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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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 Rule 14a-11(c) or
Rule 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
CALCULATION OF FILING FEE
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Per unit price or other
underlying value of Proposed
Title of each class of Aggregate number of transaction computed maximum
securities to which securities to which pursuant to Exchange aggregate value of
transaction applies: transaction applies: Act Rule 0-11: transaction: Total Fee Paid
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[_] Fee paid previously with preliminary materials.
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[_] 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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March 30, 2001
Dear Stockholder:
I cordially invite you to ICOS Corporation's Annual Meeting of Stockholders
to be held on Friday, May 4, 2001, 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, (2) approve an amendment to the 1999 Stock Option Plan to
increase the number of shares authorized under the Plan and (3) ratify the
appointment of KPMG LLP as the Company's independent public accountants for
fiscal year 2001.
As the Company's Chairman, I urge you to elect the three nominated
directors and vote "For" the remaining proposals. 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 and 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 visit our Bothell
facility. We will provide roundtrip transportation from the Four Seasons
Olympic Hotel to the Bothell facility. Space is limited so please make a
reservation for the visit and/or bus transportation by calling our Investor
Relations Department at (425) 489-8687.
On behalf of ICOS Corporation, 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 2001 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 Friday, May 4, 2001, 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 approve an amendment to the 1999 Stock Option Plan to increase
the number of shares authorized under the Plan;
3. To ratify the appointment of KPMG LLP as the Company's independent
public accountants for fiscal year 2001; and
4. 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, 2001
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, 2001
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 2001 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Friday, May 4, 2001, 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, 2001.
Each share of the Company's $.01 par value Common Stock ("Common Stock")
outstanding at the close of business on March 8, 2001 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, 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. 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) matters 2 and 3 listed in the accompanying Notice of 2001 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. 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. Under Delaware law
and the Company's Restated Bylaws: (i) shares represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee that are represented at the meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum; (ii) there is no cumulative voting, and
the director nominees receiving the highest number of votes, up to the number
of directors to be elected, are elected, and, accordingly, abstentions and
broker non-votes will not affect the election of directors; (iii) proxies that
reflect abstentions as to a particular proposal (other than the election of
directors) will be treated as voted for purposes of determining the approval
of that proposal and will have the same effect as a vote against that
proposal; and (iv) proxies that reflect broker non-votes will be treated as
unvoted for purposes of determining approval of that proposal and will not be
counted as votes for or against that proposal.
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 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, 2001, the record date for determining stockholders entitled to vote at the
Annual Meeting, 52,601,535 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 12, 2001, of 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
William H. Gates III................................ 5,707,259 10.7%
c/o Michael Larson
2365 Carillon Point
Kirkland, WA 98033
George B. Rathmann (3).............................. 2,727,639 5.1%
5404 Lake Washington Blvd. N.E., Apt. I
Kirkland, WA 94033
Frank T. Cary....................................... 191,363 *
Paul N. Clark....................................... 597,051 1.1%
James L. Ferguson................................... 168,648 *
David V. Milligan................................... 79,199 *
Robert W. Pangia.................................... 152,113 *
Alexander B. Trowbridge............................. 149,113 *
2
Shares
Beneficially Percentage of
Name and Address Owned (1) (2) Common Stock
Gary L. Wilcox (4)................................ 583,786 1.1%
Walter B. Wriston................................. 163,863 *
W. Michael Gallatin............................... 273,799 *
Thomas P. St. John................................ 270,227 *
Clifford J. Stocks................................ 33,701 *
All directors and executive officers as a group
(16 persons)..................................... 8,584,751 15.4%
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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 12, 2001.
(2) Includes options and warrants that may be exercised for Common Stock
within 60 days of February 12, 2001, for each individual as follows:
William H. Gates III, 681,640 shares; George B. Rathmann, 756,000 shares;
Frank T. Cary, 152,113 shares; Paul N. Clark, 597,051 shares; James L.
Ferguson, 160,113 shares; David V. Milligan, 79,099 shares; Robert W.
Pangia, 152,113 shares; Alexander B. Trowbridge, 144,113 shares; Gary L.
Wilcox, 560,786 shares; Walter B. Wriston, 144,113 shares; W. Michael
Gallatin, 231,299 shares; Thomas P. St. John, 227,727 shares; Clifford J.
Stocks, 33,701 shares; and all directors and executive officers as a
group, 3,340,972 shares.
(3) Includes 1,971,639 shares held by the Rathmann Family Revocable Trust.
(4) Includes 23,000 shares held by the Gary and Susan Wilcox Living 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 2002 Annual Meeting of
Stockholders and three are serving terms that will not expire until the 2003
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 Paul N. Clark, William
H. Gates III and Robert W. Pangia 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 2004:
Paul N. Clark (age 54) has been one of the Company's directors, Chief
Executive Officer and President since June 1999, and the Chairman of the Board
since February 2000. From 1984 to December 1998, Mr. Clark worked in various
capacities for Abbott Laboratories, a health care products manufacturer,
retiring from Abbott Laboratories as Executive Vice President and board member
after serving previously as Vice President from 1984 to 1990 and Senior Vice
President from 1990 to 1998. His previous experience included senior positions
with Marion Laboratories, a pharmaceutical company, and Sandoz Pharmaceuticals
(now Novartis Corporation), a pharmaceutical company. Mr. Clark received his
M.B.A. from Dartmouth College, Amos Tuck School, and his B.S. in finance from
the University of Alabama.
William H. Gates III (age 45) has been one of the Company's directors
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; he has been its Chief
Software Architect and Chairman of the Board since January 2000.
Robert W. Pangia (age 49) has been one of the Company's directors 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, an investment banking and securities brokerage firm. From 1986
to 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, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE ABOVE-NAMED NOMINEES
TO THE BOARD OF DIRECTORS.
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.
4
Alexander B. Trowbridge (age 71) has been one of the Company's directors
since January 1990. From January 1990 to the present, he has served as
President of Trowbridge Partners, Inc., a business consulting firm. From 1980
to 1990, he was President of the National Association of Manufacturers, a
national trade association. From 1976 to 1980, he was Vice Chairman of Allied
Chemical Corporation, a chemical manufacturing company, and he was President
of The Conference Board, a management and economic research organization, from
1970 to 1976. In 1967 and 1968, Mr. Trowbridge was United States Secretary of
Commerce, and he served as Assistant Secretary of Commerce from 1965 to
1967. He currently serves as a director of E.M. Warburg-Pincus Funds, Harris
Corporation and Sunoco, Inc.
Gary L. Wilcox, Ph.D. (age 54) joined the Company in September 1993 as
Executive Vice President, Operations, and has been one of the Company's
directors since 1993. In April 1995, Dr. Wilcox was appointed the Company's
Corporate Secretary. From 1989 to 1993, Dr. Wilcox served as Vice Chairman,
Executive Vice President and director of XOMA Corporation, a biotechnology
company. From 1982 to December 1989, he was the President and Chief Executive
Officer of International Genetic Engineering, Inc. (known as Ingene), a
biotechnology company, 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. He received his Ph.D. and M.A. in molecular
biology and biochemistry, and his B.A. in cellular and molecular biology from
the University of California at Santa Barbara.
Walter B. Wriston (age 81) has been one of the Company's directors since
January 1990. From 1967 to 1984, he served as Chief Executive Officer of
Citicorp and its subsidiary Citibank, N.A., part of a national banking
association, and he served as Chairman of the Board of Citicorp and Citibank,
N.A. from 1970 through 1984. Mr. Wriston currently serves as a director of
Cygnus, Inc. and Vion Pharmaceuticals, Inc.
Continuing Class 1 Directors (until 2003)
The three Class 1 Directors, Frank T. Cary, James L. Ferguson and David
V. Milligan, are currently serving terms that expire at the 2003 Annual
Meeting of Stockholders and until their respective successors are elected and
qualified.
Frank T. Cary (age 80) has been one of the Company's directors since
January 1990. He was Chief Executive Officer and Chairman of the Board of
International Business Machines Corporation, a business equipment
manufacturer, from 1973 to 1980. Mr. Cary currently serves as a director of
Celgene Corporation, Cygnus, Inc., Lexmark International Group, Inc., Lincare,
Inc. and Vion Pharmaceuticals, Inc.
James L. Ferguson (age 75) has been one of the Company's directors since
January 1990. From 1973 to 1989, he served in various capacities at General
Foods Corporation, a food manufacturing company, including Chief Executive
Officer and President. Mr. Ferguson currently serves as 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.
