<PAGE> 1
[PERKINS COIE LETTERHEAD]
July 19, 1996
VIA EDGAR
Securities and Exchange Commission
Attn: Document Control
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: ICOS CORPORATION
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
On behalf of ICOS Corporation (the "Company"), and pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), and Instruction D to
Form S-8, we are submitting for filing via EDGAR the Company's Registration
Statement on Form S-8 including exhibits relating to the issuance of up to
3,850,000 of the Company's common stock pursuant to the Company's 1989 Stock
Option Plan and its 1991 Stock Option Plan For Non-Employee Directors.
Pursuant to Rule 111 under the Securities Act, payment of the $9,376 filing
fee was transmitted via wire transfer to the Commission's lock box.
If you have any comments or require any further information with respect to
the above, please call the undersigned at (206) 287-3584.
Very truly yours,
David F. McShea
Enclosures
cc: (w/encl.)
Gary L. Wilcox
Howard S. Mendelsohn
The Nasdaq Stock Market/Nasdaq Regulatory Filings
James R. Lisbakken
<PAGE> 2
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1996
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------
ICOS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 01-1463450
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
22021 - 20TH AVENUE S.E.
BOTHELL, WASHINGTON 98021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
ICOS CORPORATION
1989 STOCK OPTION PLAN
ICOS CORPORATION
1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
(FULL TITLE OF THE PLANS)
GARY L. WILCOX
EXECUTIVE VICE PRESIDENT, OPERATIONS
ICOS CORPORATION
22021 - 20TH AVENUE S.E.
BOTHELL, WASHINGTON 98021
(206) 485-1900
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPY TO:
JAMES R. LISBAKKEN
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON 98101-3099
(206) 583-8888
-------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF SECURITIES NUMBER TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER SHARE(2) AGGREGATE OFFERING PRICE(2) REGISTRATION FEE
- ------------------------- ------------- --------------------------- --------------------------- -----------------
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE
$.01 PER SHARE
1989 STOCK OPTION PLAN 3,500,000 $7.0625 $24,718,750 $8,524
1991 STOCK OPTION PLAN
FOR NON-EMPLOYEE
DIRECTORS 350,000 $7.0625 $2,471,875 $852
TOTAL 3,850,000 $27,190,625 $9,376
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant to
the ICOS Corporation 1989 Stock Option Plan (the "1989 Stock Option Plan")
and the ICOS Corporation 1991 Stock Option Plan For Non-Employee Directors
(the "1991 Stock Option Plan") as a result of any future stock split, stock
dividend or similar adjustment of the outstanding Common Stock of the
Registrant.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
amount of the registration fee. The price per share is estimated to be
$7.0625 based on the average of the high ($7.25) and low ($6.875) trading
prices for the Common Stock in the over-the-counter market on July 16,
1996, as reported on the Nasdaq National Market.
-ii-
<PAGE> 4
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Registration Statement:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995 filed with the Securities and Exchange
Commission (the "Commission") on March 30, 1996 which contains
certified financial statements for the most recent fiscal year for
which such statements have been filed;
(b) All other reports by the Company filed pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since the end of the fiscal year covered by the
Annual Report on Form 10-K referred to in (a) above; and
(c) The description of the Common Stock contained in the Registrant's
Registration Statement on Form 8-A filed with the Commission on
April 18, 1991 under Section 12(g) of the Exchange Act, including
any amendments or reports filed for the purpose of updating such
descriptions.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and prior to the filing of
a post-effective amendment, which indicates that the securities offered hereby
have been sold or which deregisters the securities covered hereby then
remaining unsold, shall also be deemed to be incorporated by reference into
this Registration Statement and to be a part hereof commencing on the
respective dates on which such documents are filed.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Registrant's Certificate of Incorporation provides that
directors of the Registrant shall not be liable to the Registrant or its
stockholders for monetary damages for their conduct as directors to the full
extent permitted by the Delaware General Corporation Law ("Delaware Law") as it
existed at the time the Certificate of Incorporation was adopted, and as it may
thereafter be amended. Any amendment to or repeal of Article 10 shall apply
only to acts or omissions of directors occurring after such amendment or
repeal.
Section 10 of the By-Laws of the registrant requires indemnification to the
full extent permitted under Delaware law as from time to time in effect.
Subject to any restrictions imposed by Delaware law, the By-Laws provide an
unconditional right to indemnification for all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) actually and reasonably incurred or suffered by
any person in connection with any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative
(including, to the extent permitted by law, any derivative action) by reason of
the fact that such person is or was serving as a director or officer of the
registrant or that, being or having been a director or officer or an employee
of the registrant, such person is or was serving at the request of the
registrant as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including an employee
benefit plan. The By-Laws also provide that the registrant may, by action of
its Board of Directors, provide indemnification to its employees and agents
with the same scope and effect as the foregoing indemnification of directors
and officers.
