Exhibit 10.1

 

*

  Certain confidential information contained in this document, marked by
brackets, has been omitted and filed with the Securities and Exchange Commission
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

 

AMENDED AND RESTATED

MARKETING AND SALES SERVICE AGREEMENT

 

THIS AMENDED AND RESTATED MARKETING AND SALES SERVICE AGREEMENT (the
“Agreement”) is entered into and effective as of January 1, 2003 (the “Effective
Date”), by and between Lilly ICOS LLC, a Delaware Limited Liability Company (the
“Company”), Eli Lilly and Company, an Indiana corporation (“Lilly”), and ICOS
Corporation, a Delaware corporation (“ICOS”) (each such entity may be referred
to herein as a “Party”). This Agreement amends, restates and supersedes the
First Agreement (as defined below).

 

RECITALS

 

The Company, Lilly and ICOS entered into a Marketing and Sales Service Agreement
dated as of September 30, 1998 (the “First Agreement”). Since that time, the
Company, Lilly and ICOS have collaborated on how best to jointly promote the
Company’s products to customers in accordance with the terms set forth in the
First Agreement. Each Party agrees that such promotional efforts could be
enhanced by amending and restating such First Agreement as set forth below.

 

AGREEMENT

 

In consideration of the foregoing, and the covenants and promises contained in
this Agreement, the Company, Lilly and ICOS agree as follows:

 

ARTICLE I

DEFINITIONS

 

As used herein, the following terms will have the following meanings:

 

1.1 “Affiliate” has the meaning set forth in Section 1.1 of the LLC Agreement.

 

1.2 “Allocated Business-to-Business Expenses” means the cost of indirect
business-to-business activities incurred on behalf of the Company in the Shared
Territory associated with Product access, Product availability, Product
distribution (excluding any distribution expenses reimbursed under the
Manufacturing Services Agreement between the Parties), and Product reimbursement
for segments of the business including but not limited to: long-term care,
managed care, government, public health authorities and the veterans
administration, but only to the extent applicable for the Product. Allocated
Business-to-Business Expense does not include direct business-to-business
expenses included in Marketing and Other Selling Expenses.

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1.3 “Calendar Quarter” means each three (3) month period ending on March 31,
June 30, September 30, or December 31.

 

1.4 “Calendar Year” means the twelve (12) month period ending on December 31st.

 

1.5 “cGMPs” means current Good Manufacturing Practices pursuant to 21 C.F.R. §
210 et seq., as amended from time to time.

 

1.6 “Country Detail Allocation” has the meaning assigned to it in section 4.1.

 

1.7 “Detail” means a person-to-person meeting between a Targeted Physician and a
professional sales representative (whether an employee or third-party agent) of
Lilly or ICOS during which a presentation of the Product is made to such
Targeted Physician as either a Sole Detail, Primary Detail, Secondary Detail or
Third Detail. For purposes of this Agreement, “presentation” will mean that the
professional sales representative discusses with such Targeted Physician the
uses and benefits of the Product. Details performed in a particular country
shall be reported pursuant to section 8.2 hereof in a manner consistent with the
basis on which they were counted for purposes of budget planning (i.e. by each
distinct sales force). Detail does not include a Pre-Launch Detail.

 

1.8 “Detail Position Factor” means the percentage weighting attributed to each
reimbursable Detail Priority. For Sole Details the factor is [*], for Primary
Details the factor is [*], for Secondary Details the factor is [*] and for Third
Details the factor is [*].

 

1.9 “Detail Priority” means the position in which sales representatives are
instructed to Detail the Product (i.e. Sole Detail, Primary Detail, Secondary
Detail and Third Detail). For the purposes of this agreement, Detail Priority
will be defined on a country by country basis for each distinct sales force
promoting the Product within the Shared Territory. Actual Detail Priority will
not be captured for each Detail recorded by each sales representative; however,
Lilly and ICOS must provide reasonable assurance to the Company that such Detail
Priority is implemented by the sales representatives. This assurance may be
provided by such items as published call plans or incentive programs
specifically communicated to the sales representative.

 

1.10 “Effective Sales Representative” means the equivalent of a sales
representative providing Details on a full time basis adjusted by the agreed
upon Detail Position Factor associated with the assigned Detail Priority for the
sales representative. For example, if a sales representative provides Primary
Details on a full time basis, that sales representative constitutes [*] of an
Effective Sales Representative.

 

1.11 “FDA” means the United States Food and Drug Administration and any
successor agency or entity that may be established hereafter. “FDA” will also be
deemed to include the applicable regulatory authority having jurisdiction over
the Product in any particular country or region within the Shared Territory (for
example, the European Medicines Evaluation Agency for the European Union).

 

1.12 “FDA Risk Management Plan Expenses” means all expenses associated with
activities required by the FDA for the marketing of Cialis in the US and not
included in Sales Force Promotional Effort Expenses, Sales Force Incentives, IMS
Data Expenses, or Marketing and Other Selling Expenses.

 

*Confidential Treatment Requested.

 

2

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1.13 “FDCA” means the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et
seq.), as amended from time to time, together with any rules and regulations
promulgated thereunder. “FDCA” will also be deemed to include the applicable
statutory, regulatory and/or other body of law applicable to the Product in any
particular country or region within the Shared Territory.

 

1.14 “ICOS Cost per Sales Representative” means the applicable ICOS Cost per
Sales Representative for a particular Calendar Year, determined in the manner
specified in Article VII, as adjusted in the manner described therein.

 

1.15 “IMS Data Expenses” means expenses for purchase of sales and marketing data
useful for the marketing of the Product in the Shared Territory from IMS Health
or other data providers.

 

1.16 “Launch Date” means, with respect to a particular country in the Shared
Territory, the date upon which the first marketable shipment of Product occurs
within such country after regulatory approval as a result of a purchase order
from a third-party (i.e., not a Party to this Agreement or an Affiliate
thereof).

 

1.17 “Lilly Cost per Sales Representative” means the applicable Lilly Cost per
Sales Representative for a particular Calendar Year, determined in the manner
specified in Article VII, as adjusted in the manner described therein.

 

1.18 “LLC Agreement” means the Limited Liability Company Agreement of Lilly ICOS
LLC entered into by and between ICOS and Lilly and dated September 30, 1998, as
amended from time to time in accordance therewith.

 

1.19 “Major EU Countries” means [*] and [*].

 

1.20 “Marketing and Other Selling Expenses” means direct costs and expenses
other than Sales Force Promotional Effort Expenses incurred on behalf of the
Company associated with marketing, promoting and selling the Product in the
Shared Territory. Such expenses would include but not be limited to the
following: direct-to-consumer marketing, disease awareness programs, health care
professional marketing (including samples and customer programs), direct
business-to-business expenses, medical marketing, market research, and
administrative support, Allocated Business to Business Expenses, IMS Data
Expenses, FDA Risk Management Expenses, Sales Force Incentives plus a reasonable
allocation of overhead costs that are specifically associated with such
marketing and promotional activities, to the extent the Company has pre-approved
such costs and expenses pursuant to Section 7.1, and has not otherwise
reimbursed Lilly or ICOS therefor.

 

1.21 “NDA” means the New Drug Application for the Product filed with the FDA
pursuant to 21 U.S.C. § 357 and 21 C.F.R. § 314, as such laws may be amended
form time to time, together with all additions, deletions and supplements
thereto. “NDA” will also be deemed to include any similar authorization,
approval, consent, license, permit, franchise, permission, notification, filing
or registration required in a particular country or region within the Shared
Territory to market, sell and distribute Product in such country or region.

 

*Confidential Treatment Requested.

 

3

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1.22 “Non-Major EU Countries” means the Shared Territory excluding the United
States, the Major EU Countries, Canada and Mexico.

 

1.23 “Package Inserts” means labeling that is approved by the FDA that meets the
specific requirements as set forth in 21 C.F.R. §§ 201.56 and 201.57 (as such
regulations may be amended from time to time), or similar labeling in countries
within the Shared Territory other than the United States.

 

1.24 “PDMA” means the Prescription Drug Marketing Act of 1987, as amended from
time to time, together with any rules or regulations promulgated thereunder.
“PDMA” will also be deemed to include the applicable statutory, regulatory
and/or other body of law applicable to similar subject matter in any particular
country or region within the Shared Territory.

 

1.25 “Prelaunch Detail” means a person-to-person meeting occurring prior to the
Launch Date between a Targeted Physician and a professional representative of
Lilly or ICOS during which a discussion is held regarding sexual dysfunction and
other topics specified by the Company consistent with regulatory restrictions on
pre-approval discussions in the applicable country.

 

1.26 “Primary Detail” means a Detail during which the Product is the primary
product presentation to be delivered. Actual Detail Priority will not be
captured for each Detail recorded by each sales representative; however, Lilly
and ICOS must provide reasonable assurance to the Company that such Detail
Priority is implemented by the sales representatives. This assurance may be
provided by such items as published call plans or incentive programs
specifically communicated to the sales representative.