David V. Milligan, Ph.D. (age 60) has been one of the Company's
directors since October 1995. From May 1998 to the present, he has served as a
vice president of Bay City Capital, a San Francisco-based merchant bank. From
1979 to 1996, he served in various capacities at Abbott Laboratories, retiring
as Senior Vice President and Chief Scientific Officer after previously heading
both the diagnostics and the pharmaceutical research and development
sectors. 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 Collabra Pharma, Maxia Pharmaceuticals, Inc. and
Reliant Pharmaceuticals LLC.
5
Other Executive Officers
Leonard M. Blum (age 40) joined the Company as Vice President, Marketing
in June 2000 and was appointed the Company's Vice President, Sales and
Marketing in January 2001. From August 1997 to June 2000, Mr. Blum served in
various capacities for Merck Sharp & Dohme Israel, a pharmaceutical company,
including Marketing Director and Business Unit Director. He joined Merck and
Co. in 1987, served in several positions in the United States, and led sales
and marketing teams in Germany, Israel and Switzerland. His previous
experience includes service as an officer in the United States Army Special
Forces and a Corporate Financial Analyst with the Investment Banking Division
at Shearson Lehman American Express, a financial services company. Mr. Blum
received his M.B.A. from the Stanford Graduate School of Business and his A.B.
in economics from Princeton University. He was a Fulbright Scholar in
international finance at the University of Zurich.
W. Michael Gallatin, Ph.D. (age 47) has been the Company's Vice
President and Scientific Director 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 ICOS Corporation, 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 and his B.S. in zoology from Truman State University
(formerly Northeast Missouri State University).
Thomas P. St. John, Ph.D. (age 48) has been the Company's Vice
President, Therapeutic Development, 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
ICOS Corporation, Dr. St. John was a faculty member of the Fred Hutchinson
Cancer Research Center in Seattle, Washington, and an affiliate faculty member
in the Department of Medicine and Department of Genetics at the University of
Washington. Dr. St. John received his Ph.D. in biochemistry from Stanford
University and his B.S. in biology from California Institute of Technology.
Michael A. Stein (age 51) was appointed Vice President and Chief
Financial Officer of ICOS Corporation in January 2001. From October 1998 to
September 2000, Mr. Stein was Executive Vice President and Chief Financial
Officer of Nordstrom, Inc., a fashion specialty retailer, where he was
responsible for all finance functions, information technology services, real
estate and store planning, operations support and legal matters. From 1989,
until he left to join Nordstrom in 1998, Mr. Stein worked in various
capacities for Marriott International, Inc., a global hospitality company, and
its predecessor, Marriott Corporation, serving as Executive Vice President and
Chief Financial Officer from 1993 to 1998. Prior to Marriott, Mr. Stein spent
18 years with Arthur Andersen LLP, where he was a partner based in the firm's
Washington, DC office. Mr. Stein received his B.S. in business administration
from the University of Maryland at College Park, MD.
Michael B. Stewart, M.D. (age 50) joined the Company in October 2000 as
Vice President, Clinical Affairs. From September 1990 to March 2000, Dr.
Stewart worked in various capacities for Bristol-Myers Squibb Company, a
global health and personal care corporation, including serving as Vice
President, Immunology, Inflammation, Pulmonary and Dermatology, from December
1997 to March 2000, Vice President, Research and Development, for Bristol-
Myers Squibb's Intercontinental Medicines Group from January 1996 to December
1997 and Vice President, Scientific Affairs, for Bristol-Myers Squibb (Canada)
from January 1995 to January 1996. He received his M.D. from the University of
Maryland School of Medicine and his B.S. in natural sciences from Johns
Hopkins University.
Clifford J. Stocks (age 42) has been the Company's Vice President,
Business Development, 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. From October 1989 to September 1991, Mr. Stocks
was an Associate with Booz Allen & Hamilton, a management consulting firm. Mr.
Stocks received his M.B.A. from the University of Chicago Graduate School of
Business and his B.S. in biology from the University of Utah.
6
Information on Committees of the Board of Directors and Meetings
The Board of Directors met eight times during the fiscal year ended
December 31, 2000. All directors, except Mr. Gates attended at least 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. Mr. Gates attended five of the
meetings of the Board of Directors.
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 Committee is governed by an
Audit Committee Charter, and each member must meet certain independence and
financial literacy requirements. The Audit Committee assists the Board of
Directors in achieving its oversight and monitoring responsibilities to the
stockholders relating to corporate accounting, financial controls and
financial reporting practices of the Company. The Committee recommends, to the
Board of Directors, the selection, evaluation and compensation of the
independent public accountants. The members meet with the independent public
accountants and financial management to review: the scope of the proposed
audit for the year; the audit procedures to be utilized; and, at the
conclusion of the audit, the audit reports. In addition, the Audit Committee
reviews the financial statements, the related footnotes and the independent
public accountants' report thereon and makes related recommendations to the
Board of Directors as the Committee deems appropriate. The Audit Committee met
once during the fiscal year ended December 31, 2000.
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 plan. The Compensation Committee met
three times during the fiscal year ended December 31, 2000.
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 met once during the
fiscal year ended December 31, 2000.
Compensation of Directors
Pursuant to a policy in effect during 2000, directors who were not
employees of the Company were paid an annual fee of $15,000 for service on the
Board of Directors, a fee of $1,000 for each Board meeting attended and $500
for each Board committee meeting attended. In addition, pursuant to the stock
option grant program for nonemployee directors in effect during 2000, each
nonemployee director received a nonqualified stock option representing the
right to purchase 4,276 shares of Common Stock. These options were fully
vested and exercisable and had an exercise price equal to the closing market
price on the date of grant.
Pursuant to a policy adopted by the Board of Directors in January 2001,
the Company will pay directors who are not employees of the Company an annual
fee of $24,000 for service on the Board of Directors, a fee of $2,000 for each
Board meeting and $1,000 for each Board committee meeting attended.
Under the stock option grant program for nonemployee directors adopted
by the Board in January 2001 (the "Director Program"), nonemployee directors
will receive automatic stock 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.
7
Under the Director Program, upon their initial election or appointment
to the Board of Directors, each eligible director will receive an initial
grant of nonqualified stock options for a number of shares of Common Stock
determined by dividing $1,000,000 by the closing market price of the Common
Stock on the grant date. Commencing with the 2001 Annual Meeting of
Stockholders, and at each annual meeting of stockholders thereafter, each
eligible director will receive an annual grant of nonqualified stock options
for a number of shares determined by dividing $535,000 by the closing market
price of the Common Stock on the grant date. However, if the date of a
director's initial grant upon election or appointment to the Board of
Directors falls within the five-month period prior to an annual meeting of
stockholders, that director will not be eligible for an annual grant until the
second annual meeting of stockholders following the director's initial
election or appointment.
Stock options granted to nonemployee directors under the Director
Program vest and become exercisable in two equal amounts as of each of the
next two annual meetings of stockholders. However, if a director's initial
grant upon election or appointment to the Board of Directors falls within the
five-month period prior to an annual meeting of stockholders, the initial
grant will vest and become 100% exercisable on the date of the second annual
meeting of stockholders following the director's election or
appointment. Vesting schedules, for both initial and annual grants, assume
continued service on the Board during the vesting periods.
The exercise price of the stock options granted under the Director
Program will be equal to the closing market price of the Common Stock on the
date of the grant. The options will have a ten-year term but cannot be
exercised later than two years after termination of service as a director.
8
Executive Compensation
The following table sets forth information regarding compensation paid
by the Company during the past three fiscal years to its Chief Executive
Officer and the other four most highly compensated individuals who were
serving as executive officers at year-end (the "Named Executive Officers").
Summary Compensation Table
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Annual Long-Term
Compensation Compensation Awards
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Name and Principal Other Annual Securities Underlying All Other
Position Year Salary ($) Compensation ($)(2) Options (#) Compensation ($)
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Paul N. Clark 2000 $550,000 $149,520 37,509 $178,288 (4)
Chairman of the Board, 1999 271,000 (1) 62,781 1,500,000 90,512 (4)
Chief Executive Officer
and President
- -------------------------------------------------------------------------------------------------------------
Gary L. Wilcox 2000 416,000 -- 41,721 414 (3)
Executive Vice 1999 385,000 -- 44,291 752 (3)
President, Operations, 1998 345,000 -- 62,090 --
Secretary and Director
- -------------------------------------------------------------------------------------------------------------
W. Michael Gallatin 2000 308,000 -- 26,365 270 (3)
Vice President and 1999 280,000 -- 26,530 459 (3)
Scientific Director 1998 250,000 -- 40,152 --
- -------------------------------------------------------------------------------------------------------------
Thomas P. St. John 2000 297,000 -- 25,963 270 (3)
Vice President, 1999 270,000 -- 27,314 459 (3)
Therapeutic Development 1998 230,000 -- 37,376 --
- -------------------------------------------------------------------------------------------------------------
Clifford J. Stocks 2000 206,000 -- 39,354 169 (3)
Vice President, Business 1999 175,000 -- 15,000 229 (3)
Development 1998 137,000 -- 7,500 --
- ------------------------------------------------------------------------------------------------------------
(1) Mr. Clark became Chief Executive Officer and President of the Company on
June 16, 1999.
