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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))
[X] 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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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 Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
March 30, 2000
Dear Stockholder:
I cordially invite you to ICOS Corporation's Annual Meeting of
Stockholders, to be held on Thursday, May 4, 2000, 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 LLP as the Company's
independent public accountants for fiscal year 2000.
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, whether or not you plan to attend the
meeting. Therefore, please take a few minutes to vote now. To validate your
vote, you must follow the specified instructions on your proxy card or 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 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 limited roundtrip transportation from the Four
Seasons Olympic Hotel to the Bothell facility. To make a reservation for bus
transportation and/or for additional information about the meeting, please
call our Investor Relations Department at (425) 489-8687.
On behalf of ICOS Corporation, I would like to thank you for your support
of the Company.
Regards,
/s/ Paul N. Clark
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and
President
ICOS Corporation
22021 - 20th Avenue S.E., Bothell, Washington 98021
Notice of 2000 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 Thursday, May 4, 2000, 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 consider and vote upon a proposal to ratify the appointment of
KPMG LLP as the Company's independent public accountants for fiscal
year 2000; 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 prepaid
envelope.
Only stockholders of record at the close of business on March 8, 2000
are entitled to notice of, and to vote at, the Annual Meeting.
By Order of the Board of Directors
/s/ Paul N. Clark
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and
President
March 30, 2000
Bothell, Washington
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING.
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 2000 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, May 4, 2000, 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 30, 2000.
Each share of the Company's $.01 par value Common Stock ("Common Stock")
outstanding at the close of business on March 8, 2000 is entitled to one vote
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 voted, 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, or, if no choice has been
specified, the shares will be voted as recommended by the Company's 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 in the election of
Directors will be elected and (ii) matter 2 listed in the accompanying Notice
of 2000 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 at the meeting, vote 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. Abstentions and
broker nonvotes will be included in determining the presence of a quorum at
the Annual Meeting. In the election of Directors, an abstention or broker
nonvote will have no effect on the outcome. 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, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
1
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
8, 2000, the record date for determining stockholders entitled to vote at the
Annual Meeting, 45,456,223 shares of Common Stock were outstanding.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership, as of February 29, 2000, 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
Paul N. Clark....................................... 262,103 *
George B. Rathmann (3).............................. 3,028,453 6.6%
5404 Lake Washington Blvd. N.E., Apt. I
Kirkland, WA 94033
Gary L. Wilcox...................................... 538,761 1.2%
W. Michael Gallatin................................. 248,631 *
Thomas P. St. John.................................. 245,750 *
Patrick W. Gray..................................... 162,041 *
Clifford J. Stocks.................................. 80,141 *
Howard S. Mendelsohn................................ - *
Frank T. Cary....................................... 187,087 *
2
James L. Ferguson............................................. 164,372 *
William H. Gates III.......................................... 5,702,983 12.4%
c/o Michael Larson
2365 Carillon Point
Kirkland, WA 98033
David V. Milligan............................................. 74,923 *
Robert W. Pangia.............................................. 147,837 *
Alexander B. Trowbridge....................................... 144,837 *
Walter B. Wriston............................................. 159,587 *
All Directors and executive officers as a group (15 persons).. 11,147,506 22.7%
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* 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 of February 29, 2000.
(2) Includes options and warrants that may be exercised for Common Stock
within 60 days of February 29, 2000, for each individual as follows: Paul
N. Clark, 262,103 shares; George B. Rathmann, 930,807 shares; Gary L.
Wilcox, 518,761 shares; W. Michael Gallatin, 206,131 shares; Thomas P.
St. John, 203,250 shares; Patrick W. Gray, 138,041 shares; Clifford J.
Stocks, 80,141 shares; Frank T. Cary, 147,837 shares; James L. Ferguson,
155,837 shares; William H. Gates III, 677,364 shares; David V. Milligan,
74,823 shares; Robert W. Pangia, 147,837 shares; Alexander B. Trowbridge,
139,837 shares; Walter B. Wriston, 139,837 shares; and all Directors and
executive officers as a group, 3,822,606 shares.
(3) Includes 410,491 shares held by the Rathmann Family Revocable Trust.
3
Election of Directors
The Company's Board of Directors consists of nine 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. Six of the Directors are serving terms that
continue beyond the Annual Meeting. Of the continuing Directors, three are
serving terms that will not expire until the 2001 Annual Meeting of
Stockholders and three are serving terms that will not expire until the 2002
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 and until his
successor is elected and qualified.
The Board of Directors has unanimously nominated Frank T. Cary, James L.
