in Section 1.7.3 of Exhibit B) All parking spaces shall be available for Tenant’s use seven (7) days per week, and twenty-four (24) hours per day, subject to (a) Landlord’s exercise of its rights and obligations specified herein, (b) the terms of this Lease, including but not limited to the Rules and Regulations attached as Exhibit C, and (c) all matters of record as of the date of this

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Lease. Tenant shall be entitled, at its sole cost and expense, to cause an access control system (card key activated or otherwise) to be installed at the point of entry into the garage parking areas (the “Access Control System”).

26.0 MEMORANDUM OF LEASE

     26.1 Memorandum of Lease. Upon the request of either party, the other party shall execute and acknowledge and deliver to the requesting party a Memorandum of Lease in form and substance reasonably satisfactory to the requesting party. The requesting party shall have the right to record the Memorandum of Lease in the Official Records of San Mateo County. If such Memorandum of Lease is recorded, Tenant agrees to execute and acknowledge a quitclaim deed in favor of Landlord at the expiration or earlier termination of this Lease.

27.0 CROSS-DEFAULT

     27.1 Cross-Default. So long as the Landlord under this Lease and the landlord under the following leases including the 180 Oyster Point Lease dated as of June 1, 2007 (the “180 OP Lease”), the 700 Gateway Boulevard Lease dated April 14, 1997 (the “700 Lease”), the 750/800/1000 Gateway Boulevard Lease dated April 14, 1997 (the “750/800/1000 Lease”), the 750G Gateway Boulevard Lease dated September 21, 2004 (the “750G Lease”), or the 750R Gateway Boulevard Lease dated September 29, 2006 (the “750R Lease”) are affiliated with one another, any default by Tenant under Section 17.1(a) or Section 17.1(c) , or any material default by Tenant under Section 17.1(b) that is not being diligently contested in good faith by Tenant, of the 180 OP Lease, or any default by Tenant under Section 17.1(a) or 17.1(d), or any material default by Tenant under Section 17.1(c) that is not being diligently contested in good faith by Tenant, of the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease, (subject in each case to all applicable cure periods), shall, at Landlord’s election, constitute a default under this Lease. Any default by Tenant under Section 17.1(a) or 17.1(c), or any material default by Tenant under Section 17.1(b) that is not being diligently contested in good faith by Tenant, of this Lease (in each case, subject to all applicable cure periods) shall, at the election of the landlord under the 180 OP Lease, the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease, constitute a default by Tenant under the 180 OP Lease, the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease. For purposes hereof, Landlord and the landlord of the 180 OP Lease, the 700 Lease, the 750/800/1000 Lease, the 750G Lease, or the 750R Lease shall be deemed “affiliated” so long as all such entities are controlled by, or under common control with, Stephen W. Chamberlin and/or Stephen Chamberlin Associates, Inc. or any corporate successor to Stephen Chamberlin Associates, Inc. that is under the control of Stephen W. Chamberlin.

28.0 LANDLORD’S INDEMNITY

     28.1 Landlord’s Indemnity. Landlord shall indemnify and hold Tenant harmless against all claims, actions, damages and liability (i) caused by any release of hazardous substances requiring remediation caused by Landlord on the Premises or any real property in the vicinity of the Premises owned or managed by Landlord or any person or entity affiliated with Landlord; or (ii) which arise as a result of hazardous substances existing upon the Premises or any real property in the vicinity of the Premises owned or managed by Landlord or any person or entity affiliated with Landlord prior to the execution of this Lease. The foregoing indemnity shall not apply to any contamination or release or any claims, actions, damages or liability relating to hazardous substances arising from acts or occurrences caused, wholly or in part, permitted or subject to the control of Tenant, its agents, employees, contractors, sublessees, assignees, licensees or invitees. This paragraph shall survive the expiration or earlier termination of this Lease.

29.0 TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

     29.1 Transportation Demand Management Program Requirements. Tenant shall comply with the Transportation Demand Management Program Requirements that are attached hereto as Exhibit E, and are expressly incorporated herein. Any penalties incurred by Tenant’s non-compliance shall be paid by Tenant.

30.0 OPTION TO RENEW

     30.1 Grant of Option. Landlord hereby grants to Tenant an option (the “Renewal Option”) to extend this Lease for an additional term of five (5) years (the “Renewal Term”) commencing upon the expiration of the original Term. However, such Renewal Option shall be null and void, at Landlord’s sole and absolute discretion, if Tenant is in material default beyond all applicable notice and cure periods under this Lease at the time the Renewal Option is exercised and at any time from Tenant’s exercise of the Renewal Option to the commencement date of the Renewal Term. The Renewal Option must be exercised by written notice to Landlord not later than two hundred seventy (270) calendar days prior to the expiration of the original Term. The Minimum Monthly Rent for the Renewal Term shall be equal to the Fair Market Rent for the Premises (determined as provided below), but in no event shall the Minimum Monthly Rent during any year of the Renewal Term be less than the Minimum Monthly Rent payable during the last full month of the original Term. The Renewal Option shall be terminated and of no further force and effect if, at any time provided herein for exercise of the Renewal Option by Tenant, any federal, state, or local law or regulation invalidates the Renewal Option. Landlord shall have no responsibility for payment of any brokerage commission with respect to this Renewal Option, and Tenant shall indemnify, defend and hold Landlord harmless from and against any claims (and any expenses, including attorney’s fees, incurred by Landlord in connection therewith) made by any broker, agent or finder claiming the right to a fee or compensation on account of dealings with Tenant in connection therewith. The Renewal Option described in this Section 30.1 shall be personal to Tenant (or its Permitted Transferee) and may not be exercised or be assigned voluntarily or involuntarily by or to any person or entity other than the original Tenant under this Lease (or its Permitted Transferee) and shall be exercisable by the original Tenant (or its Permitted Transferee) only if the original Tenant under this Lease (or its Permitted Transferee) is then in occupancy of the Premises and the Lease is then in full force and effect.

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     30.2 Determination of Fair Market Rent. After Landlord receives written notice from Tenant of the exercise of the Renewal Option, Landlord and Tenant shall have thirty (30) days in which to agree on the initial Fair Market Rent for such Renewal Term. In the event that Landlord and Tenant cannot mutually agree upon such Fair Market Rent within such thirty (30) day period, then Landlord and Tenant shall, within fifteen (15) days after the expiration of such thirty (30) day period or the date they acknowledge that they cannot agree on an applicable Fair Market Rent, whichever is earlier, each provide to the other (by simultaneous exchange) their determination of the appropriate Fair Market Rent in writing (hereinafter, “Landlord’s Determination” and “Tenant’s Determination”), and thereafter, the issue of the Fair Market Rent shall be submitted to arbitration. Within fifteen (15) days after Landlord and Tenant exchange their determination of the appropriate Fair Market Rent, Landlord and Tenant shall mutually agree on an arbitrator (the “Arbitrator”), who shall be a California licensed real estate broker who has been active over the five (5) year period ending on the date of such appointment in the leasing of office/laboratory properties in San Mateo County, California; provided, however that if Landlord and Tenant are unable to agree upon any such arbitrator within such fifteen (15) day period, then Landlord and Tenant shall have another ten (10) days to mutually agree upon a licensed professional MAI appraiser (with experience in the appraisal of office/laboratory properties in San Mateo County, California) to serve as the Arbitrator. The determination of the Arbitrator shall be limited solely to the issue of whether Landlord’s Determination or Tenant’s Determination is the closest to the actual Fair Market Rent as determined by the Arbitrator. Neither Landlord nor Tenant may directly or indirectly consult with the Arbitrator prior to, or subsequent to, his or her appointment.

          30.2.1 The Arbitrator shall within thirty (30) days of appointment reach a decision as to Fair Market Rent and determine whether the Landlord’s Determination or Tenant’s Determination is closest to Fair Market Rent as determined by the Arbitrator and simultaneously publish a ruling (“Award”) indicating whether Landlord’s Determination or Tenant’s Determination is closest to the Fair Market Rent as determined by the Arbitrator, which shall become the then applicable Fair Market Rent. The Award issued by the Arbitrator shall be binding upon Landlord and Tenant.

          30.2.2. If Landlord and Tenant fail to appoint an Arbitrator within the time period provided in the first paragraph of this Section 30.2, either party may petition the presiding judge of the Superior Court of San Mateo County to appoint such Arbitrator, subject to the criteria of this Section 30.2, or if he or she refuses to act, either party may petition any judge having jurisdiction over the parties to appoint the Arbitrator.

          30.2.3 The Fair Market Rent shall not include the value of the improvements and equipment which Tenant is entitled to remove under this Lease.

          30.2.4 The cost of arbitration shall be paid (i) by Landlord if Tenant’s Determination is determined by the Arbitrator to be closest to the Fair Market Rent, or (ii) by Tenant if Landlord’s Determination is determined by the Arbitrator to be closest to the Fair Market Rent.

     30.3 Terms of Lease. During the Renewal Term, Tenant shall occupy the Premises upon all of the terms and conditions set forth in this Lease except (a) the Minimum Monthly Rent for the Renewal Term shall be as determined above, and (b) Tenant shall have no right to extend the term of this Lease beyond the Renewal Term.

31.0 TERMINATION RIGHT

     31.1 Termination Right. Tenant shall have one (1) option (the “Termination Option”) to terminate this Lease on the last day of the One Hundred Twentieth (120th) month after the Commencement Date. The Termination Option must be exercised, if at all, by written notice (“Termination Election Notice”) from Tenant to Landlord given not less than three hundred and sixty five (365) calendar days prior to the intended effective date of such termination (“Early Termination Date”). As a condition to the effectiveness of Tenant’s Termination Notice, Tenant must pay Landlord the “Termination Fee” (as defined below) in accordance with the terms of this Section 31. As used herein, the term “Termination Fee” shall mean and refer to an amount equal to (x) the unamortized portion of any tenant improvement costs incurred by Landlord in connection with the original build-out and delivery of the Premises, plus (y) the unamortized portion of all leasing commissions applicable to Tenant’s Lease of the Premises, plus (z) nine (9) month’s of Rent at the monthly rental rate in effect for the month in which the Early Termination Date occurs. Such unamortized balances shall be determined by using a fifteen (15) year amortization period commencing on the day following the first anniversary of the Commencement Date, utilizing an eight and one-half percent (8.5%) per annum interest rate. One third (1/3) of the Termination Fee shall be paid by Tenant to Landlord within thirty (30) calendar days after Tenant delivers the Termination Election Notice to Landlord, another one third (1/3) of the Termination Fee shall be paid by Tenant to Landlord at least One Hundred Eighty (180) calendar days prior to the Early Termination Date, and the remaining one-third (1/3) shall be paid by Tenant to Landlord at least thirty (30) calendar days prior to the Early Termination Date.

32. GUARANTY

     32.1 Guaranty. This Lease shall not become effective unless and until the duly executed Guaranty of Lease attached hereto as Exhibit G is delivered to Landlord.

33.0 RULES AND REGULATIONS

     33.1 Rules and Regulations. The Rules and Regulations attached hereto as Exhibit C are expressly incorporated herein; provided, however, that if any of the Rules and Regulations are in conflict with Tenant’s rights and/or obligations expressly set forth in this Lease, the express provisions of this Lease shall prevail over such conflicting Rules and Regulations.

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34.0 BUSINESS DAYS

     34.1 Business Day. A “business day” is a day other than a Saturday, a Sunday or a legal holiday as recognized by the Superior Court in the County in which the Premises are located. Unless expressly defined as a “business day”, all references to the term “day” shall mean a “calendar day.”

[the balance of this page has been intentionally left blank; signature page follows]

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IN WITNESS WHEROF, Landlord and Tenant have executed this Lease as of the date first above written.

LANDLORD: CHAMBERLIN ASSOCIATES 200 OYSTER POINT, L.P., a California limited liability company
By:	Chamberlin Properties I Limited Partnership, a California limited partnership, Its Member
By:	Stephen Chamberlin Associates, Inc., a California corporation, Its General Partner
By:	/s/ Anne L. Hoffman
	Name:	Anne L. Hoffman
	Title:	President
TENANT: ELAN PHARMACEUTICALS, INC., a Delaware Corporation
By:	/s/ G. Kelly Martin
	Name:	G. Kelly Martin
	Title:	President and Chief Executive Officer

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EXHIBIT A

LEGAL DESCRIPTION

(LEASE SECTIONS 1.3 AND 2.1)

All that real property situated in the City of South San Francisco, County of San Mateo, State of California, described as follows:

Parcel A, as shown on that certain Parcel Map entitled, “Parcel Map 04-0031”, filed for record in the Office of the Recorder of the County of San Mateo, on April 14, 2005, in Book 76 of Maps, at pages 16 & 17.

JPN: 015-002-022-03.01A

APN: 015-023-380

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EXHIBIT B

WORK LETTER FOR SHELL CONSTRUCTION
AND TENANT IMPROVEMENTS

THIS WORK LETTER (this “Work Letter”) sets forth the agreement of Landlord and Tenant with respect to the improvements to be constructed in the Premises, as defined in the Lease to which this Work Letter is attached as an exhibit. In the event of any inconsistency between the terms of this Work Letter and the terms of the Lease, the terms of this Work Letter shall control. All defined terms used herein shall have the meanings set forth in the Lease, unless otherwise defined in this Work Letter.

ARTICLE 1. LANDLORD’S WORK

     1.1. General Provisions. Landlord shall, at its sole cost and expense, plan, design and construct those certain improvements described in Schedule B-1 in accordance with the building specifications set forth therein, and with the other provisions of this Article 1, and the other terms and conditions of the Lease. The planning, design and construction of such improvements by Landlord are referred to collectively herein as “Landlord’s Work.” Except as otherwise specified herein, Landlord’s Work shall materially comply with those certain Design Development Documents attached hereto as Schedule B-3, as such Design Development Documents and Landlord’s Work shall change as will be reflected in Plans (as defined in Section 1.7.3 of this Exhibit, and shall include the underground and surface parking facilities of the Premises as required to provide the parking spaces required under the Lease.

     1.2. Costs of Landlord’s Work. “Costs of Landlord’s Work” shall mean and include all of the following costs incurred by Landlord with respect to Landlord’s Work: (a) architect’s, engineer’s and consultants’ fees and costs for those architects, engineers and consultants retained by Landlord; (b) deposits, fees and costs for building and other permits, licenses and approvals; (c) tests and inspections; (d) security; (e) insurance and bond premiums; (f) utilities; (g) all amounts payable to any contractors, subcontractors, suppliers and vendors retained by Landlord for Landlord’s Work; and (h) all other charges, fees, expenses and other costs incurred or arising in connection with Landlord’s Work. As of the date of the Lease, the Costs of Landlord’s Work have not been bid by Landlord’s Contractor (as defined in Section 1.7.1.2 of this Exhibit) or any subcontractor. In recognition that Tenant’s base rent payment obligations are directly tied to the Costs of Landlord’s Work, as provided in Exhibit D to the Lease, Tenant shall have the right to participate in the negotiations over the Costs of Landlord’s Work with Landlord’s Contractor as provided in Section 1.7.1.2 of this Exhibit and will provide updated cost information to Tenant throughout the period that Landlord is to perform Landlord’s Work as provided in Section 4 of Exhibit D to the Lease. Landlord agrees not to unilaterally materially increase the Cost of Landlord’s Work without Tenant’s prior approval, except as otherwise provided in Exhibit D to the Lease or this Work Letter (e.g., increase costs due to any Tenant Delay, change requests, or changes or work required by any governmental authority). Tenant’s approval shall not be unreasonably withheld and its review is to confirm that the changes are permissible Costs of Landlord’s Work.

     1.3. Building Shell. The “Building Shell” shall mean that portion of Landlord’s Work identified in Exhibit B-1 as being part of the Building Shell (and not specified in Exhibit B-1 as lagging behind the Substantial Completion of the Building Shell), provided, however, that the Building Shell expressly excludes any exterior improvements to the Building podium, exterior parking areas, exterior landscaping and other improvements outside the Building and the Building podium, except for the underground utilities to the Building included as part of Exhibit B-1, which shall be stubbed to the Building. Notwithstanding the foregoing, as part of the Building Shell, Landlord shall provide for at least two (2) pass-through window locations on each of the second and third floors of the Building in order for Tenant to install its furnishings and equipment on the upper floors of the Building; provided that Tenant may after reasonable prior notice to Landlord elect to have the work of the pass-through windows excluded from Landlord’s Work as Change Request Work (as defined in Section 1.11.1 below), with the costs savings, if any, of such exclusion to reduce the Costs of the Landlord’s Work in accordance with Exhibit D of this Lease.

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     1.4. Substantial Completion.

          1.4.1 Definition of Substantial Completion.

               1.4.1.1 Substantial Completion of the Building Shell. For purposes of this Work Letter, the term “Substantial Completion” or “Substantially Complete” shall mean, with respect to the Building Shell, that Landlord’s Work on the Building Shell is complete to the point where: (i) Landlord’s Work associated with the Building Shell is complete in accordance with the Plans for the Building Shell, but for minor Building Shell Punch List work that is capable of completion within thirty (30) days following the Walk-Through Date (as defined in Section 1.4.2 below) for the Building Shell, (ii) Tenant can safely, effectively, and completely install all of its furnishings and equipment therein with minimal risk of loss or damage due to exposure of the interior of the Building Shell to the elements, and (iii) Tenant can have uninterrupted access to the roof and all interior areas of the Building Shell for purposes of installing its furnishings and equipment within the Building Shell, with sufficient parking available on-site or on adjacent properties for Tenant’s contractors and subcontractors performing the work of the Initial Tenant Improvements. Notwithstanding the foregoing, for purposes of determining the date of Substantial Completion of the Building Shell, as long as Landlord has completed all material construction work associated with any elevators included as part of the Building Shell, then the fact that all applicable governmental authorities have not approved or permitted such elevators for use or occupancy shall not delay the date that the Building Shell is determined to be Substantially Complete. If, as a result of any such governmental authorities having not approved such elevators, it is not legally permissible for Tenant to utilize the elevators for Tenant’s construction of the Initial Tenant Improvements, then Landlord shall provide an alternative exterior service elevator for purposes of allowing Tenant reasonable access to the upper floors of the Building Shell for purposes of installing furnishings and equipment and for performing the Initial Tenant Improvements, the cost of which shall be included in the Costs of the Landlord’s Work and considered in the calculation of base rent under Exhibit D to the Lease, and which shall not require a separate agreement with Landlord’s contractor or any subcontractor, notwithstanding the requirements of Section 2.4.3 hereof.

               1.4.1.2 Substantial Completion of Landlord’s Work. For purposes of this Work Letter, the term “Substantial Completion” or “Substantially Complete” shall mean, with respect to Landlord’s Work, that such Landlord’s Work has been completed in accordance with the design and specifications of the Construction Documents, except for any minor Landlord’s Work Punch List items which are reasonably capable of completion within a 30-day period following the Walk-Through Date (as defined in Section 1.4.2 below) for the Landlord’s Work, as such 30-day period may be extended as provided in Section 1.4.6.1 hereof.

          1.4.2 Walk Through at Substantial Completion. At least five (5) business days prior to the Substantial Completion of the Building Shell and Landlord’s Work, respectively, Landlord shall notify Landlord’s Contractor (defined in Section 1.7.1.2), Landlord’s Architect, Tenant and Tenant’s Architect of the date and time of the inspection of the Building Shell or Landlord’s Work, as applicable, for purposes of determining whether the Building Shell or the remainder of Landlord’s Work, as applicable, is Substantially Complete. Such scheduled date and time for the walk-through is referred to herein as the “Walk-Through Date.” Landlord, Tenant, Landlord’s Contractor, as well as Landlord’s Architect and (if desired by Tenant) Tenant’s Architect, shall meet at the Real Property on the Walk-Through Date to determine whether the Building Shell or Landlord’s Work, as applicable, is Substantially Complete. If Tenant’s desired representative(s) is/are not available on the Walk-Through Date, Tenant shall notify Landlord of the same, in writing, at least two (2) days prior to the Walk-Through Date, in which case, the parties shall coordinate another date and time for the walk-through, which shall be no later than five (5) days after the originally scheduled Walk-Through Date. Both Landlord and Tenant shall have the right to attend the walk-through inspections.

          1.4.3 Determination of Date of Substantial Completion.

               1.4.3.1 Building Shell. If during the walk-through inspection of the Building Shell, Landlord and Tenant agree that the corresponding work is Substantially Complete, then (a) Tenant and Landlord shall document such fact in writing (the “Substantial Completion Notice”) (but any delay or failure to document such notice shall not delay the date of Substantial Completion), which writing shall specify the date of Substantial Completion of the

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Building Shell, shall be signed by Landlord and Tenant, and (b) Landlord’s Architect shall identify, in writing, those items of Landlord’s Work that are in need of repair, or that have yet to be completed, and that Landlord agrees to repair (the “Building Shell Punch List”); provided, however, that any Building Shell Punch List work shall be minor in nature, and shall not unreasonably interfere with or delay the work of the Initial Tenant Improvements, and shall, in any case, be reasonably capable of completion within thirty (30) days after the Walk-Through Date, as provided in Section 1.4.6.1. Should Tenant disagree with the items on the Building Shell Punch List, Tenant shall notify Landlord, in writing, within two (2) business days following receipt of the proposed Building Shell Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the Building Shell Punch List. If the parties are unable to agree upon the Building Shell Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2. The date for the Substantial Completion of the Building Shell accurately set forth in the Substantial Completion Notice shall be binding on Landlord and Tenant (but is subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein).

               1.4.3.2 Landlord’s Work. If during the walk-through inspection of Landlord’s Work, Landlord and Tenant agree that the corresponding work is Substantially Complete, then within two (2) days following the Walk-Through Date associated with such walk-through inspection: (a) Landlord’s Architect shall identify, in writing, those items of Landlord’s Work that are in need of repair, or that have yet to be completed, and that Landlord agrees to repair (the “Landlord’s Work Punch List”), and (b) Landlord, Landlord’s Architect, and Landlord’s Contractor shall complete and execute a Certificate of Substantial Completion substantially in the form of the American Institute of Architects document G704, as modified to reflect the definition of Substantial Completion provided in this Work Letter, with the Landlord’s Work Punch List attached; provided, however, that any Landlord’s Work Punch List items shall be minor in nature, shall not adversely affect the exterior appearance of the Building or the exterior improvements of the Premises, nor unreasonably interfere with or delay the work of the Initial Tenant Improvements, and shall, in any case, be reasonably capable of completion within thirty (30) days after the applicable Walk-Through Date as provided in Section 1.4.6.1. Should Tenant disagree with the items on the Landlord’s Work Punch List, Tenant shall notify Landlord, in writing, within two (2) business days following receipt of the proposed Landlord’s Work Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the Landlord’s Work Punch List. If the parties are unable to agree upon the Landlord’s Work Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2. The date for the Substantial Completion of the Landlord’s Work accurately set forth in the Certificate of Substantial Completion shall be binding on Landlord and Tenant (but is subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein).

          1.4.4 Disagreement As To Whether The Work Is Substantially Complete. If Landlord considers the work Substantially Complete, but Tenant does not agree that the corresponding work is Substantially Complete, then Tenant shall notify Landlord’s Architect, and Landlord, in writing, on the Walk-Through Date of the reasons for withholding such confirmation. Thereafter, an independent consultant with at least ten (10) years of experience in construction of commercial chemistry and biological research laboratory buildings in the San Francisco Bay Area, who is not affiliated with Landlord or Tenant or any of their respective Agents, or retained by either of them or any of their Agents in any capacity within the three (3) year period preceding retention under this Work Letter (the applicable person being referred to herein as the “Third Party Inspector”), shall be notified of the dispute, and shall be instructed to immediately visit the site to determine whether such work is Substantially Complete. The party or person selected to be the Third Party Inspector shall be subject to the reasonable approval of Landlord and Tenant. The determination of the date of Substantial Completion by the Third Party Inspector shall be binding on the parties (but shall be subject to adjustment for Tenant Delays and Force Majeure Delays as set forth herein). Moreover, the costs of such Third Party Inspector shall be split equally by the parties. In the event that no Third Party Inspector is reasonably available, Landlord and Tenant shall use commercially reasonable efforts to immediately agree upon another Third Party Inspector, and if Landlord and Tenant cannot immediately agree upon such a Third Party Inspector, then either Landlord or Tenant may apply to the American Arbitration Association in San Mateo, California, for an appointment of an arbitrator to select the neutral Third Party Inspector.

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          1.4.5 Delay in Determining Date of Substantial Completion. If for some reason there is a delay in determining the date of Substantial Completion, then date of Substantial Completion shall be the date when the corresponding work would have been Substantially Complete, but for the delays. For instance, if there is a delay in the selection of the Third Party Inspector, the Third Party Inspector will not only determine whether the work is Substantially Complete, but also, the date the work would have been Substantially Complete but for the delays in determining the same (which date may precede the date that such Third Party Inspector is selected).

          1.4.6 Punch List Items.

               1.4.6.1 Completion of Punch List Items. Landlord shall complete any Building Shell Punch List or Landlord’s Work Punch List work within thirty (30) calendar days of the applicable Walk-Through Date, unless such Punch List work cannot reasonably be completed within such thirty (30) day period, in which case, Landlord shall have whatever time is reasonably necessary to complete such Punch List work, provided Landlord is diligently prosecuting the same to completion.

               1.4.6.2 Disagreement Re Punch List Items. If the parties disagree on the applicable Punch List scope of work (for instance, if Landlord alleges it is not responsible for an item requested to be included in the applicable Punch List), then any such dispute shall be resolved by binding arbitration with the San Mateo, California office of the American Arbitration Association, pursuant to the commercial rules of the American Arbitration Association; provided, however, that such proceedings shall not delay the performance of the Landlord’s Work or the Initial Tenant Improvements and if the failure to perform the Punch List work is reasonably likely to cause a delay in the performance of the Landlord’s Work or the Initial Tenant Improvements, then Landlord shall perform the work subject to resolution of any such dispute, and arbitration shall be used to determine the parties’ respective liability for the cost thereof, either as a Cost of the Landlord’s Work or as a cost of the Initial Tenant Improvements.

     1.5. Possession of the Premises. Upon the Substantial Completion of the Building Shell, Tenant shall have possession and control of the Building Shell, subject to the rights of Landlord and Tenant set forth in this Exhibit and the Lease. Upon the Substantial Completion of all Landlord’s Work, Tenant shall have full possession and control of the Premises, including the exterior parking facilities, loading areas and equipment yards of the Building, subject to the terms and provisions of the Lease, and the rights of the Parties under the Lease.

     1.6. Anticipated Schedule, Delays and Adjustment of Commencement Date. Landlord’s Work shall be constructed by Landlord in accordance with this Work Letter diligently following the execution of the Lease.

          1.6.1 Anticipated Development Schedule. The preliminary development and delivery schedule for the Building Shell and for the entirety of Landlord’s Work, is attached hereto as Schedule B-2, and is expressly incorporated herein (the “Landlord’s Preliminary Development and Delivery Schedule”). Tenant and Landlord shall use their respective commercially reasonable, good faith, efforts and all due diligence to cooperate with the architects, engineers, and each other to complete all phases of the Construction Documents, general contractor selection and the permitting process, the Landlord’s Work and the Initial Tenant Improvements in accordance with the Landlord’s Preliminary Development and Delivery Schedule, and, in that regard, Landlord and Tenant shall meet on a scheduled basis to discuss progress in connection with the same.

          1.6.2 Building Permit for Landlord’s Work. Landlord shall use commercially reasonable and diligent efforts to obtain a building permit for Landlord’s Work in accordance with the time deadlines set forth in Landlord’s Preliminary Development and Delivery Schedule. If despite such efforts, Landlord is unable to obtain a building permit on or before July 1, 2008, subject to Landlord’s right to extend for an additional period of up to ninety (90) days upon written notice to Tenant by June 1, 2008 (said date, as the same may be extended by Landlord for such period, shall be referred to herein as the “Outside Permit Date”), then either party may terminate this Agreement by delivering thirty (30) days written notice of termination to the other party (anytime after the Outside Permit Date), provided, however, that the building permit is not

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issued within said thirty (30) day period. If the building permit is issued prior to the expiration of that thirty (30) day period, then this Agreement shall remain in full force and effect and such termination notice shall be of no force or effect. Conversely, if the building permit is not issued within said thirty (30) day period, this Agreement shall terminate on the expiration of said thirty (30) day period, whereupon, this Agreement shall be of no further force and effect, Landlord shall return all sums deposited by Tenant with Landlord, including but not limited to any letters of credit, and neither party shall have any obligation to the other under this Agreement. The date that the building permit has been issued and pulled for Landlord’s Work is defined herein as the “Building Permit Date.” The preliminary dates provided in Landlords’ Preliminary Development and Delivery Schedule in Schedule B-2 shall be extended by the same period of time that the Outside Permit Date is extended, if Landlord elects to extend the initial Outside Permit Date as provided above in this Section 1.6.2.

          1.6.3 Early Access.

               1.6.3.1 Commencement of Early Access Period. Landlord shall provide Tenant with reasonable access to the Building Shell (to allow Tenant to commence the construction of the Initial Tenant Improvements (as defined in Section 2.1 below)) for a period of not less than sixty (60) days within a period that is seventy-five (75) days prior to the Substantial Completion of the Building Shell (the “Early Access Period”). The start of the Early Access Period shall be referred to as the “Early Access Commencement Date.” Notwithstanding the foregoing, interruption of Tenant’s access to the Building Shell as required for performance of the Landlord’s Work shall be permitted without affecting the Early Access Commencement Date (“Permitted Interruptions”), provided that Landlord gives reasonable advance notice of any such Permitted Interruption to Tenant and the total days of Permitted Interruptions does not exceed fifteen (15) days during the Early Access Period so that Tenant will have not less than sixty (60) days of access to the Building within the Early Access Period. Landlord shall provide Tenant with at least twenty (20) days notice prior to the date that Landlord will provide Tenant with such early access, and Landlord and Tenant shall document the Early Access Commencement Date in writing promptly following such date. Tenant’s entering the Premises for such purposes shall be at Tenant’s own risk, and under no circumstances shall Tenant enter the Premises until all insurance required pursuant to the terms of this Lease are in place. Landlord shall have control of those portions of the Premises where the Landlord’s Work is being performed during the Early Access Period, but shall endeavor to cooperate with Tenant to make those portions of the Premises and the other portions of the Premises available to Tenant’s Contractor (hereinafter defined) and subcontractors throughout the Early Access Period subject to Landlord’s right to interrupt Tenant’s access for Permitted Interruptions. In performing any work resulting in a Permitted Interruption, Landlord shall also act to mitigate the duration and extent of such Permitted Interruption as is reasonable under the circumstances, and shall coordinate such mitigation efforts with Tenant.

               1.6.3.2 Landlord’s Failure to Provide Tenant with Reasonable Access. If Tenant does not have reasonable access to the Building Shell for purposes of constructing the Initial Tenant Improvements for a period of at least sixty (60) days during the Early Access Period, then the date of Substantial Completion of the Building Shell (as accelerated for any Tenant Delays), for purposes of determining the commencement date of Tenant’s obligation to pay CAM Charges (defined in Section 1.6.3.5), shall be extended by the difference (as long as such difference is a positive number) between (a) 60 days, and (b) the number of days that Tenant has reasonable access to the Building Shell within the 75-day period prior to Substantial Completion of the Building Shell for purposes of constructing the Initial Tenant Improvements (defined as “Tenant’s Access Delay”), in accordance with Section 1.6.3.5 below.

               1.6.3.3 Scheduling of the Initial Tenant Improvements During the Early Access Period. Tenant acknowledges that the exterior glass of the Building Shell may not be installed upon the Early Access Commencement Date, and that Landlord anticipates that the exterior glass of the Building Shell will be installed on a floor by floor basis. As such, Tenant agrees to schedule its work so that it can continue to construct the Initial Tenant Improvements without the exterior glass being installed on a particular floor and/or to allow the Initial Tenant Improvements within a certain floor to be constructed before proceeding with the Initial Tenant Improvements on another floor that does not have exterior glass installed (if such work would be impacted by not having the exterior windows on that floor installed); provided, however, that all exterior building glass (exclusive of any pass-through windows) must be installed by the date of

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Substantial Completion of the Building Shell. Moreover, if the internal elevators within the Building Shell are not available for use during the Early Access Period, then Landlord shall provide an alternative exterior service elevator for purposes of giving Tenant reasonable access throughout the Early Access Period to the second and third floors of the Building for purposes of staging Tenant’s construction materials and equipment, commencing construction of the Initial Tenant Improvements, installing furnishings and equipment, and the costs for such alternative service elevator shall be included as part of Landlord’s Costs of Work and considered in the calculation of Tenant’s base rent under Exhibit D to the Lease.

               1.6.3.4 Interference with Landlord’s Work. During the Early Access Period, Tenant shall schedule its entry, installation and other work with Landlord so as not to interfere with Landlord’s Work. Tenant shall comply with all reasonable instructions from Landlord and Landlord’s Contractor during such Early Access Period, subject to the limitations on Permitted Interruptions set forth in Section 1.6.3.1 above. Moreover, during the Early Access Period, Landlord shall provide a reasonable location within or adjacent to the Premises so Tenant and its construction personnel can stage construction operations, store materials and equipment, and park vehicles.

               1.6.3.5 Tenant’s Lease Obligations During Early Access Period. During the Early Access Period, all terms and conditions of the Lease (including all insurance and indemnity provisions) shall apply, except for payment of Minimum Monthly Rent, and utility costs, Operating Expenses, real estate taxes, and/or other standard triple net expenses (collectively, “CAM Charges”). Tenant’s obligations to pay CAM Charges shall commence on the date of Substantial Completion of the Building Shell (as such date may be accelerated for any Tenant Delays (in accordance with Section 1.6.11.2) and extended for Tenant’s Access Delay (in accordance with Section 1.6.3.2)). Under no circumstances shall the date of Substantial Completion of the Building Shell (as adjusted pursuant to this Section 1.6.3.5) occur any earlier than August 1, 2009.

               1.6.3.6 Responsibility During Early Access Period. During the Early Access Period, except to the extent attributable to the gross negligence or willful misconduct of Landlord or any of its agents, employees, contractors or invitees, Landlord shall have no responsibility for, and Tenant shall be fully responsible for, the security for Tenant’s property, activities and operations thereon. Each of Landlord’s Contractor and Tenant’s Contractor shall look to its respective Builder’s Risk policy of liability insurance for any loss or damage to work being performed by such contractor or its subcontractors, unless such loss or damage is attributable to the gross negligence or willful misconduct of the other contractor or any of the other contractor’s subcontractors.