 

1.27 “Product” means any product of the Company consisting of a pharmaceutical
preparation(s) that contains a PDE5 Agent and is intended for use in the
treatment or prevention of human diseases or conditions, including without
limitation Cialis® (tadalafil). For purposes of this Agreement, “PDE5 Agent”
means an agent that blocks, inhibits or stimulates the biochemical activities
of, or alters the expression of, the cyclic guanosine monophosphate-binding,
cyclic guanosine monophosphate-specific phosphodiesterase.

 

1.28 “Promotional Materials” means any materials (including, without limitation,
Product labeling and Package Inserts) used for advertising and promoting the
Product in the Shared Territory, including promotional materials produced by the
Company (examples include, but are not limited to, journal ads, brochures,
service items, managed care pull through sheets, formulary presentations, price
lists, monographs, Internet pages and websites, and telephone, radio or
television advertisements) and materials produced by outside sources (examples
include, but are not limited to, medical reprints and textbooks) to the extent
created in cooperation with or distributed by the Company, and any other items
defined as labeling or advertising in 21 U.S.C. § 201(m) or 21 C.F.R. §
202.1(l)(1) (as such laws may be amended from time to time).

 

1.29 “Sales Force Promotional Effort” means, with respect to a particular
country in the Shared Territory, the aggregate number of Effective Sales
Representatives planned for a particular Calendar Year.

 

4

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1.30 “Sales Force Promotional Effort Expenses” means those expenses related to
Sales Force Promotional Effort within the Shared Territory, calculated in the
manner specified in Section 7.

 

1.31 “Sales Force Incentives” means those cash incentives not constituting a
Sales Force Promotional Effort Expense paid to sales representatives (including
sales force management) that are attributable to Product performance and
determined in accordance with each Party’s respective sales force incentive
program as pre-approved by the Company in accordance with Section 7.9.

 

1.32 “Sales Force Structure” means the structure used by Lilly or ICOS, as the
case may be, from time to time to conduct its sales and marketing operations in
a specific country including, without limitation, number of sales
representatives, sales territory configurations and sales force relationships
with medical professionals.

 

1.33 “Secondary Detail” means a Detail during which the Product is the second
product presentation to be delivered. Actual Detail Priority will not be
captured for each Detail recorded by each sales representative; however, Lilly
and ICOS must provide reasonable assurance to the Company that such Detail
Priority is implemented by the sales representatives. This assurance may be
provided by such items as published call plans or incentive programs
specifically communicated to the sales representative.

 

1.34 “Shared Territory” means Canada, Mexico, the United States of America (not
including its territories or possessions), the countries of the European
Union/European Free Trade Area (in other words, Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, Sweden, the United Kingdom, Iceland, Liechtenstein, Norway and
Switzerland) and those additional countries that hereafter become included in
the definition of “Territory” set forth in Section 1.1 of the LLC Agreement.

 

1.35 “Sole Detail” means a Detail during which the Product is the sole product
presentation to be delivered. Actual Detail Priority will not be captured for
each Detail recorded by each sales representative; however, Lilly and ICOS must
provide reasonable assurance to the Company that such Detail Priority is
implemented by the sales representatives. This assurance may be provided by such
items as published call plans or incentive programs specifically communicated to
the sales representative.

 

1.36 “Targeted Physicians” means any health care professional in the Shared
Territory with prescribing authority whose practice or prescribing activities is
focused on an area of medicine relevant to the Product, including but not
limited to: Urology, General Practice, Family Practice, Internal Medicine,
Endocrinology, Diabetology, Cardiology or Psychiatry. If the Parties agree with
respect to any country, “Targeted Physicians” may also include any licensed
pharmacist.

 

1.37 “Third Detail” means a Detail during which the Product is the third product
presentation to be delivered. Actual Detail Priority will not be captured for
each Detail recorded by each sales representative; however, Lilly and ICOS must
provide reasonable assurance to the Company that such Detail Priority is
implemented by the sales representatives. This assurance may be provided by such
items as published call plans or incentive programs specifically communicated to
the sales representative.

 

5

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ARTICLE II

RESPONSIBILITIES OF THE COMPANY

 

2.1 Responsibilities of the Company. With respect to the Shared Territory, the
Company will be responsible for the following functions:

 

A. Direction. The Company will have overall responsibility for the approval,
supervision, coordination and direction of the joint promotion activities
contemplated by this Agreement.

 

B. Guidelines. The Company will establish guidelines to govern the joint
promotion of the Product (the “Promotional Guidelines”). The Promotional
Guidelines will include initial provisions describing (i) the authority of each
Project Director (who are to be appointed by Lilly and ICOS pursuant to Sections
3.1(A) and 3.2(A)), (ii) the types of decisions and actions that must be
presented to the Company for approval, and (iii) the procedures to be followed
by Lilly and ICOS in conducting marketing and sales activities on behalf of the
Company. The Promotional Guidelines will be completed by the Company as soon as
practicable following the execution of this Agreement. Notwithstanding their
completion, Lilly and ICOS may mutually revise the Promotional Guidelines from
time to time during the term of this Agreement; provided, however, that any
material revisions to the Promotional Guidelines must be approved in advance by
the Company.

 

C. Annual Promotional Plan. The Company will develop a detailed annual
promotional plan which will outline the strategy for the marketing and sale of
the Product by Lilly and ICOS on the Company’s behalf in each country within the
Shared Territory (the “Promotional Plan”). The Promotional Plan for a specific
Calendar Year will be completed as soon as practicable prior to the beginning of
the Calendar Year, and will not be considered final until the Company’s overall
budget has been reviewed and approved by the Company’s Board (as defined in the
LCC Agreement). To the extent practicable, the Parties will align the timing of
development of the Promotional Plan to Lilly and ICOS’ internal annual business
planning processes. The Promotional Plan will specify the marketing strategy to
be used for the joint promotion of the Product, types of Promotional Materials
to be developed, levels of Promotional Support (as described in Section 2.1(E)),
distribution plans for Product samples (and/or vouchers that enable patients to
obtain complimentary samples of the Product free of charge from pharmacists) and
such other matters as the Company determines to be appropriate. The Company may
adjust the Promotional Plan during the course of a year based upon unanticipated
changes in circumstances.

 

D. Pricing and Distribution. Unless the Company elects otherwise with respect to
any country within the Shared Territory, the Company will make all sales of the
Product and will have sole control of distribution (other than Product samples)
and pricing of the Product. The Company will determine strategies and tactics
with respect to pricing, contracting and other related activities with managed
care organizations, mail order pharmacies, wholesalers and other distribution
channels for Products. The Company will utilize a pricing strategy commensurate
with the therapeutic profile of the Product.

 

E. Promotional Support. The Company will either directly or indirectly provide,
at its sole expense, the appropriate resources required to facilitate marketing,
planning, and

 

6

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professional services support of the Product in the manner contemplated by this
Agreement. In particular, the Company will approve the amount of funds to be
spent on an annual basis for each country in the Shared Territory for matters
including, but not limited to, Marketing Expenses, and other Selling Expenses,
Allocated Business-to-Business Expenses, IMS Data Expenses, FDA Risk Management
Plan Expenses, and Sales Force Incentives. The determination will be based upon,
among other factors, an annual analysis of historical and forecasted promotional
activity of leading competitors in the relevant therapeutic class and other
leading pharmaceutical products prescribed by a broad base of physicians.

 

F. Training Support from the Company. The Company will either directly or
indirectly provide to Lilly and ICOS, at the Company’s sole expense, initial
sales training materials for the Product. The Company will also either directly
or indirectly provide to Lilly and ICOS, at the Company’s sole expense, all
later-developed sales training, launch and sales meeting materials concerning
the Product.

 

G. Trademark, Labeling, Package Inserts and Promotional Materials. The Company
will develop any trademark(s) to be used in the promotion of the Product. The
Company will develop the Product label and related Package Inserts for each
country within the Shared Territory. In addition, the Company will, at its sole
cost, develop, prepare, produce and make available to Lilly and ICOS appropriate
quantities of all Promotional Materials to be used to jointly promote the
Product within the Shared Territory. All such Promotional Materials will comply
with all applicable governing laws and/or regulations. The Company will, where
legally permissible, take all reasonable steps to ensure that both Lilly’s and
ICOS’ name and/or logos appear in equal prominence on the Product label, Package
Inserts, sample packages, and Promotional Material.

 

H. Monitoring Detailing. The Company will have the right to monitor the number
and the qualitative impact of the Parties’ respective activities relating to
conducting Details, using such means as are reasonable and customary in the
industry. If the Company, in the course of such monitoring, discovers that there
is an apparent difference in the qualitative impact between the Parties’
Details, and the Company determines that the difference is material, then the
Company will investigate the difference and will take whatever steps it deems
appropriate to address the difference in light of the result of such
investigation.

 

I. Determination of Sales Force Promotional Effort. The Company will annually
determine the Sales Force Promotional Effort and the expected number and type of
Details to be provided for the Product for each country within the Shared
Territory pursuant to the procedures stated in Article IV.

