SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission
Only (as Permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ICOS Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
Notes:
[LOGO] ICOS
April 12, 2002
Dear Stockholder:
I cordially invite you to ICOS Corporation's Annual Meeting of
Stockholders, to be held on Friday, May 17, 2002 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 two members to the Company's Board
of Directors and (2) ratify the appointment of KPMG LLP as the Company's
independent public accountants for the year ending December 31, 2002.
As the Company's Chairman, I urge you to elect the two nominated
directors and vote "For" the remaining proposal. It is important that your
shares be represented, whether or not you plan to attend the
meeting. Therefore, please take a few minutes to vote now. To vote, please
mark, sign and date the enclosed proxy card, and return it in the enclosed
prepaid envelope as promptly as possible.
After the transaction of formal business at the meeting, management will
provide an update on the Company's progress and respond to questions from
stockholders. We also invite you to visit our headquarters in Bothell,
Washington, after the meeting is adjourned. Roundtrip transportation, from the
Four Seasons Olympic Hotel, will be provided on a limited basis. 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 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 2002 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 17, 2002, at 9:30 a.m., for the following purposes:
1. To elect two directors to serve until the third Annual Meeting of
Stockholders following their election and until their successors are
elected and qualified;
2. To ratify the appointment of KPMG LLP as the Company's independent
public accountants for the year ending December 31, 2002; and
3. To transact such other business as may properly come before the
Annual Meeting and all adjournments and postponements thereof.
Your attention is directed to the accompanying Proxy Statement for
further information with respect to the matters to be acted upon at the Annual
Meeting. To constitute a quorum for the conduct of business at the Annual
Meeting, it is necessary that holders of a majority of all outstanding shares
of the Company's Common Stock be present in person or represented by proxy. To
ensure representation at the Annual Meeting, you are urged to mark, sign and
date the enclosed proxy card and return it promptly in the enclosed prepaid
envelope.
Only stockholders of record at the close of business on March 19, 2002
are entitled to notice of, and to vote at, the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Paul Clark
PAUL N. CLARK
Chairman of the Board of Directors,
Chief Executive Officer and President
April 12, 2002
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 2002 Annual Meeting of
Stockholders (the "Annual Meeting"), to be held on Friday, May 17, 2002, 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 April 12, 2002.
Each share of the Company's $.01 par value Common Stock ("Common Stock")
outstanding at the close of business on March 19, 2002 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 Amended and Restated Bylaws (the
"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 two nominees for election as directors
who receive the greatest number of votes cast in the election of directors will
be elected and (ii) matter 2 listed in the accompanying Notice of 2002 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 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, will be 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.
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 Corporate Secretary at or before
the Annual Meeting.
1
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, telex or electronic
mail. 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 materials 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 19,
2002, the record date for determining stockholders entitled to vote at the
Annual Meeting, 60,145,400 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 January 31, 2002, 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 of Beneficial Owner Owned (1) (2) Common Stock
William H. Gates III............................................ 5,707,259 9.4%
c/o Michael Larson
2365 Carillon Point
Kirkland, WA 98033
FMR Corp. and certain affiliates (3)............................ 4,811,670 8.0%
82 Devonshire Street
Boston, MA 02109
Barclays Global Investors, N.A. and certain affiliates (4)...... 3,467,520 5.8%
45 Fremont Street
San Francisco, CA 94105
Frank T. Cary................................................... 191,363 *
Paul N. Clark................................................... 1,009,867 1.7%
James L. Ferguson............................................... 149,433 *
David V. Milligan (5)........................................... 40,197 *
Robert W. Pangia................................................ 146,231 *
Gary L. Wilcox (6).............................................. 575,228 *
Walter B. Wriston............................................... 157,981 *
2
Shares
Beneficially Percentage of
Name of Beneficial Owner Owned (1) (2) Common Stock
W. Michael Gallatin............................................ 271,570 *
Thomas P. St. John............................................. 300,397 *
Michael A. Stein............................................... 48,490 *
All directors and executive officers as a group (13 persons)... 8,767,616 13.8%
- --------
* Less than 1%.
(1) Unless otherwise indicated, the persons named have sole voting and
investment power with respect to all shares shown as beneficially owned by
them, subject to applicable community property laws. Amounts shown include
shares owned and stock options and warrants that may be exercised within 60
days of January 31, 2002.
