SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ICOS Corporation
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 141-6(i) (4) and 0-11.
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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March 27, 1998
Dear Stockholder:
I cordially invite you to ICOS Corporation's Annual Meeting of
Stockholders, to be held on Wednesday, May 6, 1998, at 9:30 a.m., at the
Four Seasons Olympic Hotel, 411 University Street, Seattle, Washington
98101.
This year you are asked to (1) elect three members to the
Company's Board of Directors and (2) ratify the appointment of KPMG Peat
Marwick LLP as the Company's independent public accountants for fiscal
year 1998.
As the Company's Chairman, I urge you to elect the three
nominated Directors and vote "For" the remaining proposal. It is
important that your shares be represented, regardless of whether or not
you plan to attend the meeting. Therefore, please take a few minutes to
vote now. To validate your vote, you must mark, sign and date the
reverse side of the enclosed proxy card. Please mail the completed
proxy card in the enclosed prepaid envelope.
After the transaction of formal business at the meeting, management
will provide you with an update on the Company's progress. We will also
respond to questions from stockholders. After the meeting we invite you
to tour our Bothell facility. We will provide transportation from the
Four Seasons Olympic Hotel to the Bothell facility, and then return
transportation to the hotel. Please call Lacy Fitzpatrick, Associate
Director, Investor Relations, at (425) 485-1900 for additional
information about the meeting.
On behalf of ICOS Corporation, I would like to thank you for your
support of the Company.
Regards,
/S/ GEORGE B. RATHMANN
Chairman of the Board of Directors,
Chief Executive Officer and President
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ICOS Corporation
22021 - 20th Avenue S.E., Bothell, Washington 98021
Notice of 1998 Annual Meeting of Stockholders
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of ICOS Corporation will be held
at the Four Seasons Olympic Hotel, 411 University Street, Seattle,
Washington 98101, on Wednesday, May 6, 1998, at 9:30 a.m., for the
following purposes:
1. To elect three Directors to serve until the third Annual
Meeting of Stockholders following their election and until
their successors are elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent public accountants for fiscal year
1998; and
3. To transact such other business as may properly come
before the Annual Meeting and all adjournments and
postponements thereof.
Your attention is directed to the accompanying Proxy Statement for
further information with respect to the matters to be acted upon at the
Annual Meeting. To constitute a quorum for the conduct of business at
the Annual Meeting, it is necessary that holders of a majority of all
outstanding shares of the Company's Common Stock be present in person or
represented by proxy. To ensure representation at the Annual Meeting,
you are urged to mark, sign and date the enclosed proxy card and return
it promptly in the enclosed envelope.
Only stockholders of record at the close of business on
March 11, 1998 are entitled to notice of, and to vote at, the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ GEORGE B. RATHMANN
Chairman of the Board of Directors,
Chief Executive Officer and President
March 27, 1998
Bothell, Washington
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING.
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PROXY STATEMENT
OF ICOS CORPORATION
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of ICOS Corporation (the
"Company"), the principal address of which is 22021 - 20th Avenue S.E.,
Bothell, Washington 98021, of proxies in the accompanying form for use
at the 1998 Annual Meeting of Stockholders (the "Annual Meeting") to be
held on Wednesday, May 6, 1998 at 9:30 a.m. at the Four Seasons Olympic
Hotel, 411 University Street, Seattle, Washington 98101. The
approximate date of mailing this Proxy Statement and the enclosed form
of proxy is March 27, 1998.
Each share of the Company's $.01 par value Common Stock ("Common
Stock") outstanding at the close of business on March 11, 1998 is
entitled to one vote per share at the Annual Meeting. Proxies are
solicited so that each stockholder may have an opportunity to vote on
all matters that are scheduled to come before the Annual Meeting. When
properly executed proxies are returned, the shares represented thereby
will be voted in accordance with the stockholders' directions.
Stockholders are urged to specify their choices by marking the
appropriate boxes on the enclosed proxy card; if no choice has been
specified, the shares will be voted as recommended by the Board of
Directors. Under Delaware law and the Company's Restated Bylaws, if a
quorum is present at the Annual Meeting: (i) the three nominees for
election as Directors who receive the greatest number of votes cast for
the election of Directors will be elected and (ii) matter 2 listed in
the accompanying Notice of 1998 Annual Meeting of Stockholders will be
approved if a majority of shares of Common Stock, present in person or
represented by proxy and entitled to vote, votes in favor of such
matter. The presence in person or by proxy of holders of record of a
majority of the outstanding shares of Common Stock is required to
constitute a quorum for the transaction of business at the Annual
Meeting. Means have been provided whereby a stockholder may withhold
the vote for any Director and may vote against, or refrain from voting
on, any matter other than the election of Directors. In the election of
Directors, any action other than a vote for a nominee will have the
practical effect of voting against the nominee. Abstention from voting
will have the practical effect of voting against matter 2 since it is
one less vote for approval.
The enclosed proxy card also confers discretionary authority to
vote the shares authorized to be voted thereby on any matter that was
not known on the date of mailing this Proxy Statement but that may
properly be presented for action at the Annual Meeting.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS
OF WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
Any stockholder returning a proxy has the power to revoke it at any
time before shares represented thereby are voted at the Annual Meeting.