               1.6.3.7 No Waiver of Condition. The fact that Tenant may, with Landlord’s consent, enter into the Building prior to the date of Substantial Completion of Landlord’s Work for the purpose of performing any Initial Tenant Improvements shall not be deemed an acceptance by Tenant of possession of the Premises for the purposes of establishing the condition thereof upon Tenant’s acceptance.

          1.6.4 Landlord’s Responsibility for Delay in the Substantial Completion of Building Shell. If Landlord fails to Substantially Complete the Building Shell in accordance with the time deadlines set forth in Landlord’s Preliminary Development and Delivery Schedule, as the same shall be adjusted due to Tenant Delays and Force Majeure Delays, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except as provided in Section 1.6.6.1 below, and except for the Landlord’s obligation of repairing, correcting or replacing any design or construction defects in Landlord’s Work in accordance with the requirements set forth elsewhere in the Lease and this Work Letter.

          1.6.5 Responsibility After Substantial Completion of the Building Shell.

               1.6.5.1 Tenant’s Responsibility. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, (a) Tenant shall schedule its work in the areas of the Premises outside the Building Shell with Landlord, (b) Tenant shall cooperate with all reasonable instructions from Landlord and Landlord’s Contractor with respect to any such construction work outside the Building Shell, and (c) Tenant shall

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cooperate with Landlord in making those areas of the Premises within the Building Shell reasonably available to Landlord so Landlord can complete Landlord’s Work.

               1.6.5.2 Landlord’s Responsibility. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, (a) Landlord shall schedule its work within the Building Shell with Tenant, (b) Landlord shall cooperate with all reasonable instructions from Tenant and Tenant’s Contractor with respect to any such construction work within the Building Shell, (c) Landlord shall cooperate with Tenant in making those areas of the Premises outside the Building Shell in the designated Service Area (as defined in Section 5.2 of the Lease) reasonably available to Tenant so Tenant can complete the Initial Tenant Improvements outside the Building Shell, and (d) Landlord shall provide a reasonable location within or adjacent to the Premises (and outside the Building Shell) so Tenant and its construction personnel can stage construction operations, store materials and equipment, and park vehicles; provided, however, that Landlord’s providing such location to Tenant shall be at Tenant’s sole risk, and Tenant shall be responsible for the security of all equipment and materials so stored.

          1.6.6 Substantial Completion of Landlord’s Work.

               1.6.6.1 Substantial Completion of Building Shell. Landlord shall Substantially Complete the Building Shell on or before September 30, 2009, as extended if Landlord elects to extend the initial Outside Permit Date as provided in Section 1.6.2, and as adjusted for Tenant Delays and Force Majeure Delays (the “Adjusted Outside Shell Completion Date”). To the extent that the Building Shell is not Substantially Complete, and the Premises are not delivered to Tenant, on or before the Adjusted Outside Shell Completion Date, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except Tenant shall, as Tenant’s sole remedy, be entitled to (a) defer payment of CAM Charges until Substantial Completion of the Building Shell; and (b) a credit towards Tenant’s Minimum Monthly Rent obligation equal to two (2) days for each day that Building Shell is Substantially Complete after the Adjusted Outside Shell Completion Date, provided, however, that the Landlord Delays during such period adversely impact Tenant’s ability to complete the Initial Tenant Improvements or to conduct its business operations on the Premises.

               1.6.6.2 Substantial Completion of Landlord’s Work. Landlord shall Substantially Complete all of Landlord’s Work on or before October 31, 2009, as extended if Landlord elects to extend the initial Outside Permit Date as provided in Section 1.6.2, and as adjusted for Tenant Delays and Force Majeure Delays and as extended by the length of any delay in the Adjusted Outside Shell Completion Date under Section 1.6.6.1 above (the “Adjusted Outside Final Completion Date”). To the extent that Landlord’s Work is not Substantially Complete, and the Premises are not delivered to Tenant, on or before the Adjusted Outside Final Completion Date, this Lease shall not be void or voidable by Tenant, and Landlord shall not be liable for any loss or damage resulting therefrom, except Tenant shall, as Tenant’s sole remedy, be entitled to a credit towards Tenant’s Minimum Monthly Rent obligation equal to two (2) days for each day that Landlord’s Work is Substantially Complete after the Adjusted Outside Final Completion Date, provided, however, that the Landlord Delays during such period adversely impact Tenant’s ability to complete the Initial Tenant Improvements or to conduct its business operations on the Premises. A delay or extension of the Adjusted Outside Shell Completion Date shall cause the Adjusted Outside Final Completion Date to be extended for the same number of days as the Adjusted Outside Shell Completion Date is delayed or extended.

          1.6.7 Tenant Delays. For purposes of this Exhibit and the Lease, “Tenant Delays” shall mean any delay of Landlord’s Work caused by Tenant which actually causes the Substantial Completion of the Building Shell or Substantial Completion of Landlord’s Work to be delayed (unless such delay can reasonably be avoided by Landlord without an increase in the costs of Landlord’s Work) and is attributable to: (a) Tenant’s unreasonable rejection of all or any portion of the Landlord’s Work Construction Documents (as defined in Section 1.7.2 below) or the modified Construction Documents; (b) Tenant’s failure to provide Landlord with a reasonably detailed statement of the reasons for rejecting all or any portion of the Construction Documents or the modified Construction Documents or other approval required under this Exhibit within the time period provided in this Exhibit; (c) Change Requests (as defined in Section 1.11 below); or (d) any other delay caused by Tenant of which Tenant has received

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notice as hereinafter provided (and has failed to timely cure if permitted under this Section 1.6.7). Landlord shall notify Tenant of any Tenant Delay within twenty-four (24) hours after Landlord’s receipt of notice from Landlord’s Contractor of the Tenant Delay or when Landlord otherwise has received actual knowledge of the Tenant Delay; provided, however, that if Landlord does not notify Tenant of the Tenant Delay within such twenty-four (24) hour period of the Tenant Delay, then the Tenant Delay shall not be deemed to have commenced until Landlord notifies Tenant of the Tenant Delay (and if Tenant cures the cause of any Tenant Delay attributable to clause (d) of the preceding sentence within twenty-four (24) hours after receipt of such notice, no Tenant Delay shall accrue, but Tenant’s right to cure Tenant Delays shall not exceed five (5) days over the course of Landlord’s Work). Such written notice shall be delivered in accordance with Section 1.6.10 below and shall state in reasonable detail the nature of such event and the reasons that such event constitutes a Tenant Delay.

          1.6.8 Landlord Delays. For purposes of this Lease, “Landlord Delays” shall mean any delay of the work of the Initial Tenant Improvements caused by Landlord which actually causes the work of the Initial Tenant Improvements to fall behind the schedule for their completion in violation of Section 2.4.4.1 below (unless such delay can reasonably be avoided by Tenant without an increase in the cost of the Initial Tenant Improvements), and is attributable to: (a) Landlord’s unreasonable rejection of Tenant’s plans or the modified plans; (b) Landlord’s failure to provide Tenant with a reasonably detailed statement of the reasons for rejecting all or any portion of the plans for the Initial Tenant Improvements or the modified plans for the Initial Tenant Improvements; or (c) any other delay caused by Landlord of which Landlord has received notice as hereinafter provided (and has failed to timely cure as permitted in this Section 1.6.8). Tenant shall notify Landlord of any Landlord Delay within twenty-four (24) hours after Tenant’s receipt of notice from the Tenant’s Contractor of the Landlord Delay or when Tenant otherwise has received actual knowledge of the Tenant Delay; provided, however, that if Tenant does not notify Landlord of the Landlord Delay within such twenty-four (24) hour period, then the Landlord Delay shall not be deemed to have commenced until Tenant notifies Landlord of the Landlord Delay (and if Landlord cures the cause of such Landlord Delay attributable to clause (c) of the preceding sentence within twenty-four (24) hours after receipt of such notice, no Landlord Delay shall accrue, but Landlord’s right to cure Landlord Delays shall not exceed more than five (5) days over the course of the work of the Initial Tenant Improvements). Such written notice shall be delivered in accordance with Section 1.6.10 below and shall state in reasonable detail the nature of such event and the reasons such event constitutes a Landlord Delay.

          1.6.9 Force Majeure Delay.

               1.6.9.1 Definition of Force Majeure Delay. “Force Majeure Delay” means any delay in Landlord’s Work or the work of the Initial Tenant Improvements due to fire or other casualty, strikes or labor disputes (except as otherwise set forth in Section 1.6.9.2 below), embargo, unavailability of power or supplies, war or violence, acts of terrorism, any moratorium pursuant to any legal requirement of any governmental agency (subject to Section 1.6.9.3 below), or any other occurrence or similar event beyond the reasonable control of the party claiming such Force Majeure Delay, except for those occurrences caused by the actions of such party, which such party knows or should reasonably know will result in any occurrence otherwise characterized as a force majeure event above. Each party shall use its commercially reasonable and diligent efforts to notify the other party, in writing, of any event claimed by such party as a Force Majeure Delay, which notice shall state in reasonable detail the nature of such force majeure event and the reason(s) that such event constitutes a Force Majeure Delay.

               1.6.9.2 Strikes & Labor Disputes. Notwithstanding anything to the contrary contained herein, Force Majeure Delays shall not include strikes or labor disputes that arise solely due to Landlord’s or Tenant’s, as the case may be, negligent decisions, made directly by such party claiming a Force Majeure Delay, in the hiring of non-union contractors.

               1.6.9.3 Work Stoppage By Government Order. Notwithstanding anything to the contrary contained herein, any moratorium or stoppage of either party’s work under this Work Letter due to its intentional acts or omissions of known (or which would be known to an owner, tenant or developer of real property, having similar resources and experience as the personnel employed by such party) regulations or requirements may not be claimed by such party as a Force Majeure Delay.

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          1.6.10 Notice of Delays.

               1.6.10.1 Landlord’s Notice. Landlord shall notify Tenant, in writing, of any Tenant Delay or any Force Majeure Delays within the applicable time period provided in Section 1.6.7 or Section 1.6.9.1. Such written notice shall state the cause of the delay.

               1.6.10.2 Tenant’s Notice. Tenant shall notify Landlord, in writing, of any Landlord Delay or any Force Majeure Delay in the work of the Initial Tenant Improvements within the applicable time period provided in Section 1.6.8 or Section 1.6.9.1. Such written notice shall state the cause of the delay; provided, however, that no Force Majeure Delay shall delay the commencement of the term of the Lease or the date by which Tenant must commence paying rent or other sums under the Lease.

               1.6.10.3 Delivery of Notice Of Delay. Notwithstanding anything to the contrary contained herein, such notice of delay may be personally delivered, sent by overnight mail (FedEx or another carrier that provides receipts for all deliveries), sent by certified mail, postage prepaid, return receipt requested, or sent by e-mail transmission (provided that a successful electronic confirmation is provided) to the persons set forth below. Each of the parties shall, using commercially reasonable and good faith efforts, provide telephonic notice to the other party that a notice of delay has been sent and the cause thereof.

If to Landlord:	c/o Chamberlin Associates
	5880 West Las Positas Blvd., Suite 34
	Pleasanton, CA 94588-8552
	Attention: Anne Hoffman
	Office Phone: 925-227-0707
	Fax: 925-227-0277
	Email: Anne@chamb.com
With a copy to:	c/o Chamberlin Associates
	5880 West Las Positas Blvd., Suite 34
	Pleasanton, CA 94588-8552
	Attention: Rahn Verhaeghe AND
	Jennifer Von der Ahe
	Office Phone: 925-227-0707
	Fax: 925-227-0277
	Email: Rahn@Chamb.com
	Email: Jennifer@Chamb.com
If to Tenant:	Elan Pharmaceuticals, Inc.
	800 Gateway Blvd.
	South San Francisco, CA 94080
	Attention: Brian Oppendike
	Office Phone: 650-794-4238
	Cell Phone: 650-267-0695
	Email: brian.oppendike@elan.com
With a copy to:	Elan Pharmaceuticals, Inc.
	800 Gateway Blvd.
	South San Francisco, CA 94080
	Attention: Rick Smith
	Office Phone: 650-877-7647
	Cell Phone: 858-864-3128
	Email: charles.smith@elan.com

Such notices shall be effective upon delivery. Notice of change of address shall be given by written notice in the manner set forth in this Section. Rejection or other refusal to accept or the inability to deliver any notice due to changed address or e-mail address of which no notice in accordance with this Section was given shall not effect the delivery date. Any operational failure of a notice recipient’s e-mail system shall not effect the delivery date of such notice, unless electronic notice thereof is received in response to any attempt to deliver such notice.

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          1.6.11 Damages for Delays.

               1.6.11.1 Landlord Delay Damages. To the extent that any Landlord Delays cause a delay to Tenant in the substantial completion of the Initial Tenant Improvements, then Landlord shall be responsible for the actual additional out-of-pocket costs incurred by Tenant in constructing the Initial Tenant Improvements as a result thereof, it being acknowledged that Landlord shall not be responsible to Tenant for any consequential damages as a result of such delays.

               1.6.11.2 Tenant Delay Damages. To the extent that Tenant Delays cause a delay to Landlord in the Substantial Completion of the Building Shell or the remainder of Landlord’s Work, then (a) Tenant shall be responsible for the actual damages incurred by Landlord as a result thereof, it being acknowledged that Tenant shall not be responsible to Landlord for any consequential damages as a result of such delays, (b) the date of Substantial Completion of the Building Shell shall be adjusted to the date that the Building Shell would have been substantially completed but for such Tenant Delays, and (c) the date of Substantial Completion of the remainder of Landlord’s Work shall be adjusted to the date the Landlord’s Work would have been Substantially Complete but for such Tenant Delays.

     1.7. Plans & Permits

          1.7.1 Architects, Consultants and Contractors.

               1.7.1.1 Landlord and Tenant hereby acknowledge and agree that: (a) Randall Dowler and Karen Lin of Dowler-Gruman Architects shall be the architect (“Landlord’s Architect”) for the Building Shell, and (b) Dowler-Gruman Architects shall be the architect (“Tenant’s Architect”) for the Initial Tenant Improvements. Notwithstanding the foregoing, Landlord and Tenant shall have the right at any time, but subject to the approval of the other party (which shall not be unreasonably withheld, conditioned or delayed) to designate a different architect.

               1.7.1.2 The general contractor for Landlord’s Work shall be J.M. O’Neil, Inc. (“Landlord’s Contractor”), who shall perform Landlord’s Work pursuant to a guaranteed maximum price contract (the “Construction Contract”) approved by Tenant (which approval shall not be unreasonably withheld as long as it is consistent with the scope of work set forth in this Exhibit B, including, but not limited to, the applicable schedules attached hereto). The Construction Contract shall contain, at a minimum, terms and provisions requiring that Landlord’s Contractor name Tenant as an additional insured on Landlord’s Contractor’s commercial general liability insurance policy and naming Tenant as an additional indemnitee with the same rights of the owner set forth in any indemnity contained therein, and as a third-party beneficiary with respect to any warranties contained therein; provided, however that Tenant will not interfere with Landlord’s enforcement of any such warranties during Landlord’s warranty period as provided in Section 1.7.2 below, as long as Landlord is diligently pursuing enforcement of a warranty. Landlord shall allow Tenant to participate in Landlord’s negotiations with the Landlord’s Contractor relating to the cost of the Landlord’s Work. The Construction Contract shall also require, to the extent negotiable, that Tenant and Landlord be named as third-party beneficiaries under all construction and equipment warranties (including without limitation, the roof and any mechanical, electrical and plumbing equipment installed as part of the Landlord’s Work, which Landlord’s Contractor shall endeavor to obtain for a minimum warranty term of ten (10) years from the date of Substantial Completion of the Building Shell, with the right to enforce such warranties directly against the obligor named therein; provided, however, that there are no assurances that Landlord’s Contractor will be able to obtain such extended warranties. The cost of causing the construction and equipment warranties to have terms in excess of one (1) year shall be at Tenant’s sole cost and expense; provided, however, that Tenant shall have sole discretion with respect to the decision to obtain any warranty exceeding a term of one (1) year if Tenant is to be liable for the cost thereof.

          Landlord shall have the right to replace Landlord’s Contractor from time to time, provided that such change shall not result in any increase in the cost of constructing Landlord’s Work or the Initial Tenant Improvements, or the rights of Tenant under the construction agreement (including, without limitation, the extended warranty periods negotiated with the Landlord’s Contractor), unless such change is required as a result of a default by Landlord’s

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Contractor under the construction agreement approved by Tenant, in which case, Landlord and Tenant shall cooperate in the selection of the replacement general contractor for Landlord’s Work in order to mitigate the increased cost of Landlord’s Work that is incorporated into Tenant’s base rent obligations under the Lease. Tenant shall have the right to pre-approve all subcontractors retained by the Landlord’s Contractor for the major trades, which approval shall not be unreasonably withheld, conditioned or delayed. Attached hereto as Schedule B-4 is a list of those major trade subcontractors that are pre-approved by Tenant (the “Pre-Approved Major Trade Subcontractors”). Notwithstanding anything to the contrary contained herein, Tenant shall have the right to retain any of the Pre-Approved Major Trade Subcontractors for the Initial Tenant Improvements, provided, however, that Tenant or Tenant’s Contractor enters into a written contract with such Pre-Approved Major Trade Subcontractor(s), that Tenant and/or Tenant’s Contractor pay all amounts owed to such Pre-Approved Major Trade Subcontractors under such contracts, and that under no circumstances shall Tenant or its contractor have any right to direct the Pre-Approved Major Trade Subcontractors with respect to Landlord’s Work.

          1.7.2 Construction Documents for Landlord’s Work. Attached hereto as Schedule B-3 is a list of the design development documents for Landlord’s Work, as the same may change due to changes required by the local governmental authority and changes resulting from the value engineering process (the “Design Development Documents”). Landlord shall cause to be prepared the plans and specifications for the construction of Landlord’s Work (the “Landlord’s Work Construction Documents”) based on the Design Development Documents, and upon its completion, Landlord shall deliver copies of the Landlord’s Work Construction Documents to Tenant. Landlord warrants to Tenant, for a period of one year after Substantial Completion of the Building Shell, except for Landlord’s Work Punch List and the portion of the Building Shell that may lag Substantial Completion of the Building Shell as provided in Exhibit B-1 where the warranty period shall be one year from completion of such portions of the work (the “Landlord’s Warranty Period”), (A) the Landlord’s Work shall be constructed in accordance with the Plans (as defined in Section 1.7.3 below); (B) the Landlord’s Work shall comply with all Applicable Laws (as defined in Section 2.4 of the Lease), including but not limited to the California Uniform Building Code; and (C) there shall be no Hazardous Materials introduced or generated in, on, or about the Premises as part of Landlord’s Work in violation of any Applicable Laws. For such warranty to be effective, Tenant must notify Landlord of the violation within the Landlord’s Warranty Period.

          1.7.3 Tenant’s Acceptance of Landlord’s Construction Documents. Subject to Section 1.7.2 above, Tenant shall either accept or reasonably reject the Landlord’s Work Construction Documents, in writing, within ten (10) business days after Tenant’s receipt of the Landlord’s Work Construction Documents. Tenant shall not have the right to reject any improvements or details specified in the Landlord’s Work Construction Documents if such improvements or details are specified or contemplated in the Design Development Documents, as the same shall change to reflect changes required by the local governmental authority and changes resulting from the value engineering process. If Tenant rejects the Landlord’s Work Construction Documents, Tenant’s written notice of rejection shall reasonably detail the reasons for such rejection. If Tenant does not accept or reasonably reject, in writing, all or any portion of the Landlord’s Work Construction Documents within said ten (10) business day period, it shall have no further right to review such Landlord’s Work Construction Documents and Landlord may use the Landlord’s Work Construction Documents as if they had been accepted. If Tenant timely and reasonably rejects the Landlord’s Work Construction Documents, Landlord shall modify the Landlord’s Work Construction Documents and provide modified Landlord’s Work Construction Documents to Tenant. Thereafter, for each set of modified Landlord’s Work Construction Documents, Tenant shall either accept or reasonably reject, in writing, the modified Landlord’s Work Construction Documents by providing Landlord with a notice of acceptance, or a reasonably detailed statement of the reasons for the rejection, within five (5) business days after Tenant’s receipt of the modified Landlord’s Work Construction Documents. If Tenant does not accept or reasonably reject the modified Landlord’s Work Construction Documents, in writing, within said five (5) business day period, it shall have no further right to review such modified Landlord’s Work Construction Documents, it shall be deemed to have accepted the modified Landlord’s Work Construction Documents, and Landlord may use the modified Landlord’s Work Construction Documents as if they had been accepted. Conversely, if Landlord decides, in its sole discretion, to revise the Landlord’s Work Construction Documents or modified Landlord’s Work Construction Documents pursuant to an untimely request from Tenant, Tenant shall be responsible for all actual delays to the Substantial Completion of

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          Landlord’s Work associated with such revision, and the Commencement Date shall be subject to adjustment as a result thereof in accordance with the provisions of Section 1.6.7 above. The final Landlord’s Work Construction Documents are referred to herein as the “Plans.”

     1.8. Landlord’s Permits. Landlord shall, at Landlord’s sole cost and expense, procure all permits, licenses, consents, notices and other approvals necessary to commence and complete Landlord’s Work from all public and quasi-public authorities with jurisdiction (collectively, the "Permits”). Landlord agrees to use its reasonably diligent efforts to obtain such Permits. If prior to obtaining the Permits for Landlord’s Work, any governmental authority having jurisdiction over the construction of Landlord’s Work or any portion thereof shall impose terms or conditions upon the construction thereof which: (i) are materially inconsistent with the project envisioned in the local governmental planning department’s approval of the proposed development that has been accepted by Landlord (the “Planning Department Approval”), (ii) materially increase the cost of constructing Landlord’s Work over what was reasonably envisioned in the Planning Department Approval, or (iii) substantially delay the construction of Landlord’s Work beyond the Outside Completion Date (each of the foregoing, a “Material Project Change”), Landlord and Tenant shall reasonably, diligently, and in good faith seek means by which to mitigate or eliminate any such adverse terms and conditions. If the parties are unable to agree upon such mitigation prior to July 1, 2008 (the “Resolution Date”), which date may be extended by Landlord for up to an additional ninety (90) days upon written notice to Tenant thirty days prior to the Resolution Date, then this Agreement shall be subject to termination pursuant to Section 1.6.2 above. Any terms and provisions required by a governmental authority that do not result in a Material Project Change shall not give either party the right to terminate this Agreement.

     1.9. Construction Requirements for Landlord’s Work.

          1.9.1 Selection of Contractor. Landlord has selected the general contractor identified in Section 1.7.1.2 above to be Landlord’s Contractor to construct Landlord’s Work.

          1.9.2 Landlord’s Design Changes.

               1.9.2.1 Changes Requested by Government. Landlord shall have the authority, without the consent of Tenant, but with notice to Tenant and Tenant’s Architect, which notice may take the form of a copy of a Landlord Change Directive, as defined in Section 1.10.1.2 below, to order any changes to Landlord’s Work required by, or in order to comply with, Applicable Laws; provided that such changes do not materially affect Tenant’s Permitted Use or occupancy of the Premises. Landlord agrees to cooperate with Tenant in connection with such changes to attempt to mitigate any additional Costs of Landlord’s Work in connection therewith, but Landlord makes no assurances that such mitigation may be achieved, nor shall Tenant be entitled to terminate the Lease or have any abatement in rent.

               1.9.2.2 Minor Changes. Landlord shall have the authority, without Tenant’s consent, but with notice to Tenant and Tenant’s Architect, which notice may take the form of a copy of a Landlord Change Directive, as defined in Section 1.10.1.2 below, to order any work that is necessary in order to complete Landlord’s Work as contemplated herein, or to order minor changes in Landlord’s work that do not adversely and materially affect the Costs of Landlord’s Work, the quality of Landlord’s Work, or the schedule for the completion of the same; provided that such changes do not materially affect Tenant’s Permitted Use or occupancy of the Premises, nor materially increase (x) Tenant’s Costs of the Work (as defined in Section 2.6.5 hereof), (y) the cost of installing Tenant’s furnishings and equipment, or (z) the costs associated with Tenant’s use or occupancy of the Premises.

               1.9.2.3 Other Design Changes. Subject to the limitations on any material increases in the Costs of Landlord’s Work in this Work Letter and in Exhibit D to the Lease, Landlord shall also have the right, with Tenant’s prior written consent in accordance with Section 1.10.1.2 below, which consent shall not be unreasonably withheld, conditioned or delayed, to order Landlord Change Directives for any other reasons not covered under Section 1.9.2.1 or 1.9.2.2 above; provided, however, that if the Landlord Change Directive proposed by Landlord will increase Tenant’s Costs of the Work, Tenant shall notify Landlord of the same, in writing, at the time Tenant consents to such Landlord Change Directive. Such written notice from Tenant shall also specify the estimated increase in Tenant’s Costs of the Work resulting

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from such Landlord Change Directive. Should Landlord decide to proceed with such Landlord Change Directive, notwithstanding such notice from Tenant, then Landlord shall be responsible for all additional Tenant’s Costs of the Work incurred by Tenant as a result of such Landlord Change Directive.

     1.10. Coordination of Changes

          1.10.1 Landlord’s Obligation to Coordinate Changes to Landlord’s Work.

               1.10.1.1 Landlord’s Coordination Obligations. Landlord shall cause Landlord’s Architect to coordinate the development of any material change in the design of Landlord’s Work with Tenant’s Architect, and Tenant shall cause Tenant’s Architect to coordinate with Landlord’s Architect so Landlord’s Architect can coordinate such design change with the design of the Initial Tenant Improvements, and so Tenant’s Architect can provide information to Landlord’s Architect in order to allow Landlord’s Architect to mitigate Tenant’s damages as a result of such changes. No approval of Tenant’s Architect to any design change shall be binding on Tenant unless Tenant has also provided such approval in writing to Landlord to the extent the approval of Tenant is required under Sections 1.9.2.1 through 1.9.2.3 of this Exhibit.

               1.10.1.2 Landlord’s Change Directives. Landlord shall have Landlord’s Contractor copy Tenant on any requests for information (“RFI’s”) submitted by Landlord’s Contractor. In addition, Landlord shall copy Tenant on any (a) responses to RFI’s, (b) change orders, and (c) any plan clarifications sent to Landlord’s Contractor (collectively, “Landlord Change Directives”). It shall be Tenant’s responsibility to review that information, and to object to the same within three (3) business days after receiving Landlord’s Change Directives, if the same will impact the design or construction of the Initial Tenant Improvements. Should Tenant fail to deliver written notice to Landlord, within three (3) business days after receiving a Landlord Change Directive, then all directions to Landlord’s Contractor set forth in any such Landlord Change Directive shall be deemed to have no impact on the design or construction of the Initial Tenant Improvements.

               1.10.1.3 Landlord’s Obligation to Maintain As-Built Drawings. Landlord agrees to reasonably cooperate with Tenant in order to allow Tenant (and Tenant’s Architect) to obtain the most recent information regarding the Premises and the status and condition of Landlord’s Work, which cooperation shall include requiring Landlord’s Contractor to keep an updated set of “As-Built” drawings on site, and to make its “As-Built” drawings available for review by Landlord, Landlord’s Architect, Tenant, and Tenant’s Architect.

          1.10.2 Tenant’s Obligation to Coordinate Changes to Tenant’s Work.

               1.10.2.1 Incorporation of Design Information. Tenant shall require that Tenant’s Architect incorporate into the design of the Initial Tenant Improvements any information that it receives from Landlord or Landlord’s Contractor regarding Landlord’s Work, including but not limited to any Landlord Change Directive, and that it coordinate the design of the Initial Tenant Improvements with Landlord’s Work.

               1.10.2.2 Tenant’s Obligation to Incorporate Changes Into its Design. At Landlord’s request, Tenant shall attend (or shall cause Tenant’s Architect to attend) job site meetings for purposes of discussing the progress of Landlord’s Work, the coordination of Landlord’s Work with the Initial Tenant Improvements, and for purposes of reviewing the “As-Built” drawings prepared by Landlord’s Contractor. If Tenant or Tenant’s Architect believes that the incorporation of any such information into the plans for the Initial Tenant Improvements will increase the Tenant’s Costs of the Work (as defined in Section 2.6.5 hereof), Tenant and/or Tenant’s Architect must notify Landlord of the same, in writing, within three (3) business days after such meeting. Should Tenant or Tenant’s Architect fail to notify Landlord of the same within said three (3) business day period, then such information shall be deemed to have no effect on the Tenant’s Costs of the Work. Should Tenant or Tenant’s Architect notify Landlord, in writing, that such information will increase the Tenant’s Costs of the Work if such information is incorporated into the plans for the Initial Tenant Improvements, then Landlord and Tenant shall meet informally in an attempt to resolve the matter. Should the parties fail to resolve the matter during the meeting, any dispute regarding the same shall be resolved by

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binding arbitration with the San Francisco, California office of the American Arbitration Association, pursuant to the Commercial Rules of the American Arbitration Association.

               1.10.2.3 Tenant’s Obligation to Have Subcontractors Take Measurements. Tenant shall require that (a) Tenant’s Contractor take field measurements of Landlord’s Work before installing any work affected by Landlord’s Work, and that (b) Tenant’s Contractor immediately notify Landlord and Tenant, in writing, of any material discrepancies between such field measurements and the plans for the Initial Tenant Improvements. Should it be determined that the material discrepancies resulted from the negligence of Landlord’s Architect or Landlord’s Contractor, then Landlord shall be responsible for all additional Tenant’s Costs of the Work and any delays incurred by Tenant as a result of such material discrepancies, but only to the extent of such additional costs could not have been reasonably avoided (i) by Tenant’s contractor immediately notifying Landlord, in writing, of any such material discrepancies after it was discovered, or would have been discovered by Tenant or Tenant’s Contractor if it took field measurements as required above, or (ii) by Tenant incorporating any information contained within a Landlord Change Directive into its Tenant’s Final Plans (defined in Section 2.3.1) or any addendum or plan clarification to Tenant’s Final Plans.

     1.11. Change Requests. Tenant shall have the right to request changes to the Landlord’s Work Construction Documents as set forth herein (each a “Change Request”), and Landlord agrees not to unreasonably withhold approval of any such Change Request; provided, however, that (a) Tenant first complies with all other terms and provisions of this Exhibit regarding such Change Requests; (b) the Change Request is of a similar character to the other elements of Landlord’s Work being constructed by Landlord’s Contractor; (c) such Change Request does not negatively affect the market value of the completed Premises; (d) such Change Request does not negatively affect the structural integrity of the building or the quality or the integrity of the other engineered elements of Landlord’s Work; (e) such Change Request will not have an adverse effect on the exterior appearance of either (1) the Building or (2) that portion of the Premises outside the boundaries of the Building (as reasonably determined by Landlord); and (f) Tenant provides Landlord with all reasonable and necessary information to implement the Change Request.

          1.11.1 Change Request Procedure. Tenant shall submit all proposed Change Requests to Landlord in writing, along with all necessary plans and specifications that may be necessary for Landlord to review and approve the Change Request. Landlord will either approve or disapprove of the Change Request, in writing, within ten (10) business days after receiving Tenant’s proposed Change Request. If Landlord disapproves of a Change Request, such notice of disapproval shall specify in reasonable detail the basis for Landlord’s disapproval. Landlord shall be deemed to have approved of Tenant’s proposed Change Request unless Landlord delivers written notice disapproving of the Change Request within said ten (10) business day period. If Landlord approves or is deemed to have approved of the Change Request, then Landlord shall have Landlord’s Architect prepare plans and/or specifications with respect to such Change Request (the “Change Request Plans”) based upon the information provided to Landlord in Tenant’s proposed written Change Request. Notwithstanding the foregoing, if Landlord determines, in its reasonable discretion, that Change Request Plans are not necessary to implement the Change Request, then Landlord shall not be required to cause Change Request Plans to be prepared for such Change Request. All reasonable costs associated with the design, permitting, implementation and construction of the Change Request (the “Change Request Work”) that increase the Costs of Landlord’s Work shall be Tenant’s responsibility, and any cost savings resulting from Change Request Work shall be factored into Minimum Monthly Rent calculations made pursuant to Exhibit D to the Lease.

          1.11.2 Approval of Change Request Plans. Subject to Section 1.11.1, upon completion of any Change Request Plans, Landlord shall submit such plans to Tenant for Tenant’s review and approval. Tenant shall approve or reasonably reject such Change Request Plans, in writing, within five (5) business days after Tenant’s receipt of the same. If Tenant timely rejects such Change Request Plans, Tenant shall notify Landlord of the requested revisions to such Plans at the time Tenant’s notice of rejection is given to Landlord. Thereafter, Landlord shall proceed with the modifications to the Change Request Plans and shall submit the modified Change Request Plans to Tenant for Tenant’s approval or reasonable rejection. If Tenant fails to deliver written notice of approval or rejection within said five (5) business day period, Tenant will be deemed to have abandoned the Change Request. Landlord shall continue

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to make revisions and submit such Change Request Plans to Tenant for Tenant’s approval until (a) Tenant provides written notice of acceptance, or (b) Tenant fails to provide timely written notice of its rejection of the revised Change Request Plans. Landlord will have no obligation to modify the Change Request Plans after an untimely response by Tenant.

          1.11.3 Cost of Change Request. If Tenant gives Landlord timely written notice of its acceptance of any Change Request Plans (or if Landlord notifies Tenant, in writing, that Change Request plans are not necessary to implement the Change Request), then within ten (10) business days after Landlord receives such written notice of acceptance of any Change Request Plans from Tenant (or at the time that Landlord notifies Tenant that Change Request plans are not necessary to implement the Change Request), Landlord shall notify Tenant, in writing (the “Change Request Cost Notice”), of the cost of the Change Request (the “Change Request Cost”) and of the impact the Change Request will have on the date of Substantial Completion of the Building Shell and/or Landlord’s Work (the “Change Request Delay”). The Change Request Cost and the Change Request Delay shall be reasonably determined by Landlord. If after receiving such Change Request Cost Notice, Tenant elects to proceed with the Change Request, Tenant shall notify Landlord of the same, in writing, within five (5) business days after receiving the Change Request Cost Notice, and shall concurrently deliver to Landlord the Change Request Cost specified in Landlord’s Change Request Cost Notice. Conversely, Tenant may utilize any remaining amounts of the Tenant Improvement Allowance to pay such Change Request Cost, provided Tenant notifies Landlord of such election at the time Tenant notifies Landlord that it is electing to proceed with the Change Request. Landlord shall not be obligated to commence any Change Request Work until Tenant pays Landlord the Change Request Cost, or notifies Landlord, in writing, that it is utilizing the Tenant Improvement Allowance to pay for such Change Request Cost. Furthermore, if Tenant elects to proceed with the Change Request, Tenant and Landlord shall be bound by Landlord’s determination as to the Change Request Cost and the Change Request Delay. In the event that Tenant does not elect to proceed with the Change Request Work, Tenant shall nonetheless be obligated to pay all of the Costs of Landlord’s Work reasonably incurred by Landlord in processing the Change Request and preparing the Change Request Plans, including all out-of-pocket design fees incurred by Landlord, within thirty (30) calendar days after receiving Landlord’s written request for payment of the same. Conversely, Tenant may, by delivering written notice to Landlord within said thirty (30) day period, utilize any remaining amounts of the Tenant Improvement Allowance to pay for such Change Request Cost.