(2) Includes options and warrants that may be exercised for Common Stock within
60 days of January 31, 2002, for each individual as follows: William H.
Gates III, 675,758 shares; Frank T. Cary, 146,231 shares; Paul N. Clark,
989,742 shares; James L. Ferguson, 132,898 shares; David V. Milligan,
19,758 shares; Robert W. Pangia, 146,231 shares; Gary L. Wilcox, 539,028
shares; Walter B. Wriston, 138,231 shares; W. Michael Gallatin, 232,129
shares; Thomas P. St. John, 252,097 shares; Michael A. Stein, 48,490
shares; and all directors and executive officers as a group, 3,444,393
shares.
(3) The information provided relating to FMR Corp. and certain affiliates is
based exclusively on a Schedule 13G filed with the Commission on February
14, 2002. This filing reported that, of the 4,811,670 shares of Common
Stock beneficially owned by FMR Corp. and certain affiliates as of
December 31, 2001, FMR Corp. is the beneficial owner of an aggregate of
4,811,670 shares of Common Stock, and that FMR Corp. has sole voting power
over 8,100 of these shares and sole dispositive power over 4,811,670 of
these shares. The filing also reported that Edward C. Johnson 3rd
(Chairman of FMR Corp.) is the beneficial owner of an aggregate of
4,811,670 of these shares of Common Stock and has sole dispositive power
over these shares. In addition, the filing reported that Abigail P.
Johnson 3rd (a director of FMR Corp.) is the beneficial owner of an
aggregate of 4,811,670 of these shares of Common Stock and has sole
dispositive power over these shares.
(4) The information provided relating to Barclay's Global Investors, N.A. and
certain affiliates is based exclusively on a Schedule 13G filed with the
Commission on February 14, 2002. This filing reported that, of the
3,467,520 shares of Common Stock beneficially owned by Barclays Global
Investors, N.A. and certain affiliates as of December 31, 2001 (the
"Aggregate Barclays Shares"), Barclays Global Investors, N.A. is the
beneficial owner of an aggregate of 3,046,233 shares of Common Stock, and
that Barclays Global Investors, N.A. has sole voting power over 2,768,393
shares and sole dispositive power over 3,046,233 shares. The filing also
reported that, of the Aggregate Barclays Shares, Barclays Global Fund
Advisors is the beneficial owner of an aggregate of 395,201 shares of
Common Stock, and that Barclays Global Fund Advisors has sole voting and
dispositive power over these shares. The filing also reported that, of the
Aggregate Barclays Shares, Barclays Global Investors, LTD. is the
beneficial owner of an aggregate of 16,500 shares of Common Stock, and that
Barclays Global Investors, LTD. has sole voting and dispositive power over
these shares. In addition, the filing reported that, of the Aggregate
Barclays Shares, Barclays Funds Limited is the beneficial owner of an
aggregate of 9,586 shares of Common Stock, and that Barclays Funds Limited
has sole voting and dispositive power over these shares.
(5) Includes 20,339 shares held by the David V. Milligan Trust, of which David
V. Milligan is trustee.
(6) Includes 36,200 shares held by the Gary and Susan Wilcox Living Trust, of
which Gary L. Wilcox is a trustee.
3
Election of Directors
The Company's Board of Directors consists of eight 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 2003 Annual Meeting of
Stockholders and three are serving terms that will not expire until the 2004
Annual Meeting of Stockholders. At the Annual Meeting, two 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 Gary L. Wilcox, Ph.D and
Walter B. Wriston 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 two
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 of Directors. No circumstances are presently
known that would render any nominee named herein unavailable to serve.
Nominees for Election as Class 3 Directors. The following are the
nominees to serve as Class 3 directors until the 2005 Annual Meeting of
Stockholders and until their respective successors are elected and qualified:
Gary L. Wilcox, Ph.D. (age 55) 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 82) 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., a national banking association. He
was Chairman of President Reagan's Economic Policy Advisory Board and Chairman
of The Business Council. Mr. Wriston currently serves as a director of Cygnus,
Inc. and Vion Pharmaceuticals, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE ABOVE-NAMED NOMINEES
TO THE BOARD OF DIRECTORS.
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 81) 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.