Ferguson and David V. Milligan 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 1 Directors. The following are the
nominees to serve as Class 1 Directors until the Annual Meeting of
Stockholders to be held in the year 2003:
Frank T. Cary (age 79) has been a Director of the Company since January
1990. He was Chairman and CEO of the Board of International Business Machines
Corporation, a business equipment manufacturer, from 1973 to 1980. He is
currently a Director of Celgene Corporation, Cygnus, Inc., LEXMARK, Lincare,
Inc., VION Pharmaceuticals, Inc. and Teltrend, Inc.
James L. Ferguson (age 74) 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.
David V. Milligan (age 59) has been a Director of the Company since
October 1995. In 1996, Dr. Milligan retired from Abbott Laboratories, Inc., 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 the 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, Inc., as
well as a member of the boards of directors of Diametrics Medical, Maxia
Pharmaceuticals, Reliant Pharmaceuticals and The Presbyterian Homes. He is
also a vice president 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE ABOVE-NAMED NOMINEES
TO THE BOARD OF DIRECTORS.
Continuing Class 2 Directors (until 2001)
The three Class 2 Directors, Paul N. Clark, William H. Gates III and
Robert W. Pangia are currently serving terms that expire at the 2001 Annual
Meeting of Stockholders and until their respective successors are elected and
qualified.
4
Paul N. Clark (age 53) has been a Director, President and Chief
Executive Officer of the Company since June 1999 and the Company's Chairman of
the Board since February 2000. In December 1998, Mr. Clark retired from Abbott
Laboratories, Inc., a healthcare products manufacturer, as Executive Vice
President and board member. He served from 1984 to 1990 as Vice President and
from 1990 to 1998 as Senior Vice President. His previous experience included
senior positions with Marion Laboratories and Sandoz Pharmaceuticals (now
Novartis Corporation). Mr. Clark received his B.S. in Finance from the
University of Alabama and his MBA from Dartmouth College, Amos Tuck School.
William H. Gates III (age 44) has been a Director of the Company since
July 1990. Mr. Gates is a co-founder of Microsoft Corporation, a software
company, and was its Chief Executive Officer and Chairman of the Board from
its incorporation in 1981 until January 2000, and Chief Software Architect and
Chairman of the Board since January 2000.
Robert W. Pangia (age 48) 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.
Continuing Class 3 Directors (until 2002)
The three Class 3 Directors, Alexander B. Trowbridge, Gary L. Wilcox and
Walter B. Wriston, are currently serving terms that expire at the 2002 Annual
Meeting of Stockholders and until their respective successors are elected and
qualified.
Alexander B. Trowbridge (age 70) 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 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 and Sunoco, Inc.
Gary L. Wilcox (age 53) 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 80) 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.
5
Other Executive Officers
W. Michael Gallatin (age 46) 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 22
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.
Patrick W. Gray (age 48) is currently Vice President, Science, for the
Company, a position he has held since January 1998. Dr. Gray joined the
Company in September 1990 as Director of the Leukocyte Biochemistry Program
and became a Senior Director, Science, in July 1992. Prior to joining the
Company, Dr. Gray was a senior scientist at Genentech for nine years where his
laboratory was the first to characterize genes for several cytokines. As a
postdoctoral fellow at the University of California, San Francisco, his
research focused on the characterization of Hepatitis B viral surface antigen,
now the basis of a recombinant vaccine. Dr. Gray received his Ph.D. in
chemistry from the University of Colorado. His research has resulted in over
100 publications and has led to development of several recombinant clinical
candidates and several approved recombinant pharmaceuticals.
Thomas P. St. John (age 47) is currently 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 in 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 undergraduate
research at the California Institute of Technology in the Division of Biology,
predoctoral research at Stanford University in the Department of Biochemistry
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 a 20-year research focus on
molecular identification of cell adhesion molecules and delineation of their
roles in immune cell function and leukocyte traffic.
Clifford J. Stocks (age 41) is currently Vice President, Business
Development, for the Company, a position he has held since January 1999. Mr.
Stocks joined the Company in February 1992 as a Business/Corporate Development
Manager, and became Director, Business Development, in January 1993 and Senior
Director, Business Development, in January 1997. Prior to joining ICOS, Mr.
Stocks was an Associate with Booz Allen & Hamilton, management consultants in
the Chicago Health Services Practice. His background includes research at the
Department of Immunology at the University of Utah and the Department of
Molecular Genetics at the University of Chicago. Mr. Stocks received a B.S. in
biology from the University of Utah in 1980 and a master's of business
administration from the University of Chicago Graduate School of Business in
1989.
Information on Committees of the Board of Directors and Meetings
The Board of Directors met six times during the fiscal year ended
December 31, 1999. All Directors, except Mr. Ferguson, attended at least 80%
of the meetings of the Board of Directors and of meetings held by all
committees of the Board of Directors on which they served. Mr. Ferguson
attended 100% of the meetings of the Board of Directors, but was unable to
attend the 1999 meeting of the Audit Committee.