Section 102(b)(7) of the Delaware Law permits a corporation to provide in
its certificate of incorporation that a director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability for
(i) any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) payments of
unlawful dividends or unlawful stock repurchases or redemptions, or (iv) any
transaction from which the director derived an improper personal benefit.
Section 145 of Delaware Law, as currently in effect, sets forth the
indemnification rights of directors and officers of Delaware corporations.
Under such provision, a director or officer of a corporation (i) shall be
indemnified by the corporation for all expenses of litigation or other legal
proceedings when he or she is successful on the merits or otherwise,
II-1
<PAGE> 5
(ii) may be indemnified by the corporation for the expenses, judgments, fines
and amounts paid in settlement of such litigation (other than a derivative
suit), even if he or she is not successful on the merits, if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation (and, in the case of a
criminal proceeding, had no reason to believe his or her conduct was unlawful),
and (iii) may be indemnified by the corporation for the expenses of a
derivative suit (a suit by a stockholder alleging a breach by a director or an
officer of a duty owed to the corporation), even if he or she is not successful
on the merits, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no such indemnification may be made in accordance
with this clause (iii) if the director or officer is adjudged liable to the
corporation, unless a court determines that, despite such adjudication but in
view of all the circumstances, he or she is fairly and reasonably entitled to
indemnification of such expenses. The indemnification described in clauses
(ii) and (iii) above shall be made only upon a determination by (A) a majority
of a quorum of disinterested directors, (B) independent legal counsel in a
written opinion, or (C) the stockholders, that indemnification is proper
because the applicable standard of conduct has been met.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
5.1 Opinion of Perkins Coie regarding legality of the Common
Stock being registered
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Perkins Coie (included in opinion filed as
Exhibit 5.1)
24.1 Power of Attorney (see Signature Page)
99.1 ICOS Corporation 1989 Stock Option Plan
99.2 ICOS Corporation 1991 Stock Option Plan For Non-Employee
Directors
</TABLE>
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE> 6
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bothell, State of Washington, on the 19th day
of July, 1996.
ICOS CORPORATION
By /s/ GEORGE B. RATHMANN
-----------------------------
George B. Rathmann,
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints George B. Rathmann and Gary L. Wilcox, and each of them, with full
power of substitution and full power to act without the other, as his true and
lawful attorney-in-fact and agent to act in his name, place and stead and to
execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments with the Securities
and Exchange Commission or any regulatory authority.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 19th day of July, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/GEORGE B. RATHMANN Chairman of the Board of Directors, Chief Executive
--------------------------------- Officer and President
George B. Rathmann
/s/GARY L. WILCOX Director and Executive Vice President, Operations
---------------------------------
Gary L. Wilcox
/s/HOWARD S. MENDELSOHN Chief Accounting Officer
---------------------------------
Howard S. Mendelsohn
/s/FRANK T. CARY Director
---------------------------------
Frank T. Cary
/s/JAMES L. FERGUSON Director
---------------------------------
James L. Ferguson
/s/WILLIAM H. GATES, III Director
---------------------------------
William H. Gates, III
/s/JANICE M. LECOCQ Director
---------------------------------
Janice M. Lecocq
/s/DAVID V. MILLIGAN Director
---------------------------------
David V. Milligan
/s/ROBERT W. PANGIA Director
---------------------------------
Robert W. Pangia
</TABLE>
II-4
<PAGE> 8
<TABLE>
<S> <C>
/s/ALEXANDER B. TROWBRIDGE Director
---------------------------------
Alexander B. Trowbridge
/s/WALTER B. WRISTON Director
---------------------------------
Walter B. Wriston
</TABLE>
II-5
<PAGE> 9
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
5.1 Opinion of Perkins Coie regarding legality of the Common Stock
being registered . . . . . . . . . . . . . . . . . . . . . . . . . .
23.1 Consent of KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . .
23.2 Consent of Perkins Coie (included in Exhibit 5.1) . . . . . . . . . .
24.1 Power of Attorney (see Signature Page) . . . . . . . . . . . . . . .
99.1 ICOS Corporation 1989 Stock Option Plan . . . . . . . . . . . . . . .
99.2 ICOS Corporation 1991 Stock Option Plan For Non-Employee Directors .
</TABLE>
II-6
<PAGE> 1
EXHIBIT 5.1
July 19, 1996
ICOS Corporation
22021 - 20th Avenue S.E.
Bothell, Washington 98021
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") pursuant to
the Securities Act of 1933, as amended (the "Act"), which you are filing with
the Securities and Exchange Commission with respect to 3,500,000 shares of
Common Stock, $.01 par value per share (the "1989 Plan Shares"), to be issued
pursuant to the ICOS Corporation 1989 Stock Option Plan (the "1989 Plan") and
350,000 shares of Common Stock, $.01 par value per share (the "1991 Plan
Shares"), to be issued pursuant to the ICOS Corporation 1991 Stock Option Plan
For Non-Employee Directors (the "1991 Plan"). We have examined the
Registration Statement and such other documents and records of ICOS Corporation
as we have deemed relevant and necessary for the purposes of this opinion. By
giving this opinion, we are assuming the authenticity of all instruments
presented to us as originals, the conformity with or originals of all
instruments presented to us as copies and the genuineness of all signatures.