4
James L. Ferguson (age 76) 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 is a member of The Business Council and
the Council on Foreign Relations, a Trustee of the Aspen Institute and a Life
Trustee of Hamilton College.
David V. Milligan, Ph.D. (age 61) 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 director of Maxia
Pharmaceuticals Inc., Reliant Pharmaceuticals LLC and Galileo Laboratories Inc.
Continuing Class 2 Directors (until 2004)
The three Class 2 directors, Paul N. Clark, William H. Gates III and
Robert W. Pangia, are currently serving terms that expire at the 2004 Annual
Meeting of Stockholders and until their respective successors are elected and
qualified.
Paul N. Clark (age 55) 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 46) 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, and he has been its Chief
Software Architect and Chairman of the Board since January 2000.
Robert W. Pangia (age 50) 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. and
Network Associates, Inc.
Other Executive Officers
Leonard M. Blum (age 41) 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, magna cum laude, from Princeton University. He was a Fulbright
Scholar in international finance at the University of Zurich.
5
W. Michael Gallatin, Ph.D. (age 48) 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 the Company, Dr. Gallatin was a faculty
member of the Fred Hutchinson Cancer Research Center in Seattle, Washington,
and an affiliate faculty member of the Department of Microbiology at the
University of Washington. He received his Ph.D. in immunology from the
University of Alberta and his B.S. in zoology from Truman State University
(formerly Northeast Missouri State University).
Thomas P. St. John, Ph.D. (age 49) 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 the Company, 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 52) has been the Company's Vice President and Chief
Financial Officer since 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. From 1989 to 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 working with
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 serves on the
Board of Trustees of the Fred Hutchinson Cancer Research Center. He received
his B.S. in business administration from the University of Maryland at College
Park, MD.
Clifford J. Stocks (age 43) 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.
Information on Committees of the Board of Directors and Meetings
The Board of Directors met seven times during the year ended December 31,
2001. All directors, except Mr. Gates and Mr. Ferguson, 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.
The Board of Directors has three standing committees: an Audit Committee,
a Compensation Committee and a Nominating Committee.
The Audit Committee consists of three independent directors, Messrs.
Wriston (Chairman), Ferguson and Pangia. 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 the engagement of an
accounting firm to serve as the Company's 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; audit fees; 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 twice during the year ended
December 31, 2001.
6
The Compensation Committee consists of three non-employee 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
twice during the year ended December 31, 2001.
The Nominating Committee consists of Messrs. Clark (Chairman), Milligan
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
stock-holders. The Nominating Committee met once during the year ended
December 31, 2001.
Compensation of Directors
The Company has a policy of paying directors who are not employees of the
Company an annual fee of $24,000 for service on the Board of Directors, $2,000
for each Board meeting attended and $1,000 for each Board committee meeting
attended.
Pursuant to the Company's stock option grant program for non-employee
directors (the "Director Program"), each non-employee director is entitled to
receive nonqualified 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.
Under the Director Program, upon their initial election or appointment to
the Board of Directors, each eligible director is entitled to 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. At each Annual Meeting of Stockholders, each
eligible director is also entitled to 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 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 of Directors
during the vesting periods.
Stock options granted under the Director Program have an exercise price
equal to the closing market price of the Common Stock on the date of the
grant. The options have a ten-year term but cannot be exercised later than two
years after termination of service as a director.
During 2001, the Company granted each non-employee director a stock
option representing the right to purchase 9,139 shares of Common Stock pursuant
to the Director Program.
7
Executive Compensation
The following table sets forth information regarding compensation paid by
the Company during the past three years to its Chief Executive Officer and the
other four most highly compensated individuals who were serving as executive
officers at December 31, 2001 (the "Named Executive Officers").