Any shares represented by an unrevoked proxy will be voted according to
that proxy unless the stockholder attends the Annual Meeting and votes
in person. A stockholder's right to revoke a proxy is not limited by or
subject to compliance with a specified formal procedure, but written
notice of such revocation should be given to the Company's Secretary at
or before the Annual Meeting.
The expense of printing and mailing proxy material will be borne by
the Company. In addition to the solicitation of proxies by mail,
solicitation may be made by certain Directors, officers and other
employees of the Company in person or by telephone, facsimile
transmission, telegraph or telex. No compensation will be paid for such
solicitation.
Arrangements also will be made with brokerage firms and other
custodians, nominees and fiduciaries to forward proxy solicitation
material to certain beneficial owners of the Common Stock. The Company
will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith.
Voting Securities and Record Date
Holders of Common Stock are entitled to vote at the Annual Meeting
on the basis of one vote for each share of Common Stock held of record.
On March 11, 1998, the record date for determining stockholders entitled
to vote at the Annual Meeting, 39,903,945 shares of Common Stock were
outstanding. As of the record date, Directors and affiliates of the
Company own or have the power to vote shares representing approximately
18.2% of the voting power of the Common Stock.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership, as of March 11, 1998, of the Common Stock by (i)
each person known by the Company to beneficially own more than 5% of the
outstanding Common Stock; (ii) each Director and nominee for Director;
(iii) each of the Named Executive Officers included in the Summary
Compensation Table; and (iv) all Directors and executive officers as a
group.
Shares
Beneficially Percentage of
Name and Address Owned (1) (2) Common Stock
George B. Rathmann (3).......... 2,134,714 5.3%
c/o ICOS Corporation
22021 - 20th Avenue S.E.
Bothell, WA 98021
Gary L. Wilcox.................. 462,922 1.1%
W. Michael Gallatin............. 183,047 *
Thomas P. St. John.............. 177,086 *
Howard S. Mendelsohn............ 62,225 *
Frank T. Cary................... 155,605 *
James L. Ferguson............... 139,355 *
William H. Gates, III........... 5,031,501 12.6%
c/o Michael Larson
2365 Carillon Point
Kirkland, WA 98033
Janice M. LeCocq................ 291,225 *
David V. Milligan............... 59,441 *
Robert W. Pangia................ 124,355 *
Alexander B. Trowbridge......... 139,355 *
Walter B. Wriston............... 144,105 *
All Directors and executive
officers as a group (13 persons) 9,104,936 21.8%
* Less than 1%.
(1) Unless otherwise indicated, the persons named have sole
voting and investment power with respect to all shares shown
as beneficially owned by them, subject to applicable community
property laws. Amounts shown include shares owned and stock
options and warrants that may be exercised within 60 days.
(2) Includes options and warrants that may be exercised for
Common Stock within 60 days of March 11, 1998, for each
individual as follows: George B. Rathmann, 297,559 shares;
Gary L. Wilcox, 462,922 shares; W. Michael Gallatin, 140,547
shares; Thomas P. St. John, 134,586 shares; Howard S.
Mendelsohn, 62,225 shares; Frank T. Cary, 124,355 shares;
James L. Ferguson, 124,355 shares; William H. Gates, III,
5,882 shares; Janice M. LeCocq, 66,225 shares; David V.
Milligan, 59,341 shares; Robert W. Pangia, 124,355 shares;
Alexander B. Trowbridge, 124,355 shares; Walter B. Wriston,
124,355 shares; and all Directors and executive officers as a
group, 1,851,062 shares.
(3) Includes 150,000 shares held by the Rathmann Family
Revocable Trust.
Election of Directors
The Company's Board of Directors consists of ten Directors, each of
whom is elected for a three-year term. The Board of Directors is
divided into three classes, with one class of Directors elected to
three-year terms at each Annual Meeting of Stockholders. Seven of the
Directors are serving terms that continue beyond the Annual Meeting. Of
the continuing Directors, four are serving terms that will not expire
until the 1999 Annual Meeting of stockholders and three are serving
terms that will not expire until the 2000 Annual Meeting of
stockholders. At the Annual Meeting, three Directors will be elected,
each of whom will hold office for a term of three years or until his
successor is elected and qualified.
The Board of Directors has unanimously nominated William H. Gates,
III, Robert W. Pangia and George B. Rathmann for election at the
Annual Meeting. Unless otherwise instructed, it is the intention of the
persons named as proxies on the enclosed proxy card to vote shares
represented by properly executed proxies for the three nominees to the
Board of Directors named above. If any nominee shall not be a candidate
for election as a Director at the Annual Meeting, it is intended that
votes will be cast pursuant to the enclosed proxy for such substitute
nominee as may be nominated by the Board. No circumstances are
presently known that would render any nominee named herein unavailable
to serve.
Nominees for Election as Class 2 Directors. The following are
the nominees to serve as Class 2 Directors until the Annual Meeting of
Stockholders to be held in the year 2001:
William H. Gates, III (age 42) has been a Director of the Company
since July 1990. Mr. Gates is a co-founder of Microsoft Corporation, a
software company, and has been its Chief Executive Officer and Chairman
of the Board since its incorporation in 1981.