Based upon and subject to the foregoing, we are of the opinion that: (i)
the 1989 Plan Shares that will be issued pursuant to the 1989 Plan, upon the
due execution by ICOS Corporation and the registration by its registrar of the
1989 Plan Shares and the issuance thereof by ICOS Corporation in accordance
with the terms of the 1989 Plan, and the receipt of consideration therefor in
accordance with the terms of the 1989 Plan, will be validly issued, fully paid
and nonassessable; and (ii) the 1991 Plan Shares that will be issued pursuant
to the 1991 Plan, upon the due execution by ICOS Corporation and the
registration by its registrar of the 1991 Plan Shares and the issuance thereof
by ICOS Corporation in accordance with the terms of the 1991 Plan, and the
receipt of consideration therefor in accordance with the terms of the 1991
Plan, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/PERKINS COIE
PERKINS COIE
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors: ICOS Corporation
We consent to the use of our report incorporated herein by reference. Our
report refers to a change in the method of accounting for investments effective
January 1, 1994.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Seattle, Washington
July 18, 1996
<PAGE> 1
EXHIBIT 99.1
ICOS CORPORATION
1989 STOCK OPTION PLAN
AMENDED AND RESTATED AS OF DECEMBER 6, 1995
SECTION 1. PURPOSE
The purpose of the ICOS Corporation 1989 Stock Option Plan (this "Plan") is
to provide a means whereby selected employees, officers, agents, consultants
and independent contractors of ICOS Corporation (the "Company") or of any
parent or subsidiary (as defined in subsection 5.7 and referred to hereinafter
as "related corporations") thereof, may be granted incentive stock options
and/or nonqualified stock options to purchase the Common Stock (as defined in
Section 3) of the Company, in order to attract and retain the services or
advice of such employees, officers, agents, consultants and independent
contractors and to provide added incentive to them by encouraging stock
ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the event the Board shall appoint and/or authorize a
committee to administer this Plan, by such committee. The administrator of
this Plan shall hereinafter be referred to as the "Plan Administrator."
The foregoing notwithstanding, in the event the Company shall register any
of its equity securities pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any directors are
eligible to receive options under this Plan, then with respect to grants to be
made to directors: (a) the Plan Administrator shall be constituted so as to
meet the requirements of Section 16(b) of the Exchange Act, as amended from
time to time, or (b) if the Plan Administrator cannot be so constituted, no
options shall be granted under this Plan to any directors.
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator as
chairman. The Plan Administrator may hold meetings at such times and places as
it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in
<PAGE> 2
writing by all Plan Administrator members, shall be valid acts of the Plan
Administrator.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
corresponds to the requirements of Internal Revenue Code (the "Code") Section
422, the regulations thereunder, and any amendments thereto.
2.3 SECTION 16(B) COMPLIANCE AND BIFURCATION OF PLAN
It is the intention of the Company that this Plan comply in all respects
with Rule 16b-3 under the Exchange Act, to the extent applicable, and, if any
Plan provision is later found not to be in compliance with such Section, the
provision shall be deemed null and void, and in all events this Plan shall be
construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are
officers and directors subject to Section 16(b) of the Exchange Act without so
restricting, limiting or conditioning this Plan with respect to other
participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock") presently authorized but unissued or subsequently acquired by
the Company. Subject to adjustment as provided in Section 7 hereof, the
aggregate amount of Common Stock to be delivered upon the exercise of all
options granted under this Plan shall not exceed 8,500,000 shares as such
Common Stock was constituted on the effective date of this Plan. If any option
granted under this Plan shall expire, be surrendered, exchanged for another
option, cancelled or terminated for any reason without having been exercised in
full, the unpurchased shares subject thereto shall thereupon again be available
for purposes of this Plan, including for
-2-
<PAGE> 3
replacement options which may be granted in exchange for such surrendered,
cancelled or terminated options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to any individual who, at the
time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
officer, agent, consultant or independent contractor of the Company or any
related corporation, whether an individual or an entity. Members of the Board
who are not also employees of the Company shall not be eligible to receive
options under this Plan. Any party to whom an option is granted under this
Plan shall be referred to hereinafter as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with
this Plan. Notwithstanding the foregoing, options shall include or incorporate
by reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable (the
"exercise price") shall be as established by the Plan Administrator.