Summary Compensation Table
Annual Long-Term
Compensation Compensation Awards
- ------------------------------------------------------------------------------------------------------------------------------
Other Annual Securities Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($)(3) Options (#)(4) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------------
Paul N. Clark 2001 $600,000 $ -- $ 61,287 172,859 $ 29,014 (5)
Chairman of the Board, Chief 2000 550,000 -- 149,520 75,173 178,288
Executive Office and President 1999 271,000 (1) -- 62,781 1,510,409 90,512
- ------------------------------------------------------------------------------------------------------------------------------
Gary L. Wilcox 2001 440,000 $ -- -- 62,350 506 (6)
Executive Vice President, 2000 416,000 -- -- 34,651 414
Operations, Corporate Secretary 1999 385,000 -- -- 42,421 752
and Director
- ------------------------------------------------------------------------------------------------------------------------------
W. Michael Gallatin 2001 333,000 $ -- -- 54,132 330 (6)
Vice President and Scientific 2000 308,000 -- -- 21,685 270
Director 1999 280,000 -- -- 24,765 459
- ------------------------------------------------------------------------------------------------------------------------------
Thomas P. St. John 2001 321,000 $ -- -- 51,562 330 (6)
Vice President, Therapeutic 2000 297,000 -- -- 21,170 270
Development 1999 270,000 -- -- 24,363 459
- ------------------------------------------------------------------------------------------------------------------------------
Michael A. Stein 2001 319,000 (2) 30,000 (2) -- 117,090 506 (6)
Vice President and Chief Financial --
Officer --
- ------------------------------------------------------------------------------------------------------------------------------
- --------
(1) Mr. Clark became Chief Executive Officer and President of the Company on
June 16, 1999.
(2) Mr. Stein became Vice President and Chief Financial Officer of the Company
on January 8, 2001 and received a $30,000 bonus upon the commencement of
his employment.
(3) 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."
(4) Represents options awarded to the Named Executive Officers pursuant to the
Company's Management Incentive Program (the "MIP") and the Company's
periodic stock option grant program, and, in the case of Mr. Stein, stock
options awarded in conjunction with commencing employment with the
Company. Options granted pursuant to the MIP are reported in the year
earned for all years presented. Prior to 2002, options granted pursuant to
the MIP were reported in the year granted, and therefore totals listed in
this column for 1999 and 2000 differ from those listed in this column in
previous years' proxy statements. The total number of MIP options earned
by the Named Executive Officers for performance in 2001, 2000 and 1999 were
as follows:
2001 2000 1999
------ ------ ------
Paul N. Clark.......................... 50,459 48,073 10,409
Gary L. Wilcox......................... 15,550 14,151 21,221
W. Michael Gallatin.................... 12,732 9,585 14,265
Thomas P. St. John..................... 10,162 9,470 14,263
Michael A. Stein....................... 17,090 -- --
8
(5) Represents reimbursement of personal and spousal travel and relocation
costs, in accordance with Mr. Clark's employment agreement, and subsequent
arrangements approved by the Board of Directors, as well as taxable
compensation related to group term life insurance premiums paid by the
Company. See "Employment Contracts, Termination of Employment and Change
of Control Arrangements."
(6) Reflects taxable compensation related to group term life insurance premiums
paid by the Company for Drs. Wilcox, Gallatin and St. John and Mr. Stein.
2001 Option Grants
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers in 2001.
Option Grants in 2001
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (5)
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted
Options to Employees in Exercise Price Expiration
Name Granted (#) (1) 2001 ($/Share) (4) Date 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------
Paul N. Clark 170,473 (2) 14% $52.875 1/25/11 $ 5,668,705 $ 14,365,612
Gary L. Wilcox 60,951 (2) 5% 52.875 1/25/11 2,026,792 5,136,288
W. Michael Gallatin 50,985 (2) 4% 52.875 1/25/11 1,695,394 4,296,462
Thomas P. St. John 50,870 (2) 4% 52.875 1/25/11 1,691,570 4,286,771
Michael A. Stein 100,000 (3) 8% 42.875 1/08/11 2,696,386 6,833,171
- -------------------------------------------------------------------------------------------------------------------
Totals for:
Named Executive Officers 433,279 35% $ 13,778,847 $ 34,918,304
All Stockholders (6) $1,899,944,596 $4,814,832,638
- -------------------------------------------------------------------------------------------------------------------
- --------
(1) Represents options awarded to the Named Executive Officers pursuant to the
MIP and the Company's periodic stock option grant program, and, in the case
of Mr. Stein, stock options awarded in conjunction with commencing
employment with the Company. 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) Includes options awarded to the Named Executive Officers under the MIP (for
performance in 2000) and options awarded under the periodic stock option
grant program. The total number of MIP options granted to the Named
Executive Officers in 2001 were 48,073, 14,151, 9,585, and 9,470 to Mr.