(2) Represents payment of professional fees and taxes incurred in relation to
certain payments made by the Company to, or for the benefit of, Mr.
Clark. See "Employment Contracts, Termination of Employment and Change of
Control Arrangements."
(3) Reflects group term life insurance premiums paid by ICOS Corporation for
Mr. Stocks and Drs. Wilcox, Gallatin and St. John.
(4) Represents reimbursement of travel, temporary living expenses and other
relocation costs in accordance with Mr. Clark's employment agreement, as
well as group term life insurance premiums paid by ICOS Corporation. See
"Employment Contracts, Termination of Employment and Change of Control
Arrangements."
9
2000 Option Grants
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers in 2000.
Option Grants in Fiscal 2000
- -----------------------------------------------------------------------------------------------------------------------
Potential Realizable Value
at Assumed Annual Rates of
Individual Grants Stock Price 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 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------
Paul N. Clark 37,509 (1) 4% $30.313 1/05/10 $ 715,048 $ 1,812,072
Gary L. Wilcox 41,721 (1) 4% $30.313 1/05/10 795,343 2,015,555
W. Michael Gallatin 26,365 (1) 3% $30.313 1/05/10 502,606 1,273,702
Thomas P. St. John 25,963 (1) 3% $30.313 1/05/10 494,942 1,254,281
Clifford J. Stocks 24,354 (1) 2% $30.313 1/05/10 464,269 1,176,549
15,000 (2) 1% $46.313 10/18/10 436,885 1,107,153
- -----------------------------------------------------------------------------------------------------------------------
Totals for:
Named Executive Officers 170,912 17% $ 3,409,093 $ 8,639,312
All Stockholders (5) $1,044,853,174 $2,647,863,087
- -----------------------------------------------------------------------------------------------------------------------
(1) Represents options awarded to the Named Executive Officers pursuant to the
Company's 1999 Management Incentive Program ("MIP") and/or periodic stock
option grant program. The options granted to MIP participants in 2000 (for
performance in 1999) were fully exercisable upon grant. The total number
of MIP options granted to the Named Executive Officers in 2000 were
10,409, 16,554, 21,221, 14,265 and 14,263 to Messrs. Clark and Stocks, and
Drs. Wilcox, Gallatin and St. John, respectively. Options granted pursuant
to the periodic stock option grant program become exercisable in 48 equal
monthly installments beginning January 5, 2000. 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 plan, 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 of control.
(2) Represents a supplemental stock option grant.
(3) The exercise price of each option 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.
(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 annual growth rates of 5% and
10% in accordance with regulations of the 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) The increase in the market value of the holdings of all the Company's
stockholders over a ten-year period based on 52,382,830 shares of Common
Stock outstanding as of December 31, 2000, at assumed annual rates of
appreciation of 5% and 10% from a base price of $31.72 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
2000) would be $1,044,853,174 and $2,647,863,087, respectively. Thus, the
potential realizable gain on options granted in 2000 to the Named
Executive Officers represents 0.3% of the total realizable gain by all
stockholders if the assumed appreciation rates of 5% and 10% are
achieved. Actual gains, if any, depend on the future performance of the
Common Stock and overall market conditions. The amounts reflected in the
table may not necessarily be achieved.
10
2000 Option Exercises and Year-End Option Values
The following table sets forth certain information regarding option
exercises during 2000 and options held by Named Executive Officers as of
December 31, 2000.
Aggregated Option Exercises in 2000 and Fiscal Year-End Option Values
- ------------------------------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money Options at Fiscal
Options at Fiscal Year-End (#) Year-End ($) (1)
- ------------------------------------------------------------------------------------------------------------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------
Paul N. Clark -- $ -- 466,619 1,070,890 $ 4,468,719 $ 10,029,857
Gary L. Wilcox 3,000 111,750 537,252 38,248 22,612,620 1,002,944
W. Michael Gallatin -- -- 216,272 20,254 8,521,034 521,725
Thomas P. St. John -- -- 209,007 19,315 8,184,242 495,518
Clifford J. Stocks 96,258 2,842,013 19,737 31,689 755,925 519,810
- ------------------------------------------------------------------------------------------------------------------------------
(1) Stock options are valued based on the closing price of a share of Common
Stock as reported on The Nasdaq Stock Market on December 29, 2000
($51.938). There is no guarantee that if and when these options are
exercised, they will have this value.
Compensation Committee Interlocks and Insider Participation
During 2000, the Compensation Committee consisted of Messrs. Cary and
Ferguson and Dr. Milligan. None of the Company's executive officers serves as
a member of the compensation committee or board of directors of any entity
that has an executive officer serving as a member of the Company's
Compensation Committee or Board of Directors.
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 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 408 public and private companies in the biotechnology industry (the
"Survey"). Salary levels for 2000 for the Company's executive officers ranged
between the 50th and 80th percentiles of base salary compensation for
representative positions within the Survey for 2000. Approximately 49% of the
public companies included in the
11
Survey are included in the Center for Research in Security Prices ("CRSP")
Total Return Index for The Nasdaq Pharmaceutical Stocks, which is included in
the Stock Price Performance Graph on page 13.
Annual and Long-Term Incentive Compensation. The Committee does not
anticipate awarding annual cash bonuses while the Company is without
earnings. Instead, a MIP was established in 1994 for certain executive
officers of the Company. For 2000, Messrs. Clark, Blum and Stocks and Drs.
Gallatin, Gray, St. John and Wilcox participated in this performance-based
incentive program. Under the MIP, a competitive market value is established to
determine the number of target options available for grant to participants
based on their respective levels of responsibility. Option grants to MIP
participants are based on a combination of Company performance and individual
performance measured against predetermined incentive objectives that reflect
aggressive goals, which in general exceed expected results for the year. For
2000 performance, the total number of stock options awarded 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, operations and
financial performance. The size of individual grants to participants for 2000
performance was based on successful completion of objectives established for
each individual and corporate goal performance. Stock option grants under the
MIP have an exercise price equal to the fair market value of the Common Stock
on the grant date, are immediately vested and generally expire after ten years
or three months after termination of employment, whichever is earlier. MIP
option grants for performance against 2000 objectives were made in January
2001.
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
Companyqs stockholders. Under the program, stock options are granted to
employees on a periodic schedule, on the basis of each employee's respective
salary, position within the Company and performance. 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 generally terminate
after ten years or three months after termination of employment, whichever is
earlier.
2000 Compensation of the Chief Executive Officer. Mr. Clark's compensation
for 2000 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 2000 was $550,000. In addition, as a result of his
participation in the MIP for 2000, in January 2001 Mr. Clark received a stock
option to purchase 48,073 shares of Common Stock, or 105.9% 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. In accordance with the Company's periodic stock grant program
described above, Mr. Clark was awarded stock options in 2000 to purchase 27,100
shares of Common Stock.
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 (the "Code"). Certain performance-
based compensation is not subject to the limitation on deductibility. The
Committee does not expect cash compensation in 2001 to the Chief Executive
Officer or any other executive officer to be in excess of $1 million. The 1999
Stock Option Plan (the "1999 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
12
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 291 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]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- --------------------------------------------------------------------------------
ICOS Corporation........ $100 $103 $248 $403 $397 $704
CRSP Total Return Index
for The Nasdaq Stock
Market (U.S.
Companies)............. $100 $123 $151 $213 $395 $238
CRSP Total Return Index
for The Nasdaq
Pharmaceutical Stocks.. $100 $100 $104 $132 $248 $308
- --------------------------------------------------------------------------------
(1) Assumes $100 was invested on December 31, 1995 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, 725
South Wells Street, Suite 800, Chicago, Illinois 60607.
13
Report of the Audit Committee
The members of the Audit Committee of the Board of Directors are
independent as that term is defined in Rule 4200(a)(14) of the National
Association of Securities Dealers Marketplace Rules. On May 3, 2000, the Audit
Committee adopted a written Audit Committee Charter, a copy of which is
provided herewith as Exhibit A. The Audit Committee has reviewed and discussed
the audited financial statements for fiscal year 2000 with the Company's
management. In addition, the Audit Committee has discussed with the Company's
independent public accountants, KPMG LLP ("KPMG"), the matters required by
Statement on Auditing Standards No. 61. The Audit Committee has received the
written disclosures and the letter from KPMG required by Independence
Standards Board Standard No. 1 and has discussed, with KPMG, their
independence. Based on the discussions and reviews referenced above, the Audit
Committee recommended to the Company's Board of Directors that the audited
financial statements for fiscal year 2000 be included in the Company's Annual
Report on Form 10-K for 2000. The Committee also evaluated the performance of
KPMG and recommended to the Board of Directors that KPMG be selected as the
Company's independent public accountants, to examine and report on the
Company's financial statements for the fiscal year ending December 31, 2001.