ARTICLE 2. TENANT’S WORK

     2.1. Initial Tenant Improvements. Tenant shall plan, design and construct certain improvements (the “Initial Tenant Improvements”) in accordance with (a) the terms and provisions of this Article 2, (b) the other terms and conditions of the Lease, and (c) all Applicable Laws. Landlord and Tenant acknowledge and agree that the Building will be improved by Tenant with “Office Space” and/or “Lab Space.” “Lab Space” is defined as areas within the Building that are to be primarily equipped for scientific experimentation, research, observation, or testing that may include equipment and fixtures, such as hoods and casework, used to support work conducted within the lab, but which may include incidental offices for research personnel, which may comprise up to 40% of the Lab Space. “Office Space” is defined as all other areas within the Building that are not Lab Space, exclusive of any subterranean garage parking or subterranean storage areas. Notwithstanding the foregoing, however, a portion of the Service Area (as defined in the Lease) may be designated by Tenant, from time to time, but subject to the approval of Landlord (which approval shall not be unreasonably withheld, conditioned or delayed by Landlord), as storage space, which space shall not be added to the Rentable Square Footage of the Building, and Tenant shall not receive any additional Tenant Improvement Allowance for such space, but such space shall be subject to the Service Area Minimum Monthly Rent as further described in the Lease.

     2.2. Definitions. For purposes of this Article 2, each of the following terms shall have the following meaning:

          2.2.1 Tenant’s Contractor. The general contractor selected by Tenant and approved by Landlord, in writing, which approval shall not be unreasonably withheld, to construct the Initial Tenant Improvements (herein referred to as “Tenant’s Contractor”). The Tenant’s Contractor must be licensed and bondable in the State of California. Landlord shall

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provide written notice of such approval or disapproval within ten (10) business days after Tenant’s request for such approval.

          2.2.2 Construction Contract. The construction contract entered into between Tenant and the Tenant’s Contractor for the Initial Tenant Improvements, which shall be approved by Landlord, in writing, prior to execution, which approval shall not be unreasonably withheld, conditioned or delayed, and if Landlord’s written approval or disapproval, accompanied by a written detailed description of changes required by Landlord to satisfy its concerns relating to the proposed contract, is not received within ten (10) business days after such contract is submitted to Landlord for Landlord’s approval, then Landlord’s approval of the proposed construction contract shall be deemed to have been received (provided it contains the required provisions of subparagraphs 2.2.2.1 — 2.2.2.5 below). Such Construction Contract shall require, in addition to any other provisions reasonably requested by Landlord, that:

               2.2.2.1 Tenant’s Contractor carry workers compensation insurance as required by law, and employers liability insurance in an amount equal to $1,000,000, and shall require that all subcontractors carry such insurance as well.

               2.2.2.2 Tenant’s Contractor carry comprehensive general liability or commercial general liability insurance, covering Premises damage, personal injury, death, and products and completed operations coverage, in an amount not less than $3,000,000 per occurrence, and $5,000,000 in the aggregate with deductibles of no more than $10,000, naming Landlord and its affiliates, employees and agents as additional insureds, by endorsement (on an ISO form 2010 11 85), with an insurance company with a minimum of an A-VIII rating. The Construction Contract shall also require that all of Tenant’s Contractor’s subcontractors carry such insurance as well, except that subcontractors under subcontracts for less than ten percent (10%) of the cost of the Initial Tenant Improvements shall only be required to carry such insurance in an amount of not less than $1,000,000 per occurrence and $2,000,000 in the aggregate; provided that the insurance coverage of any of Tenant’s subcontractors required under this Section may be provided, in whole or in part, through a blanket policy of such insurance coverage maintained by Tenant’s Contractor which expressly provides that the insured’s subcontractors are covered thereunder. Such insurance shall be maintained at all times during the construction of the Initial Tenant Improvements, except for the products and completed operation coverage, which coverage is to be maintained for ten (10) years following completion of the work. Furthermore, such insurance shall preclude or waive subrogation claims by the insurer against Landlord, its affiliates, or their agents, employees, or representatives. Such insurance shall also provide that it is primary insurance with respect to the Landlord and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder.

               2.2.2.3 Tenant’s Contractor deliver to Tenant and Landlord certificates of insurance, with endorsements, evidencing the insurance requirements set forth in the Construction Contract prior to Tenant’s Contractor’s entering the Premises.

               2.2.2.4 Tenant’s Contractor (to the greatest extent allowed by law) shall protect, defend, indemnify, and hold harmless Landlord and its agents, employees, and representatives, for all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Contractor or any of its subcontractors, suppliers, subcontractors, consultants, agents, or representatives, or anyone directly or indirectly employed by any of them, with respect to the Initial Tenant Improvements.

               2.2.2.5 Landlord be named as a third party beneficiary with respect to the Tenant’s Contractor’s insurance and indemnity provisions of the Construction Contract.

          2.2.3 Construction Costs. Except as otherwise expressly set forth herein, any and all costs, expenses, fees, taxes and charges relating to or associated with the Initial Tenant Improvements and the design and/or construction of the same, shall be borne solely by Tenant.

     2.3. Plans for Initial Tenant Improvements.

          2.3.1 Preliminary Plans. Except as otherwise set forth herein, Tenant shall submit to Landlord, and obtain Landlord’s approval of, any architectural floor plan of the Initial Tenant Improvements to the Premises (“Proposed Preliminary Plans”). Landlord shall not

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unreasonably withhold its approval of such Proposed Preliminary Plans, provided, however, that (a) Tenant first complies with all other terms and provisions of this Lease regarding the submittal of such Proposed Preliminary Plans, (b) the design set forth in the Proposed Preliminary Plans does not negatively affect the structural integrity of the Building Shell or the quality or the integrity of the other engineered elements of Landlord’s Work; (c) the design set forth in the Proposed Preliminary Plans will not have an adverse effect on the exterior appearance of the Building (as reasonably determined by Landlord) or the portion of the Premises outside the Building, and (d) Tenant provides Landlord will all reasonable and necessary information necessary to evaluate the Proposed Preliminary Plans. After receiving such Proposed Preliminary Plans, Landlord shall notify Tenant in writing whether (i) Landlord approves of such Proposed Preliminary Plans, or whether (ii) Landlord disapproves of such Proposed Preliminary Plans. If Landlord disapproves of such Proposed Preliminary Plans, Landlord’s disapproval notice shall specify the basis for such disapproval. If Landlord fails to notify Tenant, in writing, of its disapproval of such Proposed Preliminary Plans, along with the written description of the reasons for such disapproval, within ten (10) business days after receiving the same, Landlord shall be deemed to have approved of such Proposed Preliminary Plans. If Landlord disapproves of such Proposed Preliminary Plans, Tenant shall cause the Proposed Preliminary Plans to be revised as required to address Landlord’s specified concerns, and shall submit the revised preliminary plans to Landlord for its review and approval as provided in this Section, and such procedure shall continue until Landlord has approved of (or is deemed to have approved of) the revised preliminary plans submitted by Tenant. After Landlord’s approval of the Proposed Preliminary Plans as provided above, such preliminary plans shall be referred to in this Article 2 as “Tenant’s Preliminary Plans.”

          2.3.2 Final Plans. After Landlord’s approval or deemed approval of Tenant’s Preliminary Plans, Tenant shall submit to Landlord, for Landlord’s review and approval, the plans and specifications for the Initial Tenant Improvements, which shall be consistent with Tenant’s Preliminary Plans (“Tenant’s Construction Documents”), and which shall be compatible with the Landlord’s Construction Documents previously provided to Tenant by Landlord. After receiving the Tenant’s Construction Documents, Landlord shall notify Tenant in writing whether (i) Landlord approves of Tenant’s Construction Documents, which approval shall not be unreasonably withheld, conditioned or delayed by Landlord, or (ii) Landlord reasonably disapproves of Tenant’s Construction Documents. If Landlord reasonably disapproves of Tenant’s Construction Documents, Landlord’s disapproval notice shall specify the basis for such disapproval. If Landlord fails to notify Tenant, in writing, of its disapproval of Tenant’s Construction Documents, along with the written description of the reasons for such disapproval, within ten (10) business days after receiving the same, Landlord shall be deemed to have approved of Tenant’s Construction Documents. If Landlord reasonably disapproves of Tenant’s Construction Documents and provides the written description of the reasons for such disapproval as required, Tenant shall cause Tenant’s Construction Documents to be revised as required to address Landlord’s specified concerns, and shall submit the revised Tenant’s Construction Documents to Landlord for its review and approval as provided in this Section, and such procedure shall continue until Landlord has approved Tenant’s Construction Documents submitted by Tenant. After approval of Tenant’s Construction Documents as provided above, such Tenant’s Construction Documents shall be referred to as “Tenant’s Final Plans,” and Tenant shall generate a project schedule for construction of the Initial Tenant Improvements (the “Schedule”), as approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord acknowledges that Tenant’s business requirements for the Building are subject to change during the one-year period following the date of the Lease, and agrees that if any changes to Tenant’s intended use of the Premises result in Initial Tenant Improvements which will reasonably require more time for construction than is currently anticipated by Tenant, then Landlord will not unreasonably withhold its approval of a Schedule that reasonably requires longer periods for completion of the Initial Tenant Improvements than the sixty (60) day period following Substantial Completion of Landlord’s Work set forth Section 2.4.4.1 below; provided, however, that any additional time provided for construction of such work shall not postpone or delay the date for the commencement of the Term of the Lease or the date by which Tenant must commence paying rent or any other sums under the Lease. Tenant shall submit a copy of Tenant’s Final Plans and the Schedule to Landlord for its records prior to commencing the construction of the Initial Tenant Improvements. Notwithstanding the foregoing, where more than one type of material or structure is indicated on Tenant’s Final Plans

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approved by Landlord and Tenant, the determination shall be made by Tenant in Tenant’s reasonable discretion.

          2.3.3 Landlord Information. Except for the Plans and other Construction Documents provided by Landlord with respect to Landlord’s Work, all other information provided to Tenant by Landlord is being made without any representation or warranty by Landlord, it being acknowledged by Tenant that such information was furnished to Landlord by third parties, and Landlord shall not have any liability or responsibility for the same; provided, however, that Landlord shall promptly notify Tenant if Landlord discovers that any of the information furnished to Tenant by Landlord is not materially true and correct. Tenant may look to the source of any reports for representations or liabilities associated with any inaccuracies contained therein.

          2.3.4 Coordination With Landlord’s Work. Tenant shall require Tenant’s Architect to coordinate its design of the Initial Tenant Improvements, and any changes to the Initial Tenant Improvements, with Landlord’s Architect. Such coordination includes, but is not limited to, reviewing Landlord Change Directives as more fully described in Section 1.10 above. In addition, Tenant shall require that Tenant’s Contractor (a) take field measurements of Landlord’s Work before installing any work affected by Landlord’s Work, and (b) immediately notify Landlord and Tenant, in writing, of any material discrepancies between such field measurements and the Tenant’s Final Plans, as further set forth in Section 1.10 above.

          2.3.5 General. It is the responsibility of Tenant to assure that Tenant’s Final Plans and the Initial Tenant Improvements constructed thereunder conform to all of the Applicable Laws. Landlord’s acceptance or approval of any plan, drawing or specification, including, without limitation, Tenant’s Preliminary Plans, Tenant’s Final Plans, or any changes thereto, shall not constitute the assumption of any responsibility by Landlord for the accuracy or sufficiency of such plans and material, and Tenant shall be solely responsible therefor. Tenant agrees and understands that the review by Landlord of all plans pursuant to the Lease or this Exhibit B is to protect the interests of Landlord in the Building and the Premises, and Landlord shall not be the guarantor of, nor responsible for, the correctness, completeness or accuracy of any such plans or compliance of such plans with Applicable Laws. Notwithstanding the foregoing, when requesting Landlord’s approval of any change to Tenant’s Final Plans, then to the extent such change effects the engineered elements of the Initial Tenant Improvements, Tenant shall provide certification from Tenant’s Architect and the applicable engineers that the requested change has been reviewed and approved by such party.

          2.3.6 Changes.

               2.3.6.1 Non-Material Changes. After Landlord’s approval of Tenant’s Final Plans and Schedule, any changes to Tenant’s Final Plans or Schedule that are not “material” (as defined in Section 2.3.6.3 below) shall not require Landlord’s prior written consent. However, Tenant shall cause Tenant’s Contractor, promptly after the implementation of such change, to update the as-built drawings to reflect such changes to Tenant’s Final Plans.

               2.3.6.2 Material Changes. After Landlord’s Approval of Tenant’s Final Plans and Schedule, any changes to Tenant’s Final Plans or Schedule that are “material” (as defined in Section 2.3.6.3 below) shall require Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

               2.3.6.3 Definition of a Material Change. For purposes of Section 2.3.6.1 and 2.3.6.2 above, a “material” change is one that (a) will substantially change the character of the design of the Initial Tenant Improvements contemplated in the Tenant’s Final Plans, (b) will delay completion of the Initial Tenant Improvements by more than sixty (60) days after the scheduled completion date set forth in the Schedule, (c) will materially and adversely affect the market value of the Premises (exclusive of the Initial Tenant Improvements), (d) will have a material adverse effect on the exterior appearance of the Building or the appearance of the portion of the Premises outside the Building, or (e) will adversely and materially affect the design or construction of the Landlord’s Work. For example, but without limitation, a change in the number of offices on a floor of the Building Shell is not considered a material change.

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          2.3.7 Requirements when the Initial Tenant Improvements Affect Landlord’s Work. Notwithstanding anything to the contrary contained herein, should any design for the Initial Tenant Improvements (or any changes to the Initial Tenant Improvements) result in any change to the design or specifications of the engineered elements of Landlord’s Work, or is reasonably likely to have an adverse effect on any warranty provided to Landlord by Landlord’s Contractor or its material suppliers with respect to Landlord’s Work, then Tenant shall either (a) have Landlord perform such work, on Tenant’s behalf, pursuant to a Change Request in accordance with Section 1.11 above, or (b) utilize Landlord’s Architect and/or Landlord’s Contractor and/or any subcontractor of Landlord’s Contractor as necessary, for the design and construction of that portion of the Initial Tenant Improvements, or any alterations to Landlord’s Work required by Tenant for the construction of the Initial Tenant Improvements, or for the fixturing or furnishing of the Premises, to the extent required to maintain (y) all contractual warranties provided to Landlord by Landlord’s Contractor or its material suppliers with respect to such Landlord’s Work, and (z) all of Landlord’s contractual rights and remedies against Landlord’s Architect with respect to the design of Landlord’s Work. The decision as to whether Tenant shall comply with clauses (a) or (b) above shall be made by Landlord in Landlord’s sole and absolute discretion. Notwithstanding anything to the contrary contained herein, should Tenant fail to retain such parties for such work, Tenant shall be responsible for the cost of any repairs that would have been covered by any warranty that is invalidated as a result of such failure.

          2.3.8 Change Order Review Costs. Tenant shall reimburse Landlord for its reasonable out of pocket costs incurred in third-party engineering review of any “material” changes (as defined in Section 2.3.6.3) to Tenant’s Final Plans. Landlord agrees not to request any such third party review unnecessarily. Tenant shall pay Landlord such amounts within thirty (30) days after receiving a written invoice from Landlord requesting payment for the same.

          2.3.9 Tenant’s Obligation to Remove Initial Tenant Improvements. All Initial Tenant Improvements shall be the property of Tenant until the expiration or earlier termination of this Lease; at that time all such Initial Tenant Improvements shall remain on the Premises and become the property of Landlord without payment therefor, unless Landlord gives written notice to Tenant to remove the same at the time Landlord approves Tenant’s Final Plans, in which event Tenant shall remove such Initial Tenant Improvements at the expiration or earlier termination of the Lease and repair any damage resulting therefrom, normal wear and tear excepted; provided that Tenant’s removable trade fixtures and personal property (such as case work, laboratory fixtures and other personal properties) shall be and remain Tenant’s property, and shall be removed by Tenant from the Premises, at Tenant’s sole cost, on or before the expiration or earlier termination of this Lease, and Tenant shall repair all damage to the Premises resulting from such removal, normal wear and tear excepted. Landlord’s right to require removal shall be limited to only those Initial Tenant Improvements that are not normally found in a combined administrative office and wet and dry laboratory facility (for example, fitness areas) or that are not of a scale appropriate to the size of the building (for instance, if a cafeteria seating capacity is designed to accommodate a population greater than that which can be housed in the Building then Landlord shall have the right to require that Tenant remove (or, at Tenant’s election, downsize) those improvements designed for a population greater than that housed in the Building).

     2.4. Construction of Initial Tenant Improvements.

          2.4.1 Pre-Construction Submittals to Landlord. At least ten (10) business days prior to the commencement of construction of the Initial Tenant Improvements, Tenant shall submit the following items to Landlord:

               2.4.1.1 A written statement setting forth the proposed commencement date and the estimated completion date for the Initial Tenant Improvements;

               2.4.1.2 Certificates of insurance (and endorsements) from Tenant, Tenant’s Contractor, and all other Tenant parties (exclusive of Tenant’s Contractor’s subcontractors) intending to enter the Premises for purposes of constructing the Initial Tenant Improvements, evidencing the insurance required to be maintained by such parties pursuant to the terms of this Lease;

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               2.4.1.3 Copies of all building permits, and all other permits and approvals required by governmental agencies to construct the Initial Tenant Improvements; and

               2.4.1.4 A copy of the fully executed Construction Contract with Tenant’s Contractor.

Notwithstanding the foregoing, at least ten (10) business days prior to the commencement of work by any subcontractor hired by Tenant’s Contractor to perform (in whole or in part) the Initial Tenant Improvements, Tenant shall provide Landlord with written notice of the name and address of such subcontractor, the scope of work of such subcontractor, and certificates of insurance from such subcontractor, evidencing the insurance required to be maintained by such subcontractor (or by Tenant’s Contractor on behalf of such subcontractor) under Section 2.2.2.2 of this Work Letter.

          2.4.2 Conduct of Work. Tenant shall cause Tenant’s Contractor to perform the work of the Initial Tenant Improvements in an orderly manner, removing trash and debris generated by Tenant’s Contractor and its subcontractors from the Premises as required to maintain a safe and orderly worksite, and Tenant shall not permit any pipes, wires, boards or other construction materials brought into the Premises by Tenant’s Contractor or any of its subcontractors to cross public areas in a manner constituting a nuisance. All construction work of the Initial Tenant Improvements shall be undertaken in material compliance with all Applicable Laws and Landlord’s reasonable rules and regulations. If Tenant fails to comply with these requirements, Landlord shall have the right, but not the obligation, in addition to all other remedies available to Landlord due to Tenant’s default, to cause remedial action (at Tenant’s cost) as reasonably deemed necessary by Landlord to protect the public. Tenant shall complete construction of the Initial Tenant Improvements free and clear of all liens, security interests and encumbrances of any kind, and (subject to Tenant’s right under Section 2.4.4.2 below) Tenant shall remove from title (by bonding or otherwise) any mechanic’s liens filed against the Building and/or the Premises within fifteen (15) business days following Tenant’s notice thereof. If Tenant fails to post such bond or otherwise remove such lien of record within said time period, Landlord shall have the right, but not the obligation, in addition to all other rights and remedies available under the Lease and the applicable requirements of Section 2.4.4.2 below, to pay the claim for such lien or obtain a bond to remove the lien as a lien against property, in which event Tenant shall reimburse Landlord in full, including attorneys’ fees, for any such expense, within fifteen (15) days after notice from Landlord.

          2.4.3 Use of Equipment. Landlord and Tenant acknowledge that during the sixty (60) day Early Access Period, and thereafter while Landlord is completing the Landlord’s Work and any Punch List work associated with Landlord’s Work, it is anticipated that Landlord and Tenant will both be performing work within the Premises concurrently, and that Landlord’s Contractor or any subcontractor of Landlord’s Contractor may have equipment on the Premises for the performance of Landlord’s Work that Tenant (or Tenant’s Contractor or any subcontractor of Tenant’s Contractor) is desirous of using for the construction of the Initial Tenant Improvements. Should Tenant be desirous of using any such equipment for the performance of the Initial Tenant Improvements, Tenant must obtain the prior written consent of Landlord (which will not be unreasonably withheld provided the use of such equipment will not delay the completion of Landlord’s Work or increase the costs of Landlord’s Work) and Landlord’s Contractor or any subcontractor that owns, rents or has control over such equipment to use such equipment, provided, however, that Tenant’s Contractor and any subcontractor of Tenant’s Contractor shall be able to use the elevator or other alternative exterior service elevator for access to the upper floors of the Building and the temporary electrical power source to the Building. Landlord will cooperate with Tenant at no additional cost or liability to Landlord in Tenant’s efforts to obtain the consent of Landlord’s Contractor or any subcontractor, as the case may be, for the use by Tenant or Tenant’s Contactor of such equipment. Tenant shall be solely responsible for payment of any additional costs, fees and charges required by Landlord’s Contractor or the subcontractor for such use of the equipment. If such additional costs, fees or charges are assessed to Landlord, then Tenant shall pay Landlord for such costs, fees or charges within thirty (30) days after written request from Landlord. Tenant shall be responsible for any damage to person or property, including any damage to any equipment of Landlord or Landlord’s Contractor or subcontractor as a result of use of such equipment by Tenant or Tenant’s Contractor or any subcontractor of Tenant’s Contractor. Tenant shall protect defend, indemnify, and hold Landlord, and its agents, representatives, consultants, contractors, and

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affiliated entities harmless from and against any and all claims, actions, damages, liability and expense (including, without limitation, fees of attorneys, investigators and experts) in connection with loss of life, personal injury or damage to property in or about the Premises as a result of the use of any such equipment by Tenant or anyone under Tenant’s control.

          2.4.4 Establishment of Escrow Account / Posting of Bonds.

               2.4.4.1 Schedule for Tenant’s Initial Tenant Improvements. With respect to the schedule for the construction of the Initial Tenant Improvements, based on Tenant’s current business projections, Tenant currently intends to substantially complete the Initial Tenant Improvements within nine (9) months after the Substantial Completion of the Building Shell; provided, however, that the schedule for construction shall be determined following Landlord’s approval of the Final Tenant Plans, and shall be established in the Schedule in accordance with Section 2.3.2 above. Subject to Tenant’s right to adjust the Schedule as set forth in Section 2.3.2 above, if, at any time after that date which is sixty (60) days following Substantial Completion of the Building Shell, Tenant is more than sixty (60) days behind schedule with respect to the construction of the Initial Tenant Improvements, as set forth in the Schedule, subject to Force Majeure Delays and Landlord Delays, Landlord shall have the right, by delivering written notice of the same to Tenant, and if Tenant does not remedy such failure within thirty (30) days following receipt of such written notice, then Tenant shall be obligated to comply with the terms and provisions of Section 2.4.4.3 below.

               2.4.4.2 Failure to Obtain Mechanic’s Lien Releases. As a condition to paying any contractor, subcontractor, material supplier, or design professional (that has served or filed pre-lien notices with Landlord) providing labor, material, equipment or services with respect to the Initial Tenant Improvements, Tenant agrees to obtain conditional and unconditional lien releases from such contractors, subcontractors, material suppliers, or design professionals in accordance with California law, and agrees to promptly deliver the latest copies of the same to Landlord on a monthly basis; provided, however, that the foregoing shall not prohibit Tenant from engaging in good faith disputes, from time to time, with such persons relating to the cost and/or performance of their goods and services; in which case, Tenant shall not be required to provide conditional or unconditional lien releases from persons who are engaged with Tenant in such disputes as long as (i) Tenant removes, whether by posting a bond or otherwise paying a claim, any mechanic’s lien filed against the Real Property even if Tenant is in good faith disputing such claim or lien, and (ii) the aggregate amount of all disputed claims outstanding at any time is not more than $100,000. If the aggregate amount of the disputed claims are more than $100,000.00, then Tenant shall be required to deposit in escrow that amount in excess of $100,000.00, which amount shall be held in escrow until either (a) the amount in dispute is equal to or less than $100,000.00, or (b) Tenant provides a surety bond resulting in the unbonded amount of disputed claims being equal to or less than $100,000.00. Such escrow account shall be established in accordance with the requirements set forth in Section 2.4.4.3.1 below. If a mechanic’s lien for a disputed claim for which funds have been deposited in escrow by Tenant is bonded off by Tenant, then funds deposited in escrow for such disputed claim may be withdrawn from escrow. If as a result of such bonding, the amount of the bonded claims are less than or equal to $100,000.00, then the entire escrowed amount shall be refunded to Tenant. Should Tenant fail to provide Landlord with evidence that Tenant has made timely payment to such contractors, subcontractors, material suppliers or design professionals of undisputed funds in accordance with the requirements of Section 2.6.4 below, and removed (or bonded off) any lien against the Real Property, then provided that Tenant does not remedy such failure within fifteen (15) business days after Landlord notifies Tenant, in writing, to do the same, then Landlord shall have the right, by delivering written notice of the same to Tenant, to require that Tenant comply with the terms and provisions of Section 2.4.4.3 below.

               2.4.4.3 Adequate Assurance of Completion. Should Tenant fail to timely cure any failure to comply with its obligations under Section 2.4.4.1 or 2.4.4.2 above, then Tenant shall immediately thereafter, do one of the following:

                    2.4.4.3.1 Escrow Account. Tenant shall place that portion of Tenant’s Over Allowance Amount that is reasonably necessary for Tenant to fund the remaining Tenant’s Costs of the Work (as defined in Section 2.6 below), as reasonably determined by Landlord and Tenant, into an escrow account established by Landlord for the benefit of both Landlord and Tenant. Said escrow account shall be used to fund all amounts

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remaining payable to the contractors, subcontractors, engineers, designers, material suppliers and all other parties entitled to payment for the design or construction of the Initial Tenant Improvements at the time such escrow is to be funded. Money may only be withdrawn from such escrow account for purposes of paying the contractors, subcontractors, engineers, designers, material suppliers and all other parties entitled to payment for the design and/or construction of the Initial Tenant Improvements. In addition, the withdrawal of funds from such escrow account shall only be made with either (a) a certification for payment from Tenant’s Architect that the parties entitled to payment have performed the work associated with such withdrawal request, or (b) written authorization from both Landlord and Tenant; and under no circumstances shall money be withdrawn from such account unless all corresponding conditional and unconditional lien releases are provided by the parties to be paid from such escrow account. Landlord and Tenant agree to timely execute any escrow instructions that are reasonably necessary in order to carry out the intent of this Section 2.4.4.3.1.

                    2.4.4.3.2 Bonds. Tenant shall provide Landlord, at Tenant’s sole cost and expense, with a completion bond, a performance bond, and/or other bond requested by Landlord as may be necessary to complete the Initial Tenant Improvements and to protect Landlord’s interest in the Building, the Premises, and/or the Real Property. The amount of such bond(s) shall be reasonably determined by Landlord and Tenant, but shall be based on that portion of Tenant’s Over Allowance Amount that is reasonably necessary for Tenant to fund the remaining Tenant’s Costs of the Work.

          2.4.5 Notice of Completion; Copy of Record-Set of Plans. Within ten (10) calendar days after completion of construction of the Initial Tenant Improvements, Tenant shall cause a notice of completion (or the equivalent notice required under applicable local law to provide notice to all contractors, subcontractors and materialmen that the work is completed and the time for filing any mechanics’ lien is running) to be recorded in the Official Records of the County in which the Building is located, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the conclusion of construction: (a) Tenant shall cause Tenant’s Contractor and Tenant’s Architect, as applicable (i) to update Tenant’s Final Plans as necessary to reflect all changes made to Tenant’s Final Plans during the course of construction, (ii) to certify to the best of their knowledge that the “record-set” of as-built drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (iii) to deliver to Landlord two (2) sets of printed copies of “as-built” drawings (in computer assisted design format (“CAD”)), as well as an electronic formatted copy, within ninety (90) calendar days following issuance of a certificate of occupancy for the Premises; and (b) Tenant shall deliver to Landlord a copy of all signed building permits and certificates of occupancy, and all warranties, guaranties, and operating manuals and information relating to the Initial Tenant Improvements. Further, after the expiration of the Term or the earlier termination of the Lease, Tenant shall, at Landlord’s written request, promptly assign to Landlord all of Tenant’s remaining rights, title and interest in and to any and all Plans, contracts, warranties, guarantees and other documents associated with those Initial Tenant Improvements remaining on the Premises after Tenant’s surrender thereof.

          2.4.6 Correction of Work. As a condition to the payment of each progress payment of the Tenant Improvement Allowance, Landlord may notify Landlord’s Architect, Tenant and Tenant’s Architect of Landlord’s decision to perform a walk-through inspection of the Initial Tenant Improvements on a day that is not later than five (5) business days following Landlord’s receipt of the Draw Request for each progress payment and the date and time (during normal business hours) for such walk-through inspection of the Initial Tenant Improvements for purposes of determining whether there are any patent defects in the construction of the Initial Tenant Improvements (the “Progress Payment Walk-Through Inspection”). Such scheduled date and time for a Progress Payment Walk-Through Inspection is referred to herein as a “Progress Payment Walk-Through Date.” Landlord, Tenant and Tenant’s Contractor, as well as Tenant’s Architect (if desired by Tenant), shall meet at the Premises at the designated time on the inspection date. If Tenant’s desired representative(s) is/are not available on the applicable Progress Payment Walk-Through Date, Tenant shall notify Landlord of the same, in writing, at least two (2) days prior to the applicable Progress Payment Walk-Through Date, in which case, the parties shall coordinate another date and time for the walk-through, which shall be no later than five (5) days after the originally scheduled Progress Payment Walk-Through Date. If during the Progress Payment Walk-Through Inspection, Landlord and Tenant agree that the

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corresponding work is free of material defects and in substantial conformance with the Tenant’s Final Plans, then (a) Landlord and Tenant shall document such fact in writing (the “TI Completion Notice”), and (b) Landlord shall identify, in writing, those items of the Initial Tenant Improvements that are in need of repair, or that have yet to be completed, and that Tenant agrees to repair (the “TI Punch List”); provided, however, that any TI Punch List work shall be minor in nature, and shall not interfere with the continued construction of the Initial Tenant Improvements or occupancy of the Premises for the Permitted Uses set forth in the Lease in connection with the Final Scheduled Payment, and shall, in any case, be reasonably capable of completion within thirty (30) days after the applicable Progress Payment Walk-Through Date. Should Tenant disagree with the items on the TI Punch List, Tenant shall notify Landlord, in writing within two (2) business days following receipt of the proposed TI Punch List from Landlord, of such disagreement and Tenant’s proposed changes to the TI Punch List. If the parties are unable to agree upon the TI Punch List scope of work, then any such disagreement shall be resolved in accordance with Section 1.4.6.2; provided that the applicable Progress Payment shall be made by Landlord net of the reasonably estimated cost of correcting the TI Punch List items disputed by Tenant. The TI Completion Notice shall be binding on Landlord and Tenant, subject to resolution of any disagreement relating to the scope of work of the TI Punch List. TI Punch List items that are determined to be defective or not in substantial conformity with Tenant’s Final Plans (as may be amended in accordance with the requirements set forth herein) shall be promptly corrected by Tenant. Landlord’s failure to require a Progress Payment Walk-Through Inspection by timely delivery of the written notice required above shall be deemed Landlord’s waiver of such inspection rights for such Progress Payment.

     2.5. Indemnity/Insurance.

          2.5.1 Indemnity. Tenant’s obligation to defend, indemnify, and hold Landlord harmless as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities (collectively, “Claims”) related in any way to the Initial Tenant Improvements, or any act or omission of Tenant or any contractor, subcontractor, material supplier, architect, engineer, consultant or any other party employed, directly or indirectly, by Tenant with respect to the Initial Tenant Improvements, or in connection with Tenant’s non-payment of any amount arising out of the Initial Tenant Improvements that Tenant is required to pay pursuant to the terms of this Lease; provided, however, that Tenant shall not be obligated to defend, indemnify, and hold Landlord harmless from and against any such Claims to the extent the same arise directly due to Landlord’s intentional failure to timely pay Tenant any portion of the Tenant Improvement Allowance that is then due, payable, and undisputed under this Work Letter.

          2.5.2 Insurance Requirements. In addition to the insurance requirements set forth in the Lease, until the Final Scheduled Payment is received by Tenant in accordance with Section 2.6.3.3 below, Tenant shall carry, or shall cause its Contractor to carry, “Builder’s All-Risk” insurance for the full replacement cost of the Initial Tenant Improvements, and otherwise in the form required in Section 2.2.2.2 of this Work Letter. Such “Builder’s All-Risk” insurance coverage shall preclude or waive subrogation claims by the insurer against Landlord, or its agents, employees, or representatives, and any certificate evidencing such insurance coverage shall contain a provision that the company writing said policy, or its agent, will endeavor to give Landlord thirty (30) calendar days’ prior written notice of any cancellation or lapse of the policy or any reduction in the amounts of such insurance. In the event that the Initial Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense, subject to Landlord’s obligation to repair any damages to the Landlord’s Work covered by Landlord’s insurance. Prior to Substantial Completion of Landlord’s Work, Landlord shall carry, or cause Landlord’s Contractor to carry, “Builder’s All Risk” insurance for the full replacement cost of Landlord’s Work, excluding costs for footings and excavation and any off-site work, as an expense included in the cost of Landlord’s Work prior to Substantial Completion of the Building Shell, and in CAM Charges thereafter. Landlord shall cause such “Builder’s All-Risk” insurance coverage on the Landlord’s Work to preclude or waive subrogation claims by the insurer against Tenant, or its agents, employees or representatives, and any certificate evidencing such insurance coverage shall contain a provision that the company writing such policy, or its agent, will endeavor to give Tenant thirty (30) calendar days prior written notice of any cancellation or lapse of the policy or any reduction in the amounts of such insurance prior to the Substantial Completion of Landlord’s Work. Upon Substantial Completion of the Landlord’s Work, the “Builder’s All-Risk”

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insurance coverage shall be replaced by an “all risk” policy of property insurance covering the replacement cost of Landlord’s Work (exclusive of the Initial Tenant Improvements) in accordance with the requirements of Section 6.3.1 of the Lease. Following Landlord’s receipt of a Draw Request satisfying the conditions for the Final Scheduled Payment, Landlord shall cause the Landlord’s “all risk” policy of insurance on the Premises to include the full replacement cost of the Initial Tenant Improvements, and delivery of the Final Scheduled Payment shall be deemed Landlord’s assumption of property insurance coverage for the Initial Tenant Improvements. In the event that the Landlord’s Work is damaged by any cause during the course of construction thereof, Landlord shall immediately repair the same at Landlord’s sole cost and expense, subject to Tenant’s obligation to repair any damages to the Initial Tenant Improvements covered by Tenant’s insurance. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under the Lease or this Work Letter.