 

J. Other Responsibilities. The Company will be responsible for taking such other
action as may be reasonably necessary to accomplish the purpose of this
Agreement.

 

7

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ARTICLE III

PROMOTION OF PRODUCT

 

3.1 Lilly Responsibilities. Lilly will be responsible for the following:

 

A. Lilly Project Director. Lilly will name at least one (1) individual to serve
as its Project Director. The Lilly Project Director will be the primary Lilly
contact person for all purposes of this Agreement, except to the extent this
Agreement provides otherwise or the Parties otherwise agree. In addition, the
Lilly Project Director will be responsible for managing communications and
performing other activities as specified in this Agreement. Lilly’s initial
Project Director will be the Cialis Product Team Marketing Director. Lilly may
designate a new Project Director by providing the Company and ICOS with written
notice thereof, provided that any new designee will have a comparable level of
authority within the Lilly organization.

 

B. Product Detailing. Lilly will use its commercially reasonable efforts to
conduct Details so as to promote the Product to Targeted Physicians in a manner
consistent with all applicable laws, rules and regulations, and the Promotional
Guidelines adopted pursuant to this Agreement.

 

C. Other Activities. Lilly will conduct other activities relating to marketing
and promotion of Products as reasonably requested by the Company from time to
time.

 

3.2 ICOS Responsibilities. ICOS will be responsible for the following:

 

A. ICOS Project Director. ICOS will name at least one (1) individual to serve as
its Project Director. The ICOS Project Director will be the primary ICOS contact
person for all purposes of this Agreement, except to the extent this Agreement
provides otherwise or the Parties otherwise agree. In addition, the ICOS Project
Director will be responsible for managing communications and performing other
activities as specified in this Agreement. ICOS’ initial Project Director will
be the Vice-President of Sales and Marketing. ICOS may designate a new Project
Director by providing the Company and Lilly with written notice thereof,
provided that any new designee will have a comparable level of authority within
the ICOS organization.

 

B. Product Detailing. ICOS will use its commercially reasonable efforts to
conduct Details so as to promote the Product to Targeted Physicians in a manner
consistent with all applicable laws, rules and regulations, and the Promotional
Guidelines adopted pursuant to this Agreement.

 

C. Other Activities. ICOS will conduct other activities relating to marketing
and promotion of Products as reasonably requested by the Company from time to
time.

 

ARTICLE IV

SALES FORCE PROMOTIONAL EFFORTS

 

4.1 Sales Force Promotional Effort. Prior to the end of each Calendar Year, for
the following Calendar Year, with respect to each country within the Shared
Territory, [*] will determine the Sales Force Promotional Effort (in addition,
[*] will also make a preliminary determination of the Sales Force Promotional
Effort for the next succeeding Calendar Year). In

 

*Confidential Treatment Requested.

 

8

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establishing the Sales Force Promotional Effort, [*] will consider, among other
factors, (i) the market opportunity for the Product in the particular country,
(ii) the regulatory and other structural issues unique to such country, and
(iii) the promotional options other than physician detailing (e.g., DTC
advertising, formulary positioning) available in such country. [*] shall then
allocate the Sales Force Promotional Effort between Lilly and ICOS, subject to
the provisions of section 4.2 and 4.3 (the number of position-adjusted Details
allocated to Lilly or ICOS for a particular country in a particular Calendar
Year is referred to herein as the “Country Detail Allocation”). In establishing
the Lilly and ICOS Country Detail Allocations, [*] will consider, among other
factors, (i) the then-existing Sales Force Structure of Lilly and ICOS for such
country and the costs to each Party to establish and maintain such sales force,
(ii) the specific types of Targeted Physicians the sales representatives should
target when performing Details, (iii) the third-party alternatives available for
physician Detailing in such country, and (iv) the overall regional allocation
targets specified in section 4.2(C). Notwithstanding [*] establishing the Sales
Force Promotional Effort in the manner described above, at any time prior to the
end of any Calendar Year, [*] may make adjustments to the Sales Force
Promotional Effort during such Calendar Year (or for the next succeeding
Calendar Year) based on changes in circumstances or failure of assumptions
underlying the original determination.

 

4.2 Default Allocation of the Sales Force Promotional Effort. For the initial
Calendar Year for which ICOS is directly providing Details in a country (with
the exception of the United States), ICOS may choose to provide from [*]% of the
Sales Force Promotional Effort in such country. If, during any subsequent
Calendar Year, [*] cannot determine ICOS’ and Lilly’s respective allocations of
the Sales Force Promotional Effort for any country for the following Calendar
Year, then (subject to the provisions of Section 4.3) at [*] option, the prior
Calendar Year’s allocation shall be used. If [*] does not elect this option then
between [*] and [*] percent [*] of the Sales Force Promotional Effort for such
country shall be allocated to ICOS (with the actual percentage to be determined
by [*] in its discretion). Lilly shall provide the balance of the Sales Force
Promotional Effort (i.e., the difference between the Sales Force Promotional
Effort and the number of Effective Sales Representatives provided by ICOS),
assuming ICOS meets its minimum obligation.

 

A. Detail Participation Level. Provided that ICOS provides at least [*] percent
[*] of the Sales Force Promotional Effort in a country (or such lesser amount as
determined by [*] in accordance with section 4.2(C)), ICOS’ election not to
provide [*] percent [*] of the Sales Force Promotional Effort for such country
in any given year will not preclude ICOS from participating fully (providing
[*]% of the Detail efforts in such country) in subsequent years. Notwithstanding
the foregoing, if ICOS elects to participate fully in such country’s sales force
efforts in a following Calendar Year (“Year X”), then to the extent Lilly
elected to use additional Lilly sales staff, and not a third-party sales force,
to provide any or all of the Details that ICOS elected not to provide in the
year preceding Year X, [*] will allocate the Sales Force Promotional Effort to
be provided in such country for the following Calendar Year between Lilly
(taking into consideration the additional Lilly sales personnel maintained to
provide incremental Details for the Company) and ICOS in as equitable a manner
as possible, taking into consideration, among other things, [*]. At least twelve
months prior to ICOS’ first allocation of the Sales Force Promotional Effort in
a particular country in the Shared Territory outside the United States, the
Parties will discuss [*] as a result of ICOS entering such country and providing
a portion of the Details, and if ICOS has sales force openings that it intends
to fill through external hiring, ICOS will [*].

 

*Confidential Treatment Requested.

 

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B. Notice of Detail Participation Level. Subject to [*] having made a
preliminary determination of the Sales Force Promotional Effort for such country
at least one year in advance as required by Section 4.1, ICOS shall provide the
Company and Lilly at least [*] notice (or, if such preliminary determination is
not made by [*] on a timely basis, [*] days after the preliminary determination
of the Sales Force Promotional Effort is actually made) prior to the beginning
of the Calendar Year in which it intends to begin providing sales force
promotional effort in a country in the Shared Territory outside the United
States (and every anniversary date thereof) regarding ICOS’ anticipated sales
force promotional effort for the applicable Calendar Year. Once ICOS has begun
providing Details in a particular country, ICOS shall not decrease its share of
the Sales Force Promotional Effort for a particular country from the prior
year’s level without the prior written consent of the other Parties, which
consent shall not be unreasonably withheld.

 

C. Planning Detail Allocation by Region. [*] will in good faith seek to
establish an allocation of the Sales Force Promotional Effort that is rational
and efficient for both Lilly and ICOS, with a target of assuring that ICOS
provides at least [*] of the aggregate Sales Force Promotional Effort in each of
the following regions: (1) [*] and (2) the countries in the Shared Territory
outside [*] in which ICOS is obligated to provide Details during the applicable
Calendar Year. In establishing such allocation, [*] may determine that it is
appropriate for ICOS to provide less than [*] of the Sales Force Promotional
Effort (or for Lilly to provide as much as 100% thereof) in a particular country
where ICOS is otherwise obligated to participate. As long as ICOS agrees to
provide at least [*] of the aggregate Sales Force Promotional Effort in [*] and
the remainder of the Shared Territory (excluding countries or regions in which
ICOS is not yet obligated to provide Details) in accordance with the allocation
plan approved by [*], ICOS shall be deemed to have met its minimum obligations
per country as set forth in this Article IV. In the event that the Parties
cannot after good faith efforts agree on a regional allocation of the aggregate
Sales Force Promotional Effort, the Parties shall revert to a country-by-country
allocation consistent with the other provisions of this Article IV.

 

4.3 Allocation of Sales Force Promotional Effort through Specified Calendar
Year. Notwithstanding Section 4.1 and 4.2, the Parties hereby agree that the
Sales Force Promotional Effort to be determined by [*] for the specified
Calendar Year shall be allocated among ICOS and Lilly in the following manner:

 

A. United States. With respect to Sales Force Promotional Effort to be performed
in the United States, ICOS shall use [*] efforts to have hired, trained and in
the field [*] prior to the anticipated Launch Date in the U.S. a U.S. sales
force of at least [*] sales representatives. No later than the U.S. launch
meeting, ICOS will use [*] efforts to have another [*] sales representatives
that have been hired, trained and ready to promote the Product at launch in the
U.S., for a total of 165 representatives. ICOS shall then use [*] efforts to
maintain, at a minimum, [*] representatives with a Detail Priority no lower than
Primary Detail through the end of [*], unless [*] determines from time to time
that a lower number of sales representatives is appropriate. Beginning with [*],
ICOS shall be required to provide at least [*] of the applicable Sales Force
Promotional Effort (which may require more than [*] sales representatives)
unless

 

*Confidential Treatment Requested.

