<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
(Mark One)
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-19171
ICOS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 91-1463450
(State of incorporation) (I.R.S. Employer
Identification No.)
22021- 20th Avenue S.E.
Bothell, Washington 98021
(425) 485-1900
(Address, including zip code, and telephone number, including area code, of
principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of voting and non-voting stock held by non-
affiliates of the registrant as of February 29, 2000.
$1,987,781,409
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock as of February 29, 2000.
<TABLE>
<CAPTION>
Title of Class Number of Shares
-------------- ----------------
<S> <C>
Common Stock, $.01 par value 45,277,767
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the annual meeting
of stockholders held on May 4, 2000, relating to "Election of Directors,"
"Continuing Class 2 Directors (until 2001)," "Continuing Class 3 Directors
(until 2002)," "Other Executive Officers," "Section 16(a) Beneficial Ownership
Reporting Compliance," "Compensation of Directors," "Executive Compensation,"
"1999 Option Grants," "1999 Option Exercises and Year-end Option Values,"
"Compensation Committee Interlocks and Insider Participation," "Employment
Contracts, Termination of Employment and Change of Control Arrangements,"
"Security Ownership of Certain Beneficial Owners and Management," and "Certain
Relationships and Related Transactions" are incorporated by reference in Part
III of this Form 10-K.
<PAGE>
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements Page in Form 10-K
--------------------------------- -----------------
<S> <C>
Independent Auditors' Report 3
Consolidated Balance Sheets at December 31, 1999 and 1998 4
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998, and 1997 5
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 1998, and 1997 6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998, and 1997 7
Notes to Consolidated Financial Statements 8-18
</TABLE>
Balance sheets of Suncos Corporation as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' equity, and cash flows for each
of the years in the two-year period ended December 31, 1999 and the periods from
February 6, 1997 (inception) through December 31, 1997 and 1999 are included
elsewhere in this report. All other consolidated financial statement schedules
have been omitted since the information is not required or because the
information required is included in the consolidated financial statements or the
notes thereto.
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
ICOS Corporation:
We have audited the accompanying consolidated balance sheets of ICOS
Corporation and subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ICOS
Corporation and subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Seattle, Washington
January 21, 2000
3
<PAGE>
ICOS CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(in thousands)
-------------------
December 31,
-------------------
1999 1998
--------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,885 $ 69,584
Investment securities, at market value 55,349 8,090
Interest receivable 1,020 391
Receivables from related parties under collaborative
arrangements 9,780 7,524
Loan receivable from related party 7,341 -
Other receivables 454 267
Prepaid expenses 1,595 501
--------- --------
Total current assets 88,424 86,357
Net property and equipment, at cost 21,042 19,576
Loan receivable from related party - 7,341
Investments in affiliates, at equity 3,241 64
Other assets 81 9
--------- --------
$ 112,788 $113,347
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,854 $ 6,080
Accrued payroll and benefits 3,565 1,005
Accrued clinical expenses 3,409 5,686
Other accrued expenses 1,561 1,195
Federal income taxes payable - 648
--------- --------
Total current liabilities 13,389 14,614
Stockholders' equity:
Preferred Stock, $.01 par value. Authorized 2,000,000
shares; none issued - -
Common Stock, $.01 par value. Authorized 100,000,000
shares; issued and outstanding 44,759,052 at
December 31, 1999 and 41,482,043 at December 31,
1998 448 415
Additional paid-in capital 223,477 189,436
Accumulated other comprehensive loss (216) (3)
Accumulated deficit (124,310) (91,115)
--------- --------
Total stockholders' equity 99,399 98,733
--------- --------
$ 112,788 $113,347
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(in thousands, except per
share data)
---------------------------
Year Ended December 31,
---------------------------
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Revenue:
Collaborative research and development from
related parties $ 64,100 $33,758 $ 21,076
License of technology to related parties 15,000 75,000 8,500
Other 500 2,010 2,000
-------- ------- --------
Total revenue 79,600 110,768 31,576
Operating expenses:
Research and development 100,541 76,978 42,783
General and administrative 5,259 4,031 2,737
-------- ------- --------
Total operating expenses 105,800 81,009 45,520
-------- ------- --------
Operating income (loss) (26,200) 29,759 (13,944)
-------- ------- --------
Other income (expense):
Equity in losses of affiliates (12,042) (191) (226)
Investment income 4,292 2,369 2,164
Other, net 755 21 (9)
-------- ------- --------
Net other income (expense) (6,995) 2,199 1,929
-------- ------- --------
Net income (loss) before income taxes (33,195) 31,958 (12,015)