Robert W. Pangia (age 46) has been a Director of the Company
since April 1990. Currently a private investor, Mr. Pangia served
from 1987 to 1996 as Executive Vice President and Director of
Investment Banking at PaineWebber Incorporated, which is engaged in
investment banking and securities brokerage. From 1986 until joining
PaineWebber in 1987, he was a Managing Director with Drexel
Burnham Lambert, an investment banking firm. From 1977 to 1986,
Mr. Pangia worked in various positions in the Corporate Financing
Department at Kidder Peabody & Co., an investment banking and
securities brokerage firm, including serving as Director of the
Technology Finance Group. He is currently a director of IDEC
Pharmaceuticals and Ryan, Beck & Company.
George B. Rathmann (age 70) has been the Company's Chairman of the
Board since January 1990 and Chief Executive Officer and President since
September 1991. Dr. Rathmann was previously associated with Abbott
Laboratories, Inc., a healthcare products manufacturer, where from 1975
o 1977 he was Director of Research and Development and from 1977 to
1980, Divisional Vice President. In 1980, he co-founded Amgen, Inc.
("Amgen"), a publicly held biotechnology company. He was a Director of
Amgen until 1993 and since 1980 has, at various times, also served as
its Chairman of the Board, President and Chief Executive Officer. He is
currently a Director of Somatogen, Inc. Dr. Rathmann received his Ph.D.
in physical chemistry from Princeton University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE -FOR-
THE ELECTION OF THE ABOVE-NAMED NOMINEES
TO THE BOARD OF DIRECTORS.
Continuing Directors (until 1999)
The four Class 3 Directors, David V. Milligan, Alexander B.
Trowbridge, Gary L. Wilcox and Walter B. Wriston, are currently
serving terms that expire at the 1999 Annual Meeting of Stockholders
and until their respective successors are elected and qualified.
David V. Milligan (age 57) has been a Director of the Company
since October 1995. In 1996, Dr. Milligan retired from Abbott
Laboratories, a healthcare products manufacturer, where he served as
Senior Vice President and Chief Scientific Officer. Dr. Milligan
joined Abbott Laboratories in 1979 and headed both the diagnostics
and pharmaceutical research and development organizations during his
career there. Dr. Milligan is currently non-executive Chairman of the
Board of Caliper Technologies, Inc., and Versicor. He is also a
member of the Business Advisory Board of Bay City Capital, a San
Francisco based merchant bank. Dr. Milligan received an A.B. in
chemistry from Princeton University, as well as an M.S. and a Ph.D.
in organic chemistry from the University of Illinois.
Alexander B. Trowbridge (age 68) has been a Director of the
Company since January 1990. He was President of the National
Association of Manufacturers, a national trade association, from
1980 to 1990, and is currently President of Trowbridge Partners,
Inc., a business consulting firm. In 1967 and 1968, Mr. Trowbridge
was Secretary of Commerce in the administration of President Johnson,
having served as Assistant Secretary of Commerce from 1965 to 1967.
He was Vice Chairman of Allied Chemical Corporation (now Allied-Signal)
from 1976 through 1980. From 1970 to 1976, he was President of The
Conference Board, a management and economic research organization.
He is currently a Director of the E.M. Warburg-Pincus Funds, Gillette
Company, Harris Corporation, IRI International Corp., New England
Life Insurance Company, The Rouse Company, The Sun Company, and
Waste Management, Inc.
Gary L. Wilcox (age 51) joined the Company in September 1993 as
Executive Vice President, Operations and has been a Director of the
Company since 1993. In April, 1995, Dr. Wilcox was appointed
Corporate Secretary of the Company. Previously, Dr. Wilcox served
as Vice Chairman, Executive Vice President and Director of Xoma
Corporation, a biotechnology company. From 1982 to 1989 he was the
President and Chief Executive Officer of International Genetic
Engineering, Inc., known as Ingene, which he co-founded. In 1989,
Ingene was acquired by Xoma Corporation. Dr. Wilcox is currently a
Director of London Pacific Group Limited, and Pepperdine University.
Dr. Wilcox received his Ph.D. in molecular biology and biochemistry
from the University of California at Santa Barbara.
Walter B. Wriston (age 78) has been a Director of the Company
since January 1990. He was Chairman of the Board from 1970 through
1984 and Chief Executive Officer from 1967 through 1984 of
Citicorp/Citibank, N.A., a national banking association. Mr. Wriston
is currently a Director of Cygnus, Inc., VION Pharmaceuticals, Inc.,
and York International Corporation. He is former Chairman of
President Reagan's Economic Policy Advisory Board, a member and former
Chairman of The Business Council and a former Co-Chairman and Policy
Committee member of the Business Roundtable.
Continuing Directors (until 2000)
The three Class 1 Directors, Frank T. Cary, James L. Ferguson,
and Janice M. LeCocq, are currently serving terms that expire at the
2000 Annual Meeting of Stockholders and until their respective
successors are elected and qualified.
Frank T. Cary (age 77) has been a Director of the Company since
January 1990. He was elected Chairman of the Board of International
Business Machines Corporation, a business equipment manufacturer, in
1973. He is currently a Director of Celgene Corporation, Cygnus Inc.,
LEXMARK, Lincare, Inc., VION Pharmaceuticals, Inc., SPS Transaction
Services, Inc., Seer Technologies and Teltrend, Inc.