Notwithstanding the foregoing, and subject to adjustment from time to time as
provided in Section 7 of this Plan, not more than an aggregate of 400,000
shares of Common Stock may be subject to options granted under this Plan to any
Optionee in any one fiscal year of the Company; provided that an aggregate of
not more than 800,000 shares of Common Stock may be subject to options granted
under this Plan to any newly hired Optionee in any one fiscal year of the
Company, such limitations 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 Code
Section 162(m).
The Plan Administrator shall act in good faith to establish the exercise
price which shall be not less than the fair market value per share of the
Common Stock at the time the option is granted with respect to incentive stock
options and not less than 85% of the fair market value per share of the Common
Stock at the time the option is granted with respect to nonqualified stock
options; provided that, with respect to
-3-
<PAGE> 4
incentive stock options granted to greater than 10% stockholders, the exercise
price shall be as required by Section 6.
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% stockholders, the term of each
incentive stock option shall be as established by the Plan Administrator and,
if not so established, shall be 10 years from the date it is granted but in no
event shall the term of any incentive stock option exceed 10 years. The term
of each nonqualified stock option shall be as established by the Plan
Administrator and, if not so established, shall be 10 years from the date it is
granted. To ensure that the Company or related corporation will achieve the
purpose and receive the benefits contemplated in this Plan, any option granted
to any Optionee hereunder shall, unless the condition of this sentence is
waived or modified in the agreement evidencing the option or by resolution
adopted by the Plan Administrator, be exercisable according to the following
schedule:
<TABLE>
<CAPTION>
Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option Is Granted Which Is Exercisable
----------------------------- ------------------------
<S> <C>
after 1 year 25%
after 2 years 50%
after 3 years 75%
after 4 years 100%
</TABLE>
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2 above, each
option may be exercised in whole or in part; provided, however, that no fewer
than 100 shares (or the remaining shares then purchasable under the option, if
less than 100 shares) may be purchased upon any exercise of option rights
hereunder and that only whole shares will be issued pursuant to the exercise of
any option. During an Optionee's lifetime, any incentive stock options granted
under this Plan are personal to him or her and are exercisable solely by such
Optionee. Options shall be exercised by delivery to the Company of notice of
the number of shares with respect to which the option is exercised, together
with payment of the exercise price.
-4-
<PAGE> 5
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the Common Stock being purchased.
The Plan Administrator can determine at the time the option is granted for
incentive stock options, or at any time before exercise for nonqualified stock
options, that additional forms of payment will be permitted. To the extent
permitted by the Plan Administrator and applicable laws and regulations
(including, but not limited to, federal tax and securities laws and regulations
and state corporate law), an option may be exercised by:
(a) delivery of shares of stock of the Company held by an Optionee having
a fair market value equal to the exercise price, such fair market value to be
determined in good faith by the Plan Administrator; provided, however, that
payment in stock held by an Optionee shall not be made unless the stock shall
have been owned by the Optionee for a period of at least six months; or
(b) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations of
the Federal Reserve Board, to promptly deliver to the Company the amount of
sale or loan proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or Common Stock under this Plan the amount of
taxes required by any government to be withheld or otherwise deducted and paid
with respect to such payment. At its discretion, the Company may require an
optionee receiving shares of Common Stock to reimburse the Company for any such
taxes required to be withheld by the Company and withhold any distribution in
whole or in part until the Company is so reimbursed. In lieu thereof, the
Company shall have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes or
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company to reimburse the
Company for any such taxes and cancel (in whole or in part) any such shares so
withheld. If required by Section 16(b) of the Exchange Act, the election to
pay withholding taxes by delivery
-5-
<PAGE> 6
of shares held by any person who at the time of exercise is subject to Section
16(b) of the Exchange Act, shall be made either six months prior to the date
the option exercise becomes taxable or during the quarterly 10-day window
period required under Section 16(b) of the Exchange Act for exercises of stock
appreciation rights.
5.6 NONTRANSFERABILITY OF OPTION
Options granted under this Plan shall not be transferable 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 Rule
16b-3 under the Exchange Act and Section 422 of the Code as then applicable to
the Company's employee benefit plans, by gift or other transfer to either (i)
any trust or estate 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 that such a
transfer would continue to require such options to be disclosed pursuant to
Item 403 of Regulation S-K under the Securities Act of 1933, as amended from
time to time. Notwithstanding the foregoing, to the extent permitted by Rule
16b-3 under the Exchange Act and other applicable law and regulation, the Plan
Administrator may permit an Optionee, during the Optionee's lifetime, to
designate a person who may exercise a nonqualified stock option after the
Optionee's death by giving written notice of such designation to the Company
(such designation may be changed from time to time by the Optionee 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 this Plan or of any right or privilege
conferred thereby, contrary to the provisions of this Plan, or the sale or levy
or any attachment or similar process upon the rights and privileges conferred
hereby, shall be null and void.