6
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, 1999.
The Compensation Committee consists of three nonemployee Directors,
Messrs. Cary (Chairman) and Ferguson and Dr. Milligan. The Compensation
Committee is responsible for establishing compensation levels for the
Company's executive officers, establishing and administering performance-based
compensation plans, evaluating the performances of the Company's executive
officers, considering management succession and related matters, and
administering the Company's stock option plans. The Compensation Committee met
twice during the fiscal year ended December 31, 1999.
The Nominating Committee consists of Messrs. Clark (Chairman),
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 reelected 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 did not meet during the
fiscal year ended December 31, 1999.
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.
Pursuant to the Company's Stock Option Grant Program for Nonemployee
Directors (the "Director Program"), nonemployee Directors receive automatic
option grants upon their initial election or appointment to the Board of
Directors and, subject to certain limitations, at each annual meeting of
stockholders thereafter, assuming continued service on the Board. Under the
Director Program, each eligible Director is entitled to receive nonqualified
stock options for a number of shares determined by dividing $170,000 by the
closing market price of the Common Stock on the grant date. The exercise price
of the options will be the closing market price of the Common Stock on the
date of the grant. Options granted to nonemployee Directors under the Director
Program become 50% exercisable after the Director has served for one year from
the date of initial election to the Board of Directors and 100% after two
years from such date. The options have a ten-year term but cannot be exercised
later than two years after the termination of service as a Director. During
1999, the Company granted each nonemployee Director a stock option
representing the right to purchase 4,352 shares of Common Stock pursuant to
the Director Program.
7
Executive Compensation
The following table sets forth information regarding compensation paid
by the Company during the past three fiscal years to its Chief Executive
Officer, the other five most highly compensated executive officers at year-end
and two former officers (the "Named Executive Officers").
Summary Compensation Table
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Annual Long-Term
Compensation Compensation Awards
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Name and Principal Other Annual Securities Underlying All Other
Position Year Salary ($) Compensation ($) Options (#) Compensation ($) (5)
- ----------------------------------------------------------------------------------------------------------
Paul N. Clark 1999 $271,000 (1) $152,937 (2) 1,500,000 $356
President, Chief
Executive Officer and
Chairman of the Board
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Gary L. Wilcox 1999 385,000 -- 44,291 752
Executive Vice 1998 345,000 -- 62,090 --
President, 1997 312,000 -- 72,819 --
Operations
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W. Michael Gallatin 1999 280,000 -- 26,530 459
Vice President and 1998 250,000 -- 40,152 --
Scientific Director 1997 225,000 -- 36,025 --
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Thomas P. St. John 1999 270,000 -- 27,314 459
Vice President, 1998 230,000 -- 37,376 --
Therapeutic Development 1997 200,000 -- 36,275 --
- ----------------------------------------------------------------------------------------------------------
Patrick W. Gray 1999 175,000 -- 4,500 383
Vice President, 1998 150,000 -- 15,000 --
Science 1997 126,000 -- 40,000 --
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Clifford J. Stocks 1999 175,000 -- 15,000 229
Vice President, 1998 137,000 -- 7,500 --
Business Development 1997 128,000 -- 40,000 --
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George B. Rathmann (3) 1999 515,000 -- 46,671 309
Former Chief Executive 1998 430,000 -- 63,434 --
Officer, Chairman 1997 370,000 -- 19,035 --
of the Board and
President
- ----------------------------------------------------------------------------------------------------------
Howard S. Mendelsohn (4) 1999 179,000 -- 6,900 234
Former Chief Accounting 1998 160,000 -- 11,000 --
Officer 1997 140,000 -- 40,000 --
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(1) On June 11, 1999, Mr. Clark entered into an employment agreement with the
Company pursuant to which he will be paid a base salary of $500,000 per
year for a term of five years beginning on the commencement of his
employment on June 16, 1999. See "Report of the Compensation Committee on
Executive Compensation", "1999 Compensation of the Chief Executive
Officers" and "Employment Contracts, Termination of Employment and Change
of Control Arrangements."
(2) Represents reimbursement of travel, temporary living expenses and the
related personal tax obligations.
(3) Dr. Rathmann ceased being Chief Executive Officer and President effective
June 16, 1999 and retired from his position as Chairman of the Board
effective February 1, 2000.
(4) Mr. Mendelsohn resigned his position as Chief Accounting Officer and was
no longer an employee of the Company effective December 10, 1999. Upon
his termination of employment, Mr. Mendelsohn forfeited 5,606 of the
stock options granted to him in 1999.
(5) Reflects group term life insurance premiums paid by ICOS Corporation.