Submitted by the Audit Committee of the Company's Board of Directors
Walter B. Wriston, Chairman
James L. Ferguson
Alexander B. Trowbridge
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 of 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
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.
14
The Agreement also obligates the Company to reimburse Mr. Clark for
certain travel and temporary living expenses, relocation services,
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 Code 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. 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. Stock options outstanding under the
Company's 1991 Stock Option Plan for Nonemployee Directors and the 1989 Stock
Option Plan (the "Prior Plans"), and any options outstanding or to be granted
under the 1999 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 Stock Option Plan or the 1999 Plan, including those
granted 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.
15
If such options are converted into options for Exchange Stock, then each
converted option will become fully vested and immediately exercisable unless
such option is (a) 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 (b) 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.
Proposal to Approve an Amendment to the 1999 Stock Option Plan to Increase the
Number of Shares Authorized Under the Plan
The purpose of the 1999 Plan is to promote the interests of the Company
and its stockholders by strengthening the Company's ability to attract and
retain the services of selected employees, officers, directors, agents,
consultants, advisors and independent contractors and to provide added
incentive to them by encouraging stock ownership in the Company. The Company's
policy is to grant options to purchase shares of Common Stock to all employees
to help ensure that the long-term interests and goals of stockholders are
closely aligned with those of the individuals responsible for the Company's
day-to-day operations and management. The Company's policy is to grant all
employees stock options upon commencement of employment. The number of shares
exercisable under each grant to new employees is based on the employee's level
of responsibility and compensation. The Company also has a program of periodic
stock option grants to existing employees subject to the achievement of
individual and corporate objectives and based on each employee's respective
responsibilities. In addition, the Company established a Management Incentive
Program ("MIP") in 1994 for certain executive officers of the Company. Under
the MIP, a number of stock options reserved for issuance under the 1999 Plan
are set aside annually for potential grants to participants. Grants to
participants under the MIP are based on achievement of certain corporate and
individual objectives established annually. Furthermore, pursuant to the stock
option grant program for nonemployee directors, eligible directors
automatically receive initial and annual grants under the 1999 Plan (see
"Compensation of Directors" for a description of the stock option grant
program for nonemployee directors). The Company believes that the inherent
value created by the granting of options under the 1999 Plan has proven to be
a highly successful means of attracting, retaining and motivating highly
qualified scientific, administrative and managerial talent.
A total of 5,000,000 shares of Common Stock were made available for
issuance under the 1999 Plan. In addition (a) any authorized shares not issued
or subject to outstanding options under the Prior Plans plus (b) any shares
subject to outstanding options under the Prior Plans that cease to be subject
to such options (other than by reason of exercise of the options to the extent
they are exercised for shares), up to an aggregate maximum of 7,412,048
shares, were no longer available for grant and issuance under such plans, but
became available for issuance under the 1999 Plan. On March 8, 2001, the Board
of Directors unanimously adopted an amendment to the 1999 Plan that, subject
to stockholder approval, would provide for the authorization to grant options
to acquire up to an additional 5,000,000 shares of Common Stock under the 1999
Plan.
As of February 12, 2001, 8,542,876 shares of Common Stock were subject
to outstanding options and 1,620,777 shares of Common Stock remained available
for future grants under the 1999 Plan. The Company and the Board of Directors
believe that increasing the number of shares available for future grants is
essential to retain and motivate existing employees through the periodic and
MIP grant programs, as well as attract the number of new employees necessary
to:
. pursue pre-marketing activities to bring the Company's product
candidates to market and establish marketing capabilities if and
when a product candidate is ready for commercialization;
. continue the development of the Company's current portfolio of
product candidates in clinical trials;
16
. engage in discovery and preclinical research to identify
additional product candidates; and
. support additional collaborations or the acquisition of
technologies or products.
The text of the 1999 Plan, as amended subject to stockholder approval,
is attached to this Proxy Statement as Exhibit B and is incorporated herein by
reference. The following description of the 1999 Plan is a summary and does
not purport to be a complete description of the provisions of the 1999
Plan. See Exhibit B for more detailed information.
Terms and Conditions of Stock Option Grants. The 1999 Plan is
administered by the Compensation Committee of the Board of Directors (the
"Administrator"). At the discretion of the Administrator, options granted
under the 1999 Plan may be either nonqualified stock options ("NSOs") or
Incentive Stock Options ("ISOs"), which are intended to meet all the
requirements of an "Incentive Stock Option" as defined in Section 422 of the
Code. Under the 1999 Plan, the Administrator may grant ISOs to any employee of
the Company and may grant NSOs to any employee, officer, agent, consultant,
advisor or independent contractor of the Company. All option grants, except as
noted below, expire ten years from the date of grant unless otherwise
established by the Administrator. All option grants vest and become
exercisable in equal monthly increments over a four-year period from the grant
date, unless otherwise determined by the Administrator. All ISOs must have an
exercise price that is at least 100% of the fair market value of the Common
Stock on the grant date. NSOs are generally granted with an exercise price
equal to 100% of the fair market value of the Common Stock on the grant date;
however, in no case may the exercise price be less than 85% of the fair market
value of the Common Stock on the grant date. Under the 1999 Plan, "fair market
value" means the closing price of the Common Stock as reported by The Nasdaq
Stock Market for a single trading date. The closing price of the Common Stock
on February 12, 2001, was $52.00 per share.
ISOs granted to employees who own more than 10% of the total combined
voting power of all classes of stock of the Company are limited to a five-year
term, and the exercise price may not be less than 110% of the fair market
value of the Common Stock on the date of grant.
Subject to vesting periods, each option may be exercised at any time in
whole or in part in accordance with its terms. All stock options granted under
the 1999 Plan terminate three months after termination of the optionee's
relationship with the Company for reasons other than cause, disability, death
or retirement, unless otherwise determined by the Administrator. Options
terminate one year after termination due to death or disability and three
years after termination due to retirement, unless the Administrator determines
otherwise. If the optionee's relationship with the Company is terminated for
cause, options terminate upon first notice of the termination, unless
otherwise determined by the Administrator.
Restrictions on Transfer. Options granted under the 1999 Plan are not
transferable, pledgable or assignable other than (a) by will or the laws of
descent and distribution or (b) to the extent permitted by the Administrator
and Section 422 of the Code, by gift or other transfer to either (i) any trust
or partnership in which the original optionee or such person's spouse or other
immediate family member has a substantial beneficial interest or (ii) a spouse
or other immediate family member; provided, however, that such a transfer
would be subject to all the same terms and conditions contained in the
instrument evidencing the option. In addition, in the Administrator's
discretion, an optionee may designate a beneficiary to exercise the option
after the optionee's death.
In the event of any reorganization, stock dividend, stock split, spin-
off or similar change in the Common Stock, the number and price per share of
shares covered by unexercised stock options will be proportionately adjusted.
For a description of treatment of stock options upon a change of
control, see "Employment Contracts, Termination of Employment and Change of
Control Arrangements."
17
Federal Income Tax Consequences. The material U.S. federal income tax
consequences to the Company and to any person granted a stock option under the
1999 Plan who is subject to taxation in the United States under existing
applicable provisions of the Code and underlying Treasury Regulations are
substantially as follows. The following summary does not address state, local
or foreign tax consequences and is based on present law and regulations as in
effect as of the date hereof.
NSOs. No income will be recognized by an optionee upon the grant of an
NSO. Upon the exercise of an NSO, the optionee will recognize taxable ordinary
income in an amount equal to the excess of the fair market value at the time
of exercise of the shares acquired over the exercise price. Upon a later sale
of those shares, the optionee will have capital gain or loss equal to the
difference between the amount realized on such sale and the tax basis of the
shares sold. Furthermore, this capital gain or loss will be long-term capital
gain or loss (currently taxed at a maximum rate of 20%) if the shares are held
for more than one year before they are sold. If payment of the option price is
made entirely in cash, the tax basis of the shares will be equal to their fair
market value on the exercise date (but not less than the exercise price), and
the shares' holding period will begin on the day after the exercise date. If
the optionee uses already-owned shares to pay the exercise price of an NSO in
whole or in part, the transaction will not be considered to be a taxable
disposition of the already-owned shares. The optionee's tax basis and holding
period of the already-owned shares will be carried over to the equivalent
number of shares received upon exercise. The tax basis of the additional
shares received upon exercise will be the fair market value of the shares on
the exercise date (but not less than the amount of cash, if any, used in
payment), and the holding period for such additional shares will begin on the
day after the exercise date.