5.7 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of the three-month period
following such cessation as to all shares for which it has not theretofore been
exercised, unless, in the case of a nonqualified stock option, such provision
is waived in the agreement evidencing the option or by resolution adopted by
the Plan Administrator within 90 days of such cessation. If, in the case of an
incentive stock option, an Optionee's relationship with the Company or related
corporation changes (i.e., from employee to nonemployee, such as a consultant),
such
-6-
<PAGE> 7
change shall constitute a termination of an Optionee's employment with the
Company or related corporation and the Optionee's incentive stock option shall
terminate in accordance with this subsection 5.7.
If an Optionee is terminated for cause, any option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall
mean dismissal for dishonesty, conviction or confession of a crime punishable
by law (except minor violations), fraud, misconduct or disclosure of
confidential information. If an Optionee's relationship with the Company or
any related corporation is suspended pending an investigation of whether or not
the Optionee shall be terminated for cause, all Optionee's rights under any
option granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not terminate
or, in the case of an incentive stock option, cease to be treated as an
incentive stock option until the end of the 12 month period following such
cessation (unless by its terms it sooner terminates and expires). As used in
this Plan, the term "total disability" refers to a mental or physical
impairment of the Optionee which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
For purposes of this subsection 5.7, a transfer of relationship between or
among the Company and/or any related corporation shall not be deemed to
constitute a cessation of relationship with the Company or any of its related
corporations. For purposes of this subsection 5.7, with respect to incentive
stock options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined
by the Plan Administrator). The foregoing notwithstanding, employment shall
not be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in,
at the time of the granting of the option, an unbroken chain of corporations
ending with the Company, if stock possessing 50% or more of the total combined
voting power of all
-7-
<PAGE> 8
classes of stock of each of the corporations other than the Company is owned by
one of the other corporations in such chain. When referring to a parent
corporation, the term "related corporation" shall mean any corporation in an
unbroken chain of corporations ending with the Company if, at the time of the
granting of the option, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
5.8 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company or
any related corporation or within the three month period (or 12 month period in
the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her estate
or by the person or persons to whom the Optionee's rights under the option
shall pass by will or by the applicable laws of descent and distribution.
5.9 STATUS OF STOCKHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a stockholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.10 CONTINUATION OF EMPLOYMENT
Nothing in this Plan or in any option granted pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ of the Company or
of a related corporation, or to interfere in any way with the right of the
Company or of any such related corporation to terminate his or her employment
or other relationship with the Company at any time.
5.11 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to incentive
stock options and to the terms and conditions and within the limitations of
this Plan, the Plan Administrator may modify or amend outstanding options
granted under this Plan. The modification or amendment of an outstanding
option shall not, without the consent of the Optionee, impair or diminish any
of his or her rights or any of the
-8-
<PAGE> 9
obligations of the Company under such option. Except as otherwise provided in
this Plan, no outstanding option shall be terminated without the consent of the
Optionee. Unless the Optionee agrees otherwise, any changes or adjustments
made to outstanding incentive stock options granted under this Plan shall be
made in such a manner so as not to constitute a "modification" as defined in
Code Section 425(h) and so as not to cause any incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as
defined in Code Section 422(b).
5.12 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value (determined at the time the
incentive stock option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by the Optionee during any
calendar year (under this Plan and all other incentive stock option plans of
the Company, a related corporation or a predecessor corporation) exceeds
$100,000, such options shall be treated as nonqualified stock options. The
previous sentence shall not apply if the Internal Revenue Service publicly
rules, issues a private ruling to the Company, any Optionee, or any legatee,
personal representative or distributee of an Optionee or issues regulations
changing or eliminating such annual limit.
SECTION 6. GREATER THAN 10% STOCKHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If incentive stock options are granted under this Plan to employees who own
more than 10% of the total combined voting power of all classes of stock of the
Company or any related corporation, the term of such incentive stock options
shall not exceed five years and the exercise price shall be not less than 110%
of the fair market value of the Common Stock at the time the incentive stock
option is granted. This provision shall control notwithstanding any contrary
terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, 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
-9-
<PAGE> 10
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 6, 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.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this 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 5.1, 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.
7.1 EFFECT OF LIQUIDATION, REORGANIZATION OR CHANGE IN CONTROL
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, 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 Optionee
shall have the right immediately prior to any such merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation to
exercise such Optionee's option in whole or in part whether or not the vesting
requirements set forth in the option agreement have been satisfied.
7.1.2 Conversion of Options on Stock for Stock Exchange
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) (a "Corporate Transaction"), all options granted
hereunder shall be converted into
-10-
<PAGE> 11
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 7.1.1. 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 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. Each converted option shall, immediately following the
consummation of the Corporate Transaction, become fully vested and
excercisable in whole or in part whether or not the vesting requirements set
forth in the option agreement have been satisfied, except that such
acceleration will not occur if, in the opinion of the Company's outside
accountants, such acceleration would render unavailable "pooling of interests"
accounting treatment for any reorganization, merger or consolidation of the
Company 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, (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, or (iii) the acceleration of such option is subject
to other limitations imposed by the instrument evidencing the 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
Optionee'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 (as defined in Section
5.7) or by the Optionee voluntarily without good reason.