     2.6. Tenant’s Costs of the Work and Tenant Improvement Allowance.

          2.6.1 Tenant Improvement Allowance. Landlord agrees to reimburse Tenant Sixty-Six Dollars and Sixty-Seven Cents ($66.67) per square foot of the Rentable Square Footage of the Building (as defined in Section 2.1 of the Lease) (collectively, the “Tenant Improvement Allowance”) for Tenant’s Costs of the Work (defined in Section 2.6.5 below) incurred by Tenant for the construction of the Initial Tenant Improvements. Before the Initial Payment toward the cost of the Initial Tenant Improvements, Landlord and Tenant shall agree on (a) the total square footage of the Rentable Square Footage of the Building as provided in Section 2.1 of the Lease, and (b) on the total amount of the Tenant Improvement Allowance. Such square footage determination, as well as such Tenant Improvement Allowance determination, shall be binding on Landlord and Tenant throughout the Lease Term.

          2.6.2 Tenant’s Responsibility for Costs; Distribution of Allowance. Tenant shall bear the cost of Initial Tenant Improvements, including, without limitation, costs in connection with design, engineering, plan checking, special inspections and testing, Tenant’s consultants, and permits and fees for the Initial Tenant Improvements. After Landlord’s approval of Tenant’s Final Plans, Tenant shall deliver to Landlord (for Landlord’s review and approval, which approval shall not be unreasonably withheld, conditioned, or delayed) a detailed breakdown of the estimated costs to be incurred for the design and construction of the Initial Tenant Improvements (the “Total Estimated Costs of Tenant’s Initial Improvements”). Tenant shall incorporate any reasonable requested changes from Landlord with respect to such estimated costs. Tenant shall update such estimate from time to time to reflect any increases in the costs of constructing the Initial Tenant Improvements. After Landlord’s approval of the Total Estimated Costs of Tenant’s Initial Improvements, Tenant shall provide Landlord with a detailed breakdown of the estimated final costs to be incurred, and that have been incurred, in connection with the Initial Tenant Improvements, setting forth the estimated cost of the construction of the Initial Tenant Improvements in excess of the Tenant Improvement Allowance (the “Over Allowance Amount”).

          2.6.3 Distribution of Tenant Improvement Allowance. During the construction of the Initial Tenant Improvements, the Tenant Improvement Allowance (to the extent payable to Tenant) shall be disbursed by Landlord in three payments to Tenant as follows:

               2.6.3.1 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 33% of the Total Estimated Costs of Tenant’s Initial Improvements (as modified by any changes thereto as permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are at least 33% complete, Tenant shall have the right to request a draw on the Tenant Improvement Allowance in an amount equal to the product of the Tenant Improvement Allowance times 33%, minus any portion of the Tenant Improvement Allowance previously paid by Landlord for any Change Request Costs as provided in Section 1.11.3 above, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below (“Initial Payment”).

               2.6.3.2 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 66% of the Total Estimated Costs of Tenant’s Initial Improvements (as modified by any changes thereto as

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permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are at least 66% complete, Tenant shall have the right to request an additional draw down on the Tenant Improvement Allowance in an amount equal to the product of the Tenant Improvement Allowance times 66%, minus any portion of the Tenant Improvement Allowance previously paid by Landlord at Tenant’s request, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below.

               2.6.3.3 Provided that Tenant complies with the Draw Request procedures set forth in Section 2.4.6 above and Section 2.6.4 below, after 100% of the Total Estimated Costs of the Work for Tenant’s Initial Improvements (as modified by any changes thereto as permitted under Section 2.3.6 above) have been paid by Tenant and after Tenant’s Architect certifies, in writing, that the Initial Tenant Improvements are 100% complete (except for any TI Punch List items), Tenant shall have the right to request an additional draw down on the remaining balance of the Tenant Improvement Allowance, which amount requested by Tenant shall be paid by Landlord in accordance with Section 2.6.4 below (the “Final Scheduled Payment”) provided, however, that under no circumstances shall such draw down amount cause the total amount withdrawn from the Tenant Improvement Allowance to exceed the Tenant’s Costs of the Work (as defined in Section 2.6.5 below).

               2.6.3.4 Notwithstanding anything to the contrary contained herein, as of the Commencement Date, if any portion of the Tenant Improvement Allowance has yet to be paid to Tenant, Tenant shall be allowed to draw down the entire remaining unpaid balance of the Tenant Improvement Allowance to reimburse Tenant for a portion of the Over Allowance Amount previously paid by Tenant.

          2.6.4 Draw Request for Payment of Allowance.

               2.6.4.1 Any request to draw on the Tenant Improvement Allowance (each, a “Draw Request”) shall include the following items, the delivery of which are a condition to Landlord’s obligation to pay Tenant the Tenant Improvement Allowance hereunder: (a) a copy of all design, consultant, construction, and material supplier contracts for the Initial Tenant Improvements (the “Tenant Construction Contracts”), that have been entered into by Tenant prior to the date of the Draw Request (which shall cover all work for which Tenant seeks payment under the Draw Request) and any change orders associated therewith (each contract and change order need be submitted only once and may be in the form of Tenant’s corporate form of purchase orders for change orders and supplier contracts); (b) a copy of the latest request for payment from Tenant’s Contractor, approved by Tenant, in a form reasonably acceptable to Landlord, showing the percentage of completion of the Tenant Improvements in the Premises, and detailing the portion of the work completed, and the portion not completed, as well as a copy of the corresponding executed conditional and unconditional mechanic’s lien release associated with such invoice from Tenant’s Contractor meeting the requirements of California law; (c) copies of the latest up to date executed conditional and unconditional mechanic’s lien releases, in accordance with California law, from all engineers, subcontractors, and material suppliers that have served or filed pre-lien notices with Landlord, in the statutory form; (d) a certificate from Tenant’s Architect certifying the requisite percentage of completion of the work associated with the Initial Tenant Improvements has been completed so as to entitle Tenant to draw on the Tenant Improvement Allowance, and (e) evidence showing that the Tenant’s Costs of the Work paid for by Tenant as of the date that such Draw Request is submitted to Landlord equal or exceed the requisite percentage of Tenant’s Estimated Costs of Tenant’s Improvements. Notwithstanding the foregoing, if Tenant has paid any portion of the Tenant’s Costs of the Work to Tenant’s Contractor or any subcontractors, engineers, design professionals or material suppliers, but pursuant to any unresolved dispute, such persons shall fail to deliver an unconditional lien waiver, then as long as Tenant provides reasonably satisfactory security against the enforcement of any mechanics’ lien not waived unconditionally pursuant to the requirements in Sections 2.4.4 (and all subsections thereof), Tenant shall receive reimbursement of the amount paid by Tenant from the Tenant Improvement Allowance.

               2.6.4.2 Thereafter, Landlord shall deliver a check made payable to Tenant for the amount requested by Tenant from the Tenant Improvement Allowance within twenty (20) days following receipt of a Draw Request including the information required pursuant to Section 2.6.4.1. Landlord’s payment of such amounts shall not be deemed

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Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s Draw Request.

               2.6.4.3 Tenant shall cooperate in a commercially reasonable manner (and as long as such disbursement schedule does not result in any increased costs to Tenant due to late fees or interest payable to its contractors or suppliers) with the disbursement schedule of Landlord’s construction lender and Landlord shall use reasonable efforts to insure that such amounts are paid promptly in accordance with Section 2.6.4.2 above.

     Notwithstanding anything to the contrary contained herein, Landlord shall have no obligation to pay Tenant, and Tenant shall waive its right to collect from Landlord, any portion of the Tenant Improvement Allowance that is not invoiced to Landlord, in accordance with the requirements set forth herein within eighteen (18) months after the Commencement Date.

          2.6.5 Tenant’s Costs of the Work. For purposes of this Work Letter, the “Tenant’s Costs of the Work” shall mean and include all of the following costs incurred by Tenant with respect to the design and construction of the Initial Tenant Improvements: (a) all design fees, engineering fees and plan check fees, (b) all deposits, fees and costs for building and other permits, licenses and approvals; (c) tests and inspections; (d) insurance and bond premiums; and (e) all amounts payable to architects, engineers, designers, contractors, and subcontractors retained by Tenant or Tenant’s Contractor for the Initial Tenant Improvements, and all suppliers and vendors providing materials and services as part of the work of the Initial Tenant Improvements. Tenant’s Costs of the Work expressly excludes the costs of (i) Tenant’s furniture, and (ii) any Tenant equipment that Tenant may remove from the Premises in its sole discretion at the expiration of the Term or the earlier termination of the Lease, pursuant to the terms and provisions of the Lease.

     2.7. Transfer/Assignment of Lease. Notwithstanding anything to the contrary contained herein, to the extent that the Landlord originally named in the Lease (the “Original Landlord”) assigns or otherwise transfers its interest in the Premises prior to (a) the substantial completion of Landlord’s Work, or (b) Landlord’s distribution of the entire Tenant Improvement Allowance which Tenant is entitled to receive under this Work Letter (collectively, the “Original Landlord Requirements”), then the Original Landlord shall remain responsible for, and shall warrant the completion of such Original Landlord Requirements, notwithstanding such conveyance, unless the new owner has expressly agreed to assume the obligation to perform the Original Landlord Requirements.

     2.8. Temporary Facilities During Construction. Until the Substantial Completion of the Building Shell, storage of Tenant’s Contractor’s and subcontractors’ construction material, tools, equipment and debris shall be confined to those areas that are reasonably designated for such purposes by Landlord; provided, however that the location of such storage areas will not interfere with Tenant’s completion of the Initial Tenant Improvements. Landlord shall not be responsible for any loss or damage to Tenant, Tenant’s Contractor, or their agents, representatives, subcontractors, consultant’s or employees’ equipment (each, a “Tenant Party”), unless such loss or damage arising from the gross negligence or willful misconduct of Landlord or Landlord’s Contractor or any of their respective agents, representatives, subcontractors or employees so long as such loss or damage is covered by insurance carried by the applicable Tenant Party. After the Substantial Completion of the Building Shell, and until the Substantial Completion of Landlord’s Work, storage of Landlord’s Contractor’s and Tenant’s Contractor’s construction material, tools, equipment and debris outside the Building Shell shall be confined to those areas outside the Building Shell that may be designated for such purposes by Landlord, and storage of same within the Building Shell shall be confined to those areas within the Building Shell reasonably designated by Tenant, provided, however that the location of such storage areas will not interfere with Landlord’s completion of Landlord’s Work. Tenant shall not be responsible for any loss or damage to Landlord, Landlord’s Contractor, or their agents, representatives, subcontractors, consultant’s or employees’ equipment (each a “Landlord Party”), unless such loss or damage arising from the gross negligence or willful misconduct of Tenant or Tenant’s Contractor or any of their respective agents, representatives, subcontractors or employees so long as such loss or damage is covered by insurance carried by the applicable Landlord Party; provided, however, that this Section shall be subject to any agreement that Tenant may have with such Landlord Party as required under Section 2.4.3.

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ARTICLE 3. MISCELLANEOUS

     3.1. Business Day. A “business day” is a day other than a Saturday, a Sunday or a legal holiday as recognized by the Superior Court in the County in which the Premises are located. Unless expressly defined as a “business day”, all references to the term “day” shall mean a “calendar day.”

     3.2. Time of the Essence. Time is of the essence in this Work Letter, and unless otherwise indicated, all references herein to a “number of days” shall mean and refer to calendar days.

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SCHEDULE B-1
THE BUILDING SHELL
(LANDLORD’S WORK)

Building Specifications

“*” indicates Landlord’s Work that may lag
behind the Substantial Completion of the Building Shell.

     The developed building shell and site will reflect a high image Life Science/R&D environment per a schedule of design drawings attached. The building shell shall include the following:

Building Structure, Foundation and Floors

• One three (3) story steel braced frame building over grade level and sub-grade parking.

• Structural components for a shell building, including foundations, footings, columns, beams, joints, purlins, girders, headers and other structural members as required to support the building structure.
* Podium and surface parking on south side of Building

• Fireproofing of structure as required by code.

• Seismic importance factor of structure to be 1.0 per code.

• Vibration design criteria are in the 6000-8000 MPS range at the 2nd and 3rd floors and in the 4000-5000 MPS range at the podium level.

• Exterior façade will be a curtain wall system consisting of double insulated glass and GFRC, or precast concrete, or metal panels. Interior walls will be unfinished and will not include insulation, drywall, studs, etc.

• Typical building floor to floor heights to be sixteen (16) feet.

• Typical elevated floors to have vented metal deck with concrete topping slab. The floor ratings are as follows:

Garage to 1st floor: 4 hour
1st to 2nd floor:       2 hour
2nd to 3rd floor:       2 hour
Roof:                         1 hour

• Waterproof membrane on podium level under landscape panel.

• Parking level 2 and a portion of Parking level 1 consist of reinforced concrete slab-on-grade with capillary moisture break; the remaining portion of Parking level 1 consists of an elevated conventionally reinforced supported slab.

• Main building entrances to include double (narrow style aluminum) doors and canopy; design and installation of vestibule, custom doors, door security, specialty hardware or modifications to be a part of tenant improvement.

• Two stairs assemblies with enclosures as required by code.

• Exterior and/or basement level service area with location and size to be determined.

• One loading area with loading door.

Roof

• Roof: Vented metal deck with 2.5 inch concrete topping.

• Roof system: Four ply built-up roof or single ply EPDM or PVC systems with insulation to meet Title 24 requirements.

• Roof screen design: Landlord to design roof screen with support system to support future penthouse; supports for major rooftop equipment and davit pedestals of window washing will be stubbed through roof membrane; roof screen installation to be part of tenant improvement.

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• Ladder and roof hatch for roof access.

Elevators

• Installation of one hydraulic freight elevator, 5,000 lbs. rated, 150 fpm capacity.

• Installation of two traction passenger elevators, 3,500 lbs. Rate, 350 fpm capacity.

• * May be pending State of California inspection/licensing of elevators

Sewer, Drainage and Plumbing

• Sanitary sewer line to be stubbed into building and capped for future connection. Any monitoring requirements to be part of the tenant improvement.

• The sanitary sewer lateral (domestic) will be distributed in the garage level to be connected with the trash enclosure floor drain. All lateral distribution to be part of the Initial Tenant Improvements.

• Domestic and irrigation water mains connected to the city water main in the street. Domestic line to be brought to the building with all distribution to be part of the tenant improvement.

• Roof drain leaders and roof overflows piped and draining onto paved areas or connected to the site storm drainage system.

• Underground site storm drainage systems shall be connected to the city storm system main.

• Service hook-up and meter fees at cost of Tenant.

Utilities and Electrical

• The electrical service is anticipated to be 2,000 to 3,000 amps of 277/480 volt, three phase, four wire power. The electrical service will include underground conduit, wire feeders, transformers, transformer pads, as well as secondary conduits and secondary feeders from transformer pads into the building’s electrical room.

• Underground pull section and house panel for exterior lighting, landscaping, and garage ventilation system. *Meter may be part of the Landlord’s Work to be done after Building Shell completion if the City does not permit a temporary meter and electricity is being provided from a neighboring property (provided that the Building Shell work shall not be substantially complete if Tenant is required to provide electricity for the work of the Initial Tenant Improvements by means of an on-site generator). However, Tenant must request and apply to PG&E for the installation of the meter and the establishment of the account in Tenant’s name before the meter can be installed.

• * An electrically operated landscape irrigation system, with controller, such that it is a complete and functioning system.

• Underground conduit from the building to the main fire protection system shut-off valve (PIV) for installation of supervisory alarm wiring.

• Telephone service conduits from the street to a designated location in the building.

• * Gas line connected to the public utility main and run to gas meter location.

Mechanical

• Mechanical exhaust fans as needed for parking garage.

• Mechanical pressurization as needed for stairs.

• Back-up generator to support mechanical items listed above.

Fire Protection (Sprinklers)

• A complete and fully functional overhead shell building system of ordinary hazard density distributed throughout the building.

• System shall include all upright pendant sprinkler heads (“uppers”) with future sprinkler head drops to be part of the tenant improvement.

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Sitework and Landscaping

• * Landlord’s Work will include site work outside the building and shall include grading, asphalt concrete, paving, landscaping, landscape irrigation, curbs, gutters, sidewalks, specialty paving (if any), retaining walls, and trash enclosures.

• * Paving sections for automobile and truck access shall be according to the Geologic Soils Report.

• * All parking lot striping, including handicap signage wheel stops and spaces.

• * Basic exterior directional signage

• * Site lighting

Structural Design Criteria: Gravity

The Building will be designed for the gravity loads listed below. The designation of “Mechanical penthouse” is intended to apply to a specific area above the third floor roof; the area designated “Roof screened area” is that area outside of the Mechanical penthouse, bounded by the roof screen; and the area designated as “roof” is the area outside the roof screen.

Area	Live Load	Dead Load
Mechanical penthouse roof	20 psf1	10 psf suspended5
Roof	20 psf2	10 psf suspended5
Roof screened area	50 psf2	10 psf suspended5
Penthouse floor	100—150 psf3	20 psf suspended6
Third floor	100 psf4	20 psf suspended6
Second floor	100 psf4	20 psf suspended6
First floor	100 psf4	20 psf suspended6
Podium level	250—300 psf4	5 psf suspended5
Parking level 1	50 psf4	5 psf suspended5
Parking level 2	50 ps4	NA

Footnotes:
1	With allowable area reduction
2	With provision for 5k point load anywhere on joist
3	With provision for 10k point load anywhere on joist
4	With no allowable area reduction in vertical loading on horizontal framing members, only columns and footings
5	With provision for 2k point load
6	With provision for 5k point load

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SCHEDULE B-2

PRELIMINARY DEVELOPMENT AND DELIVERY SCHEDULE
FOR THE BUILDING SHELL AND LANDLORD’S WORK

Phase	Lease Benchmark Date
Outside Date to Secure Building Permit (Section 1.6.2)	July 1, 2008
Earliest Date of Early Access for Commencement of Initial Tenant Improvements (Section 16.3.1)	June 1, 2009
Earliest Date of Substantial Completion of Building Shell (Section 1.6.3.1)	August 1, 2009
Probable Date of Substantial Completion of Building Shell (informational only)	September 15, 2009
Substantial Completion of Building Shell or Penalties Accrue, subject to Tenant Delays and/or Force Majeure (Section 1.6.6.1)	October 31, 2009
Substantial Completion of Landlord’s Work or Penalties Accrue, Subject to Tenant Delays and/or Force Majeure (Section 1.6.6.2)	November 30, 2009

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SCHEDULE B-3

DESIGN DEVELOPMENT DOCUMENTS
FOR LANDLORD’S WORK

The following list of Design Development Documents attached to this cover sheet is based on design documents in existence and approved by Landlord and Tenant as of the date of the Lease. The Design Development Documents may show or contemplate work that is beyond the scope of Landlord’s Work as described in Exhibit B-1 to Exhibit B. However, the scope of Landlord’s Work is limited to the work described in Exhibit B-1.

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Schedule B-3

200 Oyster Point Boulevard, South San Francisco
DD Package Drawing List, 10/10/2007
Issued by DGA

GENERAL
0	COVER SHEET
A0.1	DRAWING INDEX
A0.2	PROJECT DATA CODE ANALYSIS
A0.3	CODE ANALYSIS EXITING PLANS
A0.4	CODE ANALYSIS EXITING PLANS
CIVIL DRAWINGS
C1.0	EROSION CONTROL PLAN
C01.1	ROUGH GRADING & EROSION CONTROL PLAN
C1.1	GRADING & DRAINAGE PLAN
C2.1	UNDERGROUND PIPING PLAN
C3.1	DETAILS
LANDSCAPE DRAWINGS
L0.1	MATERIAL SCHEDULE, NOTES & LEGENDS
L1.0	LAYOUT PLAN
L1.1	LAYOUT PLAN
L3.0	PLANTING PLAN
L3.1	PLANTING PLAN
L5.0	SITE DETAILS
L5.1	SITE DETAILS
L5.2	SITE DETAILS
L5.3	PLANTING DETAILS
ARCHITECTURAL DRAWINGS
A1.0	SITE PLAN
A1.01	PODIUM SLAB LEVELS & WATER PROOFING
A1.1	SITE DETAILS
A1.2	ENLARGED SITE PLANS
A2.00	PARKING — LOWER LEVEL FLOOR PLAN
A2.0	PARKING — UPPER LEVEL FLOOR PLAN
A2.1	FIRST LEVEL FLOOR PLAN
A2.2	SECOND LEVEL FLOOR PLAN
A2.3	THIRD LEVEL FLOOR PLAN
A2.4	ROOF LEVEL PLAN
A3.1	WALL TYPE SCHEDULE & DETAILS
A3.2	DOOR SCHEDULE & DETAILS
A3.3	MOUNTING HEIGHT SCHEDULE
A4.1	BUILDING SECTIONS
A4.2	BUILDING SECTIONS
A4.3	BUILDING SECTIONS
A4.4	WALL SECTIONS
A4.5	WALL SECTIONS
A5.1	EXTERIOR ELEVATIONS
A5.2	EXTERIOR ELEVATIONS
A5.3	EXTERIOR ELEVATIONS
A5.4	EXTERIOR ELEVATIONS

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		A8.1	INTERIOR DETAILS
STRUCTURAL DRAWINGS
		S1.0	GENERAL NOTES, ABBREVIATIONS, SYMBOLS & DRAWING INDEX
		S2.00	LOWER LEVEL PARKING SLAB AND FOUNDATION PLAN
		S2.0	UPPER LEVEL PRKG STRUCTURAL SLAB FRAMING PLAN
		S2.1a	FIRST FLOOR STRUCTURAL SLABL FRAMING PLAN
		S2.1b	FIRST FLOOR PODIUM PLAN
		S2.2	SECOND FLOOR FRAMING PLAN
		S2.3	THIRD FLOOR FRAMING PLAN
		S2.4	ROOF FRAMING PLAN
		S3.1	BRACED FRAME ELEVATIONS & COLUMN SCHEDULE
		S5.1	CONCRETE DETAILS
		S5.2	CONCRETE FOUNDATION DETAILS
		S5.3	CONCRETE SLAB DETAILS
		S7.1	STEEL DECK DETAILS
		S7.2	STEEL DETAILS
		S7.3	STEEL BRACED FRAME DETAILS
		MECHANICAL DRAWINGS
		M0.1	SCHEDULES, NOTES & TITLE 24
		M0.2	EQUIPMENT SCHEDULE
		M2.00	LOWER LEVEL PARKING MECHANICAL PLAN
		M2.0	UPPER LEVEL PARKING MECHANICAL PLAN
		M2.1	FIRST FLOOR MECHANICAL PLAN
		M2.4	MECHANICAL ROOF PLAN
		PLUMBING
	P	0.1	INDEX, LEGENDS & SCHEDULES
	P	2.00	PLUMBING LOWER LEVEL PARKING FLOOR PLAN
	P	2.0	PLUMBING UPPER LEVEL PARKING FLOOR PLAN
	P	2.1	FIRST FLOOR PLUMBING PLAN
	P	2.2	SECOND FLOOR PLUMBING PLAN
	P	2.3	THIRD FLOOR PLUMBING PLAN
	P	2.4	ROOF PLUMBING PLAN
		ELECTRICAL
		E0.1	LEGEND, EXTERIOR TITLE 24 & DRAWING INDEX
		E0.2	INTERIOR TITLE 24
		E1.0	SITE LIGHTING PLAN
		E2.00	LOWER LEVEL PARKING ELECTRICAL PLAN
		E2.0	UPPER LEVEL PARKING ELECTRICAL PLAN
		E2.1	FIRST FLOOR ELECTRICAL PLAN
		E2.2	SECOND FLOOR ELECTRICAL PLAN
		E2.3	THIRD FLOOR ELECTRICAL PLAN

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SCHEDULE B-4

PRE-APPROVED MAJOR TRADE SUBCONTRACTOR
200 Oyster Point Boulevard, South San Francisco

TRADE	COMPANY	LOCATION
Concrete	Casey-Fogli	Hayward
Concrete	Central Concrete	San Jose
Concrete	Dolan Concrete	San Jose
Concrete	Jos. J. Albanese	Santa Clara
Concrete	Peck & Hiller Co.	Hayward
Demolition	Campanella Corporation	Oakland
Demolition	Demcon	Hayward
Demolition	Ferma	Mt. View
Demolition	R&B Equipment	Hayward
Dock Leveling Equipment	Interpro Systems	Redwood City
Doors & Hardware	Advanced Doorways	Livermore
Doors & Hardware	Overhead Door	Newark
Drywall	Daley’s Drywall	Campbell
Drywall	Golden Gate Drywall	Burlingame
Drywall	Interior Design Construction	Fremont
Drywall	Magnum Drywall	Fremont
Electrical	Cupertino Electric	San Jose
Electrical	Redwood City Electric	Redwood City
Electrical	Sasco/Valley Electric	Santa Clara
Elevators	Kone, Inc.	Hayward
Elevators	Otis Elevator company	SF
Elevators	Schindler Elevator	San Leandro
Fire Sprinklers	Allied Fire Protection	Oakland
Fire Sprinklers	Golden Bear Fire	Hayward
Fire Sprinklers	Grinnell Fire Protection	Rio Linda
Fire Sprinklers	J.W. McClenahan Co.	San Mateo
Glass & Glazing	Bagatelos	Sacramento
Glass & Glazing	CS Erectors	San Ramon
Glass & Glazing	Walters & Wolf	Fremont
Grading & Paving	Cozart Brothers	Livermore
Grading & Paving	Interstate Grading	S.SF
Grading & Paving	Mancebo Corporation	Fremont
Grading & Paving	Top Grade	Livermore
HVAC	ACCO Air Conditioning	Glendale
HVAC	Cal Air	San Jose
HVAC	Western Allied	Menlo Park
Insulation	Rescom Insulation	Hayward
Landscape & Irrigation	Decorative Paving	San Jose
Landscape & Irrigation	Jensen Corporation	Cupertino
Landscape & Irrigation	B&B Landscape	San Jose
Landscape & Irrigation	Herzer Landscape	San Lorenzo
Landscape & Irrigation	Maniglia Landscape	San Jose
Lath & Plaster	Fisher Lath & Plaster	San Jose
Metal Decking	Anning Johnson Company	Hayward
Metal Decking	B.T. Mancini	Milpitas
Metal Decking	JD2	Auburn
Metal Soffets	LJ Interiors	Livermore
Misc. Steel	West Co. Iron Works	San Jose
Painting	Tollner Painting	Mt. View
Plumbing	Castro Plumbing	San Jose
Plumbing	KDS Plumbing	San Jose
Reinforcing Steel	Broadhead	S.SF
Reinforcing Steel	CMC Fontana Steel	Stockton
Reinforcing Steel	Coliseum Steel	Oakland
Reinforcing Steel	Nor Cal Steel	Union City
Roofing	Alcal Roofing	Hayward
Roofing	Alliance Roofing	San Jose
Roofing	King’s Roofing	San Jose
Roofing	Statewide Roofing	San Jose
Roofing	Western Roofing	San Jose
Sheet Metal	Michael D. Burns	San Jose
Striping	Cee Gee Striping	Campbell
Striping	Weatherly Striping Co.	San Carlos
Structural Steel	Bambacigno Steel	Modesto
Structural Steel	Gayle Manufacturing	Woodland
Structural Steel	Lee’s Imperial Welding	Fremont
Structural Steel	Olson & Co. Steel	San Leandro
Structural Steel	Westco Iron Works	San Jose
Surveyor	Kier & Wright	Pleasanton
Underground	Blackwell Trenching	San Jose
Underground	Hackett Pipeline	San Jose
Underground	Preston Pipeline	Milpitas
Underground	R&B Construction	SF
Underground	Westside Underground	Saratoga
Waterproofing	Danco Waterproofing	Hayward
Waterproofing	Lawson	S.SF
Waterproofing	W.R. Grace	Greenbrae

EXHIBIT C

RULES AND REGULATIONS

1. No awning, shade, sign, placard, picture, advertisement, name, or notice shall be inscribed, painted, installed or displayed on or outside the Building without written consent of Landlord. Landlord shall have the right to remove any such unapproved item without notice and at Lessee’s expense. All approved signs or lettering on doors and facia shall be printed, painted, affixed or inscribed at the expense of Tenant by a person chosen by Landlord in accordance with Landlord’s standard signage policy. All requests for listing on the Building directory shall be submitted to the office of Landlord in writing and shall be subject to Landlord’s approval, not to be unreasonably refused. Any change requested by Tenant of Landlord of the name or names posted on directory, after initial posting, will be charged to Tenant.

2. Tenant, its employees, agents, contractors and invitees shall comply with all parking regulations promulgated by Landlord from time to time for the orderly use of the vehicle parking areas, including without limitation the following: Parking shall be limited to automobiles, passenger or equivalent vans, motorcycles, light four wheeled pickup trucks, and (in designated areas) bicycles. No vehicles shall be left in the parking lot overnight; provided however that (i) occasional overnight parking by Tenant’s employees shall be permitted, and (ii) the full-time parking of Tenant-owned maintenance and other vehicles in the basement of the parking structure shall be permitted. Parked vehicles shall not be used for vending or any other business or other activity while parked in the parking areas. Vehicles shall be parked only in striped parking spaces, except for loading and unloading, which shall occur solely in zones marked for such purpose, and be so conducted as to not unreasonably interfere with traffic flow within the Project or with loading and unloading areas of other tenants. If the Premises are part of a multi-tenant building, then employees of Tenant and Tenant’s vehicles shall not be parked in spaces marked for visitor parking or other specific use. All vehicles entering or parking in the parking areas shall do so at owner’s sole risk, and Landlord assumes no responsibility for any damage, destruction, vandalism or theft. Tenant shall cooperate with Landlord in any measures implemented by Landlord to control abuse of the parking areas, including without limitation access control programs, tenant and guest vehicle identification programs, and validated parking programs, provided that no such validated parking program shall result in Tenant being charged for spaces to which it has a right to free use under its Lease. Each vehicle owner shall promptly respond to any sounding vehicle alarm or horn, and failure to do so may result in temporary or permanent exclusion of such vehicle from the parking areas. Any vehicle which violates the parking regulations may be cited, towed at the expense of the owner, temporarily or permanently excluded from the parking areas, or subject to other lawful consequence.

3. Tenant will not install or use any window coverings except those provided by Landlord. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Building.

4. Tenant shall not use or keep in the Building or on the Premises any kerosene, gasoline or flammable or combustible fluid or material (collectively, “Combustible Materials”) other than (i) those limited quantities necessary for the maintenance of office equipment, and (ii) those Combustible Materials that are necessary to and used in the ordinary course of Tenant’s business, including, but not limited to, those associated with Tenant’s back-up generator, provided the same are used in full compliance with all applicable laws, rules and regulations pertaining to such use, and provided that Tenant shall be solely responsible for the same. Tenant shall not use or permit to be used in the Building or on the Premises any foul or noxious gas or substance, or permit or allow the Building or the Premises to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors or vibrations.

5. Tenant shall not alter any lock or install any new locks or bolts on any exterior or lobby door of the Premises without the prior consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. All re-keying of office doors, after occupancy, shall be at the expense of Tenant. Tenant, upon termination of its tenancy, shall deliver to Landlord the keys of all locks for doors on the Premises, and in the event of loss of any keys furnished by Landlord, shall pay Landlord therefor.

6. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Project are prohibited, and Tenant shall cooperate to prevent same.

7. Landlord reserves the right to exclude or expel from the Premises any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of the Rules and Regulations of the Premises.

8. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by any governmental agency or reasonably established by Landlord. No person shall go on the roof without Landlord’s permission, except that Tenant may go upon the roof in order to fulfill Tenant’s maintenance obligations.

9. Tenant assumes any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Building closed. Landlord shall have no obligation to secure the Building or the Premises, and Tenant hereby releases Landlord, to the greatest extent allowed by law, from any responsibility for protecting the Building or the Premises from theft, robbery and pilferage. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with Landlord’s instructions in their installation. Tenant shall make provision for prompt termination of any sounding alarm and failure to do so shall constitute grounds for Landlord to require that Tenant’s alarm be modified as reasonably directed by Landlord or removed. Unless specifically permitted under its Lease, Tenant shall not install any radio or television antenna, loudspeaker or other devices on the roof or exterior walls of the Building. Tenant shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere.

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10. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building, to such a degree as to be objectionable to Landlord, shall be placed and maintained by Tenant at Tenant’s expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration.

11. All goods, including material used to store goods, delivered to Tenant at the Premises shall be immediately moved into the Building and shall not be left in any surface parking or receiving areas overnight. Tenant shall not use or permit the use of any portion of the Premises for outdoor storage without the prior written consent of Landlord.

12. Tenant shall store all its trash and garbage within the Building or in the exterior trash enclosures, or in other designated areas of the Premises established or consented to by Landlord. Tenant shall not allow refuse, garbage or trash to accumulate outside of the Building except on the day of scheduled scavenger pick-up services, and then only in areas designated for that purpose by the Landlord. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal within the Premises. Tenant shall notify Landlord in advance of any unusually large amount of trash to be disposed of in the designated trash areas, including without limitation, trash associated with any permitted construction by Tenant on the Premises, Tenant’s moving in or out of the Building or delivery to Tenant at the Premises of furniture, fixtures and equipment, and Tenant shall bear the expense of any special trash pick up necessary to remove such trash.

13. Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Building or any part thereof except that pictures, certificates, licenses and similar items normally used in Tenant’s business may be carefully attached to the walls by Tenant. The cost of any special electrical circuits for items such as copying machines, computers, microwave, etc., shall be borne by Tenant unless the same are part of the Building standard improvements. Tenant shall not cut or bore holes for wires. Tenant shall not affix any floor covering to the floor of the Building, in any manner except as approved by Landlord. Tenant shall repair or be responsible for the cost of repair of any damage resulting from noncompliance with this rule.