Clark and Drs. Wilcox, Gallatin and St. John, respectively. The options
granted under the MIP were fully exercisable upon grant. Options granted
pursuant to the periodic stock option grant program become exercisable in
48 equal monthly installments beginning on January 25, 2001.
(3) Represents stock options awarded in conjunction with Mr. Stein's commencing
employment with the Company effective January 8, 2001. The options become
exercisable in 48 equal monthly installments beginning on the date of the
grant.
(4) The exercise price of each option is equal to the fair market value of the
underlying Common Stock on the date of grant based on the closing price of
the Common Stock as reported on The Nasdaq Stock Market.
9
(5) 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.
(6) The increase in the market value of the holdings of all of the Company's
stockholders over a ten-year period based on 59,744,194 shares of Common
Stock outstanding as of December 31, 2001, at assumed annual rates of
appreciation of 5% and 10% from a base price of approximately $50.57 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 2001) would be $1,899,944,596 and $4,814,832,638,
respectively. Thus, the potential realizable gain on options granted in
2001 to the Named Executive Officers represents 0.7% of the total
realizable gain by all stockholders if the assumed appreciation rates of 5%
and 10% are achieved. Actual gains, if any, depend on the future
performance of the Common Stock and overall market conditions. The amounts
reflected in the table may not be achieved.
2001 Option Exercises and Year-End Option Values
The following table sets forth certain information regarding option
exercises during 2001 and options held by Named Executive Officers as of
December 31, 2001.
Aggregated Option Exercises in 2001 and Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Year-End (#) Year-End ($) (1)
- --------------------------------------------------------------------------------------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------
Paul N. Clark -- $ -- 849,517 858,465 $11,952,335 $11,783,825
Gary L. Wilcox 64,400 3,211,150 517,945 54,106 23,044,521 678,800
W. Michael Gallatin 32,454 1,505,837 213,208 41,849 8,539,970 427,523
Thomas P. St. John -- -- 237,707 41,485 9,751,261 416,949
Michael A. Stein -- -- 22,917 77,083 333,786 1,122,714
- -------------------------------------------------------------------------------------------------------
- --------
(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 31, 2001
($57.440). There is no guarantee that, if and when these options are
exercised, they will have this value.
Compensation Committee Interlocks and Insider Participation
During 2001, 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.
10
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, provide value to stockholders
over time. These stock options are granted to executive officers pursuant to
two separate programs--the MIP, 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 considering the executive's
performance in achieving specific objectives as well as competitive salaries of
individuals in similar positions in the biotechnology industry. Executive
officer salaries 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 445
public and private companies in the biotechnology industry (the "Survey").
Excluding Mr. Clark, executive officer salary levels for 2001 were in the high
end of the range for representative positions within the Survey for the same
period. Approximately 43% of the public companies included in the 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. As discussed in further detail below, the
Committee determined Mr. Clark's 2001 salary considering competitive market data
from sources other than the Survey.
Annual and Long-Term Incentive Compensation. The Committee does not
anticipate awarding annual cash bonuses while the Company is unprofitable.
Instead, the MIP was established in 1994 for certain executive officers of the
Company. For 2001, Messrs. Clark, Blum, Stein and Stocks and Drs. Gallatin, 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 2001 performance, the total
number of stock options awarded to participants was based on the successful
completion of a series of corporate goals, as well as the individual
achievements of the participants. The corporate goals included specific
accomplishments in the clinical, research, business development, operations and
finance areas. The size of participants' individual grants, for performance in
2001, was based on a combination of the Company's success in achieving corporate
goals as well as the extent to which the individuals achieved or exceeded
objectives related to their areas of responsibility. 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 2001 performance were made in January 2002.
All Company employees, including executive officers, participate in a
periodic stock option grant program. The program's primary purpose is to offer
an incentive for long-term performance of the Company through increases in the
market price of the Common Stock, and related return on equity to the Company's
stockholders. Under the program, stock options are granted to employees on a
periodic schedule, on the basis of each employee's respective salary, 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.
11
2001 Compensation of the Chief Executive Officer. In establishing 2001
compensation for the Chief Executive Officer, the Committee considered, in
part, Mr. Clark's employment agreement, which is described in this proxy
statement under the heading "Employment Contracts, Termination of Employment
and Change of Control Arrangements." The Committee also considered Mr. Clark's
overall compensation in comparison to market data regarding the compensation of
other chief executive officers in a group of 25 peer biotechnology companies
(the "Peer Group") as well as the Company's relative success in achieving key
strategic goals. Approximately 68% of the Peer Group companies are included in
the CRSP Total Return Index for The Nasdaq Pharmaceutical Stocks as reflected
in the Stock Price Performance Graph on page 13.