8
1999 Option Grants
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers in 1999. See "Report of the
Compensation Committee on Executive Compensation."
Option Grants in Fiscal 1999
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Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term (4)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted
Options to Employees in Exercise Price Expiration
Name Granted (#) Fiscal Year ($/Share) (3) Date 0% ($) 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------------------
Paul N. Clark 16,161 (1) 1% $37.125 6/16/09 $ 0 $ 377,322 $ 956,209
1,483,839 (1) 60% $42.875 6/16/09 0 26,112,173 79,263,250
Gary L. Wilcox 44,291 (2) 2% $28.000 3/10/09 0 779,922 1,976,477
W. Michael Gallatin 26,530 (2) 1% $28.000 3/10/09 0 467,168 1,183,896
Thomas P. St. John 27,314 (2) 1% $28.000 3/10/09 0 480,974 1,218,881
Patrick W. Gray 4,500 (2) * $28.000 3/10/09 0 79,241 200,812
Clifford J. Stocks 15,000 (2) 1% $28.000 3/10/09 0 264,136 669,372
George B. Rathmann 46,671 (2) 2% $28.000 3/10/09 0 821,832 2,082,684
Howard S. Mendelsohn (5) 6,900 (2) * $28.000 3/10/09 0 121,502 307,911
- --------------------------------------------------------------------------------------------------------------------------
Totals for:
Named Executive Officers 1,671,206 68% $ 0 $ 29,504,270 $ 87,859,492
All Stockholders (6) $ 0 $1,018,707,879 $2,581,605,777
- --------------------------------------------------------------------------------------------------------------------------
* Represents less than 1% of total options granted to employees in 1999.
(1) On June 11, 1999, Mr. Clark entered into an employment agreement with the
Company pursuant to which he was granted an option (the "Option")
representing the right to purchase 1.5 million shares of the Company's
Common Stock at exercise prices as listed above. The Option granted to Mr.
Clark becomes exercisable in 60 equal monthly installments beginning upon
commencement of employment on June 16, 1999, and is subject to an
accelerated vesting schedule upon the Company's achievement of a certain
milestone. Mr. Clark will also receive an additional stock option grant
representing the rights to 300,000 shares should the Company achieve such
milestone before June 30, 2002. According to the terms of the employment
agreement, in the event the exercise price for the Option or any taxes due
upon its exercise are paid by the surrender of other Common Stock, or for
the payment of withholding taxes by withholding of shares, Mr. Clark will
be granted a replacement option for the number of shares used to make that
payment. The replacement option has an exercise price equal to the fair
market value of the Common Stock on the date the replacement option is
granted and a term expiring on the expiration date of the original
option. In the event of the termination of Mr. Clark by the Company
without cause or by Mr. Clark for good reason, the employment agreement
further stipulates that the Option will fully vest and be exercisable over
the next two years. In addition, any other unvested options, restricted
stock or performance shares will become fully vested in the event of
termination as discussed above. See "Employment Contracts, Termination of
Employment and Change of Control Arrangements" for further information
regarding Mr. Clark's employment agreement.
(2) Options granted to Named Executive Officers other than Mr. Clark were
awarded under the Company's 1998 Management Incentive Program ("MIP")
and/or periodic stock option grant program. The options granted to MIP
participants in 1999 (for performance in 1998) were fully exercisable upon
grant. The total number of MIP options granted to the Named Executive
Officers in 1999 were 18,271, 23,091, 16,030 and 17,214 to Drs. Rathmann,
Wilcox, Gallatin and St. John, respectively. Dr. Gray and Messrs. Stocks
and Mendelsohn were not participants in the MIP during 1998. Options
granted under the periodic stock option grant program become exercisable
in 48 equal monthly installments beginning March 10, 1999. Options expire
ten years from the date of the grant. The exercise price and tax
withholding obligations relating to exercise may be paid by delivery of
already owned shares or, subject to certain conditions, by offsetting the
underlying shares. According to the terms of the Company's stock option
plans, certain changes of control of the Company would provide optionees
the right to exercise their options in whole or in part whether or not the
vesting requirements set forth in their option agreements have been
satisfied. See "Employment Contracts, Termination of Employment and Change
of Control Arrangements" for a description of provisions regarding
acceleration of vesting upon certain changes in control.
(3) The exercise price of each option, other than the option to purchase
1,483,839 shares granted to Mr. Clark, is equal to the fair market value
of the underlying Common Stock on the date of the grant based on the
closing price of the Common Stock as reported on The Nasdaq Stock
Market. The exercise price of the option to purchase 1,483,839 shares of
Common Stock granted to Mr. Clark was $5.75 higher than the fair market
value of the underlying Common Stock on the date of the grant.
