Item 1.01 Entry into a Material Definitive Agreement.

The company has reached resolution with the United States Attorney for the Eastern District of Pennsylvania (EDPA) and the Office of Consumer Litigation of the Department of Justice regarding the previously-reported government investigation into the company's past U.S. marketing and promotional practices for the antipsychotic medication Zyprexa(R) (olanzapine). As part of this resolution, the company has entered into the following agreements.

1. Plea Agreement Under this agreement, the company agreed to plead guilty to one misdemeanor violation of the Food, Drug, and Cosmetic Act. The misdemeanor plea is for the off-label promotion of Zyprexa between September of 1999 and March of 2001. Specifically, the plea states that Lilly promoted Zyprexa in elderly populations as treatment for dementia, including Alzheimer's dementia, although Zyprexa is not approved for such uses. As part of this agreement, the company has agreed to pay $615 million. The plea agreement was approved by the federal court in Philadelphia on January 30, 2009.

2. Settlement Agreement The company entered into a settlement agreement resolving the federal government's civil investigation. Even though the company disagrees with and does not admit to the civil allegations, the company has agreed to settle the dispute over these allegations. Under terms for the resolution of the civil investigations, the company has agreed to make payments totaling nearly $800 million. Approximately $438 million has been paid to the federal government and approximately $362 million will be made available for payment to settling states. The settlement agreement would have been null and void had the federal court in Philadelphia not accepted the plea agreement described above.

3. Corporate Integrity Agreement The company entered into a corporate integrity agreement with the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS). This agreement requires Lilly to maintain its compliance program and to undertake a set of defined corporate integrity obligations for five years. The terms of the corporate integrity agreement are largely consistent with the company's existing compliance program. They also provide for an independent third-party review organization to assess and report on the company's systems, processes, policies, procedures and practices. The effective date of the corporate integrity agreement is February 13, 2009.

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