ISOs. No income will be recognized by an optionee upon the grant of an
ISO. The rules for the tax treatment of an NSO also apply to an ISO that is
exercised more than three months after the optionee's termination of
employment (or more than 12 months thereafter in the case of permanent and
total disability, as defined in the Code). Upon the exercise of an ISO during
employment or within three months after the optionee's termination of
employment (12 months in the case of permanent and total disability), for
regular tax purposes the optionee will recognize no income at the time of
exercise (although the optionee will have income for alternative minimum
income tax purposes at that time equal to the excess of the fair market value
of the shares over the exercise price). If the acquired shares are sold or
exchanged after the later of (a) one year from the date of exercise of the
option and (b) two years from the date of grant of the option, the difference
between the amount realized by the optionee on that sale or exchange and the
option exercise price will be taxed to the optionee as long-term capital gain
or loss. If the shares are disposed of in an arm's-length sale before such
holding period requirements are satisfied, then the optionee will recognize
taxable ordinary income in the year of disposition in an amount equal to the
excess of the fair market value of the shares received on the exercise date
over the exercise price (or, if less, the excess of the amount realized on the
sale of the shares over the exercise price), and the optionee will have short-
term or long-term capital gain or loss, as the case may be, in an amount equal
to the difference between (i) the amount realized by the optionee upon that
disposition of the shares and (ii) the exercise price paid by the optionee
increased by the amount of ordinary income, if any, so recognized by the
optionee.
Company Deduction. In all the foregoing cases, the Company will be
entitled to a deduction at the same time and in the same amount as the
participant recognizes ordinary income, subject to certain limitations. Among
these limitations is Section 162(m) of the Code, under which certain
compensation payments in excess of $1 million are not deductible by the
Company. The limitation on deductibility applies with respect to that portion
of a compensation payment for a taxable year in excess of $1 million to either
the Company's Chief Executive Officer or any one of the other four most highly
compensated executive officers. Certain performance-based compensation is not
subject to the limitation on deductibility. Options can qualify for this
performance-based exception if they meet the requirements set forth in Section
162(m) of the Code and Treasury Regulations promulgated thereunder. The 1999
Plan has been drafted to allow compliance with those performance-based
criteria.
18
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR APPROVAL OF THE AMENDMENT TO THE 1999
STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED UNDER THE PLAN.
Certain Relationships and Related Transactions
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
2000, 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 all made their installment payments under their respective
Investor Notes as such amounts were due and payable.
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 and report
on the financial statements of the Company for the fiscal year ending December
31, 2001. KPMG LLP examined the financial statements of the Company for the
fiscal year ended December 31, 2000. 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 aggregate fees and expenses billed for professional services
rendered by KPMG LLP for fiscal year 2000 were as follows:
(1) Audit....................................................... $ 79,182
(2) Financial Information Systems Design and Implementation..... $ 0
(3) All Other, primarily services in connection with the
December 2000 public offering of 5.2 million shares of the
Company's Common Stock...................................... $140,896
The Audit Committee has considered whether the services provided to the
Company, by KPMG LLP, are compatible with maintaining the public accountants'
independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE SELECTION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
19
Proposals of Stockholders
A stockholder who intends to present a proposal at the 2002 Annual
Meeting of Stockholders and desires that information regarding the proposal be
included in the 2002 proxy statement and proxy must ensure that such
information is received by the Company in writing no later than November 30,
2001.
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 2002 Annual Meeting of Stockholders, except in circumstances where
(i) the Company receives notice of the proposed matter no later than February
14, 2002, 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 Report and Form 10-K
A copy of the ICOS Corporation 2000 Annual Report, or the Annual Report
on Form 10-K for the year ended December 31, 2000, as filed with the
Securities and Exchange Commission, is being mailed to the Company's
stockholders concurrently with this Proxy Statement, the proxy and the Notice
of 2001 Annual Meeting of Stockholders. Stockholders not receiving a copy of
such Annual Reports may obtain one without charge by submitting a written
request to the Investor Relations Department at the Company's principal
executive offices.
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, 2001
Bothell, Washington
20
Exhibit A
ICOS CORPORATION
AUDIT COMMITTEE CHARTER
Mission Statement
The Audit Committee will assist the Board of Directors in achieving its
oversight and monitoring responsibilities to the stockholders relating to
corporate accounting, financial controls and financial reporting practices of
the Company.
Organization
The members of the Committee and its Chairperson shall be elected by the
Board of Directors. The Committee shall be composed of at least three
directors. The members of the Committee shall meet the independence and
financial literacy and experience requirements set forth in the corporate
governance standards of The Nasdaq Stock Market, Inc. ("Nasdaq"), as from time
to time amended or supplemented, or similar requirements of such other
securities exchange or quotation system as may from time to time apply to the
Company. A director who does not meet these requirements may be appointed to
the Committee, if the Board, under exceptional and limited circumstances,
determines that the individual's membership on the Committee is in the best
interests of the Company and its stockholders, if permitted under applicable
Nasdaq rules.
The Committee should meet with management and the independent
accountants in separate executive sessions, as necessary or appropriate, to
discuss any matters that the Committee or any of these groups believe should
be discussed privately. The Committee may ask members of management or others
to attend the meetings and provide pertinent information as necessary.
Responsibilities
Recommend to the Board of Directors the selection, evaluation, and
compensation of the independent accountants and, when appropriate, recommend
their replacement. The Committee and the Board of Directors have the ultimate
authority and responsibility with respect to these matters, as representatives
of the stockholders of the Company. The independent accountants shall be
ultimately accountable to the Board of Directors and the Committee.
Ensure receipt from the independent accountants of a formal written
statement delineating all relationships between the accountants and the
Company, consistent with Independence Standards Board Standard 1.
Actively engage in dialogue with the independent accountants with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent accountants and take, or
recommend that the full Board of Directors take, appropriate action to oversee
the independence of the accountants.
Meet with the independent accountants and financial management to review
the scope of the proposed independent audit for the current year and the audit
procedures to be utilized, and, at the conclusion thereof, review such audit.
Review with management and the independent accountants, as appropriate:
. Financial statements and related footnotes and the independent
accountants' report thereon, including their report on the
adequacy and quality of systems of internal control and any
significant recommendations they may offer to improve controls.
A-1
. The independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied
in financial reporting.
. The adequacy of the system of internal controls over financial
reporting and the safeguarding of assets and compliance with laws
and regulations.
. Any serious difficulties or disputes with management encountered
by the independent accountants during the course of the audit and
any instances of second opinions sought by management.
. Other matters related to the conduct of the external audit which
are communicated to the Committee under generally accepted
auditing standards.
Prepare a report to stockholders as required by the Securities and
Exchange Commission to be included in the Company's annual proxy statement.
Maintain minutes or other records of meetings and activities of the
Committee.
Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
Review the Committee's charter on an annual basis and update as
necessary.
The responsibilities of a member of the Committee are in addition to
those for a member of the Board of Directors. While the Committee has the
responsibility and powers set forth in this charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate and are in compliance with
generally accepted accounting principles. This is the responsibility of
management and the independent accountants. Also, it is not the duty of the
Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent accountants or to assure compliance with laws
and regulations or the Company's corporate policies.
A-2
Exhibit B
ICOS CORPORATION
1999 STOCK OPTION PLAN
Amended and Restated as of March 8, 2001
SECTION 1. PURPOSE
The purpose of the ICOS Corporation 1999 Stock Option Plan (the "Plan")
is to enhance the long-term stockholder value of ICOS Corporation, a Delaware
corporation (the "Company"), by offering opportunities to selected persons to
participate in the Company's growth and success, and to encourage them to
remain in the service of the Company and its Related Corporations (as defined
in Section 2) and to acquire and maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set
forth below:
"Board" means the Board of Directors of the Company.
"Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction
or confession of a crime punishable by law (except minor violations), in
each case as determined by the Plan Administrator, and its determination
shall be conclusive and binding.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Common Stock" means the common stock, par value $.01 per share,
of the Company.
"Corporate Transaction" has the meaning set forth in Section 11.2
"Disability," unless otherwise defined by the Plan Administrator,
means a mental or physical impairment of the Participant that is
expected to result in death or that has lasted or is expected to last
for a continuous period of 12 months or more and that causes the
Participant to be unable, in the opinion of the Company, to perform his
or her duties for the Company or a Related Corporation and to be engaged
in any substantial gainful activity.