14. Tractor trailers which must be unhooked or parked with dolly wheels beyond the concrete loading areas must use steel plates or wood blocks under the dolly wheels to prevent damage to the asphalt paving surfaces. No parking or storing of such trailers will be permitted in the auto parking areas of the Premises or on streets adjacent thereto.

15. Forklifts which operate on asphalt paving areas shall not have solid rubber tires and shall only use tires that do not damage the asphalt.

16. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violations of this rule shall be borne by the Tenant who, or whose employees or invitees, shall have caused same.

17. The sidewalks, parking lots, driveways and entrances shall be used only as a means of ingress and egress and shall remain unobstructed at all times. Loitering on any part of the Premises or obstruction of any means of ingress or egress shall not be permitted.

18. Landlord may from time to time waive any one or more of these Rules and Regulations for the benefit of Tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations nor prevent Landlord from thereafter enforcing any such Rules and Regulations.

19. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition to its occupancy of the Premises.

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EXHIBIT D

CALCULATION OF BUILDING MINIMUM MONTHLY RENT DURING FIRST YEAR OF TERM

This Exhibit D forms a part of that certain Lease (the “Lease”) by and between Chamberlin Associates 200 Oyster Point Blvd., L.P., as Landlord, and Elan Pharmaceuticals, Inc., as Tenant, to which this Exhibit is attached. All capitalized terms referred to in this Exhibit shall have the same meaning provided in the Lease, except where expressly provided to the contrary in this Exhibit. This Exhibit D establishes the means of determining Minimum Monthly Rent only, and shall not modify the respective rights and obligations of Landlord and Tenant under the Lease or Work Letter; and in the event of any discrepancy between this Exhibit D and any contrary provision of the Lease or Work Letter (except for the Minimum Monthly Rent payable under the Lease), the terms and conditions of the Lease and Work Letter shall prevail.

The Building Minimum Monthly Rent for the first one year period after the Commencement Date (the "Initial Year”) shall be calculated as set forth in this Exhibit D.

1. Definitions:

     A. The “Actual Total Project Costs” is an amount per rentable square foot (“RSF”)¹ equal to (1) the Total Project Cost per RSF as shown in the Project Budget Summary attached hereto as Schedule 1 (which is $551.19 per RSF), plus (2) the Sum of the Cost Factor Adjustments; with each Cost Factor thereof comprising the “Actual Project Cost Factor” of each such category of Cost Factor.

     B. The “Adjusted Return Rate” is defined as the sum of the Landlord’s Actual Financing Interest Rate and the Rate of Return Spread.

     C. The “Baseline Cost Factor” is defined as the baseline amount for each Cost Factor (defined in Section 1.D below) per RSF. The baseline amount for each Cost Factor is set forth below:

(1)     Baseline Loan Finance Cost:2	$41.04 per RSF
(2)     Baseline Entitlement and Permit Fees:	$12.92 per RSF
(3)     Baseline Shell and Site Construction Cost:	$245.30 per RSF

     D. The “Cost Factors” consist of the following (without duplication):

          i. The “Loan Finance Costs” is defined as all out of pocket financing costs, fees, and interest charges associated with any permanent loan or construction loan (per actual RSF) that are incurred by Landlord pursuant to Landlord’s financing of the acquisition of the Real Property for the period from the acquisition of the Real Property by Landlord until the Commencement Date, and such financing costs, fees and charges incurred by Landlord to finance the construction and development of the Landlord’s Work and/or the payment of the Tenant Improvement Allowance.

          ii. The “Entitlement and Permit Fees” is defined as all out of pocket costs incurred by the Landlord (per actual RSF) for any and all entitlements and permits necessary for, or associated with, the development of Landlord’s Work. Such costs include, but are not limited to, all consultant fees, engineering fees, design fees, and building permit, mitigation, water quality control, city planning and entitlement fees. Notwithstanding anything to the contrary contained herein, for purposes of determining the Actual Project Cost Factor for the Entitlement and Permit Fees, such Actual Project Cost Factor shall not exceed the amount of the Capped Entitlement and Permit Fees described in Section 4 below.

          iii. The “Shell and Site Construction Costs” is defined as all other out of pocket costs (exclusive of the Loan Finance Costs and the Entitlement and Permit Fees) incurred by Landlord (per actual RSF) for the design, construction and/or development of the Landlord’s

1	For purposes of this Exhibit D, the term “RSF” means the rentable square foot of Building
2	Based on Construction Loan Interest of $33.12, plus Financing Fees & Costs of $7.92, for a total of $41.04.

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Work, including, but not limited to, any associated off-site costs for signalization and median modification required as a condition to the building permit or entitlement approvals for the Landlord’s Work, including, but not limited to, all labor costs, construction costs, material costs, bond costs, and insurance costs to the extent associated therewith; provided, however, that the foregoing shall not result in the payment of any Entitlement and Permit Fees as part of the Shell and Site Construction Costs. Notwithstanding anything to the contrary contained herein, for purposes of determining the Actual Project Cost Factor for the Shell and Site Construction Costs, such Actual Project Cost Factor shall not exceed the amount of the Capped Shell and Site Construction Costs as described in Section 4 below.

     E. The “Landlord’s Actual Financing Interest Rate” is defined as the actual interest rate that the Landlord obtains for the permanent financing of the Real Property and all improvements constructed and to be constructed thereon (collectively, the “Project”), which financing Landlord shall obtain after the Effective Date and prior to the Commencement Date. Landlord’s long term financing will be secured from a reputable institutional lender such as a regional or national bank, life insurance company or comparable source.

     F. The “Landlord’s Baseline Financing Interest Rate” is Landlord’s assumed financing interest rate for the Project, as set forth in the Project Budget Summary, which is an amount equal to Seven percent (7%).

     G. The “Landlord’s Budgeted Rate of Return” is equal to .093, which was determined by dividing the Landlord’s budgeted Initial Year Rent for a 12 month period, equal to $51.24 per RSF per year ($4.27/month times 12 months), by the budgeted amount for the Landlord’s Total Project Costs per RSF, as shown in the Project’s Budget Summary set forth in Schedule 1 attached hereto (initially estimated to be equal to $551.19 per RSF).

     H. The “Project Budget Summary” shall mean the initial schedule of Total Project Cost set forth in Schedule 1 attached hereto.

     I. The “Rate of Return Spread” is equal to .023 and is determined by taking the difference between the Landlord’s Budgeted Rate of Return (.093) and Landlord’s Baseline Financing Interest Rate (.07).

     J. The “Sum of the Cost Factor Adjustments” is an amount calculated as follows for each Cost Factor: (i) determine the difference between the actual costs incurred by Landlord with respect to such Cost Factor (but without including any amount of Entitlement and Permit Fees or Shell and Site Construction Costs in excess of the Capped Entitlement and Permit Fees and Shell and Site Construction Costs) and the amount of the Baseline Cost Factor for such Cost Factor as set forth in Section 1.C of this Exhibit D; and (ii) sum all such Cost Factor differences; however, if any such Cost Factor difference is a negative number, then subtract the absolute value of that difference.

2. Calculating the Building Minimum Monthly Rent for the Initial Year. The Building Minimum Monthly Rent for the Initial Year shall be calculated as follows:

     A. Add the Rate of Return Spread to the Landlord’s Actual Financing Interest Rate, to determine the “Adjusted Return Rate”, however, under no circumstances shall Landlord’s Adjusted Return Rate be less than .083; and

     B. Determine the Building Minimum Monthly Rate for the Initial Term by multiplying the Actual Total Project Costs (per actual RSF) by the Adjusted Return Rate, and dividing by 12.

3. Example of the Calculation of the Building Minimum Monthly Rent During the Initial Year. The following is an example of how the Building Minimum Monthly Rent during the Initial Year is to be calculated.

Assuming
Landlord’s Actual Financing Interest Rate	=   7.0 %
Actual Loan Finance Cost	=   $41.39 per RSF

2

Actual Entitlement and Permit Fees	=   $13.89 per RSF
Actual Shell and Site Construction Costs	=   $255.00 per RSF

Step 1: Calculate the difference between the Actual Project Cost Factors and the Baseline Cost Factors.

Actual Loan Finance Cost: Baseline Loan Finance Cost: Difference:	$41.39 per RSF $41.04 per RSF           $0.35 per RSF
Actual Entitlement and Permit Fees: Landlord’s Capped Entitlement and Permit Fees3: Baseline for Entitlement and Permit Fees: Difference	$13.89 per RSF $13.95 per RSF $12.92 per RSF           $0.97 per RSF
Actual Shell and Site Construction Cost: Landlord’s Capped Shell and Site Construction Cost4: Baseline for Shell and Site Construction Cost: Difference:	$255.00 per RSF $250.00 per RSF $245.30 per RSF           $4.70 per RSF
Step 2: Calculate the Sum of Cost Factor Adjustments:
Sum of the Differences (a + b + c):	$6.02 per RSF
Step 3: Calculate the Actual Total Project Costs:
Add the Sum of Cost Factor Adjustments to $551.19	$557.21 per RSF
Step 4: Determine the Adjusted Return Rate:
Rate of Return Spread + Landlord’s Actual Financing Interest Rate
= .023 + .07 = .093
Step 5: Determine the Building Minimum Monthly Rent for the Initial Year:
[Actual Total Project Costs x Adjusted Return Rate)/12] =	[$557.21 x .093]/12
	= $4.32 per RSF/month

3	For calculation purposes, the Actual Entitlement and Permit Fees shall not exceed the Capped Entitlement and Permit Fees pursuant to Section 4.
4	The Actual Shell and Site Construction Costs shall not exceed the Capped Shell and Site Construction Costs pursuant to Section 4.

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4. Capped Cost Factors: Entitlement and Permit Fees and Shell and Site Construction Costs. Landlord will provide updated cost information to Tenant throughout the period that Landlord is performing Landlord’s Work (see Exhibit B, Work Letter). On or before November 1, 2008, Landlord shall deliver to Tenant updated projections for Entitlement and Permit Fees and the Shell and Site Construction Costs based on the latest known costs, as well as on the reasonably anticipated Entitlement and Permit Fees and Shell and Site Construction Costs, as may be reasonably determined by Landlord (the “Capped Cost Factors”). If the Rentable Square Footage of the Building (as defined in the Lease) is still undetermined by the date Landlord provides the Capped Cost Factors, the amount of the Capped Cost Factors will only be disclosed in total dollar amounts (and not based on RSF). The Capped Cost Factors on a RSF basis will be made when the Square Footage of the Building is determined as provided in the Lease. Tenant shall have ten (10) business days after Landlord delivers such Capped Cost Factors to Tenant to review and approve. If Tenant does not provide written notice of any objections (which shall include a reasonable basis for the objection) within such ten (10) business day period, Landlord shall provide a second written notice to Tenant requesting Tenant’s approval of the Capped Cost Factors; and if Tenant fails to provide written notice to Landlord of any objections (including a reasonable basis for the objection) to the Capped Cost Factors within five (5) business days following such second notice, Tenant shall be deemed to have approved the Capped Cost Factors. If Tenant approves, or is deemed to have approved, the Capped Cost Factors, then Landlord and Tenant agree that the actual costs of the Entitlement and Permit Fees and Shell and Site Construction Costs for purposes of determining the Building Minimum Monthly Rent for the Initial Year, shall not exceed the Capped Cost Factors for Entitlement and Permits Fees and the Shell and Site Construction Costs set forth for each category. Should Tenant object to one or both of the Capped Cost Factors, and should Landlord and Tenant be unable to resolve any disagreement regarding the same informally, then the dispute shall be resolved by binding arbitration with the San Francisco, California office of the American Arbitration Association, pursuant to the commercial rules of the American Arbitration Association. Upon the final resolution of any such disagreement, the finally determined budget shall be considered the Capped Cost Factors for purposes of this Exhibit D.

5. Payment of Building Minimum Monthly Rent for the Initial Year

     a. Landlord’s Determination of Building Minimum Monthly Rent During Initial Term. Not more than six (6) months after Landlord’s completion of Landlord’s Work, Landlord shall (a) calculate the Actual Total Project Costs for all Cost Factors (utilizing the Capped Cost Factors, as set forth in their respective definitions), and (b) deliver written notice to Tenant of the Actual Total Project Costs, along with reasonable evidence of the amounts incurred by Landlord for the Cost Factors and Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year (“Landlord’s Initial Year Minimum Monthly Rent Notice”). If Landlord has not delivered Landlord’s Initial Year Minimum Monthly Rent Notice prior to the Commencement Date, then Tenant shall pay as Minimum Monthly Rent until the first day of the month after Landlord delivers, to Tenant, Landlord’s Initial Year Minimum Monthly Rent Notice, an estimated amount for the Minimum Monthly Rent (based on the Landlord’s latest updated cost information), which amount shall be set forth in a written notice from Landlord to Tenant (the "Estimated Initial Year Minimum Monthly Rent Notice”); provided, however that if Landlord does not deliver such written notice to Tenant prior to the Commencement Date, Tenant shall pay, as the estimated amount of Minimum Monthly Rent, an amount equal to Four and 27/100ths Dollars ($4.27) per RSF of Building per month. On the first day of the month following Landlord’s Delivery of Landlord’s Initial Year Minimum Monthly Rent Notice, there shall be an adjustment made to the Minimum Monthly Rent payment then due for the difference between the amount of Minimum Monthly Rent Tenant has paid to Landlord since the Commencement Date and the amount that Tenant would have paid if the Minimum Monthly Rent as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice had been in effect as of the Commencement Date.

     b. Tenant’s Right to Object to Landlord’s Determination. After receiving Landlord’s Initial Year Minimum Monthly Rent Notice, if Tenant wishes to object to Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year, Tenant must deliver written notice to Landlord objecting to the same, which shall include an explanation of the objection and a statement of Tenant’s determination of the Building Minimum Monthly Rent for

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the Initial Year, within fifteen (15) business days after receiving Landlord’s Initial Year Minimum Monthly Rent Notice. If Tenant does not deliver such written notice to Landlord within such fifteen (15) business day period, Landlord shall provide a second written notice of Landlord’s determination of the Building Minimum Monthly Rent for the Initial Year; and if Tenant fails to provide written notice (including an explanation of the objection and a statement of Tenant’s determination of the Building Minimum Monthly Rent for the Initial Year) to Landlord of any objections to the Minimum Monthly Rent during the Initial Year as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice within five (5) business days following such second notice, Tenant shall be deemed to have approved of Landlord’s determination of the Minimum Monthly Rent during the Initial Year as set forth in Landlord’s Initial Year Minimum Monthly Rent Notice, which determination shall be final and binding on Landlord and Tenant. If Tenant delivers written notice to Landlord objecting to Landlord’s determination, then Landlord and Tenant shall, within fifteen (15) business days after Tenant’s delivery of such written notice, agree upon an accounting firm to review Landlord’s records in order to determine the Minimum Monthly Rent during the Initial Year. If Landlord and Tenant cannot agree upon an accounting firm for purposes of determining the Minimum Monthly Rent during the Initial Year, then an accounting firm shall be appointed by a referee under the Judicial Reference procedures of Section 19.1 of the Lease. Any and all costs of such accounting firm that are incurred in reviewing Landlord’s records and/or determining the Minimum Monthly Rent for the Initial Year shall be split evenly by Landlord and Tenant, and shall not be included in Operating Expenses or as part of the Landlord’s Actual Total Project Costs. However, in the event such accounting firm ultimately determines that (a) Landlord’s calculation of the Minimum Monthly Rent for the Initial Year is more than five percent (5%) greater than the accounting firm’s determination, and Tenant’s calculation of the Minimum Monthly Rent for the Initial Year is within five percent (5%) of the accounting firm’s determination, Landlord shall reimburse Tenant for all such accounting firm costs that are paid by Tenant; or (b) Tenant’s calculation of the Minimum Monthly Rent for the Initial Year is more than five percent (5%) less than the accounting firm’s determination, and Landlord’s calculation of the Minimum Monthly Rent for the Initial Year is within five percent (5%) of the accounting firm’s determination, Tenant shall reimburse Landlord for all such accounting firm costs that are paid by Landlord.

     c. Tenant’s Obligation to Pay Minimum Monthly Rent subject to Resolution of Any Tenant Objection. Notwithstanding anything to the contrary contained herein, if Tenant delivers written notice to Landlord objecting to Landlord’s determination of the Minimum Monthly Rent, Tenant shall be required to pay Landlord, as Minimum Monthly Rent, and until such time that the amount of the Minimum Monthly Rent has been finally determined in accordance with Section 5.b above, Tenant shall pay, as the estimated amount of Minimum Monthly Rent, an amount equal to Four and 27/100ths Dollars ($4.27) per RSF of Building per month. However, on the first day of the month following the applicable accounting firm’s final determination of the Minimum Monthly Rent for the Initial Year, there shall be an adjustment made to the Minimum Monthly Rent payment then due for the difference between the amount of Minimum Monthly Rent Tenant has paid to Landlord since the Commencement Date and the amount that Tenant would have paid if the Minimum Monthly Rent as determined pursuant to Section 5.b above had been in effect as of the Commencement Date.

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Schedule 1

Project Budget Summary

Chamberlin Associates

200 Oyster Point: Project Budget Summary

Tenant: ELAN

PROJECT INFORMATION

Building Size (SF):	84,000
Land Area (acres):	1.91

PROJECT BUDGET

	Percent of Total			Cost/SF		Cost
Land:		19.50	%	$	107.48	$	9,028,201
Shell, Site, Offsite1:		44.50	%	$	245.30	$	20,605,500
Finish Allowance:		12.10	%	$	66.67	$	5,600,280
Financing Fees, Costs, Interests1		7.45	%	$	41.04	$	3,447,067
Interest on Equity:		3.05	%	$	16.82	$	1,412,820
Entitlement, Permit Fees1:		2.34	%	$	12.92	$	1,085,583
Direct Expense2:		7.82	%	$	43.10	$	3,620,275
General And Admin:		3.24	%	$	17.86	$	1,500,000
Total Project Cost:		100.00	%	$	551.19	$	46,299,725

OPERATING BUDGET

Net Rent/SF:	$	4.27
Annual Rent Building:	$	51.24

Footnote:

1	Baseline Cost Factor
2	Includes Architectural & Engineering, Utility Hookups, Taxes/Exp, Contingency

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EXHIBIT E
TRANSPORTATION DEMAND MANAGEMENT PROGRAM REQUIREMENTS

Tenant agrees to comply with the Transportation Demand Management (“TDM”) measures as outlined in the 200 Oyster Point Boulevard TDM Program report (“the TDM Report”), dated July 2007 and published by Ferh & Peers, an independent transportation consultant. The purpose of the TDM program is to develop a set of strategies, measures and incentives to encourage Tenant to walk, bicycle, use public transportation, carpool or use other alternatives to driving alone when traveling to and from work, and is required by the City of South San Francisco.

a) TDM Coordinator: Tenant will designate a TDM coordinator for the site. The TDM coordinator will promote the TDM program, activities, and features to all employees, and will conduct the monitoring/reporting process. The TDM coordinator will develop an on-site transportation information center with SamTrans, BART, and CalTrain schedules and maps. The TDM coordinator will provide information via new employee orientation packets, flyers, posters, email, and educational programs. The TDM coordinator’s role will also include actively marketing alternative mode use, administering the carpool and vanpool matching program, promoting special programs such as Bike-to-Work Day or Carpool Week, and overseeing the guaranteed ride home program (working with a local taxi service or rental car agencies). The TDM coordinator will also conduct biannual employee commute surveys to identify the need for mode specific promotional material and educational programs.

b) Carpool/Vanpool Matching Services: The TDM coordinator will provide an internet link to the 511.org Rideshare website to access ride matching services, from its intranet website, if available. The TDM coordinator will also administer an on-site carpool and vanpool matching service for employees and maintain a list of available vanpools that provide service between the Oyster Point offices and various points in the Bay Area.

c) Guaranteed Ride Home Program: Tenant will participate in the Peninsula Traffic Congestion Relief Alliance’s (the “Alliance”) Guaranteed Ride Home program, which will be managed by the TDM coordinator.

d) Information Boards and Kiosks: The TDM coordinator will be responsible for maintaining an up-to-date display for the TDM Program located within the lobby of the building. The display will include shuttle maps and schedules, transit maps and schedules, bicycle facility maps, information regarding carpool and vanpool matching services, and information regarding alternative commute subsidies.

e) Promotional Programs: The TDM coordinator will manage promotional programs that include new employee orientation packets, flyers, posters, email, educational programs, and the Guaranteed Ride Home program.

f) Shuttle Bus Service: The TDM coordinator will coordinate with the Alliance to help fund their shuttle program and to identify on-site shuttle stops, if possible. The TDM coordinator will also manage participation in the Alliance’s mid-day service on the Dasher Shuttle to downtown South San Francisco.

g) TMA Membership: The TDM coordinator will participate in a local transportation management association and work with the Alliance to create a Transportation Action Plan.

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TABLE 1

200 OYSTER POINT BOULEVARD TRANSPORTATION DEMAND PROGRAM MEASURES

		City of South
		San Francisco
TDM Measure	Description	Municipal Code
Required Measures
Bicycle Racks and Lockers	A bicycle rack for 5 bicycles will be provided on-site.	20.120.040 (A, B)
Carpool/Vanpool Matching Services	The TDM coordinator will provide ride-matching services for carpool and vanpool users through 511.org and an internal program.	20.120.040 (C)
TDM Coordinators	The tenants of the building will designate a TDM coordinator.	20.120.040 (D)
Pedestrian Connections	Lighted paths and sidewalks will be provided between the building, parking area, and Oyster Point Boulevard.	20.120.040 (E, J)
Free Carpool/Vanpool Parking	Free, preferential spaces will be designated for 21 carpools and 3 vanpools.	20.120.040 (F, K)
Guaranteed Ride Home Program	Employees will be able to utilize the Alliance’s free guaranteed ride home program for emergencies via taxicabs or rental cars.	20.120.040 (G)
Information Boards and Kiosks	The building lobby will include a permanent display of commute alternative information.	20.120.040 (H)
Passenger Loading Zones	A loading zone for vanpool and carpool rides will be provided near the building entrances.	20.120.040 (I)
Promotional Programs	The TDM coordinator will provide new employee orientation packets, flyers, posters, email, and educational programs.	20.120.040 (L)
Showers and Changing Rooms	Two shower facilities with clothing lockers will be provided on-site.	20.120.040 (M)
Shuttle Bus Service	The tenants will be able to use the Oyster Point BART, Gateway Area Caltrain, and the Oyster Point Caltrain Shuttles.	20.120.040 (N)
TMA Membership	The tenants will join the Peninsula Traffic Congestion Relief Alliance	20.120.040 (O)
Additional Measures
Subsidized Transit Tickets	The tenants will subsidize transit tickets with Commuter Checks.	20.120.050 (A)
On-Site Vanpool Program	The TDM coordinator will provide an on-site ride-matching service for carpools and vanpools.	20.120.050 (J)
Downtown Dasher	The tenants will be able to use the Downtown Dasher service.	20.120.050 (J)
Source: City of South San Francisco, 2006 and Fehr & Peers, 2007.

Additional Required Measures may be substituted with alternate additional measures, so long as the programmatic credits from the alternate measures meet or exceed the programmatic credits of the measures identified in the TDM Report, dated July 2007.

Monitoring

The TDM program will be performance-based and the alternative mode use will be monitored annually, beginning one year after Tenant occupancy. The alternative mode use and general perceptions of the TDM program will come from statistically valid employee surveys. The TDM Coordinator may use information from the employee surveys to adjust existing or implement new TDM program measures. The TDM Coordinator will submit a summary report presenting the findings of the annual survey to the SSF Economic Development Director.

The TDM Coordinator will also work with SSF Economic Development staff to document the effectiveness of the TDM program through triennial reporting. Independent consultants, retained by the city and paid for by Tenant, will measure, through observation, the alternative mode use achieved at 200 Oyster Point Boulevard every three years, beginning three years after Tenant occupancy. If the alternative mode use goals are not achieved, the TDM Coordinator will provide an explanation of how and why the goal has not been reached and a detailed description of additional measures that will be adopted to attain the required mode use. The independent consultants will submit the findings of the triennial survey to the SSF Economic Development Director.

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EXHIBIT F — Form of Letter of Credit

BANK OF AMERICA — CONFIDENTIAL PAGE: 1

DATE: [to be completed]

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER: [to be completed]

	ISSUING BANK
	BANK OF AMERICA, N.A.
	1000 W. TEMPLE STREET
	7TH FLOOR, CA9-705-07-05
	LOS ANGELES, CA 90012-1514
BENEFICIARY	APPLICANT
CHAMBERLIN ASSOCIATES 200 OYSTER	ELAN PHARMACEUTICALS, INC.
POINT, LLC	800 GATEWAY BOULEVARD
5880 WEST LAS POSITAS BLVD.	SOUTH SAN FRANCISCO, CA 94588-8852
SUITE 34
PLEASANTON, CA 94588-8552
	AMOUNT
	NOT EXCEEDING USD 6,000,000.00
	NOT EXCEEDING SIX MILLION AND
	00/100’S US DOLLARS
	EXPIRATION
	[to be completed]
	AT OUR PALO ALTO OFFICE

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR WHICH IS AVAILABLE BY PAYMENT AGAINST YOUR DRAFTS DRAWN AT SIGHT ON BANK OF AMERICA, N.A. BEARING THE CLAUSE: “DRAWN UNDER IRREVOCABLE LETTER OF CREDIT NO.                     ” ACCOMPANIED BY THE FOLLOWING DOCUMENTS:

A STATEMENT SIGNED BY AN AUTHORIZED OFFICER OF THE BENEFICIARY STATING THE FOLLOWING:

“ON BEHALF OF CHAMBERLIN ASSOCIATES 200 OYSTER POINT, LLC, AS LANDLORD, UNDER THAT CERTAIN LEASE AGREEMENT DATED                     , WITH ELAN PHARMACEUTICALS, INC., AS TENANT, FOR PREMISES LOCATED AT 200 OYSTER POINT BLVD., SOUTH SAN FRANCISCO, CALIFORNIA, THE UNDERSIGNED HEREBY CERTIFIES THAT LANDLORD IS ENTITLED BY THE TERMS AND CONDITIONS OF SAID LEASE TO DRAW UNDER YOUR LETTER OF CREDIT NO. 3088607 THE AMOUNT OF                                          DOLLARS ($                    ). ”

WE HAVE BEEN ADVISED, THE LEASE MENTIONED ABOVE IS FOR IDENTIFICATION PURPOSES ONLY AND IT IS NOT INTENDED THAT SAID LEASE BE INCORPORATED HEREIN OR FORM A PART OF THIS LETTER OF CREDIT.

EXHIBIT F — Form of Letter of Credit

BANK OF AMERICA — CONFIDENTIAL PAGE: 2

THIS IS AN INTEGRAL PART OF LETTER OF CREDIT NUMBER:                     

THIS LETTER OF CREDIT IS TRANSFERABLE ONE OR MORE TIMES. TRANSFER OF THIS LETTER OF CREDIT IS SUBJECT TO OUR CONSENT AND OUR RECEIPT OF BENEFICIARY’S INSTRUCTION IN THE FORM ATTACHED HERETO AS EXHIBIT A ACCOMPANIED BY THE ORIGINAL LETTER OF CREDIT AND AMENDMENT(S), IF ANY. COSTS OR EXPENSES OF SUCH TRANSFER SHALL BE FOR THE ACCOUNT OF THE BENEFICIARY. BANK AGREES THAT SUCH COSTS OR EXPENSES SHALL NOT EXCEED $500.00 PER TRANSFER.

PARTIAL DRAWING AND MULTIPLE PRESENTATIONS ARE ALLOWED.

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT IS DEEMED TO BE AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM THE EXPIRY DATE HEREOF, OR ANY FUTURE EXPIRATION DATE, UNLESS AT LEAST 45 DAYS PRIOR TO ANY EXPIRATION DATE WE NOTIFY YOU IN WRITING BY REGISTERED MAIL OR OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT EXTENDED FOR ANY SUCH ADDITIONAL PERIOD.

ALL DEMANDS FOR PAYMENT SHALL BE MADE EITHER IN PERSON OR BY OVERNIGHT COURIER SERVICE BY PRESENTATION OF THE ORIGINAL DOCUMENTS, ON A BUSINESS DAY, AT OUR OFFICE AT PALO ALTO, CALIFORNIA.

WE AGREE THAT WE SHALL HAVE NO DUTY OR RIGHT TO INQUIRE AS TO THE BASIS UPON WHICH BENEFICIARY HAS DETERMINED THAT THE AMOUNT IS DUE AND OWING OR HAS DETERMINED TO PRESENT TO US ANY DRAFT UNDER THIS LETTER OF CREDIT, AND THE PRESENTATION OF SUCH DRAFT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT, SHALL AUTOMATICALLY RESULT IN PAYMENT TO THE BENEFICIARY.

THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (2007 REVISION), INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 600 AND ENGAGES US PURSUANT TO THE TERMS THEREIN.

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL 213-580-8345.

AUTHORIZED SIGNATURE

THIS DOCUMENT CONSISTS OF 2 PAGE(S).

     HERMANN SCHUTTERLE

EXHIBIT F — Form of Letter of Credit

TRANSFER FORM

                     200  

Bank of America N.A.
1000 W. Temple Street 7^th Floor
Los Angeles, Ca 90012
Mail Code CA9-705-07-05

Re:     Irrevocable Standby Letter of Credit No. 3088607

We request you to transfer all of our rights as beneficiary under the Letter of Credit referenced above to the transferee, named below:

Name of Transferee

Address

By this transfer all our rights as the transferor, including all rights to make drawings under the Letter of Credit, go to the transferee. The transferee shall have sole rights as beneficiary, whether existing now or in the future, including sole rights to agree to any amendments, including increases or extensions or other changes. All amendments will be sent directly to the transferee without the necessity of consent by or notice to us.

We enclose the original letter of credit and any amendments. Please indicate your acceptance of our request for the transfer by endorsing the letter of credit and sending it to the transferee with your customary notice of transfer.

For your transfer fee of $500.00

• Enclosed is our check for $                                           

• You may debit my/our Account No.                           

The signature and title at the right conform with those shown in our files as authorized to sign for the beneficiary. Policies governing signature authorization as required for withdrawals from customer accounts shall also be applied to the authorization of signatures on this form. The authorization of the Beneficiary’s signature and title on this form also acts to certify that the authorizing financial institution (i) is regulated by a U.S. federal banking agency; (ii) has implemented anti-money laundering policies and procedures that comply with applicable requirements of law, including a Customer Identification Program (CIP) in accordance with Section 326 of the USA PATRIOT Act; (iii) has approved the Beneficiary under its anti-money laundering compliance program; and (iv) acknowledges that Bank of America, N.A. is relying on the foregoing certifications pursuant to 31 C.F.R. Section 103.121 (b)(6).	We also agree to pay you on demand any expenses which may be incurred by you in connection with this transfer. NAME OF TRANSFEROR NAME OF AUTHORIZED SIGNER AND TITLE AUTHORIZED SIGNATURE
NAME OF BANK
AUTHORIZED SIGNATURE AND TITLE
PHONE NUMBER

EXHIBIT G
GUARANTY

          IN CONSIDERATION OF, and as an inducement for the execution by Chamberlin Associates 200 Oyster Point, L.P., a California limited liability company (“Landlord”), of that certain Lease dated December 17, 2007 (the “Lease”), between Landlord and Elan Pharmaceuticals, Inc., a Delaware corporation (“Tenant”), with respect to certain premises located in South San Francisco, California, commonly referred to as 200 Oyster Point (as more particularly described in the Lease, the “Premises”), the undersigned Elan Corporation, plc, a public limited company organized under the laws of Ireland (“Guarantor”) has executed and delivered this Guaranty. Guarantor acknowledges that Tenant is a subsidiary of Guarantor and therefore Guarantor will benefit when Landlord enters into the Lease. This Guaranty is given as security for the performance of Tenant’s payment and performance obligations under the Lease.

          1. Guarantor hereby guarantees to Landlord, its successors and assigns, the full and prompt payment of the rent and all other sums and charges payable by Tenant, its successors and assigns, under the Lease, and further hereby guarantees the full and timely performance and observance of all the covenants, terms, conditions and agreements therein provided to be performed and observed by Tenant, its successors and assigns, subject in each case, to the notice and cure period rights of Tenant under the Lease, if any. Guarantor hereby covenants and agrees to and with Landlord, its successors and assigns, that if default shall at any time be made by Tenant, its successors and assigns, in the payment of any such rent or any or all such other sums or charges, or in the performance and observance of any of the covenants, terms, conditions or agreements contained in the Lease, Guarantor shall forthwith pay such rent and other sums and charges, and any arrears thereof, to Landlord, its successors and assigns, and will forthwith faithfully perform and fulfill all of such terms, covenants, conditions and agreements. Guarantor shall also forthwith pay to Landlord all damages, costs and expenses that may arise in consequence of any default by Tenant, its successors and assigns, under the Lease, including without limitation all reasonable attorneys’ fees, and disbursements incurred by Landlord or caused by any such default and/or by the enforcement of this Guaranty.

               Tenant has delivered to Landlord a Letter of Credit (as defined in the Lease) as protection for the performance by Tenant of all of its obligations under the Lease and for all losses and damages Landlord may suffer, or that Landlord reasonably estimates it may suffer, as a result of any breach or default by Tenant under the Lease. Notwithstanding anything to the contrary contained in this Guaranty, although the application of the amounts drawn by Landlord under the Letter of Credit shall not reduce Guarantor’s liability under this Guaranty, the obligations and liabilities of Guarantor hereunder are nevertheless limited to the extent the amount of liability outstanding or payment due to the Landlord under the Lease (the “Deficiency”) is greater than the amount held by Landlord as part of the Letter of Credit, in which case, as long as Landlord is not prevented by law or any action by Tenant or any creditor of Tenant, either at law or in equity, including without limitation any bankruptcy or insolvency law (“Operation of Law”), from applying any funds available under the Letter of Credit to the Deficiency, no claim shall be made under this Guaranty until the amount of the Deficiency exceeds the amount held by, or immediately available to, Landlord as security for Tenant’s obligations under the Lease, except to the extent that Landlord draws less than the full amount available under the Letter of Credit and Tenant does not restore the amount drawn to the full amount of the Letter of Credit within the time period provided in the Lease, or Landlord is prevented by Operation of Law from demanding or collecting such amount, then Guarantor’s obligation under this Guaranty shall include the amount drawn and properly expended by Landlord toward the Tenant’s defaulted obligation, and Landlord shall have the right at any time to make a claim against Guarantor for such drawn and expended amount.