 

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the Company determines that an alternative allocation is appropriate. With
respect to [*] and thereafter, [*] shall determine ICOS’ and Lilly’s respective
Country Detail Allocation for the United States in the manner described in
Sections 4.1 and 4.2

 

Lilly agrees that ICOS shall be entitled to deliver and be compensated for up to
sixteen (16) months of Sole Detail activity by up to 165 sales representatives,
beginning not more than six (6) months prior to the US Launch Date and ending on
the earlier of (i) ICOS’ sales force promoting the commercial distribution of a
pharmaceutical product other than Product or (ii) December 31, 2004. ICOS may at
its election provide Primary Details rather than Sole Details, and its
compensation will be accordingly reduced. If, prior to December 31, 2004, any
portion of ICOS’ sales force begins to promote the commercial distribution of a
pharmaceutical product other than Product then (i) the sales representatives
that promote such other product shall be not be eligible for Sole Detail
reimbursement, but rather the Detail Position Factor will be determined based on
the Detail Priority given Product and (ii) the sales representatives that do not
promote such other product shall continue to be eligible for Sole Detail
reimbursement until December 31, 2004.

 

B. Major EU Countries, Mexico and Canada. With respect to the Sales Force
Promotional Effort to be provided in the Major EU Countries, Mexico and Canada
through December 31, [*], the Sales Force Promotional Effort shall be allocated
one hundred percent (100%) to Lilly. Beginning January 1, [*] and for the
remainder of the [*] Calendar Year, at least [*] of the applicable Sales Force
Promotional Effort for such period shall be allocated to ICOS (subject to the
provisions of section 4.2(C)). With respect to the [*] Calendar Year and
thereafter, [*] shall determine ICOS’ and Lilly’s respective allocation of the
Sales Force Promotional Effort in Major EU countries, Mexico and Canada in the
manner described in Sections 4.1 and 4.2.

 

C. Non-Major EU Countries. With respect to the Sales Force Promotional Effort to
be provided in the non-Major EU Countries through the end of the [*] Calendar
Year, the Sales Force Promotional Effort shall be allocated one hundred percent
(100%) to Lilly. For the [*] Calendar Year, at least [*] of the applicable Sales
Force Promotional Effort shall be allocated to ICOS (subject to the provisions
of section 4.2(C)). Thereafter, [*] shall determine ICOS’ and Lilly’s respective
allocation of the Sales Force Promotional Effort in the manner described in
Sections 4.1 and 4.2.

 

If ICOS does not agree to meet its minimum obligation for Sales Force
Promotional Effort as stated above in any Non-Major EU country by [*], then at
Lilly’s option, ICOS will have no further rights to participate in the promotion
of the Product in such country at any future time, and such country shall cease
to be a part of the Shared Territory and shall instead become part of the Lilly
Territory (each such country a “Ceded Country”). Provided, however, if ICOS
enters any such country with the good faith intention to meet its obligations,
but is unable to do so due to circumstances beyond its control, such country
will not be deemed a Ceded Country provided that ICOS advises Lilly in good
faith that it intends to fulfill its obligations the following year and does in
fact do so.

 

4.4 Failure to Deliver Allocated Details. Compliance with the Country Detail
Allocation will be assessed on an annual basis for each of Lilly and ICOS on a
country by country basis. In

 

*Confidential Treatment Requested.

 

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the event that Lilly and/or ICOS elect to delegate some or all of their
allocation of the Sales Force Promotional Effort to a third-party sales force,
the Details reported by the third-party sales force will be considered Details
performed by the delegating Party in determining whether the delegating Party
has achieved the Country Detail Allocation. If ICOS and/or Lilly does not
complete at least [*]% of the Country Detail Allocation in a specific country,
then the non-performing Party will promptly pay to the other Party, no later
than March 31st of the year following the Calendar Year in which the Country
Detail Allocation was not achieved, an amount equal to (i) the difference
between [*] and the actual percentage of Details performed (calculated as the
actual Details divided by the Country Detail Allocation), multiplied by (ii) [*]
its Cost per Sales Representative multiplied by (iii) the Effective Sales
Representatives associated with the non-performing Party’s Country Detail
Allocation. Notwithstanding the foregoing, neither Lilly nor ICOS will be deemed
to have failed to perform any Details that have been delegated to the other
Party pursuant to Section 5.2. If both Parties fail to meet [*]% of the Country
Detail Allocation, each shall make a payment to the other as calculated above.

 

4.5 Verification of Detail Performance. All Detail reports used in verifying the
delivery of Country Detail Allocations are subject to audit in accordance with
Section 11.6.

 

ARTICLE V

DELEGATION OF DETAIL OBLIGATIONS

 

5.1 Delegation of Sales Force Promotional Effort. ICOS and Lilly will each
perform its respective Country Detail Allocation as determined in accordance
with Article IV. Subject to Sections 5.2 and 15.2, ICOS and Lilly each has the
right, but not the obligation, to use a third-party sales force to provide any
portion or all of its allocation of the Sales Force Promotional Effort. However,
delegation of a portion or all of its allocation of the Sales Force Promotional
Effort does not release the Party from the Country Detail Allocation requirement
or other obligations under the agreement. For the purposes of this agreement,
the third-party sales force is considered to be within the Party’s Sales Force
Structure and thus calculated within the minimum Effective Sales Representative
and Country Detail Allocation requirements.

 

5.2 Right of First Negotiation. In the event that either ICOS or Lilly (the
“Delegating Party”) intends to utilize a third-party sales force to provide any
of its allocation of the Sales Force Promotional Effort during a Calendar Year,
the Delegating Party shall first offer to the other Party (i.e., either ICOS or
Lilly, as applicable) (the “Receiving Party”) the opportunity to negotiate in
good faith for the right to conduct such Sales Force Promotional Effort on the
Delegating Party’s behalf. The Delegating Party shall provide the Receiving
Party with written notice of its intent, which notice shall contain an
identification of the country and the number of Effective Sales Representatives
to be delegated to a third-party sales force during the relevant Calendar Year.
The Receiving Party shall have fourteen (14) days to accept or reject the
opportunity to negotiate for the right to provide the Effective Sales
Representatives. If the Receiving Party rejects the opportunity or fails to
respond in writing within fourteen (14) days, the Delegating Party may proceed
to negotiate with any third party. If the Receiving Party responds
affirmatively, then ICOS and Lilly will negotiate in good faith for a period of
up to [*] days in an effort to agree on commercially reasonable terms under
which the Delegating Party would delegate the applicable number of Effective
Sales Representatives to the Receiving Party; provided, however, neither Party
shall be obligated to enter into such agreement unless the

 

*Confidential Treatment Requested.

 

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Parties reach mutually agreeable terms with respect thereto. If the Parties are
unable to reach an agreement, the Delegating Party shall be free to enter into
an arrangement with a third party. In the event Effective Sales Representatives
are delegated to the Receiving Party (a) the delegated Effective Sales
Representatives shall be added to the Receiving Party’s allocation of the Sales
Force Promotional Effort for all purposes of this Agreement and (b) the
Receiving Party’s reimbursement for Sales Force Promotional Effort Expenses for
the applicable country will be recalculated to account for the negotiated
reimbursement rate if applicable. For purposes of this Section 5.2, an
Affiliate’s sales force will not be characterized as a “third-party sales
force.”

 

ARTICLE VI

REGULATORY MATTERS

 

ICOS and Lilly will perform all Product related marketing efforts consistent
with all applicable legal and regulatory requirements, including approved
labeling. Neither Lilly nor ICOS will promote the Product for any use not
approved by the appropriate regulatory authorities, unless otherwise permitted
by local law or regulation, or promote the Product in any manner or with any
materials not approved by the Company. Neither Lilly nor ICOS will make any (a)
false or misleading representations to customers or others regarding ICOS or
Lilly (as appropriate), the Company or the Product or (b) representations,
warranties or guarantees to customers or others with respect to specifications,
features or capabilities of the Product except as contained in the Package
Insert or Promotional Material approved by the Company.

 

ARTICLE VII

REIMBURSEMENT OF COSTS AND EXPENSES

 

7.1 Annual Budgets. Prior to the end of each Calendar Year, for the following
Calendar Year, [*] will approve the Annual Promotional Plans prepared for each
country within the Shared Territory. The Parties acknowledge that Lilly and ICOS
each will use good faith commercially reasonable efforts not to commit to or
incur expenses in excess of the amounts budgeted by the Company without the
Company’s express prior approval. However, the Company shall pay expenses
incurred in good faith in accordance with guidelines previously approved by the
Company that, due to unanticipated business conditions, exceed the approved
budget amounts (e.g., higher Sales Force Incentive Expense due to higher levels
of sales.)