James L. Ferguson (age 72) has been a Director of the Company since
January 1990. He became Chief Executive Officer of General Foods
Corporation in 1973, assumed the combined offices of Chairman and
President in 1974, and retired in 1989. Mr. Ferguson is currently a
Director of VION Pharmaceuticals, Inc., a member of The Business Council
and Council on Foreign Relations, a Trustee of the Aspen Institute, and
a Life Trustee of Hamilton College. He is past Chairman of the Grocery
Manufacturers of America, Inc., the Council for Aid to Education, and
The Conference Board.
Janice M. LeCocq (age 48) has been a Director of the Company since
October 1990. Since December 1994, she has been Chairman and Chief
Executive Officer of Gryphon Sciences, a biotechnology company. From
October 1990 to December 1994, Dr. LeCocq served as the Executive Vice
President, Finance and Administration and Chief Financial Officer of the
Company. From 1986 to 1990, Dr. LeCocq held positions within the
corporate finance group at Montgomery Securities, an investment banking
company. From 1985 to 1986, she was responsible for the investor
relations consulting group at Regis McKenna, a communications company.
Dr. LeCocq is currently a Director of Molecular Dynamics. Dr. LeCocq
received her Ph.D. from Stanford University.
Other Executive Officers
W. Michael Gallatin (age 44) is currently Vice President and
Scientific Director of the Company, a position he has held since April
1995. Dr. Gallatin joined the Company in 1990 as Director of the Cell
Adhesion Program and became a Senior Director, Science, in July 1992.
He was appointed Vice President, Biological Research, in October 1993.
Prior to joining the Company, Dr. Gallatin was a faculty member of the
Fred Hutchinson Cancer Research Center in Seattle, Washington, and an
affiliate faculty member of the Department of Microbiology at the
University of Washington. He received his Ph.D. in immunology from the
University of Alberta (Canada) for his research on genetic resistance
to neoplastic disease and mechanisms of tumor cell metastasis.
Dr. Gallatin has been actively researching immunobiology and cell
adhesion for 21 years and has authored numerous scientific articles,
including the first description of a cell adhesion molecule involved
in site-specific leukocyte traffic, which he published in 1983 while a
postdoctoral fellow at Stanford University.
Howard S. Mendelsohn (age 40) is currently the Chief Accounting
Officer of the Company, a position he has held since March 1994, prior
to which he served as Corporate Controller, beginning in November 1992.
From 1989 to 1990, Mr. Mendelsohn was Chief Financial Officer of
Biotope, Inc., a medical product manufacturer. From 1987 to 1990, he
served as Chief Financial Officer of BioControl Systems, Inc., a
diagnostics manufacturing company. Mr. Mendelsohn received his B.S. in
biochemical business management from the University of California and is
a Certified Management Accountant.
Thomas P. St. John (age 45) is currently the Vice President,
Therapeutic Development for the Company, a position he has held since
October 1993. Dr. St. John joined the Company in September 1990 as
Director of the Structural Cell Biology Program and became a Senior
Director, Science, in July 1992. Prior to joining the Company, Dr. St.
John was a faculty member of the Fred Hutchinson Cancer Research Center,
Seattle, Washington, and an affiliate faculty member of the University
of Washington in the department of Medicine and department of Genetics.
Dr. St. John received his Ph.D. in biochemistry from Stanford University
in 1980. He conducted predoctoral research at the California Institute
of Technology in the division of Biology and postdoctoral research at
Stanford University in the departments of Medical Microbiology and
Pathology. Dr. St. John's record of publications in the fields of cell
adhesion and immunology reflect an 18-year research focus on molecular
identification of cell adhesion molecules and delineation of their roles
in immune cell function and leukocyte traffic.
Information on Committees of the Board of Directors and Meetings
The Board of Directors met six times during the fiscal year ended
December 31, 1997. Each of the Directors, with the exception of Mr.
Gates, attended more than 75% of the meetings of the Board of Directors
and of meetings held by all committees of the Board of Directors on
which they served.
The Board of Directors has three standing committees: an Audit Committee,
a Compensation Committee and a Nominating Committee.
The Audit Committee consists of three nonemployee Directors, Messrs.
Ferguson, Trowbridge and Wriston (Chairman). The Audit Committee
reviews the preparation of the Company's accounts and considers the
engagement of independent public accountants for the ensuing year and
the terms of such engagement. In addition, the Audit Committee reviews
the scope of the audit proposed by such accountants and receives and
reviews the audit reports. The Audit Committee met once during the
fiscal year ended December 31, 1997.
The Compensation Committee consists of three nonemployee Directors,
Messrs. Cary (Chairman) and Ferguson and Dr. Milligan. The Compensation
Committee establishes the salary and certain terms of employment of the
Company's officers and administers the Company's 1989 Stock Option Plan
(the "1989 Plan") and the grants of options thereunder. The
Compensation Committee met three times during the fiscal year ended
December 31, 1997.
The Nominating Committee consists of Dr. Rathmann (Chairman) and
Messrs. Trowbridge and Wriston. The Nominating Committee makes
recommendations to the Board of Directors concerning the qualifications
of prospective candidates to fill vacancies on, or to be elected or re-
elected to, the Board of Directors. The Nominating Committee also makes
recommendations to the Board of Directors concerning candidates for
election as Chief Executive Officer of the Company, election of other
corporate officers and succession planning for senior management. No
procedures have been established for considering nominations by
stockholders. The Nominating Committee met once during the fiscal year
ended December 31, 1997.