Notwithstanding the foregoing, no incentive stock option shall become
exercisable pursuant to this Section 7.1 without the Optionee's consent, if the
result would be to cause such option not to be treated as an incentive stock
option (whether by reason of the annual limitation described in Section 5.12 of
this Plan or otherwise).
-11-
<PAGE> 12
"Good reason" means the occurrence of any of the following events or
conditions:
(a) the assignment to the Optionee of any duties materially
inconsistent with the Optionee's position, authority, duties or
responsibilities as in effect immediately prior thereto 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
Optionee;
(b) a reduction in the Optionee's annual base salary;
(c) the successor corporation's requiring the Optionee (without the
Optionee'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 Optionee 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 Optionee under this Plan.
7.2 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.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 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. Unless an Optionee agrees otherwise, any change or
adjustment to an
-12-
<PAGE> 13
incentive stock option shall be made in such a manner so as not to constitute a
"modification" as defined in Code Section 425(h) and so as not to cause his or
her incentive stock option issued hereunder to fail to continue to qualify as
an incentive stock option as defined in Code Section 422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of any
shares hereunder. Inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder or the
unavailability of an exemption from registration for the issuance and sale of
any shares hereunder shall relieve the Company of any liability in respect of
the nonissuance or sale of such shares as to which such requisite authority
shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on stock
certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all
-13-
<PAGE> 14
stock issued hereunder if not previously listed on such exchange shall be
authorized by that exchange for listing thereon prior to the issuance thereof.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan, provided
that except as set forth in Section 7 and to the extent required by any
applicable law or regulation, the approval of the holders of a majority of the
stock held by stockholders present in person or by proxy and entitled to vote
on the matter at a duly held stockholders' meeting is necessary within 12
months after the adoption by the Board of any amendment which will:
(a) increase the number of shares which are to be reserved for the
issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons other than
those presently permitted to receive stock options under this Plan; or
(c) require stockholder approval under applicable law, including Section
16(b) of the Exchange Act.
9.2 AUTOMATIC TERMINATION
Unless sooner terminated by the Board, this Plan shall terminate ten years
from the earlier of (a) the date on which this Plan is adopted by the Board or
(b) the date on which this Plan is approved by the stockholders of the Company.
No option may be granted after such termination or during any suspension of
this Plan. The amendment or termination of this Plan shall not, without the
consent of the option holder, alter or impair any rights or obligations under
any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as it
is approved by the holders of a majority of the Company's outstanding shares of
voting capital stock at any time within 12 months before or after the adoption
of this Plan.
Adopted by the Board of Directors on December 11, 1989 and approved by the
stockholders on December 11, 1989. Amended and restated by the Compensation
Committee and the Board of Directors on December 6, 1995 and approved by the
stockholders on May 8, 1996 with respect to amendments to Sections 3 and 5.1.
-14-
<PAGE> 1
EXHIBIT 99.2
ICOS CORPORATION
1991 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
AMENDED AND RESTATED AS OF DECEMBER 6, 1995
ARTICLE I
PURPOSE
The purposes of the ICOS Corporation 1991 Stock Option Plan for Nonemployee
Directors (the "Plan") are to attract and retain the services of experienced
and knowledgeable nonemployee directors of ICOS Corporation (the "Corporation")
and to provide an incentive for such directors to increase their proprietary
interest in the Corporation's long-term success and progress.
ARTICLE II
SHARES SUBJECT TO THE PLAN
The total number of shares of common stock (the "Shares") of the
Corporation for which options may be granted under the Plan is 950,000, subject
to adjustment in accordance with Article VI hereof. The Shares shall be shares
presently authorized but unissued or subsequently acquired by the Corporation
and shall include shares representing the unexercised portion of any option
granted under the Plan which expires or terminates without being exercised in
full.
ARTICLE III
ADMINISTRATION OF THE PLAN
The administrator of the Plan (the "Plan Administrator") shall consist of a
committee appointed by the Board of Directors of the Corporation (the "Board").
Subject to the terms of the Plan, the Plan Administrator shall have the power
to construe the provisions of the Plan, to determine all questions arising
thereunder and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. No member of the Plan
Administrator shall participate in any vote by the Plan Administrator on any
matter materially affecting the rights of any such member under the Plan.