 

7.2 Reimbursement for Certain Expenses. The Company shall reimburse ICOS and
Lilly for Marketing and Other Selling Expenses incurred on behalf of the Company
in the Shared Territory. In general, the Company will reimburse such expenses
based on the direct cost of the goods or services associated with marketing,
promoting and selling the Product in the Shared Territory. However, certain
expenses may be reimbursed via an allocation mechanism which will be reviewed
and approved as a part of the business planning process.

 

7.3 Reimbursement for Sales Force Promotional Effort Expenses. Lilly and ICOS
shall each be reimbursed for their respective Sales Force Promotional Effort
Expenses. The reimbursement shall be calculated on a monthly basis and be equal
to the lesser of (a) the actual Effective Sales Representatives in the field as
of the end of the month multiplied by an amount equal to one-twelfth of the
respective Lilly or ICOS Cost per Sales Representative or (b) the Company
approved Effective Sales Representatives for each distinct sales force within a
country multiplied by an amount equal to one-twelfth of the respective Lilly or
ICOS Cost per Sales

 

*Confidential Treatment Requested.

 

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Representative. Reimbursement for use of third-party sales representatives shall
be in accordance with Section 7.8. Such expenses shall be included in the
invoice contemplated by Section 7.10.

 

7.4 Determination of the Initial Lilly and ICOS Cost per Sales Representative.
The Cost Per Sales Representative shall be calculated on a country by country
basis for each of Lilly and ICOS. The guidelines for cost inclusion or exclusion
shall be applied consistently by both Parties. The Cost Per Sales Representative
shall represent the ongoing cost of Lilly and ICOS’ sales organization including
costs associated with normal turnover. However, the Cost per Sales
Representative shall not include the cost of initial sales representative
training or the costs associated with establishing or expanding a sales force.
The Cost per Sales Representative calculation shall take into consideration both
direct and indirect costs of the sales force. Lilly and ICOS shall each take
into consideration its previously defined accounting and reporting system when
determining if a cost is to be considered direct or indirect. Direct costs that
are not specifically excluded per other sections of this Agreement shall be [*]%
allocated to the Cost per Sales Representative. Indirect costs that are not
specifically excluded per other sections of this Agreement shall be allocated to
the Cost per Sales Representative calculation based on reasonable analysis to be
reviewed and agreed to by each Party. In general, costs specifically
identifiable by Product should not be included in the Cost per Sales
Representative as these costs shall be accounted for under Marketing and Other
Selling Expenses. These costs include such things as Product specific training
initiatives, Product samples, customer programs, sample vouchers, IMS Data
Expenses and Sales Force Incentives. Finally, a high-level adjustment to be
agreed upon by the Parties shall be applied to cover the reasonable
approximation of corporate general and administrative expenses that support the
Sales Force Structure.

 

  (a) Initial Lilly Cost per Sales Representative. The Parties have agreed that
the initial Lilly Cost per Sales Representative shall be the amount specified in
Attachment A.

 

  (b) Initial ICOS Cost per Sales Representative. The Parties have agreed that
the initial ICOS Cost Per Sales Representative for the United States shall be
the amount set forth in Attachment A. The applicable initial rate for other
countries in the Territory shall be established through good faith negotiation
between the parties as a part of annual planning process prior to year of entry
in the applicable country(ies), using a methodology similar to that used to
establish the Lilly rates for the applicable country. This rate shall then be
recalculated for each country no later than 60 days following the twelfth month
of participation in the promotion of an approved Product in that country, or
after such other period as the parties may agree. The rate shall be recalculated
in accordance with provisions outlined above based on costs actually incurred
during that twelve month period. This calculation shall then be made available
to Lilly for review and approval. Once the revised rate has been reviewed and
approved by Lilly, it will replace the Initial ICOS Cost per Sales
Representative for that country. The reimbursement provided to ICOS pursuant to
Section 7.11 for the initial twelve month period of participation in the Sales
Force Promotional Effort for a specific country shall then be recalculated based
on the revised Initial ICOS Cost per Sales Representative.

 

*Confidential Treatment Requested.

 

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Based on the outcome of this calculation, either (a) the Company shall reimburse
ICOS the difference between the original reimbursement and the revised
reimbursement in the event the revised reimbursement exceeds the original
reimbursement or (b) ICOS shall reimburse the Company the difference between the
original reimbursement and the revised reimbursement in the event the revised
reimbursement is less than the original reimbursement. The ICOS Cost per Sales
Representative from the thirteenth month of participation in a country through
the end of the Calendar Year which includes that month, shall be equal to the
revised Initial ICOS Cost per Sales Representative adjusted by the applicable
annual inflation factor described in Section 7.5 (subject to pro rata reduction
based on the percentage of months remaining in the Calendar Year).

 

7.5 Costs per Sales Representative Inflation Adjustment. Through 2006, the Lilly
and ICOS Cost per Sales Representative shall each be adjusted on January 1st of
each Calendar Year. The adjusted Lilly and ICOS Cost per Sales Representative
shall be equal to the product of the previous year’s Lilly and ICOS Cost per
Sales Representative, respectively, multiplied by the expected pharmaceutical
pay increase trend for the applicable year reported by Mercer Human Resource
Consulting Inc. published during the prior year. For example, the inflation
adjustment applied as of January 1, 2004 shall be the expected 2004 rate as
published in the 2003/2004 report distributed during the 2003 calendar year. If
the Mercer report is not available for a particular country, the Parties shall
agree upon an appropriate adjustment.

 

7.6 Recalculation of the Cost per Sales Representative. No later than June [*]
(and every [*] thereafter), Lilly and ICOS shall recalculate their respective
cost per sales representative in accordance with the provisions outlined in
Section 7.4 above, based on actual expenses incurred by each respective company.
This rate will become the Cost per Sales Representative as of January 1st of the
subsequent Calendar Year (i.e. [*]), and will be subject to the inflation
adjustment provisions outlined in Section 7.5 and 7.7.

 

7.7 Hyperinflation. In the event of unusual and significant changes in the Cost
per Sales Representative in the local currency during a given year due to
hyperinflationary circumstances, the Parties may agree to adjust the Lilly Cost
per Sales representative or ICOS Cost per Sales Representative more frequently
than annually.

 

7.8 Reimbursement for Third Party Sales Forces. In the event that either Lilly
or ICOS elect to delegate a portion of all of its allocation of the Sales Force
Promotional Effort pursuant to Section 5.1, these costs shall be reimbursed by
the Company based on the lesser of (a) the cost for the applicable number of
Effective Sales Representatives determined based on the Party’s allocation of
the Sales Force Promotional Effort multiplied by the applicable Lilly or ICOS
Cost per Sales Representative or (b) the actual cost incurred for the contracted
third-party sales force. If no Cost per Sales Representative has yet been
established for ICOS in a particular country, and if the proposed third-party
rate exceeds Lilly’s Cost per Sales Representative in the applicable country,
Lilly will have the right to approve the proposed third-party rate, which
approval shall not be unreasonably withheld; provided, that if the parties had a
negotiation pursuant to section 5.2 but were unable to come to terms regarding
the country in question, the third-party rate will

 

*Confidential Treatment Requested.

 

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be deemed approved if it is less than the highest amount ICOS offered to pay
Lilly to perform the same Details. In no event shall the Company reimburse a
Party for third-party sales activities at a rate higher than the highest rate
offered to the other Party to provide the associated Details (assuming the
parties actually negotiated with respect to the country in question).

 

7.9 Sales Force Incentives. The Company shall approve in advance any Sales Force
Incentives program, which approval shall not be unreasonably withheld. The
Company will reimburse Lilly and ICOS for Sales Force Incentives paid in
accordance with an approved program. To the extent actual Sales Force Incentives
incurred by Lilly and/or ICOS, exceed the amounts determined in accordance with
the approved bonus program, the excess bonus amounts will not be reimbursed by
the Company.

 

7.10 Quarterly Report/Invoice. Unless the Parties agree to a different
procedure, within forty-five (45) days following the end of each Calendar
Quarter, ICOS and Lilly each will prepare a report (the “Invoice”) Detailing (a)
Marketing and Other Selling Expenses, Allocated Business-to-Business Expenses,
FDA Risk Management Expenses and IMS Data Expenses incurred and (b) Sales Force
Promotional Effort Expenses incurred in each country within the Shared Territory
during the prior Calendar Quarter. Within forty-five (45) days following the end
of each Calendar Quarter, ICOS and Lilly will each forward its Invoice to the
Company with a copy to the other Party for review and approval by a designated
representative of each Party. Each Party shall provide sufficient Detail with
each Invoice to support the expenses being charged and will make available to
the other Parties all underlying supporting documentation and records. If an
objection by a Party with respect to an Invoice is not raised within fifteen
(15) days of receipt thereof, such Invoice will be deemed approved (such
approval will not be construed as a waiver of any audit or other rights related
thereto). Once approved as described above, each invoice will be submitted to
the Company for payment in accordance with the terms set forth in Section 7.8.
If necessary, adjustments or corrections to an Invoice as agreed to by ICOS and
Lilly will be made before the Invoice is submitted to the Company for payment.
The Company, or its representatives, will have the right to audit both ICOS and
Lilly records with respect to such Invoices, in accordance with Section 8.2(D).