In January 2001, the Committee reviewed Mr. Clark's accomplishments over
the previous year, particularly as they related to overall Company achievements
in 2000, including: completion of enrollment in two pivotal Phase 3 studies
with Cialis(TM); the acquisition of product rights to sitaxsentan and TBC3711,
through a collaboration with Texas Biotechnology Corporation; the acquisition
of product rights to LFA-1, from Abbott Laboratories; the initiation of Phase 1
studies with TBC3711 and IC14, and the initiation of a Phase 2 study with
tadalafil; and, the completion of a secondary public offering, which provided
$181.1 million in net proceeds to the Company. Considering all of the above,
the Committee established Mr. Clark's annual base salary for 2001 at $600,000.
In January 2002, as a result of his participation in the MIP for 2001,
Mr. Clark was awarded a stock option to purchase 50,459 shares of Common
Stock. The MIP award was based on a combination of Mr. Clark's individual
performance and the achievement of 2001 corporate objectives, including: filing
of a New Drug Application for Cialis(TM); progress on the Pafase(R) Phase 3
clinical trial for severe sepsis; establishing a joint development and
commercialization agreement for LFA-1 antagonists, including IC747, with Biogen
Inc.; acquisition of licensing rights to RTX(TM) from Afferon Corporation; and,
certain financial goals.
During 2001, Mr. Clark was also awarded options to purchase 122,400
shares of Common Stock under the Company's periodic stock option grant program.
Section 162(m) Limitations on Executive Compensation. Compensation
payments in excess of $1 million to each of the Chief Executive Officer and the
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 2002 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 the CRSP Total
Return Index for The Nasdaq Pharmaceutical Stocks, an index of approximately
262 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. 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 the CRSP Total Return Index for The Nasdaq Pharmaceutical Stocks(1)
[CHART]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- --------------------------------------------------------------------------------------------------------------------------------
ICOS Corporation......................................................... $100 $240 $390 $384 $681 $753
CRSP Total Return Index for The Nasdaq Stock Market (U.S. Companies)..... $100 $122 $173 $321 $193 $153
CRSP Total Return Index for The Nasdaq Pharmaceutical Stocks............. $100 $103 $131 $247 $308 $262
- --------------------------------------------------------------------------------------------------------------------------------
- --------
(1) Assumes $100 was invested on December 31, 1996 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 the 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, and carry out their
responsibilities in accordance with an Audit Committee Charter adopted on May 3,
2000. The Audit Committee has reviewed and discussed the audited financial
statements for the year ended December, 31 2001, with the Company's management.
In addition, the Audit Committee has discussed with the Company's independent
public accountants, KPMG LLP ("KPMG"), all of the matters required by Statement
on Auditing Standards No. 61, Communication with Audit Committees. 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 these discussions and reviews, the Audit Committee
recommended to the Company's Board of Directors that the audited financial
statements, for the year ended December 31, 2001, be included in the Company's
Annual Report on Form 10-K for 2001. 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 audit and report on
the Company's financial statements for the year ending December 31, 2002.
Submitted by the Audit Committee of the Company's Board of Directors
Walter B. Wriston, Chairman
James L. Ferguson
Robert W. Pangia
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"), in which he agreed to 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. The Agreement established Mr.
Clark's initial annual salary, subject to future increase at the sole
discretion of the Board of Directors, and Mr. Clark was granted a ten-year
stock option (the "Option"), vesting ratably over a 60-month period, to
purchase 1,500,000 shares of the Company's Common Stock under the 1999
Plan. 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 will vest in equal
monthly amounts over a 48-month period. In addition, subject to certain
limitations, 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.
The Agreement also obligates the Company to reimburse Mr. Clark for
certain travel and temporary living expenses, relocation services, professional
fees and certain taxes incurred by, 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) subject to certain restrictions, 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.
14
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. Except for certain circumstances in
which the Company's stockholders receive capital stock of another corporation
("Exchange Stock") in exchange for their own as discussed below, and subject to
the final determination of the Company's Board of Directors, 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 Company's stockholders receive Exchange Stock 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. 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.