          2. This Guaranty is an absolute and unconditional guaranty of payment and of performance. The obligations of Guarantor under this Guaranty are independent of the obligations of Tenant under the Lease. This Guaranty shall be enforceable against Guarantor without the necessity of any suit or proceedings on Landlord’s part of any kind or nature whatsoever against Tenant, its successors and assigns, or any other guarantor of all or any portion of Tenant’s obligations to Landlord under the Lease, or any security for Tenant’s obligations under the Lease, and without the necessity of any notice of nonpayment, nonperformance or nonobservance, or any notice of acceptance of this Guaranty, or any other notice or demand to which Guarantor might otherwise be entitled, all of which Guarantor hereby expressly waives. Guarantor’s obligations hereunder shall in no way be terminated, affected, diminished or impaired by reason of Landlord’s assertion of, or failure to assert, against Tenant or against Tenant’s successors and assigns, any of the rights or remedies reserved to Landlord pursuant to the provisions of the Lease, or by relief of Tenant from any of Tenant’s obligations under the Lease or otherwise by (a) the release or discharge of Tenant in any creditors’ proceedings, receivership, bankruptcy or other proceedings, (b) the impairment, limitation or modification of the liability of Tenant or the estate of Tenant in bankruptcy, or of any remedy for the enforcement of Tenant’s said liability under the Lease, resulting from the operation of any present or future provision of the United States Bankruptcy Code or other statute or from the decision in any court, or (c) the rejection or disaffirmance of the Lease in any such proceedings.

          3. Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) Sections 2787 to 2855, inclusive, of the California Civil Code; (ii) any disability or other defense of Tenant or any other person; (iii) the cessation or limitation from any cause whatsoever, other than payment or performance in full, of the obligations of Tenant under the Lease; (iv) any lack of authority of any officer, director, partner, agent or other person acting or purporting to act on behalf of Tenant if a corporation, partnership or any other type of entity, or any defect in the formation of such Tenant; (v) any act or omission by Landlord which directly or indirectly results in or aids the discharge of Tenant or any portion of the Tenant’s obligations under the Lease by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Landlord against Tenant; or (vi) any modification of the Lease. Guarantor further waives all rights and defenses Guarantor may have arising out

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of (A) any election of remedies by Landlord, even though that election of remedies destroys Guarantor’s rights of subrogation or Guarantor’s rights to proceed against Tenant for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of Tenant’s obligations under the Lease now or at any time hereafter being secured by real property, or by reason of any rights, powers or remedies of Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Tenant’s obligations under the lease, including, but not limited to, any rights or defenses based upon Sections 580a, 580b, 580d or 726 of the California Code of Civil Procedure.

          4. This Guaranty shall be a continuing guaranty and the liability of Guarantor shall in no way be affected, modified or diminished by reason of any assignment, amendment, renewal, supplement, modification or extension of the Lease or by reason of any modification or waiver of, or change in, any of the terms, covenants, conditions or provisions of the Lease, or by reason of any extension of time that may be granted by Landlord to Tenant, its successors or assigns or a changed or different use of the Premises consented to in writing by Landlord, or by reason of any dealings or transactions or matters or things occurring between Landlord and Tenant, its successors or assigns, whether or not notice thereof is given to Guarantor.

          5. Guarantor shall be fully bound by any consents, waivers or releases granted by Tenant in favor of Landlord, made either with or without notice to or the consent of Guarantor.

          6. Landlord’s consent to any assignment or assignments, and successive assignments by Tenant and Tenant’s assigns of the Lease, made either with or without notice to Guarantor, shall in no manner whatsoever release Guarantor from any liability as Guarantor.

          7. The assignment by Landlord of the Lease and/or the avails and proceeds thereof, made either with or without notice to Guarantor, shall in no manner whatsoever release Guarantor from any liability as Guarantor. Landlord may without prior notice to Guarantor assign this Guaranty to the grantee of Landlord’s interest in the Premises pursuant to any conveyance thereof, or to any lender pursuant to a loan secured by Landlord’s interest in the Premises. Landlord shall use reasonable efforts to provide notice to Guarantor of any such assignment, provided that such notice may be given after the occurrence of any such assignment, and provided further that in any event the failure of Landlord to provide any notice shall not affect the validity or enforceability of this Guaranty.

          8. All of the Landlord’s rights and remedies under the Lease or under this Guaranty are intended to be distinct, separate and cumulative, and no such right or remedy therein or herein mentioned is intended to be in exclusion of, or a waiver of, any of the others. The obligations of Guarantor hereunder shall not be released by Landlord’s receipt, application or release of security given for the performance and observance of covenants and conditions required to be performed and observed by Tenant under the Lease, nor shall Guarantor be released by the maintenance of or execution upon any lien which Landlord may have or assert against Tenant and/or Tenant’s assets.

          9. Until all the covenants and conditions in the Lease on Tenant’s part to be performed and observed are fully performed and observed, Guarantor (a) shall have no right of subrogation against Tenant by reason of any payments or acts of performance by Guarantor in compliance with the obligations of Guarantor hereunder, (b) waives any right to enforce any remedy which Guarantor now or hereafter shall have against Tenant by reason of any one or more payments or acts of performance in compliance with the obligations of Guarantor hereunder, and (c) subordinates any liability or indebtedness of Tenant now or hereafter held by Guarantor to the obligations of Tenant to Landlord under the Lease, subject, however, to the limitations set forth in Paragraph 1 above relating to the application of the Security Deposit to any Deficiency amount.

          10. Guarantor hereby irrevocably appoints as its agents for the service of process in any action or proceeding arising out of or in connection with this Guaranty any and all of the following: (a) Tenant, or if Tenant is more than one person, then any one of them, or if Tenant is a corporation, trustee or partnership all persons authorized to accept service on behalf of Tenant under California law, or (b) if Tenant is not available for receipt of service on behalf of Guarantor in accordance with the notice provisions of the Lease, C T Corporation System, 818 West Seventh Street, Los Angeles, CA 90017; provided, however, that Guarantor shall have the right to change its address for notice under this Guaranty from time to time upon reasonable advance written notice to Landlord, provided that the changed address shall be a company or party in the State of California. This provision does not affect any right to serve process upon Guarantor in any other manner permitted by law.

          11. The parties agree that Landlord may, at its election, bring an action or actions in the state or federal courts located in the County of San Mateo and/or the City and County of San Francisco, or commence an arbitration or arbitrations in the County of San Mateo, to enforce this Guaranty and/or to resolve any disputes arising out of or in connection with this Guaranty, and Guarantor hereby irrevocably consents to the jurisdiction of such courts and arbitration tribunals.

               If Landlord elects to commence an arbitration, the matter shall be determined by final and binding arbitration conducted in the County of San Mateo, California, and administered by and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “Rules”), provided that all proceedings and any decision shall be presided over and rendered by one sole arbitrator. The arbitrator shall be a retired California or federal judge selected in accordance with the Rules. The sole arbitrator will decide the matter. The arbitrator will be directed to: (1) require all testimony to be transcribed; (2) require any award or decision to be accompanied by findings of fact and a statement of reasons for such award or decision; (3) allow reasonable discovery; and (4) render its award or decision within thirty (30) days of being appointed.

2

               The prevailing party, as determined by the court in the event an action is commenced as provided herein, or the arbitrator, in the event an arbitration is commenced as provided herein, shall be entitled to recover its reasonable attorneys’ fees and costs expended in any action or arbitration proceeding, including court fees and the fees of the American Arbitration Association, as appropriate, as well as in any subsequent proceeding required to enforce the judgment, ruling or arbitration award.

               Any judgment, award, relief or remedy obtained by Landlord in connection with this Guaranty shall be recognized and may be entered and enforced against Guarantor in any jurisdiction, court, tribunal or body in the United States and abroad, including, without limitation, any court of Ireland (including the High Court). Any judgment, award, relief or remedy obtained by Guarantor in connection with this Guaranty shall be recognized and may be entered and enforced against Landlord in the state or federal courts located in the County of San Mateo and/or the City and County of San Francisco.

          12. As used herein, the term “Tenant” shall mean Elan Pharmaceuticals, Inc., a Delaware corporation, and any successor to its interest under the Lease, whether by assignment, operation of law or otherwise (including, without limitation, any receiver, trustee, liquidator or assignee for the benefit of creditors). This Guaranty shall continue in full force and effect notwithstanding any sale or other disposition of Guarantor’s financial interest, whether direct or indirect, in Tenant, or Tenant’s disposition of its interest, whether direct or indirect, in the Lease. Guarantor acknowledges that any such disposition of Guarantor’s financial interest in Tenant or of Tenant’s interest in the Lease will result in a benefit to Guarantor.

          13. This Guaranty shall be governed by and construed in accordance with California law. The terms, covenants, agreements and conditions herein contained shall apply to and bind the heirs, successors, executors, administrators and assigns of Guarantor. If any provision of this Guaranty shall be determined to be illegal or unenforceable, such determination shall not affect any other provision of this Guaranty and all such other provisions shall remain in full force and effect.

          14. Guarantor hereby represents and warrants to Landlord that the persons signing and delivering this Guaranty on behalf of Guarantor are fully authorized to do so; that Guarantor has the full right, power and authority to enter into, deliver and perform this Guaranty; that all requisite action necessary to authorize Guarantor to enter into, deliver, and perform its obligations hereunder have been taken; that this Guaranty is a valid and binding obligation of Guarantor enforceable in accordance with its terms; and that this Guaranty does not conflict with or violate any of Guarantor’s organizational documents, or any provision of any agreement or judicial order to which Guarantor is subject.

     IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as of the 17^th of December, 2007.

GUARANTOR: Elan Corporation, plc, a public limited company organized under the laws of Ireland
By:	/s/ G. Kelly Martin
	Name:	G. Kelly Martin
	Title:	President and Chief Executive Officer A CEO, President or any Vice President
By:	/s/ William Daniel
	Name:	William Daniel
	Title:	Secretary A Secretary, any Assistant Secretary, the Chief Financial Officer or any Assistant Treasurer

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EXHIBIT H
Intentionally Deleted

EXHIBIT I
LIST OF BASELINE ENVIRONMENTAL REPORTS

TITLE	PREPARED BY	DATE
Soil Management Plan	The Source Group Inc.	May 2006
Case Closure for Hazardous Materials Letter	County of San Mateo Health Department	March 21, 2006
Remedial Action Report	The Source Group Inc.	May 2005
Soil Investigation Report	The Source Group Inc.	May 2004
Environmental Site Characterization Report	Treadwell & Rollo	March 2003
Geotechnical Investigation	Treadwell & Rollo	January 2001

EXHIBIT J
Intentionally Deleted

Exhibit K
Rules and Regulations Governing Alterations

These Rules and Regulations Governing Alterations set forth those rules and regulations to be observed by Tenant pursuant to any alterations, improvements or modifications which may be made by or for Tenant following the commencement of the Lease, but shall not apply to the completion of any initial tenant improvements in process as of the commencement date of the Lease. In the event of any inconsistency between the terms of this Exhibit and the terms of the Lease, the terms of the Lease shall prevail. All capitalized terms in this Exhibit shall have the meanings set forth in the Lease.

General Requirements:

1. Prior to the commencement of any work in the Building, an orientation meeting is required between the General Contractor, Landlord, and the Tenant in order to outline and identify the general parameters and requirements for the work involved.

2. Tenant must provide Landlord in writing a complete schedule for the work, including start date, demolition time frame (if applicable), material delivery schedule, critical project dates, and standard working hours, which will be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. This communication and approval will help to ensure the quickest possible access to construction areas.

3. Insurance certificates, in compliance with the contractor insurance requirements section referenced in the Lease must be in possession of the Landlord prior to the commencement of the work.

4. Tenant is required to submit home, mobile, and office telephone numbers for the Tenant’s project manager (or if none, General Contractor) to Landlord prior to construction in the event that Tenant or General Contractor must be contacted regarding the project after hours or on weekends.

5. Smoking is not permitted in any area of the Building.

6. During break time the contractors’ and subcontractors’ employees will not congregate in any exterior parking area of the Building.

7. Tenant will provide Landlord with periodic updates regarding the status of the Tenant’s work, in accordance with the work schedule approved by Landlord as required above, and if reasonably requested by Landlord, Tenant will coordinate status meetings between those individuals involved in the Tenant finish process and Landlord. If the Premises are part of a multi-tenant building, the purpose of this meeting is to keep all interested parties advised of upcoming plans, problems and/or anticipation of changes in work scheduling.

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8. If the Premises are part of a multi-tenant building, then prior to the commencement of the work or delivery of any materials to the Premises, Tenant and Landlord will perform a walk-through inspection, including the space proposed for construction, the entrance and each and every passage of travel between the two points (including elevators, lobby, hallways, restroom, elevator cores, etc.) and identify any and all existing damage that is present prior to the start of construction. Immediately after the completion of construction, General Contractor, and Landlord will perform a post construction walk-through and identify all areas of damage. Costs to repair any such damage will be paid by Tenant.

9. General Contractor shall ensure that any portion of the work area and project site that are visible from the exterior of the Premises are clean of all litter left by construction crews on a daily basis.

10. If the Premises are part of a multi-tenant building, General Contractors’ and Subcontractors’ employees shall park in the areas agreed to by Landlord and Tenant and Tenant understands that any vehicle parked in unauthorized areas may be towed at automobile owner’s or contractor’s expense.

11. It is understood that all Sub-Contractors performing services at the Building are experienced and professional in their particular field of expertise and are solely under the direction of the General Contractor. It is the responsibility of Tenant to be certain that these Rules and Regulations are distributed to, understood and complied with by General Contractor and by every individual under the direction of the General Contractor.

12. General Contractor and their Sub-Contractors are responsible for the safekeeping of their own equipment, supplies and tools. The Landlord will not be responsible for any missing items.

13. If the Premises are part of a multi-tenant building: no supplies, tools, etc., are to be placed outside the construction area; doors into common area corridors are to remain closed at all times; and if an entry door to the Premises from a common area corridor has to be installed, a plastic curtain must be hung to stop dust from entering public areas.

14. If the Premises are part of a multi-tenant building, any direct dust, paint debris tracked into corridors or damage, which in the opinion of the Landlord is over and above normal, minimal limits, must be cleaned or corrected immediately by the Contractor. Should the Contractor, after notification, not correct the situation, Landlord or Tenant shall correct it at the Tenant’s sole expense.

15. If the Premises are part of a multi-tenant building, no radios, tape players or like, may be operated within the Premises during normal hours if such devices are audible outside the Premises.

16. No sign, placard, picture, name, advertisement or notice visible from the exterior of the Premises will be inscribed, painted, affixed or otherwise displayed by Tenant or General

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Contractor in any part of the Building or Premises without prior written consent of the Landlord or Tenant. In the event of the violation of this rule by Tenant or General Contractor, Landlord or Tenant may remove the violating items without liability and may charge the expense incurred by such removal to the Tenant or Contractors violating this rule.

Building Specific Requirements:

1. Building Access: If the Premises are part of a multi-tenant building, all contractors will enter the Building through the loading dock doors and will use the freight elevator to access all construction floors.

2. After Hour’s Access and Cost: All access required outside of normal business hours, (7:00 A.M. to 5:00 P.M.) or any time on weekends would require prior authorization by the Tenant. It will be the General Contractor’s responsibility to grant access to any and all Sub-Contractors. If the Premises are part of a multi-tenant building and a Building Engineer is required to be present after normal business hours, the costs will be billed to the General Contractor.

3. Loading/Unloading Area:

a.	If the Premises are part of a multi-tenant building, all large deliveries to the Building should be scheduled in advance by Tenant for arrival outside of the normal working hours if possible. If deliveries cannot be completed after hours, Tenant should schedule such deliveries with Landlord to avoid interference with the operational activities of any other tenants of the Building.
b.	If the Premises are part of a multi-tenant building, all deliveries must be delivered through the loading dock entrance. Masonite, plywood boards, planks and like protection must be utilized wherever materials are to be rolled across carpeted or finished floor.

4. Freight Elevators: If the Building contains a freight elevator, (i) all contracted personnel must use the freight elevator for all construction work, and (ii) passenger elevators are for Tenant and its guests only and are NOT to be used by contractors for travel between floors

5. Demolition: The following rules and regulations apply:

a.	If the Premises are part of a multi-tenant building, Building trash dumpsters are not to be utilized for construction debris of any kind.
b.	Prior approval of the location by the Tenant and Landlord is necessary for the placement of General Contractor’s dumpster.

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c.	If the Premises are part of a multi-tenant building, the opening and/or removal of any medium pressure supply ducts must be scheduled for after hours, and must be immediately capped so when the system starts it can maintain static pressure.
d.	Thermostats in the construction area of a multi-tenant floor of the Building are usually servicing zones in occupied suites and corridors. Therefore, such thermostats must not be turned off, removed, capped or remounted in a different location than the drawing identifies. All pneumatic lines are to be capped immediately should changes be required. Replacement thermostats or additional thermostats are required to match the building standard.
e.	All doors, frames, lights, sidelights, carpet pieces or any other material permanently fixed to the Premises and installed by Landlord or at Landlord’s expense are the property of the Building. Arrangements must be made to transport these items to the Building’s designated storage area.
f.	All construction debris must be transported during prescheduled time frames in Rubbermaid type container so as to not damage walls, floors, etc. If the Premises are part of a multi-tenant building, the staging of construction debris outside the construction area is strictly prohibited. General Contractor shall take special care to cover and protect all walls and outside corners.

6. Fire and Life Safety Systems: General Contractor and all associated Sub-Contractors must ensure with the Landlord’s designated representative that the fire system is off-line each day before the commencement of work. Any time reasonably required by Landlord’s personnel to respond to false alarms caused by an employee, agent or contractor of General Contractor or an associated Sub-Contractor will be charged back to Tenant. Persistent offenders will be removed from the approved Contractor list and no longer be permitted access to the Premises. Proposed fire detection equipment should be submitted to and reviewed by Landlord’s designated engineer before starting any work (including smoke detectors, flow switches, pull stations, fire dampers, duct detectors, etc.). The General Contractor will be required to bag each detector at the beginning of each day and is required to unbag all detectors at the end of each workday. Any troubles on the fire system that are caused by the General Contractor or any Sub-Contractors will be required to be corrected the same business day and any costs associated with said repairs will be the Tenant’s responsibility.

7. Fire Alarm System Modification: Any change to the existing Building Fire Alarm System, including but not limited to relocation of horns, speakers, magnetic hold opens, Card Access System interface, etc., shall be planned and coordinated with Landlord. Any and all work on the Building Fire Alarm System must be performed by a licensed contractor approved by Owner, which approval shall not be unreasonably withheld. All cost associated with modifications are to be made a part of General Contractor’s overall budget.

8. Scheduled walk-through: General Contractor should expect and anticipate that at a minimum, once each week, a representative from the Building’s Management or Engineering

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department shall schedule a walk-through inspection of the Premises in order to assess construction progress, assure compliance with these Rules and Regulations and/or inform the General Contractor of any special circumstances that may impact the construction progress.

9. Disturbance to the Normal Course of Business: If the Premises are part of a multi-tenant building, any project or operation causing a potential disturbance to other tenants of the Building, such as but not limited to demolition, core drilling, powder actuated tools, etc. would typically only be permitted during non-business hours and must be scheduled in advance with Landlord. All costs associated with having the Landlord’s designated representative present after hours is the sole responsibility of Tenant and will be billed by the Landlord.

10. Use of Hazardous Substances: General Contractor shall use the Hazardous Substance Control Form any time hazardous substances are used on the facility required to be reported under OSHA requirements. This control form is to be turned into Landlord prior to the utilization of hazardous substances in conjunction with construction.

11. Flammable Gases and Liquids. No kerosene, gasoline or other similar flammable liquid used in construction is permitted on the Premises except when in use and must never be left unattended; provided that bottled flammable gases typically utilized in construction activities may be stored in a safe and secure manner in locations approved by Landlord.

12. Core Drilling: Tenant must coordinate all core drilling locations with Landlord; and once such locations are approved, core drilling in any multi-tenant building may only take place outside of normal business hours. If Landlord reasonably requires x-raying of floor slabs for core drills and floor slab penetrations in any multi-tenant building, such x-raying activities in multi-tenant buildings must be performed during non-business hours. The cost for any repairs to conduit or wiring that is damaged by core drilling shall be the sole responsibility of the Tenant.

13. Painting: If the Premises are part of a multi-tenant building, no painting, spraying or other work, which involves noxious fumes, is permitted during working hours of the Building, Monday through Friday (7:00 A.M. to 6:00 P.M.), and such work will have to be scheduled after hours or on weekends and will require the Building Engineer to set up the ventilation system to provide positive ventilation of the floor that these activities are taking place.

14. Cabling: The cabling contractor will be required to submit to Tenant the proposed mapping of the cabling through the building’s riser space as well as plenums. Prior Landlord and Tenant approval is required before cabling installation begins.

15. Ceiling. Electrical, plumbing or other services, which require access to the ceiling in the occupied tenant space, must be performed professionally, neatly and as quickly as possible. Fingerprints, dirt, construction debris, as well as replacement of any damaged ceiling tiles etc., shall be performed at Tenant’s cost and expense. If the Premises are part of a multi-tenant building, then in some cases, it may be necessary to schedule this work outside the Tenant’s normal business hours.

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16. Janitorial Closets. Slop sinks are provided in the janitorial closets and this is the only water source available to the General Contractor and Sub-Contractors. If the Premises are part of a multi-tenant building, access to janitorial closets will be obtained through the Building Engineer. No debris is to be disposed of at janitors’ sinks (including, but not limited to, painting and drywall tool clean up).

17. Exterior Door Locks. All Tenant exterior door locks to the Building must match the Building master system; therefore, all keying requirements must be coordinated by Tenant with Landlord.

18. Amendments. Landlord reserves the right at any time to reasonably change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord’s reasonable judgment may from time to time be necessary for the management, safety, care and cleanliness of the Premises and Building, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein.

Rules & Regulations Governing Alterations
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Page 6

CONTRACTOR INSURANCE REQUIREMENTS

     Contractor shall maintain in full force and effect, during the time frame services are provided, insurance coverage of the types and in the amounts as required in the Lease.

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Page 7

HAZARDOUS SUBSTANCE CONTROL FORM

Building Address:                                         

Contractor Name:                                         

Tenant Name:                                         

Floor Number(s):                                         

Ø	Hazardous Substances to be used during construction: (Attachment of MSDS is required)
Ø	Quantities to be stored on site during construction:
Ø	Intended use of hazardous substances:

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Page 8

HAZARDOUS SUBSTANCE CONTROL (cont.)

Control measures that could be implemented in order to limit the exposure of hazardous fumes, over spray and airborne material as they affect the health and safety of Tenants, workers and employees.

Please indicate with yes (y) or no (n):

* Physical enclosure of construction zone	(y)	(n)
* Dilution of ventilation required	(y)	(n)
* Outside exhaust	(y)	(n)
* Off-site lacquer spraying	(y)	(n)
* Use of alternate products with lower hazardous effect characteristics	(y)	(n)
* Other (please state)

GENERAL CONTRACTOR IS RESPONSIBLE FOR THE REMOVAL OF ALL REMAINING CONSTRUCTION MATERIALS FROM THE SITE, ALSO INSURING THE PROPER HANDLING OF ANY HAZARDOUS SUBSTANCES.

EX-4.(C)(12)

Exhibit 4(c)(12)

	875 Third Avenue, 3rd Floor
	New York, NY 10022
	T (212) 407-5748
	F (212) 755-2947

July 18, 2007

CONFIDENTIAL

Lars Ekman
213 Avenida Cortez
La Jolla, CA 92037

Re: Severance Agreement

Dear Lars:

     This letter agreement (“Agreement”) confirms the arrangements agreed upon by you and Elan Pharmaceuticals, Inc. (the “Company”) and sets forth the terms and conditions of your involuntary termination of employment as EVP & President, Global Research & Development on December 31, 2007 (“Severance Date”). The Agreement supersedes and replaces any and all severance-related payments or benefits under any documents as well as any oral or written agreements including but not limited to your November 20, 2000 offer letter and the Elan U.S. Severance Plan. Upon your execution of this Agreement (and you not later revoking the waiver and release (“Waiver”) that is part of this Agreement), the Company shall provide you the payments and benefits set forth below. Notwithstanding the foregoing, any benefits which become payable under this Agreement shall be paid only after the seven (7) day revocation period for a signed Waiver has passed without revocation. To accept the terms and conditions set forth below, you must sign and date this Agreement where indicated and return it to me within 21 days from your Severance Date. Please return a signed copy of this Agreement to me by facsimile, mail or hand delivery at the Company’s address.

1. Termination Benefits.

     A. Severance Pay and Accrued Vacation. You will be paid a lump-sum of $2,500,000, less applicable federal, state and local tax withholding within five weeks of your Severance Date. In addition, you will receive any accrued and unused vacation time due in accordance with the Company’s vacation policy on your Severance Date.

     B. Equity Grants. As of your Severance Date, all of your unvested equity grants (e.g., stock options and RSUs) will accelerate and become fully vested with the exception of the 2/1/2006 RSU grant (see footnote number 1 below). You will have 24 months after your

Lars Ekman
Severance Agreement
July 18, 2007

Severance Date to exercise your equity grants. This modified exercise period includes those equity grants that vested before your Severance Date. Notwithstanding the previous sentences, your rights and obligations with respect to such equity grants will be determined in accordance with the terms of the applicable plan. Specific unvested equity grants that shall become vested upon your Severance Date include:

• Stock options:

• 10,000 @ $16.27 (granted on 3/10/2004)

• 30,000 @ $7.47 (granted on 3/10/2005)

• 95,850 @ $15.90 (granted on 2/1/2006)

• 106,371 @ $13.95 (granted on 2/21/2007)

• RSUs:

• 18,868 (granted on 2/1/2006) ¹

• 16,487 (granted on 2/21/2007)

A letter enclosing your Optionee Statement and stock option exercise forms will be sent to you separately by the Company’s Stock Administrator upon your separation. This letter will also direct you how to exercise your stock options should you choose to do so.

     C. Health and Welfare Benefits. Upon your Severance Date, you will be eligible to elect individual and dependent continuation group health coverage under Section 4980B(f) of the Internal Revenue Code (“COBRA”) for the maximum COBRA coverage period available, subject to all conditions and limitations of COBRA. If you or one or more of your covered dependents elect COBRA coverage, the Company shall pay the cost of the COBRA coverage for the 18-month period beginning on January 1, 2008 or, if shorter, until COBRA otherwise expires. You will also be eligible to participate in the Company-sponsored life and supplemental life insurance programs for you and your spouse at the coverage levels elected on the date immediately preceding your Severance Date. The Company will pay the cost of such coverage for an 18-month period beginning on January 1, 2008. Further, you will receive a lump-sum payment of $70,200 on or before March 15, 2008 to assist you with the purchase of health and life insurance coverage for you and your dependents after the initial 18-month period of Company-paid coverage for such programs has expired.

¹ As to the 2/1/2006 RSU grant referred to above, the plan does not permit accelerated vesting so, in lieu of the RSUs, you will receive a cash payment, less applicable federal, state and local tax, based on the closing NYSE value of the Company’s ADRs on the Severance Date. This will be paid within five weeks of your Severance Date.

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Lars Ekman
Severance Agreement
July 18, 2007

     D. German Pension Plan. In order to make up the accrued benefit that you would have earned had you remained employed at Schwarz until age 60, the Company shall continue to make an annual $60,000 payment to Viktoria Life Insurance. The Company will do so by making a lump-sum payment representing the remaining payments due in the fourth quarter of 2007.

     E. Eligibility for Special Milestone Payments. Provided you agree to become a non-executive director of the Elan Corp. plc Board of Directors, you will be eligible to receive the lump-sum payments described below if the Company achieves the related milestones.

• $250,000 if Elan/Wyeth file an NDA for AAB-001

• $750,000 if AAB-001 is approved for commercialization by the U.S. Food and Drug Administration.

You will be paid a lump-sum cash payment of such amounts less applicable federal, state and local tax withholding within two weeks of the Company attaining such milestones, provided that you are still a member of the Board of Directors at the time of each event. If you are not a member of the Board of Directors and your service as a member of the Board of Directors ceased involuntarily (so long as involuntarily is not for “cause”) you will still receive the milestone payments if the milestones occur within a 24-month period of your termination from the Board.

     F. Career Transition Services. The Company shall provide you with career transition assistance services through Drake Beam and Morin for two years following your Severance Date. You will receive separate, detailed information about the career transition services, including the types of available services, how to enroll and the locations of available programs.

     G. Other Employee Benefits. Unless otherwise provided in the Agreement, all other employee benefits to which you are entitled shall cease as of your Severance Date. Any payment or benefit to which you are entitled under the Elan 401(k) Savings Plan or the Elan Deferred Compensation Plan shall be payable in accordance with the terms of such plan. If you have any questions concerning your account in the Elan 401(k) Savings Plan or the Elan Deferred Compensation Plan, please contact Sherry Bravo at (858) 784-6322.

     H. Section 409A Compliance. For purposes of this Agreement, each of the payments of severance (except the second payment in Paragraph (A) above) and continued welfare benefits under sub-paragraphs 1A, 1C, and 1E above are designated as separate payments for purposes of the short-term deferral rules under Treasury Regulation Section 1.409A-1(b)(4)(i)(F). As a result,

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Lars Ekman
Severance Agreement
July 18, 2007

payments that are made on or before the 15^th day of the third month of the calendar year following the applicable year of termination are exempt from the requirements of Code Section 409A.

2. Nonadmission of Liability. You acknowledge that this Agreement, compliance with this Agreement and the provision of consideration hereunder are not and shall not be construed in any way as an admission of wrongdoing or liability on the part of Elan, any of the Releasees hereunder (as defined in Paragraph 6), or any other person or business entity. You further acknowledge that Elan denies all allegations of wrongdoing and specifically disclaims any liability for any alleged violation of my rights, or for any alleged violation of any order, law, statute, duty, or contract on the part of Elan or any of the Releasees hereunder (as defined in Paragraph 6).

3. Ownership of Claims. You represent that you have not transferred or assigned, or purported to transfer or assign, to any person or entity, any claim described in this Agreement. You further agree to indemnify and hold harmless each and all of the Releasees identified in Paragraph 6 below against any and all claims based upon, arising out of, or in any way connected with any such actual or purported transfer or assignment.

4. No Filings. You represent that you have not filed any action, claim, charge, or complaint against Elan or any other Releasee identified in Paragraph 6 below, with any local, state, or federal agency or court. In the event that any agency or court assumes jurisdiction of any lawsuit, claim, charge or complaint, or purports to bring any legal proceedings against any Releasee on your behalf, you promptly will request that the agency or court withdraw from or dismiss the lawsuit, claim, charge, or complaint with prejudice.

5. Covenant Not to Sue. In consideration for the promises set forth in this Agreement, you agree on behalf of yourself and your heirs that you will not file, participate in, or instigate the filing of any lawsuits, complaints or charges by you or by any other person or party in any state or federal court or any proceedings before any local, state or federal agency, except as required by law, claiming that Releasees identified in Paragraph 6 below, or any of them have violated any law or obligation, including, but not limited to, any claims that have been made or that could have been made, based upon events or omissions occurring prior to the effective date of this Agreement. You agree to withdraw and dismiss all claims, charges, or actions currently on file against Releasees. You also agree that in the event you receive notice of your right to participate in any type of class action against Releasees that you will take all appropriate steps to “opt out”

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Lars Ekman
Severance Agreement
July 18, 2007

of the class action litigation. In the event of a breach of the covenant contained in this Paragraph, you agree that you will indemnify the Releasees and each of them for all damages and expenses, including attorneys’ fees and costs, incurred by any Releasee in defending, participating in, or investigating any matter or proceeding covered by this Paragraph. In addition, should you breach any of the covenants undertaken pursuant to this Paragraph, Elan will be entitled to recover from you all payments made and shall also be entitled to withhold any future payments due under this Agreement.

6. Release. You hereby, for yourself and your heirs, representatives, attorneys, executors, administrators, successors, and assigns, release, acquit, and forever discharge: Elan and all of Elan’s past and present affiliates, and each of their respective subsidiaries, divisions, joint venturers, predecessors, successors, assigns, consultants, subcontractors, employee benefit plans and the trustees, fiduciaries, and administrators of those plans, and stockholders, officers, directors, partners, servants, agents, employees, independent contractors, representatives, attorneys, and all persons acting under, by, through, or in concert with any of them, and each of them (all of whom are referred to herein as “Releasees”), from any and all actions, causes of action, grievances, obligations, attorneys’ fees, costs, expenses, damages, losses, claims, liabilities, suits, debts, demands, and benefits, of whatever character, in law or in equity, known or unknown, suspected or unsuspected, matured or unmatured, of any kind or nature whatsoever, based on any act, omission, event, occurrence, or nonoccurrence from the beginning of time to the effective date of this Agreement, including but not limited to any claims or causes of action arising out of or in any way relating to your employment with Elan or the ending of your employment with Elan.

     You agree that this release of claims includes, but is not limited to, claims for breach of any implied or express contract or covenant, claims for promissory estoppel; claims of entitlement to any pay (other than the compensation promised in Paragraph 2); claims of wrongful denial of insurance and employee benefits, including but not limited to claims for benefits or monies under Elan’s benefit plans, Elan’s severance plan, or any other plan; claims for wrongful termination, public policy violations, defamation, invasion of privacy, fraud, misrepresentation, emotional distress or other common law or tort causes of action; claims of harassment, retaliation or discrimination under federal, state, or local law; claims based on any federal, state or other governmental statute, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1866, the Civil Rights Act of 1871, the Civil Rights Act of 1991, the National Labor Relations Act, the Older Workers’ Benefit Protection Act, the Employee Retirement Income Security Act, the California Family Rights Act, the California Constitution, and/or the California Labor Code, including

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Lars Ekman
Severance Agreement
July 18, 2007

Labor Code Section 132a, or under Elan’s personnel policies. You understand by signing this Release you are not releasing any claim for vested stock options under the applicable option agreement(s). Nor are you waiving any other claims or rights which cannot be waived by law, including the right to file an administrative charge of discrimination or to file for unemployment insurance benefits; you are, however, waiving the right to monetary recovery in connection with any such charge.