 

7.11 Reimbursement Payments. The Company will make any payments due under this
Article VII on a quarterly basis to ICOS and Lilly, net fifteen (15) days after
approval of an Invoice as described in Section 7.10

 

7.12 Prelaunch Detail Reimbursement. The Company will approve the type and
amount of Prelaunch Details to be conducted by each of Lilly and ICOS. The
Company will reimburse Lilly and ICOS for such activities pursuant to the
Prelaunch Detail expenses in accordance with the budget for such activities
approved by the Company. Any claim for expenses related to Pre-launch Details
shall be included in the Invoice.

 

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7.13 Exchange Rate. When making payments and/or reimbursements to either Lilly
or ICOS, the Company will make all such payments and/or reimbursements in U. S.
Dollars. Company agrees in determining such amounts, it will use U. S. Generally
Accepted Accounting Principles for the translation of foreign currency
transactions and balances into U.S. Dollars.

 

ARTICLE VIII

ACCOUNTING AND REPORTS

 

8.1 Books and Records. The Parties will keep comprehensive books and records
relating to their respective obligations under this Agreement in accordance with
generally accepted accounting principles. With respect to the Company, such
books and records will document Product sold, shipped and returned for the
Calendar Year as well as all reimbursed expenses. All such books and records
will be maintained for at least three (3) years following the relevant Calendar
Year, or such longer period as is required by law.

 

8.2 Reports. The Parties will provide the following information to one another:

 

A. Product Sold. After the Launch Date, within twenty (20) business days after
the end of each Calendar Quarter, the Company will deliver to each of Lilly and
ICOS a report indicating the quantity of Product sold and the value of these
sales, including revenues derived therefrom and Lilly on-hand inventory levels,
within the Shared Territory on a country-by-country basis.

 

B. Detailing Report. Beginning with the Calendar Quarter ended March 31, 2004,
within twenty (20) business days after the end of each Calendar Quarter, Lilly
and ICOS will deliver to each other and the Company a report indicating. (i) the
number of actual sales representatives for each distinct sales force, (ii) the
Detail Priority for each distinct sales force, and (iii) the Details reported by
each distinct sales force (including any Details completed by third-party sales
forces).

 

C. Product Samples Distributed. Beginning with the Calendar Quarter ended March
31, 2004, within twenty (20) business days after the end of each Calendar
Quarter, Lilly and ICOS will deliver to each other and the Company a report
indicating the number of Product samples distributed within the Shared Territory
on a country-by-country basis.

 

D. Marketing Report. Within twenty (20) business days of the end of each
Calendar Quarter, the Company will deliver to Lilly and ICOS a report regarding
marketing activities and associated Expenses.

 

E. Audits. Each Party’s audit rights will be provided under, pursuant to and in
accordance with the terms of Section 15.1(d) of the LLC Agreement, which terms
are hereby incorporated into this Agreement by this reference.

 

F. Adjustments. In the event that any examination or audit of the records as
described above discloses an under-payment or over-payment of amounts due
hereunder, written notice of such fact, specifying the amount and basis of the
under-payment or over-payment, will promptly be furnished to all Parties by the
person who performs the examination or audit. Within thirty (30) days after
receipt of such a notice, the Party owing any payment hereunder will promptly
make payment to the Party entitled thereto.

 

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G. Report Content. The Company will determine the requirements for the content
of the reports described in Sections 8.2(A) - (D) within the then existing
capabilities of the Lilly and ICOS information technology systems.

 

ARTICLE IX

REPRESENTATIONS OF THE COMPANY

 

The Company represents and warrants to each of Lilly and ICOS as follows:

 

9.1 Authorization. The Company has full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated herein.
This Agreement and the provisions hereof constitute the valid and legally
binding obligations of the Company and do not require the consent, approval or
authorization of any person, public or governmental authority or other entity.

 

9.2 No Conflicts with Other Instruments. The execution and delivery of this
Agreement by the Company, and the performance of its obligations hereunder, are
not in violation or breach of, and will not conflict with or constitute a
default under, the LLC Agreement or any material agreement, contract, commitment
or obligation to which the Company is a Party or by which it is bound, and will
not conflict with or violate any applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court having jurisdiction over the
Company or its assets or properties.

 

ARTICLE X

REPRESENTATIONS BY LILLY AND ICOS

 

Lilly and ICOS each individually, and not jointly, represents and warrants to
the Company as follows:

 

10.1 Authorization. Lilly and ICOS each has full power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
herein. This Agreement and the provisions hereof constitute the valid and
legally binding obligations of each of Lilly and ICOS and do not require the
consent, approval or authorization of any person, public or governmental
authority or other entity.

 

10.2 No Conflicts with Other Instruments. The execution and delivery of this
Agreement by each of Lilly and ICOS, and the performance of their respective
obligations hereunder, are not in violation or breach of, and will not conflict
with or constitute a default under, the Articles of Incorporation or Bylaws of
either Lilly or ICOS, or any material agreement, contract, commitment or
obligation to which either Lilly or ICOS is a Party or by which it is bound, and
will not conflict with or violate any applicable law, rule, regulation,
judgment, order or decree of any governmental agency or court having
jurisdiction over either Lilly or ICOS or their respective assets or properties.

 

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ARTICLE XI

OTHER COVENANTS

 

11.1 Compliance with Laws. The Company, Lilly and ICOS each agrees to perform
its obligations under this Agreement in compliance with all applicable laws,
rules and regulations. Lilly and ICOS will each maintain during the term of this
Agreement a compliance program designed to prevent and detect violations of
applicable laws relating to sales and marketing activities; the program
maintained by each Party in the United States will be designed in a manner
consistent with the Compliance Program Guidance for Pharmaceutical Manufacturers
(the “Guidance”) issued in April, 2003 by the HHS Office of Inspector General,
and will address, at a minimum, the legal risk areas discussed in the Guidance
(to the extent such Party is responsible for the relevant activities described
in the Guidance). In the event any Party receives notice of an inspection or
notification by a governmental entity, including the FDA, relating to the
promotion of the Product, Promotional Materials or compliance with PDMA, the
Party receiving such inspection or notification will notify the other Parties as
soon as possible but in no event later than twenty-four (24) hours after receipt
of such notice or notification, and provide to such other Parties, within
seventy-two (72) hours, copies of all documents, including the FDA Forms 482,
483, Warning Letters and other correspondence and notifications, as such other
Parties may request. The Company, Lilly and ICOS agree to cooperate with each
other during any inspection, investigation or other inquiry by the FDA or any
other governmental entity, including providing information and/or documentation,
as requested by the FDA or other governmental entity, or any of the Parties to
this Agreement. The Company, Lilly and ICOS also agree to discuss any response
to observations or notifications received and to give the other Parties an
opportunity to comment on any proposed response before it is made. In the event
of disagreement concerning the form or content of such response, however, the
Company will be responsible for deciding the appropriate form and content of any
response with respect to the Product (“Regulatory Response”). Each Party agrees
to conform its respective activities, with respect to the Product, only to any
commitments made by such Party in a Regulatory Response.

 

11.2 Adverse Event Reporting. Prior to the commercial launch of the Product in
any country, the Company will have developed written procedures for the
assessment and reporting of Adverse Events and Serious Adverse Events for such
country, which procedures will be reasonably acceptable in form and substance to
Lilly and ICOS. Lilly and ICOS agree to abide by such procedures. Unless
otherwise agreed to by the Parties, the Company intends to enter into an
agreement with [*] to utilize [*] adverse event reporting system where [*] would
be compensated for such services at its cost. For purposes of this Agreement (a)
an “Adverse Event” means any untoward happening in a patient or clinical
investigation subject after the onset of administration of Product without
regard to a causal relationship between such Product and the event, whether or
not such event is considered drug related and (b) a “Serious Adverse Event”
means any Adverse Event with the following conditions: death, life-threatening,
hospitalization or prolonged hospitalization, permanent disability, congenital
abnormality, cancer or other condition deemed serious.

 

 

11.3 Product Quality Complaints and Medical and Technical Inquiries. Prior to
the commercial launch of the Product in any country, the Company will have
developed written procedures for handling and responding to Product quality
complaints and the medical and technical inquiries of customers, physicians,
pharmacists and other healthcare professionals with

 

*Confidential Treatment Requested.

 

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respect to the Product in such country. Lilly and ICOS agree to abide by such
procedures. Unless otherwise agreed to by the Parties, the Company intends to
enter into an agreement with [*] to utilize [*] product quality complaints and
medical and technical inquiry system where [*] would be compensated for such
services at its cost.