(4) The actual value, if any, that a Named Executive Officer or any other
individual may realize will 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 realizable values
presented above reflect assumed compounded growth rates of 0%, 5% and 10%
in accordance with regulations of the
9
Securities and Exchange Commission ("SEC"). These values are not intended
to forecast possible future appreciation, if any, in the price of the
Common Stock. There can be no assurance that the actual value realized by
a Named Executive Officer or stockholder will approximate the potential
realizable values set forth in the table.
(5) Upon his departure from the Company on December 10, 1999, Mr. Mendelsohn
forfeited 5,606 of the 6,900 options granted during the year.
(6) The increase in the market value of the holdings of all the Company's
stockholders over a ten-year period based on 44,759,052 shares of Common
Stock outstanding as of December 31, 1999, at assumed annual rates of
appreciation of 5% and 10% from a base price of $36.19 per share (which
represents the weighted-average of the fair market value of the
underlying Common Stock on the dates of the grants to Named Executive
Officers during 1999) would be $1,018,707,879 and $2,581,605,777,
respectively. Thus, the potential realizable gain on options granted in
1999 to the Named Executive Officers represents 2.90% and 3.40%,
respectively, of the total realizable gain by all stockholders if the
assumed appreciation rates of 5% and 10% are achieved. Actual gains, if
any, depend on the future performance of the Common Stock and overall
market conditions. The amounts reflected in this table may not
necessarily be achieved.
10
1999 Option Exercises and Year-End Option Values
The following table sets forth certain information regarding option
exercises during the year and options held by Named Executive Officers as of
December 31, 1999.
Aggregated Option Exercises in 1999 and Fiscal Year-End Option Values
- -------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money Options at Fiscal
Options at Fiscal Year-End (#) Year-End ($) (1)
- -------------------------------------------------------------------------------------------------------------------------
Value
Shares Acquired Realized
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
Paul N. Clark -- $ -- 150,000 1,350,000 $ -- $ --
Gary L. Wilcox 64,851 1,544,580 485,533 51,246 10,107,107 571,591
W. Michael Gallatin -- -- 186,108 24,053 3,447,193 257,277
Thomas P. St. John -- -- 179,412 22,947 3,279,826 247,350
Patrick W. Gray -- -- 120,423 22,802 2,674,584 334,162
Clifford J. Stocks -- -- 80,852 27,478 1,586,136 298,308
George B. Rathmann 260,491 4,924,329 105,227 48,762 1,717,217 362,869
Howard S. Mendelsohn 88,875 1,863,944 1,456 -- 25,496 --
(1) Stock options are valued based upon the closing price of a share of Common
Stock as reported on The Nasdaq Stock Market on December 31, 1999 ($29.25).
There is no guarantee that if and when these options are exercised, they
will have this value.
Compensation Committee Interlocks and Insider Participation
During 1999, the Compensation Committee consisted of Messrs. Cary and
Ferguson and Dr. Milligan. Each of Messrs. Cary and Ferguson is indebted to ICOS
Clinical Partners, L.P., an affiliate of the Company, in connection with their
August 1997 purchase of interests in such limited partnership. As of December
31, 1999, the outstanding amount of such indebtedness for Messrs. Cary and
Ferguson was $20,000 each. See "Certain Relationships and Related Transactions."
11
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 performances of the Company's executive
officers, considering management succession and related matters, and
administering the Company's stock option plans. 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, 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 405 public and private companies in the biotechnology industry (the
"Survey"). Salary levels for 1999 for the Company's executive officers ranged
between the 60th and 90th percentiles of base salary compensation for
representative positions within the Survey for 1999. Approximately 41% of the
public companies included in the Survey are included in the "CRSP Total Return
Index for The Nasdaq Pharmaceutical Stocks," which is included in the Stock
Price Performance Graph on page 14.
Annual and Long-Term Incentive Compensation. The Committee 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. For 1999, Messrs. Clark and Stocks and Drs. Gallatin,
Gray, Rathmann, St. John, and Wilcox participated in this performance-based
incentive program. Under the MIP, a number of options reserved for issuance
under the 1999 Stock Option 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 1999 performance,
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, business development and financial
performance. Because of corporate performance in 1999, options representing a
total of 95% 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 for
1999 performance was based on successful completion of objectives established
for each individual. 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 1999 table
set forth on page 9 reflects MIP awards made in 1999 for performance against
1998 objectives, together with grants made in 1999 pursuant to the periodic
stock option grant program.
12
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 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.
1999 Compensation of the Chief Executive Officers. Mr. Clark's
compensation for 1999 was established in his employment agreement, which is
more fully described in this proxy statement under the heading "Employment
Contracts, Termination of Employment and Change of Control Arrangements."