"Effective Date" means the date on which the Plan is adopted by
the Board, so long as it is approved by the Company's stockholders at
any time within 12 months of such adoption.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the Nasdaq
Stock Market, the closing selling price for the Common Stock as reported
by the Nasdaq Stock Market for a single trading day or (b) if the Common
Stock is listed on the New York Stock Exchange or the American Stock
Exchange, the closing selling price for the Common Stock as such price
is officially quoted in the composite tape of transactions on such
exchange for a single trading day; provided, however, that if there is
no such reported price for the Common Stock for the date in question,
then such price on the last preceding date for which such price exists
shall be determinative of Fair Market Value.
"Good Reason" means the occurrence of any of the following events
or conditions:
(a) the assignment to the Participant of any duties
materially inconsistent with the Participant's position,
authority, duties or responsibilities as in effect immediately
prior to a
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Corporate Transaction or any other action by the successor
corporation which results in a material diminution in such
position, authority, duties or responsibilities, excluding for
this purpose an isolated and inadvertent action not taken in bad
faith and which is remedied by the successor corporation promptly
after receipt of notice thereof given by the Participant;
(b) a reduction in the Participant's annual base salary;
(c) the successor corporation's requiring the Participant
(without the Participant's consent) to be based at any place
outside a 35-mile radius of his or her place of employment prior
to a Corporate Transaction, except for reasonably required travel
on the successor corporation's business that is not materially
greater than such travel requirements prior to the Corporate
Transaction;
(d) the successor corporation's failure to provide the
Participant with compensation and benefits at least equal in the
aggregate (in terms of benefit levels and/or reward opportunities)
to those provided for under any employee benefit plan, program or
practice as in effect immediately prior to the Corporate
Transaction, except for changes in general welfare and benefit
plans in a manner consistent with similar plans applicable to the
employees of the successor corporation and its affiliates in
general, which changes on the whole (after consideration of any
additional benefits provided after the consummation of the
Corporate Transaction) are not material decreases; or
(e) any material breach by the successor corporation of its
obligation to Participant under the Plan.
"Grant Date" means the date on which the Plan Administrator
completes the corporate action relating to the grant of an Option and
all conditions precedent to the grant have been satisfied, provided that
conditions to the exercisability or vesting of Options shall not defer
the Grant Date.
"Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an
"incentive stock option" as that term is defined in Section 422 of the
Code.
"Nonqualified Stock Option" means an Option to purchase Common
Stock granted under Section 7 other than an Incentive Stock Option.
"Option" means the right to purchase Common Stock granted under
Section 7.
"Option Term" has the meaning set forth in Section 7.3.
"Parent," except as otherwise provided in Section 8.4 in
connection with Incentive Stock Options, means any entity, whether now
or hereafter existing, that directly or indirectly controls the Company.
"Participant" means (a) the person to whom an Option is granted;
(b) for a Participant who has died, the personal representative of the
Participant's estate, the person(s) to whom the Participant's rights
under the Option have passed by will or by the applicable laws of
descent and distribution, or the beneficiary designated in accordance
with Section 10; or (c) the person(s) to whom an Option has been
transferred in accordance with Section 10.
"Plan Administrator" means the Board or any committee or
committees designated by the Board to administer the Plan under Section
3.1.
"Related Corporation" means any Parent or Subsidiary of the
Company.
"Retirement" means retirement as of the individual's normal
retirement date under the Company's 401(k) Plan or other similar
successor plan applicable to salaried employees, unless otherwise
defined by the Plan Administrator from time to time for purposes of the
Plan.
"Securities Act" means the Securities Act of 1933, as amended.
B-2
"Subsidiary," except as provided in Section 8.4 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company.
"Termination Date" has the meaning set forth in Section 7.6.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board (a "Plan Administrator"). If and so long as
the Common Stock is registered under Section 12(b) or 12(g) of the Exchange
Act, the Board shall consider in selecting the members of any committee acting
as Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a)
"outside directors" as contemplated by Section 162(m) of the Code and (b)
"nonemployee directors" as contemplated by Rule 16b-3 under the Exchange
Act. Notwithstanding the foregoing, the Board may delegate the responsibility
for administering the Plan with respect to designated classes of eligible
persons to different committees consisting of one or more members of the
Board, subject to such limitations as the Board deems appropriate. Committee
members shall serve for such term as the Board may determine, subject to
removal by the Board at any time.
3.2 Administration and Interpretation by Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Options under the Plan, including the
selection of individuals to be granted Options, the type of Options, the
number of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option and the terms of any
instrument that evidences the Option. The Plan Administrator shall also have
exclusive authority to interpret the Plan and the terms of any instrument
evidencing the Option and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant
to the Plan, shall be conclusive and binding on all parties involved or
affected. The Plan Administrator may delegate administrative duties to such of
the Company's officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 11.1, the
number of shares of Common Stock that shall be available for issuance under
the Plan shall be 10,000,000 shares. In addition, (a) any authorized shares
not issued or subject to outstanding options under the Company's 1989 Stock
Option Plan or its 1991 Stock Option Plan for Nonemployee Directors (the
"Prior Plans") on the Effective Date and (b) any shares subject to outstanding
options under the Prior Plans on the Effective Date that cease to be subject
to such options (other than by reason of exercise of the options to the extent
they are exercised for shares), up to an aggregate maximum of 7,412,048
shares, shall, as of the date of stockholder approval of the Plan, cease to be
available for grant and issuance under the Prior Plans, but shall be available
for issuance under the Plan. Shares issued under the Plan shall be drawn from
authorized and unissued shares or shares now held or subsequently acquired by
the Company as treasury shares.
4.2 Limitations
Subject to adjustment from time to time as provided in Section 11.1, not
more than 2,500,000 shares of Common Stock may be made subject to Options
under the Plan to any individual in the aggregate in any
B-3
consecutive three year period, such limitation to be applied in a manner
consistent with the requirements of, and only to the extent required for
compliance with, the exclusion from the limitation on deductibility of
compensation under Section 162(m) of the Code.
4.3 Reuse of Shares
Any shares of Common Stock that have been made subject to an Option that
cease to be subject to the Option (other than by reason of exercise of the
Option to the extent it is exercised for shares) shall again be available for
issuance in connection with future grants of Options under the Plan; provided,
however, that for purposes of Section 4.2, any such shares shall be counted in
accordance with the requirements of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY
Options may be granted under the Plan to those officers, directors and
employees of the Company and its Related Corporations as the Plan
Administrator from time to time selects. Options may also be made to
consultants, agents, advisors and independent contractors who provide services
to the Company and its Related Corporations; provided, however, that such
Participants render bona fide services not in connection with the offer and
sale of the Company's securities in a capital-raising transaction.
SECTION 6. SETTLEMENT OF OPTIONS AND ACQUIRED COMPANY OPTIONS
6.1 Settlement of Options
The Company may settle Options through the delivery of shares of Common
Stock, cash payments, the granting of replacement Options or any combination
thereof as the Plan Administrator shall determine. Any Option settlement,
including payment deferrals, may be subject to such conditions, restrictions
and contingencies as the Plan Administrator shall determine. The Plan
Administrator may permit or require the deferral of any Option payment,
subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents. The Plan
Administrator may at any time offer to buy out, for a payment in cash or
Common Stock, an Option previously granted based on such terms and conditions
as the Plan Administrator shall establish and communicate to the Participant
at the time such offer is made.
6.2 Acquired Company Options
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for options
issued under other plans, or assume under the Plan options issued under other
plans, if the other plans are or were plans of other acquired entities
("Acquired Entities") (or the parent of the Acquired Entity) and the new
Option is substituted, or the old option is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization or
liquidation (the "Acquisition Transaction"). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is
approved by the Board and said agreement sets forth the terms and conditions
of the substitution for or assumption of outstanding options of the Acquired
Entity, said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such options shall be deemed to be Participants.
B-4
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified
Stock Options, which shall be appropriately designated. Options may be granted
singly or in combination.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options and not less than 85% of the Fair Market Value of the
Common Stock on the Grant Date with respect to Nonqualified Stock Options. For
Incentive Stock Options granted to a more than 10% stockholder, the Option
exercise price shall be as specified in Section 8.2.