 

11.4 Intellectual Property Rights. This Agreement is not intended to transfer or
assign any rights, title or interest in or to the intellectual property of any
other Party, including patents, trademarks, copyrights and know-how. Copyright
interests in Promotional Materials related to Product will be owned by the
Company. Lilly and ICOS may use such copyrighted materials anytime after the
Effective Date.

 

11.5 Product Recalls. In the event that any governmental entity issues a
request, directive or order, or the Company determines in its sole discretion
that Product be recalled, Lilly and ICOS will fully cooperate with the Company
in conducting any such recall and will take all appropriate corrective actions.

 

11.6 Access to Call Reporting Systems and Sales Representatives. Lilly and ICOS
each agrees to provide the other Party, as well as the Company, access
restricted to Product, upon reasonable notice and during normal business hours,
to its internal call reporting system for auditing purposes in accordance with
Section 15.1(d) of the LLC Agreement. In addition, ICOS agrees to allow Lilly’s
sales managers to travel with ICOS’ sales representatives at a reasonable
frequency so that the Lilly sales managers can directly monitor the content,
consistency and delivery of the ICOS sales representative’s Details on the
Product. Lilly also agrees to provide ICOS with the same monitoring rights set
forth in the preceding sentence.

 

11.7 Product Samples. The Parties anticipate that Product samples, if any, will
be provided directly to Lilly and ICOS by the manufacturer thereof and that any
such samples will be provided on the same cost basis as the Company pays for
Product. Product samples, if any, at the time of shipment to Lilly and/or ICOS:
(A) will comply in all material respects with applicable NDA specifications and
internal Company guidelines for acceptance, (B) will conform to the information
indicated on the certificates of analysis for such Product samples, (C) will
comply in all material respects with the requirements of the FDCA, (D) will not
be products that have been adulterated or misbranded within the meaning of the
FDCA and regulations issued thereunder, or any state or local law substantially
similar to the FDCA, and (E) will not be products that may not be introduced
into interstate commerce pursuant to federal or state law. In addition, Product
samples will have been manufactured, packaged, stored and shipped in conformity
with all applicable cGMPs.

 

11.8 Manufacture and Support for the Product.

 

A. Adequate Supply. The Company will use commercially reasonable efforts to
ensure that an adequate supply of the Product is manufactured to meet the
expected demand for the Product in the Shared Territory. The Company will notify
Lilly and ICOS immediately upon the Company’s discovery of any events or
conditions that the Company expects have the potential to have an impact on the
Company’s ability to have an adequate supply of Product. The Parties will meet
within thirty (30) days after such notice to assess the potential impact of such
event or condition on Lilly’s and ICOS’ ability to fulfill their respective
obligations under this Agreement.

 

*Confidential Treatment Requested.

 

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B. NDAs. With respect to each country in the Shared Territory, the Company will
use commercially reasonable efforts to maintain and support the NDA for the
Product. The Company may supplement the NDA, add or delete package or dosage
formats of the Product or change the Package Insert as it deems reasonably
appropriate consistent with the Company’s normal business practice (so long as
any such supplement, addition, deletion or change is in compliance with all
applicable laws, rules and regulations). Lilly and ICOS each acknowledge and
accept that FDA approval may be required for some or all of such matters, and
Lilly and ICOS each agree to cooperate with the Company in this regard and to
not use any affected materials until the Company has notified Lilly and ICOS
each in writing that the Company has received FDA approval or that it is
otherwise permissible to use any such affected materials. The Company will
notify Lilly and ICOS of any proposed amendment to the Package Insert or other
changes that might impact Lilly’s and ICOS’ obligations under this Agreement,
and will provide Lilly and ICOS with at least fifteen (15) days to comment,
before implementation of such amendment or change unless Lilly and ICOS each
agrees in writing to some lesser amount of time in which to comment. In the
event of disagreement between the Parties concerning the form or content of such
amendment, the Company will have the sole right and responsibility to decide
upon the appropriate form and content of such amendment or change; provided,
however, if the Company is unable to make such decision, then it shall be
resolved through the dispute resolution procedures set forth in Article 12 of
the LLC Agreement.

 

11.9 Compliance Audit Request. Each Party will provide the other (and the
Company will cause any third Party under contract with it to provide) with the
right to conduct reasonable compliance and quality assurance audits with respect
to all distribution operations and activities, sampling activities, and
marketing and promotional activities conducted under or in connection with this
Agreement to verify their conformance with applicable legal and regulatory
requirements. Such audits will only be conducted upon reasonable notice during
reasonable business hours.

 

ARTICLE XII

TERM, EXTENSION, AND

TERMINATION OF AGREEMENT

 

12.1 Term. This Agreement will become effective on the Effective Date and will
continue in effect unless the Company is dissolved or it is terminated earlier
as described hereunder or by mutual written agreement of the Parties.

 

12.2 Termination for Material Breach. In the event that either Lilly or ICOS is
in material breach of this Agreement the Company will have the right to
terminate this Agreement after ninety (90) days written notice to Lilly or ICOS
(collectively or individually, as the case may be, the “Breaching Party”) unless
the Breaching Party cures the breach before the expiration of such period of
time. Such notice will set forth in reasonable detail the specifics of the
breach. Similarly, in the event that the Company is in material breach of this
Agreement, the Party whom the breach has been committed against (either Lilly
and/or ICOS) will have the right to terminate this Agreement after ninety (90)
days written notice to the Company (with a copy to the other Party to this
Agreement) unless the Company cures the breach before the expiration of such
period of time. Such notice will set forth in reasonable detail the specifics of
the breach.

 

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12.3 Voluntary Termination by the Company. The Company may terminate this
Agreement for any reason at any time during the term of this Agreement and such
termination will be effective after thirty (30) days written notice to each
Party. During such thirty (30) days, each Party will appropriately commence
wind-down efforts, including reasonable termination of its efforts under this
Agreement and the Company will remain responsible for expenses incurred in
accordance with this Agreement for such period, but only to the extent that such
costs are unavoidable expenses and expenditures.

 

12.4 Termination Upon Insolvency. This Agreement may be terminated by a Party
hereto upon notice to the other Parties should a Party (a) become insolvent, or
(b) file a petition under any bankruptcy or insolvency law or have any such
petition filed against it which has not been stayed within 60 days of such
filing.

 

12.5 LLC Membership Change. Lilly and ICOS will each have the right, but not the
obligation, to terminate this Agreement if the other Party ceases to be a Member
(as defined in Section 1.1 of the LLC Agreement) of the Company. Termination
under this Section 12.5 will be effective upon thirty (30) days written notice
from the Party that desires to exercise such termination right to the other
Parties.

 

12.6 Effect of Termination. Termination of this Agreement will not operate to
release any Party from any obligation or liability incurred under the terms of
this Agreement prior to or upon termination hereof. Any provision of this
Agreement which by its context is intended to apply after termination of this
Agreement will survive its termination, including the provisions of Article VI
(Regulatory Matters), Article VII (Reimbursement of Costs and Expenses), Article
XIII (Indemnification), and Article XIV (Confidentiality).

 

ARTICLE XIII

INDEMNIFICATION

 

13.1 Indemnification by the Company. The Company shall indemnify, defend and
hold ICOS harmless from and against any losses, including product liability,
which arise from any claim, lawsuit or other action by a third party arising out
of the manufacture of the Product, the breach by the Company of its warranties
or obligations under this Agreement, or the negligence or willful misconduct of
the Company, its employees or its agents, except to the extent such losses
result from (i) the breach by Lilly and/or ICOS of their respective warranties
or obligations hereunder or (ii) the negligence or willful misconduct of Lilly
and/or ICOS, their respective employees or their respective agents. The Company
shall indemnify, defend and hold Lilly harmless in the same manner and under the
same conditions, except to the extent Lilly is obligated to indemnify, defend
and hold harmless the Company and its Affiliates pursuant to the Manufacturing
Agreement between Lilly and the Company.

 

13.2 Indemnification By Lilly. Lilly shall indemnify, defend and hold the
Company and ICOS harmless from and against any losses which arise from any
claim, lawsuit or other action by a third party arising out of the breach by
Lilly of its warranties or obligations under this Agreement, or the negligence
or willful misconduct of Lilly, its employees or its agents, except to the
extent such losses result from (i) the breach by the Company and/or ICOS of
their respective warranties or obligations hereunder or (ii) the negligence or
willful misconduct of the Company and/or ICOS, their respective employees or
their respective agents.

 

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13.3 Indemnification by ICOS. ICOS shall indemnify, defend and hold the Company
and Lilly harmless from and against any losses which arise from any claim,
lawsuit or other action by a third party arising out of the breach by ICOS of
its warranties or obligations under this Agreement, or the negligence or willful
misconduct of ICOS, its employees or its agents, except to the extent such
losses result from (i) the breach by the Company and/or Lilly of their
respective warranties or obligations hereunder or (ii) the negligence or willful
misconduct of the Company and/or Lilly, their respective employees or their
respective agents.