Mr. Clark's annual base salary for 1999 was $500,000, and he was granted a
stock option to purchase 1,500,000 shares of the Company's Common Stock under
the 1999 Stock Option Plan. In addition, as a result of his participation in
the MIP for 1999 for six months, Mr. Clark received a stock option to purchase
10,409 shares of Common Stock, or 92.5% 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, discovery research, business development and financial
performance. These options were granted in January 2000. During 1999,
Mr. Clark did not participate in the Company's periodic stock option grant
program described above.
In determining Dr. Rathmann's salary for 1999, 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 20% in 1999, which resulted in a base salary in the 65th
percentile of base salaries for chief executive officers of companies in the
Survey. As a result of his participation in the MIP for 1999, Dr. Rathmann
received stock options to purchase 20,818 shares of Common Stock, or 93% 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, discovery research, business
development and financial performance. These options were granted in January
2000. During 1999, Dr. Rathmann did not participate in the Company's periodic
stock option grant program described above. In March 1999, Dr. Rathmann
received options to purchase 18,271 shares of Common Stock pursuant to his
participation in the MIP in 1998.
Section 162(m) Limitations on Executive Compensation. Compensation
payments in excess of $1 million to each of the Chief Executive Officer or
four other most highly compensated executive officers are subject to a
limitation on deductibility for the Company under Section 162(m) of the
Internal Revenue Code of 1986, as amended. Certain performance-based
compensation is not subject to the limitation on deductibility. The Committee
does not expect cash compensation in 2000 to the Chief Executive Officer or
any other executive officer to be in excess of $1 million. The 1999 Stock
Option Plan is designed to qualify stock option awards for the performance-
based exception to the $1 million limitation on deductibility of compensation
payments.
Submitted by the Compensation Committee of the Company's Board of Directors
Frank T. Cary, Chairman
James L. Ferguson
David V. Milligan
13
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 CRSP Total
Return Index for The Nasdaq Stock Market (U.S. Companies) and CRSP Total
Return Index for The Nasdaq Stock Market Pharmaceutical Stocks, an index of
approximately 240 companies, the stocks of which are quoted on The Nasdaq
Stock Market and the Primary Standard Industrial Classification Code Number of
which is 283, Pharmaceutical Companies. Upon request, the Company will provide
to stockholders 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 CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies)
and CRSP Total Return Index for The Nasdaq Pharmaceutical Stocks(/1/)
[COMPARISON GRAPHIC FOR ICOS CORPORATION]
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------
ICOS Corporation........ $100 $200 $207 $497 $807 $793
CRSP Total Return Index
for The Nasdaq Stock
Market (U.S.
Companies)............. $100 $141 $174 $213 $300 $542
CRSP Total Return Index
for The Nasdaq
Pharmaceutical Stocks.. $100 $183 $184 $190 $242 $452
- --------------------------------------------------------------------------------
(1) Assumes $100 was invested on December 31, 1994 in the Common Stock, The
CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies) and
CRSP Total Return Index for The Nasdaq Pharmaceutical Stocks. Total
return performance for the CRSP Total Return Index for The Nasdaq Stock
Market (U.S. Companies) and CRSP Total Return Index for The Nasdaq
Pharmaceutical Stocks is weighted based on the market capitalization of
the firms included in each index and assumes that dividends are
reinvested. The CRSP Total Return Index for The Nasdaq Stock Market (U.S.
Companies) and CRSP Total Return Index for The Nasdaq Pharmaceutical
Stocks are produced and published by the Center for Research in Security
Prices at the University of Chicago, Graduate School of Business, 1101
East 58th Street, Chicago, Illinois 60637.
14
Employment Contracts, Termination of Employment and Change of Control
Arrangements
Employment Agreement Between ICOS Corporation and Paul N. Clark. On June
11, 1999, the Company entered into an employment agreement with Paul N. Clark
(the "Agreement"), pursuant to which Mr. Clark was to commence employment on
June 16, 1999, serve as President and Chief Executive Officer of the Company,
be elected a director of the Company, and have overall charge and
responsibility for the business and affairs of the Company. The Agreement is
for a term of five years; however, starting with the second anniversary of the
Agreement, the Agreement will be extended under a daily three-year "evergreen"
feature such that the remaining term of the Agreement will always be at least
three years unless either party gives notice of discontinuation of the
"evergreen" feature. Under the terms of the Agreement, Mr. Clark's annual
salary will be $500,000, subject to increase at the sole discretion of the
Board, and Mr. Clark was granted a ten-year stock option (the "Option") to
purchase 1,500,000 shares of the Company's Common Stock under the 1999 Stock
Option Plan. The exercise price for the portion of the Option that is to be
treated as an incentive stock option is the closing price of the Common Stock
as reported by the Nasdaq National Market on the date of commencement of Mr.