7.3 Term of Options
The term of each Option (the "Option Term") shall be as established by
the Plan Administrator or, if not so established, shall be ten years from the
Grant Date. For Incentive Stock Options, the maximum Option Term shall be as
specified in Sections 8.2 and 8.5.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the
Plan Administrator at any time:
Period of Participant's Continuous
Employment or
Service With the Company or Its
Related
Corporations From the Option Grant Percent of Total Option
Date That Is Vested and Exercisable
---------------------------------- ------------------------------
After 1 month 1/48th
Each additional one-month period of An additional 1/48th
continuous service
completed thereafter
After 4 years 100%
Unless the Plan Administrator (or the Company's Chief Executive Officer
in the case of Participants who are not subject to Section 16 of the Exchange
Act) determines otherwise, the vesting schedule of an Option shall be adjusted
proportionately to the extent a Participant's hours of employment or service
are reduced after the Grant Date.
To the extent that the Option has vested and become exercisable, an
Option may be exercised from time to time by delivery to the Company of a
written stock option exercise agreement or notice, in a form and in accordance
with procedures established by the Plan Administrator, setting forth the
number of shares with respect to which the Option is being exercised, the
restrictions imposed on the shares purchased under such exercise agreement, if
any, and such representations and agreements as may be required by the Plan
Administrator, accompanied by payment in full as described in Section 7.5. An
Option may not be exercised as to less than a reasonable number of shares at
any one time, as determined by the Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such
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consideration must be paid in cash or by check or, unless the Plan
Administrator in its sole discretion determines otherwise, either at the time
the Option is granted or at any time thereafter, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by
attestation) shares of Common Stock already owned by the Participant for
at least six months (or any shorter period necessary to avoid a charge
to the Company's earnings for financial reporting purposes) having a
Fair Market Value on the day prior to the exercise date equal in amount
to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a
brokerage firm designated by the Company to deliver promptly to the
Company the aggregate amount of sale or loan proceeds to pay the Option
exercise price and any withholding tax obligations that may arise in
connection with the exercise and (ii) the Company to deliver the
certificates for such purchased shares directly to such brokerage firm,
all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Participant (including a Participant who is an
officer or a director of the Company) in acquiring shares of Common Stock
pursuant to an Option granted under the Plan, the Plan Administrator, in its
sole discretion, may authorize, either at the Grant Date or at any time before
the acquisition of Common Stock pursuant to the Option, (i) the payment by a
Participant of a full-recourse promissory note, (ii) the payment by the
Participant of the Purchase price, if any, of the Common Stock in
installments, or (iii) the guarantee by the Company of a loan obtained by the
Participant from a third party. Subject to the foregoing, the Plan
Administrator shall in its sole discretion specify the terms of any loans,
installment payments or loan guarantees, including the interest rate and terms
of and security for repayment.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable,
and the terms and conditions of such exercise, if a Participant ceases to be
employed by, or to provide services to, the Company or its Related
Corporations, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Option, the Option shall be exercisable according to the following terms
and conditions, which may be waived or modified by the Plan Administrator at
any time:
(a) Any portion of an Option that is not vested and exercisable on
the date of termination of the Participant's employment or service
relationship (the "Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Participant's Termination Date occurs for
reasons other than Cause, death, Disability or Retirement, the
three-month anniversary of such Termination Date;
(iii) if the Participant's Termination Date occurs by reason
of death or Disability, the one-year anniversary of such
Termination Date; and
(iv) if the Participant's Termination Date occurs by reason
of Retirement, the three-year anniversary of such Termination
Date.
Notwithstanding the foregoing, if the Participant dies after the
Termination Date while the Option is otherwise exercisable, the portion of the
Option that is vested and exercisable on such Termination Date shall
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expire upon the earlier to occur of (y) the last day of the Option Term and
(z) the first anniversary of the date of death, unless the Plan Administrator
determines otherwise.
Also notwithstanding the foregoing, in case of termination of the
Participant's employment or service relationship for Cause, the Option shall
automatically expire upon first notification to the Participant of such
termination, unless the Plan Administrator determines otherwise. If a
Participant's employment or service relationship with the Company is suspended
pending an investigation of whether the Participant shall be terminated for
Cause, all the Participant's rights under any Option likewise shall be
suspended during the period of investigation.
A Participant's transfer of employment or service relationship between
or among the Company and its Related Corporations, or a change in status from
an employee to a consultant that is evidenced by a written agreement between a
Participant and the Company or a Related Corporation, shall not be considered
a termination of employment or service relationship for purposes of this
Section 7. Employment or service relationship shall be deemed to continue
while the Participant is on a bona fide leave of absence, if such leave was
approved by the Company or a Related Corporation in writing and if continued
crediting of service for purposes of this Section 7 is expressly required by
the terms of such leave or by applicable law (as determined by the
Company). The effect of a Company-approved leave of absence on the terms and
conditions of an Option shall be determined by the Plan Administrator, in its
sole discretion.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
To the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and conditions:
8.1 Dollar Limitation
To the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and
all other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option. In the
event the Participant holds two or more such Options that become exercisable
for the first time in the same calendar year, such limitation shall be applied
on the basis of the order in which such Options are granted.
8.2 More Than 10% Stockholders
If an employee owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option Term shall not exceed five
years. The determination of more than 10% ownership shall be made in
accordance with Section 422 of the Code.
8.3 Attribution Rule
For purposes of Section 8.2, in determining stock ownership, an employee
shall be deemed to own the stock owned, directly or indirectly, by or for his
or her brothers, sisters, spouse, ancestors and lineal descendants. Stock
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust shall be deemed to be owned proportionately by or for its stockholders,
partners or beneficiaries. If an employee or a person related to the employee
owns an unexercised option or warrant to purchase stock of the Company, the
stock subject to that portion of the option or warrant which is unexercised
shall not be counted in determining stock ownership. For purposes of this
Section 8, stock owned by an employee shall include all stock actually issued
and outstanding immediately before the grant of the Incentive Stock Option to
the employee.
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8.4 Eligible Employees
Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.4, "parent corporation" and
"subsidiary corporation" shall have the meanings attributed to those terms for
purposes of Section 422 of the Code.
8.5 Term
Except as provided in Section 8.2, the Option Term shall not exceed 10
years.
8.6 Exercisability
An Option designated as an Incentive Stock Option shall cease to qualify
for favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three months
after the Termination Date for reasons other than death or Disability, (b)
more than one year after the Termination Date by reason of Disability, or (c)
after the Participant has been on leave of absence for more than 90 days,
unless the Participant's reemployment rights are guaranteed by statute or
contract. For purposes of this Section 8.6, Disability shall mean "disability"
as that term is defined for purposes of Section 422 of the Code.
8.7 Taxation of Incentive Stock Options
In order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold the shares
issued upon the exercise of an Incentive Stock Option for two years after the
Grant Date and one year from the date of exercise. A Participant may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option. The Participant shall give the Company prompt notice of any
disposition of shares acquired by the exercise of an Incentive Stock Option
prior to the expiration of such holding periods.
8.8 Promissory Notes
The amount of any promissory note delivered pursuant to Section 7.5 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator, but in no case less than the rate
required to avoid imputation of interest (taking into account any exceptions
to the imputed interest rules) for federal income tax purposes.
SECTION 9. WITHHOLDING
The Company may require the Participant to pay to the Company the amount
of any withholding taxes that the Company is required to withhold with respect
to the grant, vesting or exercise of any Option. Subject to the Plan and
applicable law, the Plan Administrator may, in its sole discretion, permit the
Participant to satisfy withholding obligations (up to the maximum rate), in
whole or in part, by paying cash, by electing to have the Company withhold
shares of Common Stock or by transferring shares of Common Stock to the
Company, in such amounts as are equivalent to the Fair Market Value of the
withholding obligation. The Company shall have the right to withhold from any
Option or any shares of Common Stock issuable pursuant to an Option or from
any cash amounts otherwise due or to become due from the Company to the
Participant an amount equal to such taxes. The Company may also deduct from
any Option any other amounts due from the Participant to the Company or a
Related Corporation.
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SECTION 10. ASSIGNABILITY
Options granted under the Plan shall not be transferable, pledgable or
assignable other than (a) by will or the laws of descent and distribution or
(b) to the extent permitted by the Plan Administrator, in its sole discretion,
and by Section 422 of the Code with respect to Incentive Stock Options, by
gift or other transfer to either (i) any trust or partnership in which the
original option recipient or such person's spouse or other immediate family
member has a substantial beneficial interest or (ii) a spouse or other
immediate family member; provided, however, that any Option so assigned or
transferred shall be subject to all the same terms and conditions contained in
the instrument evidencing the Option. During a Participant's lifetime, any
Options granted under the Plan are personal to the Participant and are
exercisable solely by the Participant or a permitted assignee or
transferee. Notwithstanding the foregoing, to the extent permitted by Section
422 of the Code with respect to Incentive Stock Options, the Plan
Administrator may permit a Participant, during the Participant's lifetime, to
designate a person who may exercise an Option after the Participant's death by
giving written notice of such designation to the Company (such designation may
be changed from time to time by the Participant by giving written notice to
the Company revoking any earlier designation and making a new
designation). Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any Option under the Plan or of any right or privilege
conferred thereby, contrary to the provisions of the Plan, or the sale or levy
or any attachment or similar process upon the rights and privileges conferred
hereby, shall be null and void.