7. Release of Unknown Claims. For the purpose of implementing full and complete releases, you expressly acknowledge that the release given in this Agreement is intended to include, without limitation, claims you did not know or suspect to exist in your favor at the time of the effective date of this Agreement, regardless of whether the knowledge of such claims, or the facts upon which they might be based would materially have affected the settlement of this matter; and that the consideration given under the Agreement was also for the release of those claims and contemplates the extinguishment of any such unknown claims, despite the fact that California Civil Code Section 1542 may provide otherwise. You expressly waive any right or benefit available to you in any capacity under the provisions of Section 1542, which provides as follows:

     A GENERAL RELEASE DOES NOT EXTEND TO ALL CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

     8. Notice and Revocation. You understand and agree that you:

(a)	Have had a full twenty-one (21) days within which to consider this Agreement before executing it.
(b)	Have carefully read and fully understand all of the provisions of this Agreement.
(c)	Are, through this Agreement, releasing Elan and Releasees from any and all claims you may have against Elan and/or Releasees.
(d)	Knowingly and voluntarily agree to all of the terms set forth in this Agreement.

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Lars Ekman
Severance Agreement
July 18, 2007

(e)	Knowingly and voluntarily intend to be legally bound by the same.
(f)	Were advised and hereby are advised in writing to consider the terms of this Agreement and consult with an attorney of your choice prior to executing this Agreement.
(g)	Have a full seven (7) days following execution of this Agreement to revoke this Agreement and have been and hereby am advised in writing that this Agreement shall not become effective or enforceable until the revocation period has expired.

     Any revocation by you must be made in writing and must be received by General Counsel, Legal Department, Elan Pharmaceuticals, Inc., 800 Gateway Blvd., South San Francisco, CA 94080, within such seven (7) day period. If you timely revoke this Agreement, you shall not be eligible to receive the consideration set forth in Paragraph 1 of this Agreement. If you timely submit the signed Agreement and do not timely exercise your right to revoke the Agreement, you shall be eligible to receive all of the consideration set forth in this Agreement.

(h) Understand that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 621 et seq.) that may arise after the date of this Agreement is executed are not waived. You also understand that nothing in this Agreement shall be construed to prohibit you from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission.

9. Counsel. You acknowledge you are encouraged to contact your personal attorney at your own expense to review the Waiver and Release Agreement if you so desire.

10. Successors. This Agreement shall be binding upon the parties, and their heirs, representatives, executors, administrators, successors, insurers, and assigns, and shall inure to the benefit of each and all of the Releasees, and to their heirs, representatives, executors, administrators, successors, and assignees.

11. Confidentiality. You recognize and acknowledge and agree that during your employment with Elan you have had access to highly confidential and proprietary information relating to Elan and trade secrets (“Proprietary Information,” as described herein) and the use, misappropriation or disclosure of Proprietary Information would cause irreparable injury to Elan;

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Lars Ekman
Severance Agreement
July 18, 2007

and it is essential to the protection of Elan’s good will and to the maintenance of Elan’s competitive position that Proprietary Information be kept secret and that you not disclose Proprietary Information to others, or use any Proprietary Information to your own advantage or the advantage of any third parties. For purposes of this Agreement, the term “Proprietary Information” shall include any and all information, in any form whatsoever, including but not limited to, hard copy, computer floppy diskette, CD, CD-ROM drive, information retained in electronic storage, or other information storage means, relating to the Company’s technology; techniques; processes; tools; research and development; market research, data and strategy; and, information relating to sales, pricing and customers, including customer-specific sales information, pricing policies and strategies. You acknowledge and agree that your obligations under this Paragraph shall survive the Severance Date.

12. Confidentiality/Non-Disclosure of this Agreement. You agree that you have not disclosed the terms of this Agreement, or the negotiations leading thereto, to anyone other than your attorney or immediate family members. Except to the extent required by law, you represent and agree that you will keep the terms of this Agreement completely confidential and that confidentiality is of the essence of this Agreement. Accordingly, you shall keep confidential and not publicize or disclose any of the terms of this Agreement in any manner whatsoever, whether in writing or orally, to any person, directly or indirectly, or by or through any agent or representative, except as necessary to effectuate the terms of the Agreement, other than to the following: (1) immediate family members; (2) attorneys and legal support personnel; (3) accountants; (4) tax consultants; (5) psychiatrists and psychologists; and (6) such other representatives or entities required by law and/or court order. With respect to any individuals referred to in subparts (1) through (6) to whom you disclose any information regarding this Agreement and its terms, you agree that you will inform such individual prior to your disclosure that the information is strictly confidential and may not be reviewed, discussed or disclosed, orally or in writing with any other person, organization or entity, and you shall not disclose any confidential information if you have reason to believe such person(s) will not guard the confidential nature of the information. Upon inquiry regarding this Agreement and/or the circumstances surrounding the termination of your employment with Elan, you agree that you shall state (and shall inform any individuals referred to in subparts (1) through (6) to whom you disclose any information regarding this Agreement and its terms to state) only that your employment with Elan ended and you shall give no other indication, verbal or otherwise, regarding the amount or fact of payment to you hereunder or the other terms set forth in this Agreement.

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Lars Ekman
Severance Agreement
July 18, 2007

     In the event that you are required by law or court order to disclose, publicize, or to permit, authorize or instigate the disclosure of this Agreement, in whole or in part, you must notify Elan in writing at least seven (7) business days prior to the disclosure in order to provide Elan with the opportunity to object to such disclosure. Such written notification shall be sent to: General Counsel, Legal Department, Elan Pharmaceuticals, Inc., 800 Gateway Blvd., South San Francisco, CA 94080. You agree to cooperate fully with Elan if Elan decides to object to such disclosure. This confidentiality agreement specifically includes, but is not limited to, an obligation, on the part of you and your attorneys and other representatives and your family members, not to disclose, or cause to be disclosed, the terms of the Agreement to any current or former employee or independent contractor of Elan or any affiliate of Elan, or to any individual associated with the press or media. You agree that you shall be responsible and liable for any disclosure prohibited by this Paragraph 12, including disclosures made by you, your representatives, your consultants and/or family members.

13. Full and Independent Knowledge. The Parties represent that they fully understand all of the provisions of the Agreement, and are voluntarily entering into this Agreement.

14. No Representations. The Parties acknowledge that, except as expressly set forth herein, no representation of any kind or character has been made to induce the execution of this Agreement.

15. Breach; Arbitration. Any dispute regarding any aspect of this Agreement or any act that allegedly has or would violate any provision of this Agreement will be submitted to binding arbitration, only after mutual exhaustion of a reasonable meet and confer effort to resolve such dispute, according to then current rules of JAMS/Endispute. The decision of the arbitrator shall be final and conclusive, and the parties waive the right to trial de novo or appeal excepting only for the purpose of confirming the arbitrator’s decision, for which purpose the Parties agree that the San Diego County Superior Court shall have jurisdiction. The prevailing Party or Parties will be entitled to recover reasonable attorneys’ fees and costs of bringing or defending the arbitration and any action for enforcement, the amount of the awards to be determined by the arbitrator and the Court, respectively.

16. Waiver. The failure of Elan or you to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof, or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

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Lars Ekman
Severance Agreement
July 18, 2007

17. No Re-Hire. You understand and acknowledge that neither Elan, nor any of its current subsidiaries, divisions, or affiliates shall be under any obligation to re-hire or retain you as either an employee or independent contractor, and that any refusal by Elan or its current subsidiaries, divisions, or affiliates to re-hire or retain you will not subject them to liability on any grounds. You agree that you shall not apply for work as an employee or independent contractor with Elan or any of its current subsidiaries, divisions, parent, successor, or affiliated companies, and that any application to be an employee or independent contractor that you make to such company may be rejected without cause and without any liability whatsoever by the company to which application is made.

18. Miscellaneous.

(a)	The language of all parts in this Agreement shall be construed as a whole, according to its fair meaning, and not strictly for or against either party.
(b)	Should any provision in this Agreement be declared or determined to be illegal or invalid, the validity of the remaining parts, terms, or provisions shall not be affected thereby, and the illegal or invalid part, term, or provision shall be deemed not to be part of this Agreement, and all remaining provisions shall remain valid and enforceable.
(c)	This Agreement, in addition to the Employee Proprietary Information and Inventions Agreement that you previously signed (the terms of which are incorporated herein by reference), constitutes a single, integrated contract setting forth the entire agreement between the parties and fully supersedes any and all prior agreements and understandings between the parties pertaining to the subject matter of this Agreement.
(d)	The headings used herein are for reference only and shall not affect the construction of this Agreement.
(e)	This Agreement is made and entered into in the State of California and shall in all respects be interpreted and governed under the law of that State.

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Lars Ekman
Severance Agreement
July 18, 2007

19. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

20. Good Faith Compliance. Each party hereto agrees to cooperate in good faith and to do all things necessary to effectuate this Agreement.

     PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES THE RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

DATED: 7/20, 2007		/s/ Lars Ekman
		LARS EKMAN
DATED: 7/25, 2007	ELAN PHARMACEUTICALS, INC.
	By	/s/ Kathleen Martorano
		Its EVP, Human Resources

*     *     *     *

We appreciate your dedication and service with Elan and we wish you all the best with your future endeavours. Please do not hesitate to contact me with any questions.

Sincerely,

Kathleen Martorano
Executive Vice President, Strategic Human Resource

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EX-4.(C)(18)

Exhibit 4(c)(18)

ELAN U.S.
Severance Plan

Effective March 1, 2001 and
Amended and Restated as of January 1, 2008

TABLE OF CONTENTS

	Page
ARTICLE I Introduction		1
ARTICLE II Definitions		1
ARTICLE III Eligibility		4
ARTICLE IV Pay and Benefits In Lieu of WARN Notice		6
ARTICLE V Severance Pay and Severance Benefits		6
ARTICLE VI Waiver and Release Agreement		13
ARTICLE VII Plan Administration		14
ARTICLE VIII Procedures for Making and Appealing Claims for Plan Benefits		14
ARTICLE IX Amendment/Termination/Vesting		16
ARTICLE X No Assignment		16
ARTICLE XI Confidential Information/Cooperation		16
ARTICLE XII Miscellaneous Provisions		17

ELAN U.S.
SEVERANCE PLAN

(Effective March 1, 2001, and
Amended and Restated Effective as of January 1, 2008)

ARTICLE I
Introduction

     Athena Neurosciences, Inc. (the “Company”) adopted the Elan U.S. Severance Plan (the “Plan”), effective March 1, 2001, for the benefit of certain “Eligible Employees” of the Company and certain Affiliates specified by the Company. The Plan is intended to apply to United States based “Employees,” as described herein. The Plan was amended and restated on January 1, 2004, August 15, 2004 and January 1, 2006. By this instrument, the Company hereby amends and restates the Plan, effective January 1, 2008. The Plan shall be binding on any successor to all or substantially all of the Company’s assets or business.

     The Plan is an unfunded welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Except as otherwise provided herein, the Plan supersedes any prior formal or informal severance plans, programs or policies of the Company or its Affiliates covering Eligible Employees. The Plan operates on a calendar year.

ARTICLE II
Definitions

     2.1. “Affiliate” means any member of the group of corporations, trades or businesses or other organizations comprising the “controlled group” with Athena Neurosciences, Inc. under Section 414 of the Code.

     2.2. “Change in Control” means:

(a)	The consummation of a merger or consolidation of Elan Corporation, plc with or into another entity or any other corporate reorganization, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s issued shares or securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not shareholders of Elan Corporation, plc immediately prior to such merger, consolidation or other reorganization;
(b)	The sale, transfer or other disposition of all or substantially all of Elan Corporation, plc’s assets;
(c)	A change in the composition of the Board of Directors of Elan Corporation, plc, as a result of which fewer than fifty percent (50%) of the incumbent directors are

directors who either (i) had been directors of Elan Corporation, plc on the date 24 months prior to the date of the event that may constitute a Change in Control (the “original directors”) or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or

(d)

Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Elan Corporation, plc representing at least fifty percent (50%) of the total voting power represented by Elan Corporation, plc’s then outstanding voting securities (e.g., issued shares). The term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of Elan Corporation, plc or of any subsidiary of Elan Corporation, plc and (ii) a company owned directly or indirectly by the shareholders of Elan Corporation, plc in substantially the same proportions as their ownership of the ordinary shares of Elan Corporation, plc.

     A transaction shall not constitute a Change in Control if its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held Elan Corporation, plc’s issued shares immediately before such transaction.

     2.3. “Company” means Athena Neurosciences, Inc.

     2.4. “Comparable Position” means a position either with the Company or any of its Affiliates or with a successor or transferee of all or a part of the business of the Company or Affiliate, on terms which do not cause a Significant Reduction in Scope or Base Compensation and do not entail a Relocation. The Plan Administrator, in its sole discretion, will determine a Comparable Position.

     2.5. “Confidential Information” means trade secrets and other propriety information of an Employer or any Affiliate. If an Eligible Employee entered into a confidentiality or proprietary rights agreement with an Employer or any Affiliate, the term “Confidential Information” for purposes of this Plan shall have the meaning ascribed to any such term or concept as it is defined under, or used in, the separate agreement.

     2.6. “Eligible Employee” means each Employee who is not (i) covered by a written employment agreement that contains a severance provision, or covered by a written severance agreement (for the duration of that agreement); (ii) classified as “temporary,” including without limitation, anyone classified as an “intern” or “co-op”; (iii) a consultant; (iv) a “leased employee” as defined in Section 414(n) of the Internal Revenue Code; or (v) a person performing services for an Employer on a contract basis or as an independent contractor or

2

consultant or through a purchase order, supplier agreement or any other form of agreement that the Employer enters into for services.

     2.7. “Employee” means any full-time or part-time employee of an Employer.

     2.8. “Employer” means the Company and each Affiliate identified on Attachment A, including the wholly-owned subsidiaries of the Affiliates identified on Attachment A.

     2.9. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     2.10. “Executive Employee” means an Eligible Employee who has the title of Senior Vice President or Executive Vice President or any other title ranked at or higher than Senior Vice President.

     2.11. “Involuntary Termination” means a termination of an Eligible Employee’s employment by the Employer due to a business condition, as determined in the sole discretion of the Company. The term Involuntary Termination shall include (i) a termination effective when the Eligible Employee exhausts a leave of absence during, or at the end of, a WARN Notice Period and (ii) a situation where an Eligible Employee on an approved leave of absence during which the Employee’s position is protected under applicable law (e.g., a leave under the Family Medical Leave Act), returns from such leave, and cannot be placed in employment with the Employer.

     2.12. “Plan” means the Elan U.S. Severance Plan, as set forth in this instrument and as hereafter amended.

     2.13. “Relocation” means a material change in the geographic location at which the Eligible Employee performs services. Such change in an Eligible Employee’s primary job site will be considered material if the new location increases the Eligible Employee’s commute between home and primary job site by at least thirty (30) miles. Notwithstanding the foregoing, this term shall not apply to an Eligible Employee who is a field-based sales representative or who works from home.

     2.14. “Severance Date” means the final day of employment with the Employer which date shall be communicated in writing by the Employer to the Employee.

     2.15. “Significant Reduction in Scope or Base Compensation” means a material diminution in the Eligible Employee’s base compensation or material diminution in the Eligible Employee’s authority, duties, or responsibilities. The Plan Administrator, in its sole discretion, shall determine whether an Eligible Employee experiences a “Significant Reduction”.

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     2.16. “Triggering Event” means an Involuntary Termination, Relocation or Significant Reduction in Scope or Base Compensation.

     2.17. “WARN Notice Date” means the date the Employer is required to notify an Eligible Employee pursuant to the WARN Act that he or she is to be terminated from employment with the Employer in conjunction with a “plant closing” or “mass layoff” as described in the WARN Act.

     2.18. “WARN Notice Period” means the sixty (60) consecutive calendar day period commencing on an Eligible Employee’s WARN Notice Date.

     2.19. “Week of Pay” shall be determined based on the Eligible Employee’s status as a salaried or hourly Employee. If the Eligible Employee is a salaried Employee, Week of Pay shall be the Eligible Employee’s regular weekly base salary compensation rate in effect on his/her Severance Date. If the Eligible Employee is an hourly Employee, Week of Pay shall be the Eligible Employee’s regular hourly base compensation rate multiplied by his/her regularly scheduled number of hours worked per week in effect on his/her Severance Date. If the Eligible Employee works part-time, his/her Week of Pay is determined on a prorated basis by calculating his/her average number of hours per week actually worked during the prior Year of Service.

     2.20. “Years of Service” shall be determined in accordance with the Employer’s personnel records. An Eligible Employee shall receive credit for a Year of Service for each twelve (12) month period of active service with the Employer. For partial years of employment, the Eligible Employee shall receive credit for a full Year of Service if he or she completes at least six (6) full months of active service. If an Eligible Employee has not completed at least six full months of active service during a partial year, he or she shall not receive credit for a Year of Service.

ARTICLE III
Eligibility

     3.1. Conditions of Eligibility. To be eligible for benefits as described in Article V, the Eligible Employee must (i) remain an Employee through the Severance Date, (ii) through the Severance Date, fulfill the normal responsibilities of his/her position, including meeting regular attendance, workload and other standards of the Employer, as applicable, and (iii) submit the signed Waiver and Release Agreement required by the Plan Administrator on, or within forty-five (45) days after, his/her Severance Date or receipt of the Waiver and Release Agreement (whichever occurs later) and not revoke the signed Waiver and Release Agreement. In addition, in the event of a Relocation or a Significant Reduction in Scope or Base Compensation, the Eligible Employee must provide his/her Employer with written notice within ninety (90) days after the occurrence of such event. The Employer shall then have thirty (30) days to cure such event.

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     3.2. Conditions of Ineligibility. An otherwise Eligible Employee shall not receive severance pay or severance benefits under the Plan if:

(a)	the Employee ceases to be an Eligible Employee as defined by the Plan;
(b)	the Employee terminates employment with the Employer by reason of death;
(c)	the Employer terminates the Employee’s employment for one or more of the following reasons (determined in the sole discretion of the Plan Administrator): Commission by the Employee of an act of fraud, theft, misappropriation of funds, dishonesty, bad faith or disloyalty; violation by the Employee of any federal, state, local law or regulation; violation by the Employee of any rule, regulation or policy of the Employer or other job related misconduct; failure to perform the duties of the position held by such Employee in a manner which satisfies the reasonable expectations of the Employer; failure by the Employee to meet any requirement reasonably imposed upon such Employee by the Employer as a condition of continued employment; or dereliction or neglect by the Employee in the performance of such Employee’s job duties;
(d)	the Employee terminates employment with the Employer through job abandonment;
(e)	other than as set forth in the last sentence of Section 2.11, the Employee is eligible to receive long-term disability benefits from the Employer (as determined under the applicable Employer-sponsored long-term disability plan) as of the date the Triggering Event would have occurred had the individual been actively at work on such date;
(f)	the Employee is employed in an operation, division, department or facility, that is sold, leased or otherwise transferred, in whole or in part, from an Employer, and (i) the Employee accepts any position with the new owner/operator, or (ii) the Employee is offered a Comparable Position by the new owner/operator;
(g)	the Employee gives notice of his/her voluntary termination (other than as provided in Section 2.16) prior to his/her Severance Date or the effective date of a sale, lease or transfer of an operation, division, department or facility, as described in Section 3.2(f), regardless of the effective date of such termination;
(h)	the Employee ceases working with the Employer and receives severance benefits under the terms of another group reorganization/restructuring benefit plan or severance program sponsored by the Employer;

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(i)	the Employee is offered a Comparable Position from an Employer, or accepts any position with an Employer, even if it is not a Comparable Position;
(j)	the Employee experiences a Triggering Event after the Plan is terminated;
(k)	the Employee does not timely execute and return to the Plan Administrator a valid Waiver and Release Agreement;
(l)	the Employee works primarily in an office located in a country other than the United States and is entitled to severance benefits under the laws of such country or the policies of the company at which he or she is based and such severance benefits may not be waived; or
(m)	the Employee is offered a Comparable Position by, or accepts any position with, an employer with which the Company or any of its Affiliates has reached an agreement or arrangement under which the employer agrees to offer employment to the otherwise Eligible Employee.

     The foregoing list of conditions is intended to be illustrative and may not be all inclusive; the Plan Administrator will determine in the Plan Administrator’s sole discretion whether an Eligible Employee is eligible for severance pay and severance benefits under the Plan.

ARTICLE IV
Pay and Benefits In Lieu of WARN Notice

     4.1. Wage Payments. If an Eligible Employee is entitled to advance notice of a “plant closing” or a “mass layoff” under the WARN Act, but experiences a Triggering Event before the end of a WARN Notice Period, the Eligible Employee shall be entitled to receive Weeks of Pay until the end of the WARN Notice Period as if he or she were still employed through such date. The Weeks of Pay under this Section 4.1 will be issued according to the normal payroll practices of the Employer and shall not be subject to the Waiver and Release Agreement.

     4.2. Benefits. An Eligible Employee described in Section 4.1 shall be entitled to benefits under an Employer-sponsored medical and dental benefit plans, as amended from time to time, through the end of the WARN Notice Period on the same terms and under the same conditions as applied to the Eligible Employee immediately prior to the Triggering Event. The benefits under this Section 4.2 are not subject to the Waiver and Release Agreement.

ARTICLE V
Severance Pay and Severance Benefits

     5.1. Generally. In exchange for providing the Employer with an enforceable Waiver and Release Agreement, in a form acceptable to the Plan Administrator, an Eligible Employee

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who terminates employment on account of a Triggering Event shall be eligible to receive severance pay and severance benefits as described below and subject to the other provisions of this Plan. The consideration for the voluntary Waiver and Release Agreement shall be the severance pay and severance benefits the Eligible Employee would not otherwise be eligible to receive.

     5.2. Severance Pay. Severance pay shall be determined in accordance with the table below based on the Eligible Employee’s “Band” classification and in accordance with the terms hereof. If the applicable Triggering Event occurs within two years following a Change in Control and the Eligible Employee was an Employee at the time of the Change in Control, the Eligible Employee’s severance pay shall be determined under the column in the table below titled “Change in Control Severance Pay” and shall be paid in accordance with the terms hereof. The Band applicable to any Eligible Employee shall be determined by the Plan Administrator, in its sole discretion, based on the Eligible Employee’s job position relative to the job grading system in place for the applicable Employer.

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Employment
Classification	Severance Pay	Change in Control Severance Pay
Band I	Six (6) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of thirty-nine (39) Weeks of Pay.	Same as severance pay
Band II	Nine (9) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of thirty-nine (39) Weeks of Pay.	Same as severance pay
Band III	Fifteen (15) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of forty-five (45) Weeks of Pay.	Same as severance pay
Band IV	Fifteen (15) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of forty-five (45) Weeks of Pay.	Same as severance pay
Band V	Twenty-four (24) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of fifty-two (52) Weeks of Pay.	The greater of (i) severance pay described at left or (ii) twenty-six (26) Weeks of Pay plus an amount equal to the bonus attributable to the Eligible Employee’s most recent Year of Service.
Band VI	Thirty-six (36) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of seventy-eight (78) Weeks of Pay.	The greater of (i) severance pay described at left or (ii) seventy-eight (78) Weeks of Pay plus an amount equal to the bonus attributable to the Eligible Employee’s most recent Year of Service

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Employment
Classification	Severance Pay	Change in Control Severance Pay
Executive Employee	Thirty-six (36) Weeks of Pay plus two (2) additional Weeks of Pay for each Year of Service, limited to a maximum period of seventy-eight (78) Weeks of Pay.	If such Executive Employee is a Senior Vice President, then an amount equal to the greater of (i) severance pay as described at left or (ii) Two times (2x) the sum of (a) the base pay attributable to the Executive Employee’s most recent Year of Service and (b) the bonus attributable to the Executive Employee’s most recent Year of Service.
		If such Executive Employee is an Executive Vice President (or has a title that is the equivalent thereof or higher), then an amount equal to the greater of (i) severance pay as described at left or (ii) Two and one half times (2.5x) the sum of (a) the base pay attributable to the Executive Employee’s most recent Year of Service and (b) the bonus attributable to the Executive Employee’s most recent Year of Service.
		* * *
		Furthermore, all Executive Employees will be entitled to the benefits of the Modified Excise Tax Gross-Up pursuant to Section 5.4 under the Plan.

     Severance pay shall be paid in a lump sum payment as soon as practicable following the later of the Severance Date or the end of the WARN Notice Period, as applicable, but in no event later than March 15 of the year following the year of the Severance Date or the end of the WARN Notice Period. Notwithstanding the foregoing, any severance pay and severance benefits which become payable shall be paid only after the seven (7) day revocation period for a signed Waiver and Release Agreement has passed. All legally required taxes and any sums owed the Employer shall be deducted from Plan severance pay.

     If an Employer reemploys an Eligible Employee who is receiving severance pay and benefits under the Plan, the individual shall become ineligible and such pay and benefits shall cease effective as of the reemployment date. Further, the former Eligible Employee must repay

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the portion of the severance pay attributable to the period that begins on the date the Eligible Employee was reemployed. If the Plan Administrator, in its sole discretion, determines that the former Eligible Employee’s services address a critical business need, then the Plan Administrator may provide that no such repayment is required.

     5.3. Severance Benefits.

     (a) Medical and Dental Benefits Coverage Continuation. Under federal health care continuation coverage law (referred to as “COBRA”), the Eligible Employee who is receiving health care coverage under an Employer-sponsored plan is entitled to elect health care continuation coverage under the applicable Employer health plan if his/her employment terminates for certain reasons. Any of the Triggering Events would qualify the Eligible Employee to receive such continuation coverage, subject to the terms of the applicable health plan and governing law. Under COBRA, the Eligible Employee is required to pay the full cost for such coverage plus a two-percent administrative fee. If an Eligible Employee experiences a Triggering Event before his or her WARN Notice Period (if applicable) expires, his or her COBRA rights begin when the WARN Notice Period expires.

     If an Eligible Employee elects to exercise his/her applicable COBRA continuation rights under the Employer health plan, the Eligible Employee will only be required to pay the same share of the applicable premium that would apply if he or she were participating in the plan as an active employee. This benefit continues for a period lasting as long as the Eligible Employee would be entitled to receive regular (i.e., not Change in Control) severance pay under this Plan (as described in the middle column on the previous page), limited to a maximum period of six (6) months. Even if the Eligible Employee is entitled to Change in Control severance pay, the medical and dental benefits described in this Section 5.3 stop after (i) the period that applies to regular severance pay, or (ii) six (6) months, whichever period is shorter. Any partial month will be rounded up to the next whole month. If the Employer elects to distribute severance pay in a lump sum the health care subsidy will continue for as long as the Eligible Employee would have been permitted to receive severance pay (limited to a maximum period of six (6) months), not including any period by which Change in Control severance pay exceeds regular severance pay. Thereafter, the Eligible Employee shall be required to pay the full applicable COBRA premium.

     All of the terms and conditions of an Employer-sponsored medical and dental benefit plans, as amended from time to time, shall be applicable to an Eligible Employee (and his/her eligible dependents, if applicable) participating in any form of continuation coverage under a Employer-sponsored medical and dental benefit plans. This Plan is not to be interpreted to expand an Eligible Employee’s health care continuation rights under COBRA.

     (b) Career Transition Assistance. A career transition assistance firm selected and paid for by an Employer shall provide career transition assistance. An Eligible Employee must begin the available career transition assistance services within sixty (60) days following his/her Severance Date.

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     Subject to the limitations set forth above, career transition assistance shall be provided in accordance with the following table:

Employment
Classification	Career Transition Services
Band I	QuickLaunch or reasonably equivalent program.
Band II	One month Powerstart Program or reasonable equivalent.
Band III	Three-month executive program.
Band IV	Six-month executive program.
Band V	Nine-month executive program.
Band VI	Twelve-month executive program.
Executive Employee	Twelve-month Key Executive Program.

     (c) Severance Reduction for WARN Notice Period. If the Employer is required to provide advance notice to an Eligible Employee of a “plant closing” or “mass layoff” under the WARN Act, and the Eligible Employee (i) is placed on a paid leave of absence during the WARN Notice Period (or any portion thereof) or, (ii) receives wages and benefits under Sections 4.1 and 4.2 through the end of the WARN Notice Period, the Employer shall offset against the Eligible Employee’s severance pay and benefits described above the amount of pay and benefits the Eligible Employee received under Sections 4.1 and 4.2. Under Section 5.2, this means the Weeks of Pay that would otherwise apply are reduced by each Week of Pay the Eligible Employee received during the WARN Notice Period. Partial weeks are prorated. Likewise, under Section 5.3, the period of Employer-subsidized medical coverage is reduced by the time during which the Eligible Employee received medical coverage during the WARN Notice Period.

     5.4 Taxes.

     (a) Parachute Gross-Up Payment. This Section 5.4 shall apply only if an Executive Employee experiences a Triggering Event within two (2) years following a Change in Control and the Eligible Employee was an Employee at the time of the Change in Control. If it is determined that the pay and benefits under this Plan and any other plan or arrangement of an Employer (the “Total Payments”) constitute a “parachute payment” (within the meaning of Section 280G of the Internal Revenue Code (the “Code”) that would be subject to the excise tax imposed by Code Section 4999 or any interest or penalties with respect to such excise tax (such excise tax and any such interest or penalties are collectively referred to as the “Excise Tax”), then the Executive Employee shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount calculated to ensure that after the Executive Employee pays all taxes (and any interest or penalties imposed with respect to such taxes), including any Excise Tax

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imposed upon the Gross-Up Payment, the Executive Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

     (b) Determination by Accountant. All determinations and calculations required to be made under this Section 5.4 shall be made by an independent accounting firm selected by the Executive Employee from among the largest five accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, to the Executive Employee and the Company within ten (10) business days after the Executive Employee or the Company made the request (if the Executive Employee reasonably believes that any of the Total Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive Employee, it shall furnish the Executive Employee with a written statement that it has concluded that no Excise Tax is payable (including reasons therefor) and that the Executive Employee has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive Employee within ten (10) business days after the Determination has been delivered to the Company. Notwithstanding the foregoing, if the Executive Employee is a “specified employee” as defined and applied in Code Section 409A and the Gross-Up Payment (and/or Underpayment as described below in Section 5.4(c)) is not otherwise exempt from the application of Code Section 409A, any Gross-Up Payment due above will be paid no earlier than the six-month anniversary of the Executive Employee’s separation from service. In no event shall a Gross-Up Payment be made later than the end of the Executive Employee’s taxable year next following the Executive Employee’s taxable year in which the Executive Employee remits the Excise Tax. Any determination by the Accounting Firm shall be binding upon the Company and the Executive Employee, absent manifest error.

     (c) Over — and Underpayments. As a result of uncertainty in the application of Code Section 4999 at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made (“Underpayments”) or that Gross-Up Payments will have been made by the Company that should not have been made (“Overpayments”). In either event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the Company shall promptly pay the amount of such Underpayment to the Executive Employee or for his benefit. In the case of an Overpayment, the Executive Employee shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonable instructions from, and procedures established by the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Executive Employee shall in no event be obligated to return to the Company an amount greater than the net after-tax portion of the Overpayment that the Executive Employee has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent

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with the intent of subsection (a) above, which is to make the Executive Employee whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Executive Employee’s repaying to the Company an amount that is less than the Overpayment.

     (d) Limitation on Parachute Payments. Any other provision of this Section 5.4 notwithstanding, if the Excise Tax could be avoided by reducing the Total Payment by ten percent (10%) or less, then the Total Payments shall be reduced to the extent necessary to avoid the Excise Tax and no Gross-Up Payment shall be made. If the Accounting Firm determines that the Total Payments are to be reduced under the preceding sentence, then the Company shall promptly give the Executive Employee notice to that effect and a copy of the detailed calculation thereof. The Executive Employee may then elect, in his sole discretion, which and how much of the Total Payments are to be eliminated or reduced (as long as after such election no Excise Tax shall be payable), and the Executive Employee shall advise the Company in writing of his election within ten (10) days of receipt of notice. If the Executive Employee makes no such election within such ten (10)-day period, then the Company may elect which and how much of the Total Payments are to be eliminated or reduced (as long as after such election no Excise Tax shall be payable), and it shall notify the Executive Employee promptly of such election.

ARTICLE VI
Waiver and Release Agreement

     In order to receive the severance pay and severance benefits available under the Plan, an Eligible Employee must submit a signed Waiver and Release Agreement form to the Plan Administrator on or within forty-five (45) days after his/her Severance Date or receipt of the Waiver and Release Agreement, whichever occurs later. The required Waiver and Release Agreement form is attached to the Summary Plan Description as Attachment III. An Eligible Employee may revoke his/her signed Waiver and Release Agreement within seven (7) days of his/her signing the Waiver and Release Agreement.

     Any such revocation must be made in writing and must be received by the Plan Administrator within such seven-(7) day period. An Eligible Employee who timely revokes his/her Waiver and Release Agreement shall not be eligible to receive any severance pay or severance benefits under the Plan. An Eligible Employee who timely submits a signed Waiver and Release Agreement form and who does not exercise his/her right of revocation shall be eligible to receive severance pay and severance benefits under the Plan.

     Eligible Employees shall be advised to contact their personal attorney at their own expense to review the Waiver and Release Agreement form if they so desire.

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ARTICLE VII
Plan Administration

     The Company shall designate a committee to serve as the “Plan Administrator” of the Plan and the “named fiduciary” within the meaning of such terms as defined in ERISA. The Plan Administrator shall have full power and discretionary authority to determine eligibility for Plan severance pay and severance benefits and to construe the terms of the Plan, including, but not limited to, the making of factual determinations, the determination of all questions concerning benefits and procedures for claim review and the resolution of all other questions arising under the Plan. Severance pay and severance benefits under the Plan will be payable only if the Plan Administrator determines in the Plan Administrator’s discretion that the Eligible Employee is entitled to them. The decisions of the Plan Administrator shall be final and conclusive with respect to all questions concerning the administration of this Plan.

     The Plan Administrator may delegate to other persons responsibilities for performing certain of the duties of the Plan Administrator under the terms of this Plan and may seek such expert advice as the Plan Administrator deems reasonably necessary with respect to the Plan. The Plan Administrator shall be entitled to rely upon the information and advice furnished by such delegatees and experts, unless actually knowing such information and advice to be inaccurate or unlawful. The Plan Administrator shall establish and maintain a reasonable claims procedure, including a procedure for appeal of denied claims. The Plan Administrator has discretionary authority to grant or deny benefits under this Plan. In no event shall an Eligible Employee or any other person be entitled to challenge a decision of the Plan Administrator in court or in any other administrative proceeding unless and until the claim and appeals procedures established under this Plan have been complied with and exhausted.