Clark's employment. The exercise price for the portion of the Option that is
to be treated as a nonqualified stock option is the closing price of the
Common Stock as reported by the Nasdaq National Market on the date of
execution of the Agreement by Mr. Clark, but not less than 85% of the closing
Nasdaq National Market price on the date of commencement of employment. The
Option vests ratably over a 60-month period. If the Company receives FDA
approval of a new drug application, the last 300,000 shares to vest under the
Option will accelerate in vesting as of the date of approval. If such approval
occurs before June 30, 2002, Mr. Clark will be granted an additional option to
purchase 300,000 shares at an exercise price equal to the closing price on the
date of the grant, which vests in equal monthly amounts over a 48-month
period. In addition, the Agreement also provides that Mr. Clark will be
granted certain replacement stock options in the event that the exercise of
the Option, the exercise of a previously granted replacement stock option, or
the payment of taxes related to such exercises is affected by the surrender of
other Common Stock held by Mr. Clark and that the then fair market value of
the Common Stock is at least 25% higher than the exercise price of the Option
or replacement stock option being exercised. The replacement stock options
will be for the same amount of shares as surrendered by Mr. Clark, will vest
six months after the date of grant, will have a term equal to the remainder of
the original Option and will have an exercise price equal to the fair market
value of the Common Stock on the date of grant.
The Agreement also obligates the Company to reimburse Mr. Clark for
certain travel and temporary living expenses, relocation services and
professional fees and taxes incurred in relation to certain payments made by
the Company to, or for the benefit of, Mr. Clark under the Agreement.
In the event of termination of employment by the Company without cause,
or by Mr. Clark for good reason, the Agreement provides that (a) the Option
will fully vest and be exercisable over the next two years, (b) any additional
stock options, restricted stock or performance shares granted to Mr. Clark
will likewise become fully vested, and (c) Mr. Clark will have the option of
receiving (i) continuing payments of his then current annual salary plus an
annual payment equal to his most recent annual performance cash bonus target
(or most recent cash bonus payment) for a period of three years or (ii) a lump
sum representing such salary continuation and bonus payment based on a 6%
annual discount factor. The foregoing salary continuation and bonus payments
will not be paid if, at the time of the termination, the aggregate built-in-
gain of all vested stock options granted to Mr. Clark is greater than $6
million.
If any payment to Mr. Clark under the Agreement or otherwise would
subject him to federal excise taxes imposed under Section 4999 of the Internal
Revenue Code, as amended, on "excess parachute payments," the Company is
obligated to make an additional payment to Mr. Clark in an amount sufficient
to cover (a) the excise tax due under such Section 4999, (b) all taxes due on
such additional payment being paid to Mr. Clark, and (c) any interest and/or
penalties with respect to such taxes.
Employment Agreement Between ICOS Corporation and Gary Wilcox. In
September 1993, the Company entered into a four-year employment agreement with
Dr. Gary Wilcox pursuant to which Dr. Wilcox was employed as a senior
executive officer of the Company and nominated for election to the Board of
Directors.
15
According to the terms of the agreement, Dr. Wilcox's employment is
automatically renewed for successive one-year terms upon expiration of the
initial four-year employment period, unless notice of nonrenewal is given. In
the event that the Company terminates Dr. Wilcox's employment without cause or
Dr. Wilcox terminates the agreement for good reason, Dr. Wilcox will receive
severance pay through the end of the one-year term. The severance pay is based
on his then current annual salary and may be reduced under certain
circumstances.
Change of Control Arrangements. Options outstanding under the Company's
1991 Stock Option Plan for Nonemployee Directors and the 1989 Stock Option
Plan (the "1989 Plan"), and any options outstanding or to be granted under the
1999 Stock Option Plan, will 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. An optionee, however, 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 or the 1999 Stock Option 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 it is
determined that such options will terminate, the optionee will have the right
immediately prior to such merger, consolidation, acquisition of property or
stock, separation or reorganization to exercise such options 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 will 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 will be accelerated in the
event the optionee's employment or services should subsequently terminate
within two years following such transaction, unless such termination is for
cause or by the optionee voluntarily without good reason.
Certain Relationships and Related Transactions
In June 1996, the Company entered into a transaction with Charybdis
Corporation, a start-up biotechnology company now known as Ceptyr, Inc.
("Ceptyr"), in which the Company (i) licensed and released to Ceptyr 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 Ceptyr, including laboratory space and certain small-molecule screening
services and know-how and (iii) received stock of Ceptyr. This agreement was
extended and expanded to provide the Company with an option to acquire rights
to certain technologies developed by Ceptyr or to convert the value of the
Company's services provided to Ceptyr into additional stock of Ceptyr. In
December 1998, the Company exercised the option to become co-owner of the two
compounds being developed by Ceptyr. In addition, for a cash investment in
June 1996, Ceptyr issued
16
stock to Falcon Technology Partners II, L.P., 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. In accordance with the rights of the Company to designate a director
to the Ceptyr board of directors, Dr. Wilcox, the Company's Executive Vice
President, Operations, became a director of Ceptyr.