SECTION 11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
11.1 Adjustment of Shares
The aggregate number and class of shares for which Options may be
granted under the Plan, the number and class of shares covered by each
outstanding Option and the exercise price per share thereof (but not the total
price), and the limitations set forth in Section 4.2, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
11.2 Effect of Liquidation, Reorganization or Change in Control
(a) Except as provided in subsection 11.2(b), upon 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 stockholders of the Company receive
cash, stock or other property in exchange for or in connection with their
shares of Common Stock, any Option granted hereunder shall terminate, but the
Participant shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such Participant's Option in whole or in part whether
or not the vesting requirements set forth in the Option agreement have been
satisfied.
(b) 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 (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 or reorganization (other than a mere reincorporation or the
creation of a holding company) (each a "Corporate Transaction"), all Options
granted hereunder shall be converted into options to purchase shares of
Exchange Stock unless the Company and the corporation issuing the Exchange
Stock, in their sole discretion determine that any or all such Options granted
hereunder shall not be converted into options to purchase shares of Exchange
Stock but instead shall terminate in accordance with the provisions of
subsection 11.2(a). The amount and price of converted options shall be
determined by adjusting the amount and price of the Options granted hereunder
in the same proportion as used for determining
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the number of shares of Exchange Stock the holders of the Common Stock receive
in such merger, consolidation, acquisition of property or stock, separation or
reorganization.
(c) Each converted option shall, immediately following the consummation
of the Corporate Transaction, become fully vested and exercisable in whole or
in part whether or not the vesting requirements set forth in the Option
agreement have been satisfied, except that such acceleration shall not occur
if, in the opinion of the Company's outside accountants, such acceleration
would render unavailable "pooling of interests" accounting treatment for any
Corporate Transaction for which pooling of interests accounting treatment is
sought by the Company. Such Options shall not so accelerate, however, if and
to the extent that: (i) such Option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation or parent
thereof or 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) such Option is to be replaced with a cash incentive program of the
successor corporation that preserves the spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such Option. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be conclusive and binding. All such
Options shall terminate and cease to remain outstanding immediately following
the consummation of the Corporate Transaction, except to the extent assumed by
the successor corporation or its parent corporation. Any such Options that are
assumed or replaced in the Corporate Transaction and do not otherwise
accelerate at that time shall be accelerated in the event the Participant's
employment or services should subsequently terminate within two years
following such Corporate Transaction, unless such employment or services are
terminated by the successor corporation for Cause or by the Participant
voluntarily without Good Reason.
(d) Upon 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, a mere
reincorporation or the creation of a holding company, each Option outstanding
under the Plan shall be assumed or an equivalent option shall be substituted
by the successor corporation or a parent or subsidiary of such corporation,
and the vesting schedule set forth in the instrument evidencing the Option
shall continue to apply to such assumed or equivalent option.
11.3 Fractional Shares
In the event of any adjustment in the number of shares covered by any
Option, any fractional shares resulting from such adjustment shall be
disregarded and each such Option shall cover only the number of full shares
resulting from such adjustment.
11.4 Determination of Board to Be Final
All Section 11 adjustments shall be made by the Board, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
SECTION 12. AMENDMENT AND TERMINATION OF PLAN
12.1 Amendment of Plan
The Plan may be amended only by the Board in such respects as it shall
deem advisable; provided, however, that to the extent required for compliance
with Section 422 of the Code or any applicable law or regulation, stockholder
approval shall be required for any amendment that would (a) increase the total
number of shares available for issuance under the Plan, (b) modify the class
of persons eligible to receive Options, or (c) otherwise require stockholder
approval under any applicable law or regulation. Any amendment made to the
Plan that would constitute a "modification" to Incentive Stock Options
outstanding on the date of such amendment shall not, without the consent of
the Participant, be applicable to such outstanding Incentive Stock Options but
shall have prospective effect only.
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12.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan shall
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than ten years after the later of (a) the Plan's
adoption by the Board and (b) the adoption by the Board of any amendment to
the Plan that constitutes the adoption of a new plan for purposes of Section
422 of the Code.
12.3 Consent of Participant
The amendment or termination of the Plan or the amendment of an
outstanding Option shall not, without the Participant's consent, impair or
diminish any rights or obligations under any Option theretofore granted to the
Participant under the Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Participant, be
made in a manner so as to constitute a "modification" that would cause such
Incentive Stock Option to fail to continue to qualify as an Incentive Stock
Option. Notwithstanding the foregoing, any adjustments made pursuant to
Section 11 shall not be subject to these restrictions.
SECTION 13. GENERAL
13.1 Evidence of Options
Options granted under the Plan shall be evidenced by a written
instrument that shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with the Plan.
13.2 No Individual Rights
Nothing in the Plan or any Option granted under the Plan shall be deemed
to constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Corporation or limit in any way
the right of the Company or any Related Corporation of the Company to
terminate a Participant's employment or other relationship at any time, with
or without Cause.
13.3 Registration
Notwithstanding any other provision of the Plan, the Company shall have
no obligation to issue or deliver any shares of Common Stock under the Plan or
make any other distribution of benefits under the Plan unless such issuance,
delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities Act), and the
applicable requirements of any securities exchange or similar entity. The
Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if
made. The Company may issue certificates for shares with such legends and
subject to such restrictions on transfer and stop-transfer instructions as
counsel for the Company deems necessary or desirable for compliance by the
Company with federal and state securities laws. To the extent that the Plan or
any instrument evidencing an Option provides for issuance of stock
certificates to reflect the issuance of shares of Common Stock, the issuance
may be effected on a noncertificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
13.4 No Rights as a Stockholder
No Option shall entitle the Participant to any cash dividend, voting or
other right of a stockholder unless and until the date of issuance under the
Plan of the shares that are the subject of such Option.
B-11
13.5 Compliance With Laws and Regulations
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
Participants who are officers or directors subject to Section 16 of the
Exchange Act without so restricting, limiting or conditioning the Plan with
respect to other Participants. Additionally, in interpreting and applying the
provisions of the Plan, any Option granted as an Incentive Stock Option
pursuant to the Plan shall, to the extent permitted by law, be construed as an
"incentive stock option" within the meaning of Section 422 of the Code.
13.6 Participants in Foreign Countries
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company
or its Related Corporations may operate to assure the viability of the
benefits from Options granted to Participants employed in such countries and
to meet the objectives of the Plan.
13.7 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special
deposits for any immediate or deferred amounts payable to any Participant, and
no Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.
13.8 Severability
If any provision of the Plan or any Option is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Option under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform
to applicable laws, or, if it cannot be so construed or deemed amended
without, in the Plan Administrator's determination, materially altering the
intent of the Plan or the Option, such provision shall be stricken as to such
jurisdiction, person or Option, and the remainder of the Plan and any such
Option shall remain in full force and effect.
13.9 Choice of Law
The Plan and all determinations made and actions taken pursuant hereto,
to the extent not otherwise governed by the laws of the United States, shall
be governed by the laws of the State of Washington without giving effect to
principles of conflicts of laws.
SECTION 14. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the
Board, so long as it is approved by the Company's stockholders at any time
within 12 months of such adoption.
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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
authorizes 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,
2001 at the annual meeting of stockholders to be held on May 4, 2001 or any
adjournment or postponement thereof.
(Continued, and to be marked, dated and signed on the other side.)
. FOLD AND DETACH HERE .
Please mark [X]
your votes
as indicated
The Board of Directors recommends a vote "FOR" the nominees in Item 1 and "FOR"
Items 2 and 3.
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, 2 and 3.
FOR all WITHHELD
nominees listed below AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below
1. ELECTION OF DIRECTORS: [ ] [ ]
(Instruction: To withhold
authority to vote for any
individual nominee strike a
line through the nominee's
name.)
Class 2 Paul N. Clark,
William H. Gates III,
Robert W. Pangia
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE 1999 [ ] [ ] [ ]
STOCK OPTION PLAN to increase the number of shares
authorized under the Plan.
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP as [ ] [ ] [ ]
the Company's independent public accountants for
fiscal year 2001.
4. In their discretion the Proxies are authorized to
vote upon such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
Dated , 2001
---------------------------------
--------------------------------------------
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.
. FOLD AND DETACH HERE .