     In the event of a group termination, as determined in the sole discretion of the Plan Administrator, the Plan Administrator shall furnish affected Eligible Employees with such additional information as may be required by law.

ARTICLE VIII
Procedures for Making and Appealing
Claims for Plan Benefits

     8.1. Claim for Benefits. It is not necessary that an Eligible Employee apply for severance pay and severance benefits under the Plan. However, if an Eligible Employee wishes to file a claim for severance pay and severance benefits, such claim must be in writing and filed with the Plan Administrator. If the Eligible Employee does not provide all the necessary information for the Plan Administrator to process the claim, the Plan Administrator may request additional information and set deadlines for the Eligible Employee to provide that information. Within ninety (90) days after receiving a claim, the Plan Administrator will:

(a) either accept or deny the claim completely or partially; and

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(b) notify the claimant of acceptance or denial of the claim.

     8.2. Benefits Review. If the claim is completely or partially denied, the Plan Administrator will furnish a written notice to the claimant containing the following information:

(a)	specific reasons for the denial;
(b)	specific references to the Plan provisions on which any denial is based;
(c)	a description of any additional material or information that must be provided by the claimant in order to support the claim and an explanation of why such material or information is necessary; and
(d)	an explanation of the Plan’s appeal procedures which shall also include a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the claim upon review.

     8.3. Appeal of Denied Claim. A claimant may appeal the denial of his/her claim and have the Plan Administrator reconsider the decision. The claimant or the claimant’s authorized representative has the right to:

(a)	request an appeal by written request to the Plan Administrator not later than sixty (60) days after receipt of notice from the Plan Administrator denying his claim;
(b)	review or receive copies, upon request and free of charge, any documents, records or other information “relevant” (within the meaning of Department of Labor Regulation 2560.503-1(m)(8)) to the claimant’s claim; and
(c)	submit written comments, documents, records and other information relating to his or her claim.

     In deciding a claimant’s appeal the Plan Administrator shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim. If the claimant does not provide all the necessary information for the Plan Administrator to decide the appeal, the Plan Administrator may request additional information and set deadlines for the claimant to provide that information.

     The Plan Administrator will make a decision with respect to such an appeal within sixty (60) days after receiving the written request for such appeal or, in special circumstances, within one-hundred twenty (120) days after receiving the written request for such appeal. The claimant will be advised of the Plan Administrator’s decision on the appeal in writing. The notice will set forth (1) the specific reasons for the decision, (2) specific reference to Plan provisions upon which the decision on the appeal is based, (3) a statement that the claimant is entitled to receive,

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upon request and free of charge, reasonable access to, and copies of, all documents, records or other information relevant to the claimant’s claim, and (4) a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a wholly or partially denied claim for benefits.

     In no event shall a claimant or any other person be entitled to challenge a decision of the Plan Administrator in court or in any other administrative proceeding unless and until the claim and appeal procedures described above have been complied with and exhausted.

ARTICLE IX
Amendment/Termination/Vesting

     Eligible Employees do not have any vested right to severance pay and/or severance benefits under the Plan and the Company reserves the right, in its sole discretion, to amend or terminate the Plan at any time in writing, signed by an authorized officer of the Company, provided, however, that (i) no amendment nor termination shall reduce severance pay or severance benefits attributable to a Triggering Event that occurs prior to the date the Plan terminates, and (ii) any amendment or termination that becomes effective after a Change in Control shall not adversely affect the rights of any Eligible Employee compared with such Eligible Employee’s rights if his or her employment terminated effective immediately before such amendment or termination became effective.

     The Plan shall be effective only with respect to Triggering Events that occur before December 31, 2010. The Company may extend the Plan in its sole discretion.

ARTICLE X
No Assignment

     Severance pay and severance benefits payable under the Plan shall not be subject to anticipation, alienation, pledge, sale, transfer, assignment, garnishment, attachment, execution, encumbrance, levy, lien, or charge, and any attempt to cause such severance pay and severance benefits to be so subjected shall not be recognized, except to the extent required by law.

ARTICLE XI
Confidential Information/Cooperation

     Recognizing that the disclosure or improper use of such Confidential Information will cause serious and irreparable injury to an Employer, Eligible Employees with such access acknowledge that (i) they will not at any time, directly or indirectly, disclose Confidential Information to any third party or otherwise use such Confidential Information for their own benefit or the benefit of others and (ii) payment of severance pay and severance benefits under the Plan shall cease if an Eligible Employee discloses or improperly uses such Confidential Information. Any Eligible Employee subject to an individual confidentiality agreement or

16

proprietary rights agreement with an Employer or any Affiliate will be deemed to violate the terms of this Article XI if he or she violates the terms of the individual confidentiality agreement or proprietary rights agreement.

     Subject to the terms of the Waiver and Release Agreement, each Eligible Employee shall cooperate with any Employer and its legal counsel in connection with any current or future investigation or litigation relating to any matter to which the Eligible Employee was involved or of which the Eligible Employee has knowledge or which occurred during the Eligible Employee’s employment. Such assistance shall include, but not be limited to, depositions and testimony and shall continue until such matters are resolved. In addition, an Eligible Employee shall not in any way disparage any Employer nor any person associated with an Employer to any person, corporation, or other entity.

ARTICLE XII
Miscellaneous Provisions

     12.1. Return of Property. In order for an Eligible Employee to commence receiving severance pay and severance benefits under the Plan, (i) he/she shall be required to return all Employer property (including, but not limited to, Confidential Information, client lists, keys, credit cards, documents and records, identification cards, equipment, laptop computers, software, and pagers), and (ii) repay any outstanding bills, advances, debts, amounts due to an Employer, as of his/her Severance Date.

     All pay and other benefits (except Plan severance pay and severance benefits) payable to an Eligible Employee as of his/her Severance Date according to the established policies, plans, and procedures of the Employer shall be paid in accordance with the terms of those established policies, plans and procedures. In addition, any benefit continuation or conversion rights which an Eligible Employee has as of his/her Severance Date according to the established policies, plans, and procedures of the Employer shall be made available to him/her.

     12.2. Code Section 409A Compliance. It is the Company’s intent that amounts paid under this Plan shall not constitute “deferred compensation” as that term is defined under Code Section 409A and the regulations promulgated thereunder. However, if any amount paid under this Plan is determined to be “deferred compensation” within the meaning of Code Section 409A and compliance with one or more of the provisions of this Plan causes or results in a violation of Code Section 409A, then such provision shall be interpreted or reformed in the manner necessary to achieve compliance with Code Section 409A, including but not limited to, the imposition of a six-month delay in payment to any “key employee” (as defined in Code Section 416(i)) following such key employee’s date of termination which entitles him or her to a payment under this Plan.

     12.3. Representations Contrary To The Plan. No employee, officer, or director of an Employer has the authority to alter, vary, or modify the terms of the Plan except by means of an

17

authorized written amendment to the Plan. No verbal or written representations contrary to the terms of the Plan and its written amendments shall be binding upon the Plan, the Plan Administrator, or an Employer.

     12.4. No Employment Rights. This Plan shall not confer employment rights upon any person. No person shall be entitled, by virtue of the Plan, to remain in the employ of an Employer and nothing in the Plan shall restrict the right of an Employer to terminate the employment of any Eligible Employee or other person at any time.

     12.5. Plan Funding. No Eligible Employee shall acquire by reason of the Plan any right in or title to any assets, funds, or property of the Company. Any severance pay, which becomes payable under the Plan is an unfunded obligation and shall be paid from the general assets of the Company. No employee, officer, director or agent of the Company personally guarantees in any manner the payment of Plan severance pay and severance benefits.

     12.6. Applicable Law. This Plan shall be governed and construed in accordance with ERISA and in the event that any reference shall be made to State law, the laws of the State of Delaware shall apply, without regard to its conflicts of law provisions.

     12.7. Severability. If any provision of the Plan is found, held or deemed by a court of competent jurisdiction to be void, unlawful or unenforceable under any applicable statute or other controlling law, the remainder of the Plan shall continue in full force and effect.

     12.8. Recovery Of Payments Made By Mistake. An Eligible Employee shall be required to return to the Company any severance pay payment and any severance benefits payment, or portion thereof, made by a mistake of fact or law.

ATHENA NEUROSCIENCES, INC.
By:	/s/ Richard T. Collier
Its:	Vice President and Secretary

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Elan U.S.
Severance Plan

Attachment A

For purposes of this Plan, “Employer” means Athena Neurosciences, Inc. and each of the following Affiliates to the extent each remains and Affiliate (including wholly-owned subsidiaries of these Affiliates):

1.	Elan Pharmaceuticals, Inc.
2.	Elan Drug Delivery, Inc.
3.	Elan Holdings, Inc.
4.	Elan Diagnostics, Inc.
5.	Elan Pharmaceutical Management Corp.
6.	Elan Operations, Inc.

EX-4.(C)(19)

Exhibit 4(c)(19)

		875 Third Avenue New York, NY 10022 T (212) 407-5748 F (212) 755-2947
		MEMO
To		Date	May 17, 2007
From	Kathleen Martorano	CC	Kelly Martin
			Kevin Hickey
Subject	Amendment to Your Outstanding Stock Option and 2007 RSU Grants

The purpose of this memo agreement is to document and notify you of the amendment to certain outstanding grant agreements for restricted stock units (RSUs) — issued under the Elan Corporation, plc 2006 Long Term Incentive Plan — redeemable for shares of Elan Corporation, plc (the “Company”) and all stock options to purchase shares of the Company.

The Leadership Development and Compensation Committee (LDCC) of the Board of Directors recently approved amending your outstanding stock option and 2007 RSU grants to provide that if your employment with the Company or a Subsidiary (as defined in your grant agreements) is terminated by the Company or a Subsidiary for any reason other than Cause (as defined in your grant agreements) or you resign from your employment with the Company or a Subsidiary on account of Good Reason (as defined in your grant agreements), your unvested RSUs granted in 2007 and all stock options will become fully vested as of the date of your termination or resignation.¹ In addition, with respect to all outstanding stock options, you will have two years from your termination or resignation date or the original termination date of the option, if earlier, to exercise your stock options.

This action is a significant improvement for you as, prior to this amendment, for the acceleration of vesting and extension of the period of time to exercise your stock options to occur, your termination without Cause or resignation for Good Reason had to occur within the two year period following a Change in Control of the Company (as defined in your grant agreements).

¹ Your RSUs granted in 2006 will not be so amended. Instead, your 2006 unvested RSUs will be cancelled if you are terminated for any reason other than Cause or resign for Good Reason prior to the vesting date of such RSUs. The company will pay you the fair market value of such cancelled RSUs (less required tax withholding) as determined by multiplying the number of such RSUs by the closing price of our stock on the NYSE on the effective date of your termination or resignation.

The following RSU and stock option awards will be impacted by the above LDCC approval (note: data as of 05/04/07):

			Total Options/RSUs	Options/RSUs Outstanding
Grant Date	Grant Type	Option Price	Outstanding	Vested	Unvested

NQSO = Non-Qualified Stock Option

RSU = Restricted Stock Unit

Regarding all future RSU and/or stock option grants, the specific terms will be reflected in the grant documentation that is provided at that time.

Please acknowledge your agreement to the foregoing changes to the above listed grant agreements by signing below where indicated and returning this memo agreement to me no later than June 1, 2007. In addition, you should retain a copy of this memo agreement with your affected outstanding grant agreements.

Should you have any questions, please contact me at (212) 407-5748.

		,	2007
Elan Corporation, plc	Date
Kathleen Martorano
EVP, Strategic Human Resources

I hereby agree to the amendment to my outstanding stock options and 2007 RSUs as described in this memo agreement:

	,	2007
Date

EX-4.(C)(20)

Exhibit 4(c)(20)

ELAN CORPORATION, PLC Limited Group of EVP+ and
Certain SVPs

Restricted Stock Unit Agreement

     THIS AGREEMENT, dated as of      , 200[ ], between Elan Corporation, plc (the “Company”) and                                          (the “Employee” or “you”).

     WHEREAS, the Employee has been granted the award set forth below under the Company’s 2006 Long Term Incentive Plan (the “Plan”);

     NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto agree that the following terms shall apply to the award.

     1. Award of Share Units. Pursuant to the provisions of the Plan, the terms of which are incorporated herein by reference, the Employee is hereby awarded                                          Restricted Stock Units (the “Restricted Stock Units”), subject to the terms and conditions herein set forth. Capitalized terms used herein and not defined shall have the meanings set forth in the Plan. In the event of any conflict between this Agreement and the Plan, the Plan shall control.

     2. Terms and Conditions. It is understood and agreed that the award of Restricted Stock Units evidenced hereby is subject to the following terms and conditions:

          (a) Vesting of Restricted Stock Units. Subject to Section 2(b) below and the other terms and conditions of this Agreement, the Restricted Stock Units shall become vested in four equal annual installments, commencing on the first anniversary of the date hereof and continuing thereafter on the second, third and fourth anniversaries thereof if you are an employee of the Company or a Subsidiary on each such date. Unless otherwise provided by the Company, all amounts receivable in connection with any adjustments to the Shares under Section 3(c) of the Plan shall be subject to the vesting schedule in this Section 2(a).

          Except as otherwise provided in the Plan, all Restricted Stock Units will become vested if (i) your employment with the Company or a Subsidiary is terminated for any reason other than Cause (as defined below) or you resign for Good Reason (as defined below); (ii) you die while you are still an employee of the Company or a Subsidiary; or (iii) your service as an employee of the Company or a Subsidiary terminates because of your Total and Permanent Disability (as defined below).

          As used herein, “Cause” shall mean any of the following: (a) your willful breach, habitual neglect, or poor performance of your job duties and responsibilities, as determined by the Company in its sole discretion; (b) your conviction (or the entry of a guilty plea or plea of nolo contendre) of any crime, excluding minor traffic offenses; (c) your commission of an act of dishonesty or breach of fiduciary duty; (d) your commission of a

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material violation of any of the personnel policies of the Company or a Subsidiary, including but not limited to, violations of the Company’s confidentiality or stock trading policies or its policies against any form of harassment; or (e) any action or omission by you, which, as reasonably determined by the Company, is contrary to the business interest, reputation or goodwill of the Company or a Subsidiary.

          As used herein “Good Reason” means (a) a material diminution in your title, duties, responsibilities or authority, or (b) the requirement that you move your principal place of business by more than 30 miles from that previously the case without your consent.

          As used herein “Total and Permanent Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.

          (b) Termination of Service; Forfeiture of Unvested Restricted Stock Units. Except as provided in Section 2(a), if you cease to be an employee of the Company or a Subsidiary for any reason prior to the date the Restricted Stock Units become vested, the unvested Restricted Stock Units shall be forfeited and become the property of the Company.

          (c) Distribution of Shares. At the time of vesting of a Restricted Stock Unit, a number of Shares equal to the number of Restricted Stock Units that become vested shall be distributed to you as soon as practicable but, in any event, within the same calendar year.

          (d) Rights and Restrictions. The Restricted Stock Units shall not be transferable, other than pursuant to will or the laws of descent and distribution. Prior to vesting of the Restricted Stock Units and delivery of the Shares, you shall not have any rights or privileges of a shareholder as to the Shares subject to the Restricted Stock Units. Specifically, you shall not have the right to receive dividends or the right to vote such Shares prior to vesting of the Restricted Stock Units and delivery of the Shares.

          (e) Withholding Obligations. In consideration of the award of the Restricted Stock Units, you agree and acknowledge that, whenever under the Plan Shares are to be delivered, the Company, in its sole discretion, shall be entitled to withhold from your regular salary or wages the minimum amount it determines necessary to satisfy any required federal, state, local, foreign or other withholding tax relating to such amount, or to require as a condition of delivery that the Employee remit, when due, the minimum amount necessary to satisfy all required federal, state, local, foreign, or other withholding tax relating thereto. You agree to execute any additional documents, including documents required for a third-party broker to process any withholding, at the request of the Company. Any failure by you to comply with the foregoing may result in a forfeiture of the Restricted Stock Units and the resultant Shares.

          (f) Brokerage Account with Charles Schwab. A condition to the vesting of the Restricted Stock Units is that you shall have a brokerage account with Charles Schwab. The Shares will be deposited into such account if all or parts of the Restricted Stock

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Units become vested (to the extent of such vesting) in accordance with the terms of this Agreement and the Plan. Absent provisions otherwise made to fulfill the withholding obligations referenced in Section 2(e), you agree that Charles Schwab shall, upon deposit of Shares into such brokerage account as the result of vesting of all or part of the Restricted Stock Units, sell such portion of the Shares as is necessary to generate sufficient funds to cover the withholding obligations and shall remit such funds to the Company.

          (g) Restrictions on Sale of Shares. By signing this Agreement, you agree not to sell any Shares at a time when applicable laws or the Company’s policies prohibit a sale.

     3. Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or by courier, by telegram, cablegram, facsimile message, electronic mail or telex message, or sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the party concerned at the address indicated below or to such changed address as such party may subsequently by similar process give notice of:

If to the Company:

c/o Elan Pharmaceuticals, Inc.
800 Gateway Boulevard
South San Francisco, CA 94080

Attn.: Stock Administrator

If to the Employee:

To the last address delivered to the Company by the Employee in the manner set forth herein.

     4. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of Ireland, without giving effect to principles of conflict of laws.

     5. Entire Agreement. This Agreement and the Plan constitute the entire agreement among the parties relating to the subject matter hereof, and any previous agreement or understanding among the parties with respect thereto is superseded by this Agreement and the Plan. By signing this Agreement you agree to all of the terms and conditions described in this Agreement and the Plan and you evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.

     6. Section 409A. In the case of Restricted Stock Units awarded to Employees subject to the Code, it is intended that the Plan and the Restricted Stock Units will comply with Section 409A of the Code (and any regulations and guidelines issued thereunder) to

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the extent the Plan and Units are subject thereto, and the Plan and the Restricted Stock Units shall be interpreted on a basis consistent with such intent. The Plan and this Agreement may be amended in any respect deemed by the Company to be necessary in order to preserve compliance with Section 409A of the Code.

     7. Counterparts. This Agreement may be executed in two counterparts, each of which shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

ELAN CORPORATION, PLC
 

By:  

Employee 

EX-4.(C)(21)

Exhibit 4(c)(21)

Limited Group of EVP+ and Certain SVPs

ELAN CORPORATION, plc
2006 LONG-TERM INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

Nonstatutory Stock Option	This Option is not intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly.
Vesting	Your right to exercise this Option vests in increments over the four-year period starting on the Vesting Start Date, as shown on the cover sheet. The percentage of the total number of Shares for which this option will be exercisable is as follows:

Anniversary of Vesting
Start Date:	Percentage:
First		25	%
Second		50	%
Third		75	%
Fourth		100	%

The resulting number of Shares will be rounded up to the nearest whole number.

Except as otherwise provided in the Plan, the entire Option becomes exercisable if (i) your employment with the Company or a Subsidiary is terminated for any reason other than Cause (as defined below) or you resign for Good Reason (as defined below) (such a resignation or termination being hereinafter referred to as an “Involuntary Termination”); (ii) you die while you are still an employee of the Company or a Subsidiary; or (iii) your service as an employee of the Company or a Subsidiary terminates because of your Total and Permanent Disability (as defined below).

As used herein, “Cause” shall mean any of the following: (a) your willful breach, habitual neglect, or poor performance of your job duties and responsibilities, as determined by the Company in its sole discretion; (b) your conviction (or the entry of a guilty plea or plea of nolo contendre) of any crime, excluding minor traffic offenses; (c) your commission of an act of dishonesty or breach of fiduciary duty; (d) your

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	commission of a material violation of any of the personnel policies of the Company or a Subsidiary, including but not limited to, violations of the Company’s confidentiality or stock trading policies or its policies against any form of harassment; or (e) any action or omission by you, which, as reasonably determined by the Company, is contrary to the business interest, reputation or goodwill of the Company or a Subsidiary.
	As used herein “Good Reason” means (a) a material diminution in your title, duties, responsibilities or authority or (b) the requirement that you move your principal place of business by more than 30 miles from that previously the case without your consent.
	No additional Shares will vest after the date your service has terminated for any reason.
Term	Your Option will expire in any event at the close of business at the Company’s registered office on the day before the 10th anniversary of the Date of Option Grant, as shown on the cover sheet. (It will expire earlier if your service terminates, as described below.)
Involuntary Termination	Following an Involuntary Termination, your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date 24 months after the date of such Involuntary Termination (or on the tenth anniversary of the Date of Option Grant, if earlier).
Death	If you die prior to expiration of this Option, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date twelve months after the date of death (or on the tenth anniversary of the Date of Option Grant, if earlier). During that twelve month period, your estate or heirs may exercise this Option.
Disability	If your service as an employee of the Company (or an Subsidiary) terminates because of your Total and Permanent Disability, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date twelve months after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier). “Total and Permanent Disability” means that you are unable to engage in any substantial gainful

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	activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.
Regular Termination	If your service as an employee of the Company (or a Subsidiary) terminates for any reason other than those set forth in the immediately preceding three paragraphs, then your right to exercise vested Shares under this Option will expire at the close of business at the Company’s registered office on the 90th day after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier).
	The Company determines when your service terminates for this purpose.
Leaves of Absence	For purposes of this Option, your service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. But your service will be treated as terminating 90 days after you went on leave, unless your right to return to active work is guaranteed by law or by a contract. Your service terminates, in any event, when the approved leave ends, unless you immediately return to active work.
	The Company determines which leaves count for this purpose.
Restrictions on Exercise	The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation.
Notice of Exercise	When you wish to exercise this Option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many Shares you wish to purchase. Your notice must also specify how your Shares should be registered (in your name only or in your and your spouse’s names as community property or as joint tenants with right to survivorship). The notice will be effective when it is received by the Company.
	If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.
Form of Payment	When you submit your Notice of Exercise, you must include

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	payment of the exercise price for the Shares you are purchasing. Payment may be made in one (or a combination of both) of the following forms:
	•   Your personal check, a cashier’s check or a money order.
	•   Irrevocable directions to a securities broker approved by the Company to sell your Option Shares and to deliver all or a portion of the sale proceeds to the Company in payment of the exercise price. (The balance of the sale proceeds, if any, less withholding taxes, will be delivered to you.) The directions must be given by signing a special “Notice of Exercise” form provided by the Company.
Taxes	You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any taxes that may be due as a result of the Option exercise.
Restrictions on Resale	By signing this Agreement, you agree not to sell any Option Shares at a time when applicable laws or the Company policies prohibit a sale.
Transfer of Option	Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
	Regardless of any marital property settlement agreement, Elan is not obligated to honor a Notice of Exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your Option in any other way.
Retention Rights	Neither your Option nor this Agreement gives you the right to be retained by the Company (or any Subsidiary) in any capacity. The Company (and any Subsidiary) reserves the right to terminate your service at any time, with or without cause.
Shareholder Rights	You, or your estate or heirs, have no rights as a shareholder of the Company until a proper Notice of Exercise has been filed with the Company and the exercise price has been tendered. No adjustments are made for dividends or other rights if the applicable record date occurs before a proper Notice of Exercise has been filed with the Company and the exercise

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	price has been tendered, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Shares covered by this Option and the exercise price per Share may be adjusted pursuant to the Plan. In the event where the Company is a party to a merger, this Option will be handled in accordance with the Plan.
Applicable Law	This Agreement will be interpreted and enforced under the laws of Ireland.
The Plan and Other Agreements	The text of the Plan and any amendments thereto are incorporated in this Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.

Revised: April 2007

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EX-4.(C)(22)

Exhibit 4(c)(22)

1-Year Cliff (New Director) and Vesting

ELAN CORPORATION, plc
2006 LONG TERM INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

Nonstatutory Stock Option	This Option is not intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly.
Vesting	Your right to exercise this Option vests in total on the first anniversary of the Vesting Start Date, as shown on the cover sheet. The percentage of the total number of Shares for which this Option will be exercisable is as follows:

Anniversary of Vesting
Start Date:	Percentage
First		100	%

	Except as otherwise provided in the Plan, the entire Option becomes exercisable if (i) following a Change in Control (as defined in the Plan) your service as a Director is terminated for any reason; (ii) you die while you are still a Director; or (iii) your service as a Director terminates because of your Total and Permanent Disability (as defined below).
	No additional Shares will vest after the date your Elan service has terminated for any reason.
Term	Your Option will expire in any event at the close of business at Elan’s registered office on the day before the 10th anniversary of the Date of Option Grant, as shown on the cover sheet. (It will expire earlier if your Elan service terminates, as described below.)
Death	If you die prior to expiration of this Option, then the right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the date twenty-four months after the date of death (or on the tenth anniversary of the Date of Option Grant, if earlier). During that twenty-

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	four month period, your estate or heirs may exercise this Option.
Disability	If your service as a Director terminates because of your Total and Permanent Disability, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the date twenty-four months after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier). “Total and Permanent Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.
Six Years of Service with Elan	If you have served as a Director for six or more years and your service as a Director is terminated by your retirement or resignation, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the date twenty-four months after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier).
Regular Termination	Except as provided above, if you have not served as a Director for at least six years at the time your service as a Director terminates, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the 90th day after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier).
	Elan determines when your service terminates for this purpose.
Restrictions on Exercise	Elan will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation.
Notice of Exercise	When you wish to exercise this Option, you must notify Elan by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many Shares you wish to purchase. Your notice must also specify how your Shares should be registered (in your name only or in your and your spouse’s names as community property or as joint tenants with right to survivorship). The notice will be effective when it is received by Elan.
	If someone else wants to exercise this Option after your death, that person must prove to Elan’s satisfaction that he or she is

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	entitled to do so.
Form of Payment	When you submit your Notice of Exercise, you must include payment of the Exercise Price for the Shares you are purchasing. Payment may be made by your personal check, a cashier’s check or a money order.
Taxes	You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any taxes that may be due as a result of the Option exercise.
Restrictions on Resale	By signing this Agreement, you agree not to sell any Option Shares at a time when applicable laws or Elan policies prohibit a sale.
Transfer of Option	Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
	Regardless of any marital property settlement agreement, Elan is not obligated to honor a Notice of Exercise from your former spouse, nor is Elan obligated to recognize your former spouse’s interest in your Option in any other way.
Shareholder Rights	You, or your estate or heirs, have no rights as a shareholder of Elan until a proper Notice of Exercise has been filed with Elan and the Exercise Price has been tendered. No adjustments are made for dividends or other rights if the applicable record date occurs before a proper Notice of Exercise has been filed with Elan and the Exercise Price has been tendered, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Elan stock, the number of Shares covered by this Option and the Exercise Price per Share may be adjusted pursuant to the Plan. In the event where Elan is a party to a merger, this Option will be handled in accordance with the Plan.
Applicable Law	This Agreement will be interpreted and enforced under the laws of Ireland.
The Plan and Other Agreements	The text of the Plan and any amendments thereto are incorporated in this Agreement by reference.

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This Agreement and the Plan constitute the entire understanding between you and Elan regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.

Revised: September 2006

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EX-4.(C)(23)

Exhibit 4(c)(23)

2-Year Cliff and Vesting

ELAN CORPORATION, plc
2006 LONG TERM INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

Nonstatutory Stock Option	This Option is not intended to be an incentive stock option under section 422 of the Internal Revenue Code and will be interpreted accordingly.
Vesting	Your right to exercise this Option vests in total on the second anniversary of the Vesting Start Date, as shown on the cover sheet. The percentage of the total number of Shares for which this Option will be exercisable is as follows:

Anniversary of Vesting
Start Date:	Percentage
Second		100	%

	Except as otherwise provided in the Plan, the entire Option becomes exercisable if (i) you have served as a member of the Board of Directors of Elan for six or more years and your service as a Director terminates due to your retirement or resignation; (ii) Elan is subject to a Change in Control (as defined in the Plan) and your service as a Director terminates for any reason; (iii) you die while you are still a Director; or (iv) your service as a Director terminates because of your Total and Permanent Disability (as defined below).
	No additional Shares will vest after the date your Elan service has terminated for any reason.
Term	Your Option will expire in any event at the close of business at Elan’s registered office on the day before the 10th anniversary of the Date of Option Grant, as shown on the cover sheet. (It will expire earlier if your Elan service terminates, as described below.)
Death	If you die prior to expiration of this Option, then the right to exercise vested Shares under this Option will expire at the

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	close of business at Elan’s registered office on the date twenty-four months after the date of death (or on the tenth anniversary of the Date of Option Grant, if earlier). During that twenty-four month period, your estate or heirs may exercise this Option.
Disability	If your service as a Director terminates because of your Total and Permanent Disability, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the date twenty-four months after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier). “Total and Permanent Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year.
Six Years of Service with Elan	If you have served as a Director for six or more years and your service as a Director is terminated by your retirement or resignation, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the date twenty-four months after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier).
Regular Termination	Except as provided above, if you have not served as a Director for at least six years at the time your service as a Director terminates, then your right to exercise vested Shares under this Option will expire at the close of business at Elan’s registered office on the 90th day after your termination date (or on the tenth anniversary of the Date of Option Grant, if earlier).
	Elan determines when your service terminates for this purpose.
Restrictions on Exercise	Elan will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation.
Notice of Exercise	When you wish to exercise this Option, you must notify Elan by filing the proper “Notice of Exercise” form at the address given on the form. Your notice must specify how many Shares you wish to purchase. Your notice must also specify how your Shares should be registered (in your name only or in your and your spouse’s names as community property or as joint tenants with right to survivorship). The notice will be effective when it is received by Elan.

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	If someone else wants to exercise this Option after your death, that person must prove to Elan’s satisfaction that he or she is entitled to do so.
Form of Payment	When you submit your Notice of Exercise, you must include payment of the Exercise Price for the Shares you are purchasing. Payment may be made by your personal check, a cashier’s check or a money order.
Taxes	You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any taxes that may be due as a result of the Option exercise.
Restrictions on Resale	By signing this Agreement, you agree not to sell any Option Shares at a time when applicable laws or Elan policies prohibit a sale.
Transfer of Option	Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will.
	Regardless of any marital property settlement agreement, Elan is not obligated to honor a Notice of Exercise from your former spouse, nor is Elan obligated to recognize your former spouse’s interest in your Option in any other way.
Shareholder Rights	You, or your estate or heirs, have no rights as a shareholder of Elan until a proper Notice of Exercise has been filed with Elan and the Exercise Price has been tendered. No adjustments are made for dividends or other rights if the applicable record date occurs before a proper Notice of Exercise has been filed with Elan and the Exercise Price has been tendered, except as described in the Plan.
Adjustments	In the event of a stock split, a stock dividend or a similar change in Elan stock, the number of Shares covered by this Option and the Exercise Price per Share may be adjusted pursuant to the Plan. In the event where Elan is a party to a merger, this Option will be handled in accordance with the Plan.
Applicable Law	This Agreement will be interpreted and enforced under the laws of Ireland.

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The Plan and Other Agreements	The text of the Plan and any amendments thereto are incorporated in this Agreement by reference.
	This Agreement and the Plan constitute the entire understanding between you and Elan regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan and evidence your acceptance of the powers of the Committee of the Board of Directors of the Company that administers the Plan.

Revised: September 2006

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EX-8.1

Exhibit 8.1

Organizational Structure

     At December 31, 2007, we had the following principal subsidiary undertakings:

		Group
		Share		Registered Office &
Company	Nature of Business	%		Country of Incorporation
Athena Neurosciences, Inc.	Holding company		100	800 Gateway Blvd South San Francisco, CA, United States
Elan Drug Delivery, Inc.	R&D		100	3000 Horizon Drive King of Prussia, PA, United States
Elan Finance plc	Financial services company		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Holdings, Inc.	Manufacture of pharmaceutical and medical device products		100	1300 Gould Drive Gainesville, GA, United States
Elan Holdings Ltd.	Holding company		100	Monksland, Athlone Co. Westmeath, Ireland
Elan International Services Ltd.	Financial services company		100	Clarendon House, 2 Church St Hamilton, Bermuda
Elan Management Ltd.	Provision of management services		100	Treasury Building, Lower Grand Canal Street, Dublin 2, Ireland
Elan Pharma International Ltd.	R&D, manufacture, sale and distribution of pharmaceutical products and financial services		100	Monksland, Athlone Co. Westmeath, Ireland
Elan Pharmaceuticals, Inc.	R&D and sale of pharmaceutical products		100	800 Gateway Blvd South San Francisco, CA, United States
Monksland Holding BV	Financial services company		100	Claude Debussylaan 1082MD Amsterdam The Netherlands

EX-12.1

Exhibit 12.1

CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, G. Kelly Martin, certify that:

1. I have reviewed this annual report on Form 20-F of Elan Corporation, plc (the Company).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the Consolidated Financial Statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

/s/  G. KELLY MARTIN

G. Kelly Martin

President and Chief Executive Officer

Date: February 28, 2008

EX-12.2

Exhibit 12.2

CERTIFICATION PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Shane Cooke, certify that:

1. I have reviewed this annual report on Form 20-F of Elan Corporation, plc (the Company).

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the Consolidated Financial Statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

b) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

/s/  SHANE COOKE

Shane Cooke

Executive Vice President and Chief Financial Officer

Date: February 28, 2008

EX-13.1

Exhibit 13.1

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F for the period ending December 31, 2007 (the “Report”) of Elan Corporation, plc (the Company), as filed with the Securities and Exchange Commission on the date hereof, I, G. Kelly Martin, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This certification accompanies this Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

/s/  G. KELLY MARTIN

G. Kelly Martin

President and Chief Executive Officer

Date: February 28, 2008

EX-13.2

Exhibit 13.2

Certification Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 20-F for the period ending December 31, 2007 (the “Report”) of Elan Corporation, plc (the Company), as filed with the Securities and Exchange Commission on the date hereof, I, Shane Cooke, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

This certification accompanies this Report pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

/s/  SHANE COOKE

Shane Cooke

Executive Vice President and Chief Financial Officer

Date: February 28, 2008

EX-15.1

Exhibit 15.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Elan Corporation, plc:

We consent to the use of our reports dated February 28, 2008, with respect to the consolidated balance sheets of Elan Corporation, plc and subsidiaries, as of December 31, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity/(deficit) and other comprehensive income/(loss) and cash flows for each of the years in the three-year period ended December 31, 2007, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2007, included in this annual report on Form 20-F. Our report on the consolidated financial statements, dated February 28, 2008, contains an emphasis paragraph which states that effective January 1, 2007, Elan Corporation, plc adopted the provisions of the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, and effective January 1, 2006, Elan Corporation, plc adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, as discussed in Note 2 to the consolidated financial statements.

/s/ KPMG

Dublin, Ireland
February 28, 2008