The Ceptyr transaction described in the preceding paragraph was 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 of private investor interests in
the Partnership. Such interests were sold as $100,000 investment units (each a
"Unit"), each Unit consisting of one limited partnership interest and warrants
representing the right to purchase 16,000 shares of the Company's Common
Stock. In respect of the $100,000 purchase price for each Unit, each investor
was required to make a cash payment in the amount of $30,000 and to deliver a
non-interest bearing promissory note (an "Investor Note") payable to the
Partnership, evidencing the investor's obligation to make installment payments
to the Partnership of $25,000 on May 31, 1998 and May 31, 1999, and $20,000 on
May 31, 2000. Dr. Rathmann, an officer and Director of the Company during
1999, and Mr. Gates, a Director of the Company, each purchased 41 Units for
$4.1 million. Messrs. Cary, Ferguson and Pangia, Directors of the Company,
each purchased one Unit for $100,000. Dr. Rathmann and Messrs. Gates, Cary,
Ferguson and Pangia have made their installment payments under their
respective Investor Notes as such amounts have been due and payable.
During 1999, the Company chartered an airplane from AMI Jet Charter,
Inc. dba TAG Aviation ("TAG") and recognized approximately $282,000 in
expenses for services rendered. The aircraft subject to the charter
arrangement was under the control of Peregrine Aviation, LLC, ("Peregrine"), a
company wholly owned by George B. Rathmann, who concurrently served as the
Company's Chairman of the Board of Directors. Peregrine subleased the plane to
TAG, which used it as part of its charter fleet. Management believes that the
rates charged by TAG were below the standard rates for commercial charter
services.
Proposal to Ratify Appointment of Independent Public Accountants
The Board of Directors will request that the stockholders ratify its
selection of KPMG LLP, independent public accountants, to examine the
financial statements of the Company for the fiscal year ending December 31,
2000. KPMG LLP examined the financial statements of the Company for the fiscal
year ended December 31, 1999. Representatives of KPMG LLP will be present at
the Annual Meeting to make a statement if they desire to do so and respond to
questions of stockholders. 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 LLP as the Company's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
Proposals of Stockholders
A stockholder who intends to present a proposal at the 2001 Annual
Meeting of Stockholders and desires that information regarding the proposal be
included in the 2001 proxy statement and proxy must ensure that such
information is received by the Company in writing no later than November 30,
2000.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as
amended, the Company intends to retain discretionary authority to vote proxies
with respect to stockholder proposals for which the proponent does not seek
inclusion of the proposed matter in the Company's proxy statement for the
Company's 2001
17
Annual Meeting of Stockholders, except in circumstances where (i) the Company
receives notice of the proposed matter no later than February 14, 2001, and
(ii) the proponent complies with the other requirements set forth in Rule 14a-
4.
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
A copy of the ICOS Corporation 1999 Annual Report is being mailed to the
Company's stockholders concurrently with this Proxy Statement, the proxy and
the Notice of 2000 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, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Paul N. Clark
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and
President
March 30, 2000
Bothell, Washington
18
Please mark
your votes
as indicated __X__
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Items 1 and 2.
1. ELECTION OF DIRECTORS: FOR all WITHHOLD
(INSTRUCTION: To withhold nominees listed AUTHORITY
authority to vote for any below (except as to vote for all
individual nominee strike marked to the nominees listed
a like through the contrary below) below
nominee's name) ______ ______
Class I Frank T. Cary
James L. Ferguson
David V. Milligan
2. PROPOSAL TO RATIFY THE APPOINTMENT FOR AGAINST ABSTAIN
OF KPGM LLP as the Company's
independent public accountants _____ _____ _____
for fiscal year 2000.
3. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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| Dated ____________________________, 2000
|
________________________________________
Signature
________________________________________
Signature if held jointly
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. if a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
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PROXY
ICOS Corporation
22021 - 20th Avenue S.E.
Bothell, Washington 98021
This Proxy is Solicited on Behalf of the board of Directors
The undersigned hereby appoints Paul N. Clark, Gary L. Wilcox and
Walter B. Wriston as Proxies, each with the power to appoint his
substitute, and hereby authorized them to represent and to vote, as
designated below, all the shares of Common Stock of ICOS Corporation
held of record by the undersigned on March 8, 2000 at the annual
meeting of stockholders to be held on May 4, 2000 or any adjournment
or postponement thereof.
(Continued, and to be marked, dated and signed on the other side.)
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