Compensation of Directors
The Company has a policy of paying Directors who are not employees
of the Company an annual fee of $15,000 for service on the Board of
Directors, together with a fee of $1,000 for each Board meeting and $500
for each Board committee meeting attended.
The 1991 Stock Option Plan for Nonemployee Directors (the "Director
Plan") provides for an initial grant and automatic annual grants
thereafter to each nonemployee Director of nonqualified stock options
for a number of shares determined by dividing $100,000 (increased by
$10,000 each year starting in 1993) by the market price of the Common
Stock on the date of grant. The exercise price of the options will be
the closing market price of the Common Stock on the date of grant.
Options granted under the Director Plan become 50% exercisable after the
Director has served for one year from the date of initial election to
the Board of Directors and 100% after two years. The options have a
ten-year term but cannot be exercised later than two years after
termination of service as a Director.
Executive Compensation
The following table sets forth certain information regarding
compensation paid by the Company during the past three fiscal years to
its Chief Executive Officer and the other four most highly compensated
executive officers in 1997 (the "Named Executive Officers").
Summary Compensation Table
Annual Long-Term
Compensation Compensation
Awards
Name and
Principal Securities
Position Year Salary Underlying All Other
($) Options (#) Compensation ($)
George B. Rathmann 1997 $370,000 19,035 -
Chief Executive 1996 335,000 48,788 -
Officer and President 1995 276,500 55,852 -
Gary L. Wilcox 1997 312,000 72,819 -
Executive Vice 1996 282,000 49,252 -
President, Operations 1995 257,000 59,878 -
W. Michael Gallatin 1997 225,000 36,025 -
Vice President and 1996 170,000 31,354 -
Scientific Director 1995 146,250 20,000 -
Thomas P. St. John 1997 200,000 36,275 -
Vice President, 1996 155,000 30,194 -
Therapeutic Development 1995 135,000 15,000 -
Howard S. Mendelsohn 1997 140,000 40,000 -
Chief Accounting 1996 115,000 12,000 -
Officer 1995 100,000 10,000 -
1997 Option Grants
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers in 1997. See "Report of
the Compensation Committee on Executive Compensation."
Option Grants in Fiscal 1997
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term (2)
Percent
of Total
Number of Options
Securities Granted to
Underlying Employees Exercise
Options in Fiscal Price Expiration
Name Granted (#) 1 Year ($/Share) Date 0% ($) 5% ($) 10% ($)
- -------- ------------- ---------- ---------- ----------- ------ -------- -------
George B. Rathmann 19,035 2% $8.609 1/8/07 $0 $103,240 $260,557
Gary L. Wilcox 72,819 6% $8.609 1/8/07 0 394,946 996,769
W. Michael Gallatin 36,025 3% $8.609 1/8/07 0 195,388 493,121
Thomas P. St. John 36,275 3% $8.609 1/8/07 0 196,744 496,543
Howard S. Mendelsohn 40,000 3% $8.609 1/8/07 0 216,947 547,532
- -----------------------------------------------------------------------------------------------------------
Totals for:
Named Executive
Officers: 204,154 17% $0 $1,107,264 $2,794,523
All Shareholders (3): $0 $215,945,767 $547,248,973
(1) The options granted to Management Incentive Program ("MIP")
participants in 1997 (for performance in 1996) as described in the
report of the Compensation Committee became exercisable upon grant
date. The total number of MIP options granted to the Named
Executive Officers in 1997 were 19,035, 22,819, 16,025 and 16,275
to Drs. Rathmann, Wilcox, Gallatin and St. John, respectively.
Mr. Mendelsohn was not a participant in the MIP during 1996.
Options granted under the periodic stock option grant program
became exercisable in 48 equal monthly installments beginning
January 8, 1997. The per share option exercise prices represent
the fair market value of the Common Stock on the date of grant
based on the closing price of the Common Stock as reported on
The Nasdaq National Market. The option term is ten years. The
optionee would have the right immediately prior to certain changes
of control of the Company to exercise his or her option in whole or
in part whether or not the vesting requirements set forth in his or
her option agreement have been satisfied. The exercise price and
tax withholding obligations relating to exercise may be paid by
delivery of already-owned shares or by offsetting the underlying
shares, subject to certain conditions. See "Employment Contracts,
Termination of Employment and Change of Control Arrangements."
(2) The dollar amounts under these columns are the result of
calculations at the 0%, 5% and 10% rates in accordance with
regulations of the Securities and Exchange Commission ("SEC") and
therefore are not intended to forecast possible future
appreciation, if any, of the Common Stock price. Actual gains, if
any, on stock option exercises depend on the future performance of
the Common Stock and overall market conditions, as well as the
optionholders' continued employment through the vesting period.
The amounts reflected in this table may not necessarily be
achieved.
(3) The increase in the market value of the holdings of all of the
Company's stockholders over a ten-year period based on 39,885,414
shares of Common Stock outstanding as of December 31, 1997, at
assumed annual rates of appreciation of 5% and 10% from a base
price of $8.609 per share (which is the weighted average of the
exercise prices of the grants), would be $215,945,767 and
$547,248,973, respectively. Thus, the potential realizable gain
on options granted in 1997 to the Named Executive Officers
represents 0.51% of the total realizable gain by all stockholders
if the assumed appreciation rates of 5% and 10% are achieved.