<PAGE> 2
ARTICLE IV
PARTICIPATION IN THE PLAN
Each Director of the Corporation elected or appointed who is not otherwise
an employee of the Corporation or any subsidiary ("Eligible Director") shall
receive the following option grants under the Plan:
1. INITIAL GRANTS
An initial grant (an "Initial Grant") of an option to purchase that number
of shares calculated by dividing $100,000 (such dollar amount to be increased
by $10,000 each year for grants made in each year beginning after fiscal year
1992) by the Exercise Price, as hereinafter defined, shall automatically be
granted to
(a) each Eligible Director immediately following the Board's approval
of the Plan and
(b) each Eligible Director upon the earlier of the Director's initial
election or appointment as a Director of the Corporation.
The Initial Grants shall vest annually over two years from the earlier of
the Director's initial election or appointment as a Director of the Corporation
in accordance with the schedule set forth in Article V.
2. ADDITIONAL GRANTS
Commencing with the 1992 annual meeting of stockholders of the Corporation
as specified in the Corporation's By-laws (the "Annual Meeting"), each Eligible
Director shall automatically receive an additional grant (an "Additional
Grant") of an option to purchase that number of shares calculated by dividing
$100,000 (such dollar amount to be increased by $10,000 each year for grants
made in each year beginning after fiscal year 1992) by the Exercise Price, as
hereinafter defined, immediately following each year's Annual Meeting; provided
that a Director who has received an Initial Grant within five months prior to
an Annual Meeting shall not receive an Additional Grant until the next year's
Annual Meeting.
Additional Grants shall vest annually over two years from the earlier of
the Director's initial election or appointment as a Director of the Corporation
in accordance with the schedule set forth in Article V.
<PAGE> 3
ARTICLE V
OPTION TERMS
Each option granted to an Eligible Director under the Plan and the issuance
of Shares thereunder shall be subject to the following terms:
1. OPTION AGREEMENT
Each option granted under the Plan shall be evidenced by an option
agreement ("Agreement") duly executed on behalf of the Corporation and by the
Eligible Director to whom such option is granted. Each Agreement shall comply
with and be subject to the terms and conditions of the Plan. Any Agreement may
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Plan Administrator.
2. OPTION EXERCISE PRICE
The option exercise price (the "Exercise Price") for an option granted
under the Plan shall be the fair market value of the Shares covered by the
option at the time the option is granted. For purposes of the Plan, "fair
market value" shall mean the closing price or, if there is no closing price,
the mean between the high and low sale prices for the Shares quoted on the day
of grant on the National Association of Securities Dealers, Inc. Automated
Quotation System or, if the Shares are traded on an exchange, the closing price
on the day of grant on the principal exchange on which such Shares are then
traded.
3. TIME AND MANNER OF EXERCISE OF OPTION
Subject to stockholder approval of the Plan, Initial Grants and Additional
Grants shall become exercisable in accordance with the following schedule and
vested portions may be exercised in full at one time or in part from time to
time:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Service as
a Director With the Corporation From the
Date of Initial Election or Appointment Portion of Grant That Is Exercisable
--------------------------------------- ------------------------------------
<S> <C>
After one year 50%
After two years 100%
</TABLE>
Grants to Directors who have held office for two years or more shall be
fully vested and immediately exercisable, subject to stockholder approval of
the Plan. If
-3-
<PAGE> 4
the stockholders of the Corporation fail to approve the Plan at the next annual
meeting of stockholders, all options granted hereunder shall be deemed null and
void.
Any option may be exercised by giving written notice, signed by the person
exercising the option, to the Corporation stating the number of Shares with
respect to which the option is being exercised, accompanied by payment in full
for such Shares, which payment may be in whole or in part (i) in cash or by
check, (ii) in shares of the common stock of the Corporation already owned for
at least six (6) months by the person exercising the option, valued at fair
market value at the time of such exercise, or (iii) by delivery of a properly
executed exercise notice, together with irrevocable instructions to a broker,
all in accordance with the regulations of the Federal Reserve Board, to
properly deliver to the Corporation the amount of sale or loan proceeds to pay
the exercise price.
4. TERM OF OPTIONS
Each option shall expire ten (10) years from the date of the granting
thereof, but shall be subject to earlier termination as follows:
(a) In the event of the death of an optionee, the option granted to
such optionee may be exercised only within two (2) years after the date of
death of such optionee or prior to the date on which the option expires by its
terms, whichever is earlier, by the estate of such optionee, or by any person
or persons whom the optionee shall have designated in writing on forms
prescribed by and filed with the Corporation or, if no such designation has
been made by the person or persons to whom the optionee's rights have passed,
by will or the laws of descent and distribution.
(b) In the event that an optionee ceases to be a Director of the
Corporation, the option granted to such optionee may be exercised by him or her
only within two (2) years after the date such optionee ceases to be a Director
of the Corporation or prior to the date on which the option expires by its
terms, whichever is earlier.