 

13.4 Indemnification Procedures. A Party seeking indemnification hereunder (the
“Indemnified Party”) will give written notice to the indemnifying Party (the
“Indemnifying Party”) of its indemnification claims hereunder, specifying the
amount and nature of the claim, and giving the Indemnifying Party the right to
contest any such claim represented by counsel of its choice. If any such claim
is made hereunder by the Indemnified Party and such claim arises from the claims
of a third party against the Indemnified Party and the Indemnifying Party does
not elect to undertake the defense thereof by written notice within fifteen (15)
days after receipt of the original notice from the Indemnified Party, the
Indemnified Party will be entitled to indemnity pursuant to the terms of this
Agreement to the extent of its payment in respect of such claim. To the extent
that the Indemnifying Party undertakes the defense of such claim in good faith
by proceeding diligently at its expense, and without materially impairing the
financial conditions or operations of the Indemnified Party, the Indemnified
Party will be entitled to indemnity hereunder only if, and to the extent that,
such defense is unsuccessful as determined by a final judgment of a court of
competent jurisdiction or is settled with the consent of the Indemnifying Party.
The Party defending a third-party claim will have the right to choose its own
counsel.

 

ARTICLE XIV

CONFIDENTIALITY

 

Except as otherwise expressly provided in this Agreement, each Party will be
subject to the confidentiality provisions provided under, pursuant to and in
accordance with Section 2.7 of the LLC Agreement, which terms are by this
reference incorporated in and made a part of this Agreement.

 

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ARTICLE XV

MISCELLANEOUS

 

15.1 Subcontracting Permitted. Each Party acknowledges and agrees that portions
of the work to be performed hereunder by the Company may be performed on its
behalf by third Parties hired by the Company. If either Lilly or ICOS (as
applicable, the “Subcontracting Party”) determines that proper execution of its
obligations hereunder requires the retention, or either Party desires the
retention, of one or more subcontractors, the Subcontracting Party will, prior
to engaging a third party to perform services hereunder, obtain a written
confidentiality agreement with the subcontractor(s) containing terms no less
restrictive than those contained herein. In addition, the Subcontracting Party
will be fully responsible to the Company and the other Party for any portion of
the services performed by the subcontractor to the same extent as if such
portion of the services was performed directly by the Subcontracting Party.

 

15.2 Third Party Sales Force. Subject to compliance with Section 5.2 and 15.1,
Lilly and ICOS will each have the right to subcontract with third Parties to
assist in performing the Details required of each such Party hereunder provided
that: (a) no such third party is itself, nor is it controlled by, a
pharmaceutical, biotechnology or other similar company that is marketing or
selling any compound for any of the approved indications claimed by the Product
and (b) the Subcontracting Party uses its best efforts to ensure that the sales
and marketing efforts of the third Parties are integrated and coordinated fully
with the sales and marketing strategies of the other Party.

 

15.3 Additional Joint Ventures or Other Structures. The Parties agree to review
the need to create additional joint ventures or other business structures, in
each case applying the global principles set forth herein to the greatest extent
possible, if doing so would maximize the commercial potential of the Product to
the Company in different countries and/or regions throughout the Shared
Territory.

 

15.4 Force Majeure. No Party will be in breach of or liable to any other Party
for loss or damages for any default or delay attributable to any Force Majeure
event if the Party affected gives prompt notice of any such cause to the other
Parties. The Party giving such notice of Force Majeure will take reasonable and
diligent actions to cure such cause. In addition, the Parties will meet promptly
to determine an equitable solution to the effects of any such event. In the
event the Party affected by the Force Majeure event cannot resume its compliance
with this Agreement within ninety (90) days of the event, then the other Party
may terminate this Agreement. For purposes of this Agreement, “Force Majeure”
will mean, without limitation, acts of God, war, fire, flood, earthquake,
strike, labor dispute and the like, provided that such events were not within
the reasonable control of the Party affected.

 

15.5 Non-Solicitation. From the Effective Date until the termination of
activities contemplated by this Agreement and for a period of [*] thereafter,
each Party agrees that it will not directly recruit, solicit or induce any
employee, consultant or agent of another Party to terminate his or her
relationship with such other Party, except as otherwise provided in Section
4.2(A). However, nothing set forth in this section will prohibit a Party from
indirectly recruiting, soliciting or inducing such individual to leave the other
Party through use of advertisements in trade journals and the like or from
discussing employment opportunities with such individuals to the extent such
individuals contact such Party first.

 

*Confidential Treatment Requested.

 

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15.6 Use of Trademarks. Use of one Party’s trademark by another Party will be
pursuant to a Trademark License Agreement in form and substance to be agreed
upon by the Parties.

 

15.7 Limitation of Liability. EXCEPT AS MAY ELSEWHERE HEREIN SPECIFICALLY BE
PROVIDED FOR OTHERWISE, IN NO EVENT WILL ANY PARTY BE LIABLE FOR INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING COSTS OF
PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, OR FOR ANY LOST PROFITS OF ANY
OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING OUT OF THIS
AGREEMENT. THESE LIMITATIONS WILL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.

 

15.8 Successors and Assigns. Except as otherwise provided herein, neither this
Agreement nor any interest hereunder shall be assignable by either Party without
the prior written consent of the other. This Agreement shall be binding upon the
successors and permitted assignees of the Parties and the name of a Party
appearing herein shall be deemed to include the names of such Party’s successors
and permitted assigns to the extent necessary to carry out the intent of this
Agreement. Any assignment not in accordance with this Section shall be void.

 

15.9 Incorporation by Reference. Each Party agrees to the incorporation of the
following provisions, which terms are by this reference incorporated in and made
a part of this Agreement (references are to the Section set forth in the LLC
Agreement): (a) Dispute Resolution — Article 12, (b) Notices — Section 16.1, (c)
Waiver — Section 16.2, (d) Severability — Section 16.3, (e) Further Assurances —
Section 16.5, (f) Governing Law — Section 16.6, (g) Counterparts — Section 16.7,
(h) Limitation on Rights of Others — Section 16.8, (i) Entire Agreement;
Amendment — Section 16.10, (j) Expenses — Section 16.11, (k) Construction —
Section 16.12, (l) Disclaimer of Agency — Section 16.13, (m) Rights and Remedies
— Section 16.14, and (n) Attorneys’ Fees — Section 16.15.

 

15.10 Applicability. This Agreement applies only to the activities of the
Parties in the Shared Territory.

 

15.11 Transition to Amended and Restated Agreement. This Amended and Restated
Marketing and Sales Service Agreement has been executed on the dates marked
below with retroactive effect to January 1, 2003; provided, however, that
neither Party shall be deemed in breach of this Agreement for failure to timely
give or make any notice, report, or accounting prior to the date of execution of
this Amended and Restated Marketing and Sales Service Agreement.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives in the manner legally binding as of the
date first above written.

 

LILLY ICOS LLC   ELI LILLY AND COMPANY By:  

/s/ Paul Clark

--------------------------------------------------------------------------------

  By:  

/s/ John C. Lecheiter

--------------------------------------------------------------------------------

Name:  

Paul Clark

--------------------------------------------------------------------------------

  Name:  

John C. Lecheiter

--------------------------------------------------------------------------------

Title:  

Chairman

--------------------------------------------------------------------------------

  Title:  

Exec. VP, Pharmaceutical Operations

--------------------------------------------------------------------------------

Date:  

December 17, 2004

--------------------------------------------------------------------------------

  Date:  

December 16, 2004

--------------------------------------------------------------------------------

        On behalf of Eli Lilly and Company, Member ICOS CORPORATION         By:
 

/s/ Paul Clark

--------------------------------------------------------------------------------

        Name:  

Paul Clark

--------------------------------------------------------------------------------

        Title:  

President and CEO

--------------------------------------------------------------------------------

        Date:  

December 17, 2004

--------------------------------------------------------------------------------

        On behalf of ICOS Corporation, Member        

 

26

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Exhibit A

Cost Per Sales Representative

 

I. ICOS Cost Per Sales Representative

 

Country

--------------------------------------------------------------------------------

   Initial Year
ICOS Cost per Sales
Representative

--------------------------------------------------------------------------------

United States

   [*]

 

II. Lilly Cost Per Sales Representative

 

Country

--------------------------------------------------------------------------------

   Currency

--------------------------------------------------------------------------------

  

2003

Cost per Sales
Representatives

--------------------------------------------------------------------------------

United States

   USD    [*]

France

   EUR    [*]

Germany

   EUR    [*]

Italy

   EUR    [*]

Spain

   EUR    [*]

United Kingdom

   GBP    [*]

Austria

   EUR    [*]

Belgium

   EUR    [*]

Denmark/Iceland

   DKK    [*]

Finland

   EUR    [*]

Greece

   EUR    [*]

Netherlands

   EUR    [*]

Norway

   NOK    [*]

Portugal

   EUR    [*]

Sweden

   SEK    [*]

Switzerland

   CHF    [*]

Canada

   CAD    [*]

Mexico

   MXN    [*]

 

*Confidential Treatment Requested.