Actual gains, if any, depend on the future performance of the
Common Stock and overall market conditions. The amounts reflected
in this table may not necessarily be achieved.
1997 Option Exercises and Year-end Option Values
No stock options were exercised by the Named Executive Officers
during 1997. The following table sets forth for the Named Executive
officers the number of shares covered by both exercisable and
nonexercisable stock options as of December 31, 1997. Also reported are
the values for "in-the-money" options, which represent the positive
spread between the exercise price of any such existing stock options and
the year-end price of the Common Stock.
Fiscal Year-End Option Values
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Options at
Year-End (#) Fiscal Year-End ($)
Name Exercisable Unexercisable Exercisable Unexercisable
George B. Rathmann 244,750 59,625 $2,547,550 $752,023
Gary L. Wilcox 408,132 87,117 5,077,247 989,963
W. Michael Gallatin 96,811 46,668 1,076,017 536,537
Thomas P. St. John 93,501 44,168 1,030,910 500,756
Howard S. Mendelsohn 54,829 40,521 638,849 413,182
(1) Amounts are based on the December 31, 1997 closing price of the
Common Stock of $18.3125 per share as reported on The Nasdaq
National Market. There is no guarantee that if and when these
options are exercised, they will have this value.
Compensation Committee Interlocks and Insider Participation
During 1997, the Compensation Committee consisted of Messrs. Cary,
Ferguson and Milligan. In August 1997, each of Messrs. Cary and
Ferguson purchased an interest in ICOS Clinical Partners, L.P.,
an affiliate of the Company, for a purchase price of $100,000 per
unit. See "Certain Relationships and Related Transactions."
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee") is responsible for establishing compensation levels for
the Company's executive officers, establishing and administering
performance-based compensation plans, evaluating the performance of the
Company's executive officers, considering management succession and
related matters, and administering the 1989 Plan. The Committee is
comprised of Frank T. Cary (Chairman), James L. Ferguson and David V.
Milligan, all of whom are independent nonemployee Directors of the
Company. The Committee reviews with the Board of Directors all aspects
of compensation for the executive officers; decisions regarding awards
of stock options under the 1989 Plan, however, are made solely by the
Committee.
The Committee takes into account the compensation paid by competing
companies in the industry to assist it in determining the reasonableness
of compensation for executive officers of the Company and to ensure that
the Company is able to attract and retain key executive talent.
The Committee's compensation policy is to structure executive
compensation such that a substantial portion of the annual compensation
of each executive officer is related to a combination of the Company's
overall performance and each officer's individual contribution. As a
result, much of an executive officer's compensation is comprised of
stock options that, by their nature, provide value to that officer in
direct proportion to the performance of the Common Stock price and,
thus, its value to stockholders over time. These stock options are
granted to executive officers pursuant to two separate programs, a
performance-based incentive program and a periodic grant program.
Base Salaries. Executive officer salary levels are based on a
subjective evaluation of the compensation of the individual compared to
competitive salaries of individuals in similar positions in the
biotechnology industry; however, they are not targeted to a specific
level of comparable compensation. In fulfilling its duties, the
Committee relies on compensation statistics from various sources,
including a survey of executive compensation for 335 public and private
companies in the biotechnology industry (the "Survey"). Salary levels
for 1997 for the Company's executive officers ranged between the 50th
and 75th percentiles of base salary compensation for representative
positions within the Survey for 1997. Approximately 32% of the public
companies included in the Survey are included in the "Nasdaq
Pharmaceutical Stock Index," which is included in the Stock Price
Performance Graph on page 11.
Annual and Long-Term Incentive Compensation. The Committee
generally does not anticipate awarding annual cash bonuses while the
Company is in a loss position. Instead, the MIP was established in 1994
for certain executive officers of the Company. During 1997, Drs.
Gallatin, Rathmann, St. John and Wilcox participated in this
performance-based incentive program. Under the MIP, a number of options
reserved for issuance under the 1989 Plan are set aside annually in a
pool for grants to MIP participants. Maximum individual grant award
targets depend on the level of the individual's responsibility. Option
grants to MIP participants are based on a combination of Company
performance and individual performance against predetermined incentive
objectives that reflect aggressive goals, which in general exceed
expected results for the year. For 1997, the total number of options in
the pool available for grant to participants was based on the successful
completion of a series of corporate objectives, listed in order of
relative weighting. The objectives included clinical development,
discovery research, financing, company collaborations and financial
performance. Options representing a total of 126% of the available
incentive option pool for completion of corporate objectives were
available for allocation to individual MIP participants. The size of
individual grants from the pool to participants in 1997 was based on
successful completion of objectives established for each individual.
Options granted to individuals for achieving incentive objectives in
1997 ranged from 73% to 123% of the individual grant award target.
Option grants under the MIP have an exercise price equal to the fair
market value of the Common Stock on the grant date, are subject to
immediate vesting, and expire after ten years or three months after
termination of employment, whichever is earlier. The Option Grants in
Fiscal 1997 table set forth on page 8 reflects MIP awards for 1996 made
in 1997, together with grants made in 1997 pursuant to the periodic
stock option grant program.