5. TRANSFERABILITY
Options granted under the Plan shall not be transferable or assignable
other than (a) by will or the laws of descent and distribution or (b) to the
extent permitted by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as then applicable to the Corporation's employee
benefit plans, by gift or other transfer to either (i) any trust or estate in
which the original optionee or such person's spouse or other immediate family
member has a substantial beneficial
-4-
<PAGE> 5
interest or (ii) a spouse or other immediate family member; provided that such
a transfer would continue to require such options to be disclosed pursuant to
Item 403 of Regulation S-K under the Securities Act of 1933, as amended from
time to time. Notwithstanding the foregoing, to the extent permitted by Rule
16b-3 under the Exchange Act and other applicable law and regulation, an
optionee may, during the optionee's lifetime, designate a person who may
exercise the option after the optionee's death by giving written notice of such
designation to the Corporation (such designation may be changed from time to
time by the optionee by giving written notice to the Corporation 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.
6. HOLDING PERIOD
Shares of Common Stock obtained upon the exercise of any option granted
under the Plan may not be sold by persons subject to Section 16 of the Exchange
Act until six (6) months after the date the option was granted.
7. PARTICIPANT'S OR SUCCESSOR'S RIGHTS AS STOCKHOLDER
Neither the recipient of an option under the Plan nor his or her
successor(s) in interest shall have any rights as a stockholder of the
Corporation with respect to any Shares subject to an option granted to such
person until such person becomes a holder of record of such Shares.
8. REGULATORY APPROVAL AND COMPLIANCE
The Corporation shall not be required to issue any certificate or
certificates for Shares upon the exercise of an option granted under the Plan,
or record as a holder of record of Shares the name of the individual exercising
an option under the Plan, without obtaining to the complete satisfaction of the
Plan Administrator the approval of all regulatory bodies deemed necessary by
the Plan Administrator, and without complying, to the Plan Administrator's
complete satisfaction, with all rules and regulations under federal, state or
local law deemed applicable by the Plan Administrator.
-5-
<PAGE> 6
ARTICLE VI
CAPITAL ADJUSTMENTS
The aggregate number and class of Shares for which options may be granted
under this Plan, the number and class of Shares covered by each outstanding
option and the exercise price per share thereof (but not the total price),
shall all be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a split-up or consolidation of Shares or
any like capital adjustment, or the payment of any stock dividend.
Upon a merger (other than a merger of the Corporation in which the holders
of Shares immediately prior to the merger have the same proportionate ownership
of Shares 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 Corporation, as a result of which the stockholders of the
Corporation receive cash, stock or other property in exchange for or in
connection with their Shares, any option granted hereunder shall terminate, but
the optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise such optionee's option in whole or in part whether or
not the vesting requirements set forth in the option agreement have been
satisfied.
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.
ARTICLE VII
EXPENSES OF THE PLAN
All costs and expenses of the adoption and administration of the Plan shall
be borne by the Corporation, and none of such expenses shall be charged to any
optionee.
-6-
<PAGE> 7
ARTICLE VIII
APPROVAL OF STOCKHOLDERS
The Plan shall be effective upon adoption by the Board so long as it
receives approval by the holders of a majority of the Corporation's outstanding
shares of voting capital stock at the next Annual Meeting.
ARTICLE IX
TERMINATION AND AMENDMENT OF THE PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that if required to qualify the
Plan under Rule 16b-3 promulgated under Section 16 of the Exchange Act, no
amendment may be made more than once every six months that would change the
amount, price, timing or vesting of the Initial Grants and Additional Grants,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, or the rules and regulations promulgated thereunder; and provided,
further, that if required to qualify the Plan under Rule 16b-3, no amendment
that would
(a) materially increase the number of Shares that may be issued under
the Plan,
(b) materially modify the requirements as to eligibility for
participation in the Plan, or
(c) otherwise materially increase the benefits accruing to
participants under the Plan shall be made without the approval of a majority of
the shares of the Corporation's stock represented in person or by proxy and
entitled to vote on the matter at a duly held stockholders' meeting.
ARTICLE X
COMPLIANCE WITH RULE 16B-3
It is the intention of the Corporation that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Exchange Act and that
Plan participants remain disinterested persons for purposes of administering
other employee benefit plans of the Corporation and having such other plans be
exempt from Section 16(b) of the Exchange Act. Therefore, if any Plan
provision is later found not to be in compliance with Rule 16b-3 or if any Plan
provision would disqualify Plan participants from remaining disinterested
persons, that provision shall
-7-
<PAGE> 8
be deemed null and void, and in all events the Plan shall be construed in favor
of its meeting the requirements of Rule 16b-3.
*****
Adopted by the Board of Directors on November 18, 1991 and approved by the
stockholders on May 18, 1992.
Amendment No. 1 (increasing the number of shares available under the plan
to 600,000) adopted by the Board of Directors on March 9, 1994 and approved by
the stockholders on May 11, 1994.
Amended and restated by the Board of Directors on December 6, 1995 and
approved by the stockholders on May 8, 1996 with respect to the amendment to
Article II.
-8-