In addition, in the event of a corporate transaction in which the
Company's stockholders receive capital stock of another corporation in exchange
for their shares of Common Stock, any unexercised options granted under the
1991 Stock Option Plan for Nonemployee Directors shall be assumed or an
equivalent option shall be substituted by the successor corporation or a parent
or subsidiary of such successor corporation.
15
Proposal to Ratify Appointment of Independent Public Accountants
The Board of Directors will request that the stockholders ratify its
selection of KPMG, independent public accountants, to audit and report on the
financial statements of the Company for the year ending December 31, 2002. KPMG
audited the financial statements of the Company for the year ended December 31,
2001. Representatives of KPMG 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 as the
Company's independent auditors. If the Company's stockholders fail to ratify the
selection of KPMG, the Audit Committee and the Board of Directors will consider
whether to retain KPMG, and may retain that firm or another firm without
resubmitting the matter to the Company's stockholders.
The aggregate fees and expenses billed for professional services rendered
by KPMG for the year ended December 31, 2001 were as follows:
(1) Audit.................................................................................... $ 74,251
(2) Financial Information Systems Design and Implementation.................................. $ 0
(3) All Other:
Tax planning, compliance and refund claims............................................ $619,500
Audit related services (primarily services in connection with the Company's
November 2001 public offering of 5.5 million shares of Common Stock).................. $ 84,515
The Audit Committee has considered whether the services listed in
category (3) above are compatible with maintaining the public accountants'
independence.
Proposals of Stockholders
An eligible stockholder who wishes to have a qualified proposal
considered for inclusion in the proxy materials for the 2003 Annual Meeting of
Stockholders must send such proposal to the Company's Corporate Secretary. The
qualified proposal must be received at the Company's principal executive
offices no later than December 13, 2002.
Any stockholder who intends to nominate candidates for election as
directors or present a proposal at the 2003 Annual Meeting of Stockholders
pursuant to the Company's Bylaws, without inclusion of such proposal in the
Company's 2003 proxy materials, is required to provide notice of such proposal
to the Company. Notice must be received by the Corporate Secretary not earlier
than 90 days and not later than 60 days prior to the 2003 Annual Meeting of
Stockholders. The Company's Bylaws provide that any matter to be presented at
the 2003 Annual Meeting of Stockholders must be proper business to be
transacted at an Annual Meeting of Stockholders and must have been properly
brought before such a meeting, pursuant to the Company's Bylaws. Copies of the
pertinent provisions of the Bylaws are available upon request submitted to the
Corporate Secretary, 22021 - 20th Avenue S.E., Bothell, WA 98021.
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. Based solely on
its review of the copies of reports furnished to the Company, or written
representations that no reports were required, the Company believes that all
filing requirements under Section 16(a) applicable to its officers, directors
and greater-than-10% beneficial owners were made with respect to the Company's
fiscal year ended December 31, 2001.
16
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 as proxies in the accompanying proxy card.
Annual Report and Form 10-K
A copy of the Company's 2001 Annual Report, or the Annual Report on Form
10-K for the year ended December 31, 2001, is being mailed to the Company's
stockholders concurrently with this Proxy Statement, the proxy card and the
Notice of 2002 Annual Meeting of Stockholders. Stockholders not receiving a
copy of an Annual Report 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 Clark
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and President
April 12, 2002
Bothell, Washington
17
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 19,
2002, at the annual meeting of stockholders to be held on May 17, 2002, or any
adjournment or postponement thereof.
(Continued, and to be marked, dated and signed on the other side.)
. FOLD AND DETACH HERE .
The Board of Directors recommends a vote "FOR" the nominees in
Item 1 and "FOR" Item 2.
Please mark
your votes [X]
as indicated
1. ELECTION OF DIRECTORS:
(INSTRUCTION: To withhold authority to vote for any individual nominee strike
a line through the nominee's name.)
Class 3 01. Gary L. Wilcox, Ph.D.
02. Walter B. Wriston
FOR all WITHHOLD
nominees listed below AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below
[_] [_]
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR Items 1 and 2.
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP as the Company's independent
public accountants for the year ending December 31, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. 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 , 2002
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Signature
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Signature if held jointly
Please sign exactly as name appears on
the left. 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 .