All Company employees, including executive officers, participate in
a periodic stock option grant program. The program's primary purpose is
to offer an incentive for long-term performance of the Company through
increases in the market price of the Common Stock, and related return on
equity to the Company's stockholders. Under the program, stock options
are granted to employees on a periodic schedule, on the basis of each
employee's respective salary, responsibilities, position within the
Company, and performance for those individuals who are nonexecutive
officers. In determining the size of stock option grants under the
periodic program, the Committee considers the price of the Company's
Common Stock but does not consider the outstanding number of stock
options held by each individual. The options granted through the program
have an exercise price equal to the fair market value of the Common
Stock on the grant date, vest monthly over a four-year period, and
terminate after ten years, or three months after termination of
employment, whichever is earlier.
1997 Compensation of the Chief Executive Officer. In
determining Dr. Rathmann's salary for 1997, the Committee considered
competitive compensation data for chairmen and chief executive officers
of similar companies within the biotechnology industry. Dr. Rathmann
received a salary increase of 10% in 1997, which resulted in a base
salary in the 50th percentile of base salaries for chief executive
officers of companies in the Survey. As a result of his participation
in the MIP for 1997, Dr. Rathmann received options to purchase 18,434
shares of Common Stock, or 73% of the individual grant target. This
amount was based on a combination of the achievement of certain
corporate objectives and individual performance criteria relating to
clinical development, research, financing, corporate partnerships and
other operational factors. These options were granted in January 1998.
In 1997, Dr. Rathmann did not receive a stock option grant under the
Company's periodic stock option grant program described above. In
January 1997, Dr. Rathmann received options to purchase 19,035 shares of
Common Stock pursuant to his participation in the MIP in 1996.
Section 162(m) Limitations on Executive Compensation. Section
162(m) of the Internal Revenue Code of 1986, as amended, makes certain
non-performance-based compensation in excess of $1,000,000 paid to
executive officers of public companies nondeductible by such companies.
Certain performance-based compensation that has been approved by
stockholders is not subject to the deduction limit.
Submitted by the Compensation Committee of the Company's Board of
Directors
Frank T. Cary, Chairman
James L. Ferguson
David V. Milligan
Stock Price Performance Graph
The graph below compares the cumulative total stockholder return on
the Common Stock with the cumulative total stockholder return of The
Nasdaq Stock Market Total Return Index (U.S. Companies) and The Nasdaq
Stock Market Pharmaceutical Stock Index, an index of approximately 375
companies, the stocks of which are quoted on The Nasdaq National Market
and the Primary Standard Industrial Classification Code Number of which
is 283, Pharmaceutical Companies. The Company will provide to
stockholders upon request a list of companies that comprise the Nasdaq
Pharmaceutical Stock Index. Note: Stock price performance shown for
the Company is historical and not necessarily indicative of future price
performance.
Comparison of Cumulative Total Return Among ICOS Corporation,
The Nasdaq Stock Market Total Return Index (U.S. Companies)
and The Nasdaq Pharmaceutical Stock Index (1)
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Nasdaq Stock Market Total Return Index (U.S. Companies) $100 $115 $112 $159 $195 $240
Nasdaq Pharmaceutical Stock Index $100 $89 $67 $123 $123 $127
ICOS Corporation $100 $74 $48 $97 $100 $240
(1) Assumes $100 was invested on December 31, 1992 in the Common Stock,
the Nasdaq Stock Market Total Return Index (U.S. Companies) and
The Nasdaq Pharmaceutical Stock Index. Total return performance
for The Nasdaq Stock Market Total Return Index (U.S. Companies) and
The Nasdaq Pharmaceutical Stock Index is weighted based on the
market capitalization of the firms included in each index and
assumes that dividends are reinvested. The Nasdaq Stock Market
Total Return Index (U.S. Companies) and The Nasdaq Pharmaceutical
Stock Index are produced and published by the Center for Research
in Securities Pricing at the University of Chicago, Graduate School
of Business, 1101 East 58th Street, Chicago, Illinois 60637.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
Any option granted either under the 1989 Plan or the Director Plan
shall terminate in the event of a merger (other than a merger of the
Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of common stock in the
surviving corporation immediately after the merger), consolidation,
acquisition of property or stock, separation, reorganization (other than
a mere reincorporation or the creation of a holding company) or
liquidation of the Company, as a result of which the Company's
stockholders receive cash, stock or other property in exchange for or in
connection with their shares of Common Stock, but the optionee would
have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation to exercise his or her option in whole or in part whether or
not the vesting requirements set forth in the option agreement have been
satisfied. The exercise price and tax withholding obligations relating
to exercise may be paid by delivery of already-owned shares or by
offsetting the underlying shares, subject to certain conditions.
If the stockholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common
Stock in any transaction involving a merger, consolidation, acquisition
of property or stock, separation or reorganization, except in certain
conditions, all options granted under the 1989 Plan, including those to
executive officers, will be converted into options to purchase shares of
the Exchange Stock unless the Company and the other corporation in their
sole discretion determine that any or all such options will terminate.
If such options are determined to terminate, the optionee will have the
right immediately prior to such merger, consolidation, acquisition of
property or stock, separation or reorganization, to exercise such
optionee's option in whole or in part whether or not the vesting
requirements have been satisfied.
If the options are converted into options for Exchange Stock then
each converted option shall become fully vested and immediately
exercisable unless such option is (i) assumed by the successor
corporation or such option is to be replaced with a comparable option
for the purchase of shares of the capital stock of the successor
corporation or its parent corporation or (ii) to be replaced with a cash
incentive program of the successor corporation that preserves the spread
existing at the time of the transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such
option. Any such options that are assumed or replaced and do not
otherwise accelerate at the time of the transaction shall be accelerated
in the event the optionee's employment or services should subsequently
terminate within two years following such transaction, unless such
termination shall be for cause or by the optionee voluntarily without
good reason.
Certain Relationships and Related Transactions
During 1997, the Company contracted with Gryphon Sciences, a start-
up biotechnology corporation ("Gryphon"), whereby Gryphon has utilized
its proprietary technology to synthesize certain proteins for evaluation
by the Company. The Company has paid $84,000 to Gryphon for such
services. Dr. LeCocq, a Director of the Company, is the Chairman and
Chief Executive Officer and a stockholder of Gryphon. Falcon Technology
Partners ("Falcon"), a venture capital limited partnership in which Dr.
Rathmann, the Company's Chairman, Chief Executive Officer and President,
is the limited partner and two of Dr. Rathmann's adult children, James
L. Rathmann and Richard C. Rathmann, are the general partners, has a
minority interest in Gryphon.
In June 1996, the Company entered into a transaction with Charybdis
Corporation, a start-up biotechnology company ("Charybdis"), in which
the Company (i) licensed and released to Charybdis certain technology
that the Company had independently determined would not be part of the
Company's development programs, (ii) agreed to provide incubation
services to Charybdis, including laboratory space and certain small-
molecule screening services and know-how, which services the Company
expects to extend for additional consideration, and (iii) received stock
of Charybdis. This agreement was extended and expanded to provide the
Company with an option to acquire rights to certain technologies
developed by Charybdis or to convert the value of the Company's services
provided to Charybdis into additional stock of Charybdis. In addition,
for a cash investment in June 1996, Charybdis issued stock to Falcon
Technology Partners II, L.P. ("Falcon II"), a venture capital limited
partnership all of whose interests (general partner and limited partner
interests) are directly or indirectly held by Dr. Rathmann's five adult
children. Falcon II borrowed funds from Falcon for its investment in
Charybdis. The Company and Falcon have a controlling interest in
Charybdis. In accordance with the rights of the Company to designate a
director to the board of directors of Charybdis, Dr. Wilcox, the
Company's Executive Vice President, Operations, became a director of
Charybdis.
The Gryphon and Charybdis transactions described in the preceding
paragraphs have been approved by the disinterested members of the
Company's Board of Directors.
In August 1997, ICOS Clinical Partners, L.P. (the "Partnership"),
an affiliate of the Company, completed the sale to private investors of
interests in the Partnership. Dr. Rathmann, an officer and Director of
the Company, and each of Messrs. Cary, Ferguson, Gates and Pangia,
Directors of the Company, purchased interests in the Partnership
(each a "Unit"). Dr. Rathmann purchased 41 Units for $4.1 million,
Mr. Gates purchased 41 Units for $4.1 million, Messrs. Cary, Ferguson
and Pangia each purchased one Unit for $100,000.
Appointment of Independent Public Accountants
The Board of Directors will request that the shareholders ratify
its selection of KPMG Peat Marwick LLP, independent auditors, to examine
the financial statements of the Company for the fiscal year ending
December 31, 1998. KPMG Peat Marwick LLP examined the financial
statements of the Company for the fiscal year ended December 31, 1998.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting to make a statement if they desire to do so and respond to
questions of shareholders. The affirmative vote of a majority of the
shares represented at the Annual Meeting is required for the
ratification of the Board's selection of KPMG Peat Marwick LLP as the
Company's independent auditors.
The Board of Directors recommends a vote FOR the ratification of
the selection of KPMG Peat Marwick LLP as independent auditors of the
Company.
Proposals of Stockholders
A stockholder who intends to present a proposal at the 1999 Annual
Meeting of Stockholders and desires that information regarding the
proposal be included in the 1999 proxy statement and proxy must ensure
that such information is received by the Company in writing no later
than December 4, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers, and persons who
own more than 10% of a registered class of securities, to file with the
SEC the initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers,
Directors and greater-than-10% beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Other Business
As of the date of this Proxy Statement, the Company knows of no
other business to be presented at the Annual Meeting. If any other
business properly comes before the Annual Meeting, it is intended that
the shares represented by proxies will be voted with respect thereto in
accordance with the best judgment of the persons named in the
accompanying proxy.
Annual Reports
Copies of the 1997 Annual Report to stockholders of the Company are
being mailed to stockholders concurrently with this Proxy Statement, the
proxy and the Notice of 1998 Annual Meeting of Stockholders. Additional
copies may be obtained from the Investor Relations Department at the
Company's principal executive offices.
Upon written request addressed to the Investor Relations Department
at the Company's principal executive offices from any person solicited
herein, the Company will provide, at no cost, a copy of the Form 10-K
Annual Report filed with the SEC for the fiscal year ended
December 31, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ GEORGE B. RATHMANN
Chairman of the Board of Directors,
Chief Executive Officer and President
March 27, 1998
Bothell, Washington
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