Income taxes - current - 648 -
-------- ------- --------
Net income (loss) $(33,195) $31,310 $(12,015)
======== ======= ========
Net income (loss) per common share - basic $ (0.76) $ 0.78 $ (0.30)
======== ======= ========
Net income (loss) per common share - diluted $ (0.76) $ 0.67 $ (0.30)
======== ======= ========
Weighted average common shares outstanding -
basic 43,449 40,139 39,595
======== ======= ========
Weighted average common shares outstanding -
diluted 43,449 46,849 39,595
======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------------------------
Accumulated
Additional other Total
Common paid-in comprehensive Accumulated stockholders'
Stock capital income (loss) deficit equity
------ ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December
31, 1996 $394 $165,273 $ 10 $(110,410) $55,267
Comprehensive income
(loss):
Net loss - - - (12,015) (12,015)
Unrealized gains on
investment
securities:
Unrealized holding
gains arising during
the year 13 - 13
Less: reclassification
adjustment for gains
included in net loss (4) - (4)
----- --------- -------
Total comprehensive
income (loss) 9 (12,015) (12,006)
Issuance of 467,661
shares of Common Stock
from exercise of
options 5 2,525 - - 2,530
Value of warrants
issued to ICOS
Clinical Partners,
L.P. - 4,081 - - 4,081
-----------------------------------------------------------------------------------
Balances at December
31, 1997 399 171,879 19 (122,425) 49,872
Comprehensive income
(loss):
Net income - - - 31,310 31,310
Unrealized gains on
investment
securities:
Unrealized holding
gains arising during
the year 6 - 6
Less: reclassification
adjustment for gains
included in net
income (28) - (28)
----- --------- -------
Total comprehensive
income (loss) (22) 31,310 31,288
Issuance of 292,429
shares of Common Stock
from exercise of
options 3 1,950 - - 1,953
Issuance of 1,304,200
shares of Common Stock
from exercise of
warrants 13 12,260 - - 12,273
Value of warrants
issued to ICOS
Clinical Partners,
L.P. - 3,347 - - 3,347
-----------------------------------------------------------------------------------
Balances at December
31, 1998 415 189,436 (3) (91,115) 98,733
Comprehensive loss:
Net loss - - - (33,195) (33,195)
Unrealized losses on
investment
securities:
Unrealized holding
losses arising during
the year (216) - (216)
Less: reclassification
adjustment for losses
included in net loss 3 - 3
----- --------- -------
Total comprehensive
loss (213) (33,195) (33,408)
Issuance of 860,909
shares of Common Stock
from exercise of
options 9 6,953 - - 6,962
Issuance of 2,416,100
shares of Common Stock
from exercise of
warrants 24 22,839 - - 22,863
Value of warrants
issued to ICOS
Clinical Partners,
L.P. - 4,249 - - 4,249
-----------------------------------------------------------------------------------
Balances at December
31, 1999 $448 $223,477 $(216) $(124,310) $99,399
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
ICOS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(in thousands)
----------------------------
Year Ended December 31,
----------------------------
<S> <C> <C> <C>
1999 1998 1997
-------- -------- --------
Cash flows from operating activities:
Net income (loss) $(33,195) $ 31,310 $(12,015)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 4,539 3,459 3,678
Amortization of investment
premiums/discounts (516) (320) (570)
(Gain) loss on sale of investment
securities 14 (28) (4)
Equity in losses of affiliates 12,042 191 226
Change in operating assets and liabilities:
Interest receivable (629) 133 (375)
Receivables from related parties under
collaborative arrangements (1,855) (5,435) (2,089)
Other receivables (187) (90) (84)
Prepaid expenses (1,094) 8 91
Accounts payable (1,226) 3,888 1,008
Accrued payroll, benefits and other
accrued expenses (647) 7,352 76
Federal income taxes payable 648 (648) -
Other (66) - -
-------- -------- --------
Net cash provided by (used in) operating
activities (22,172) 39,820 (10,058)
-------- -------- --------
Cash flows from investing activities:
Purchases of investment securities (80,844) (17,421) (41,644)
Maturities of investment securities 24,908 7,000 31,978
Sales of investment securities 8,966 26,502 25,916
Acquisitions of property and equipment (6,011) (5,256) (5,830)
Loan receivable from related party - - (7,341)
Equity investments in affiliates (15,219) (218) (197)
Other - (1) (9)
-------- -------- --------
Net cash provided by (used in) investing
activities (68,200) 10,606 2,873
-------- -------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options and
warrants 29,825 14,226 2,530
Proceeds from issuance of warrants 3,848 3,528 3,900
-------- -------- --------
Net cash provided by financing activities 33,673 17,754 6,430
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents (56,699) 68,180 (755)
Cash and cash equivalents at beginning of
year 69,584 1,404 2,159
-------- -------- --------
Cash and cash equivalents at end of year $ 12,885 $ 69,584 $ 1,404
======== ======== ========
Supplemental disclosure concerning cash flow
information:
Acquisition of property and equipment
financed through accounts payable $ - $ - $ 171
Receivable for issuance of warrants 401 - 181
Cash paid during the year for income taxes 648 - -
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
ICOS CORPORATION
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(dollars in thousands, except per share data or as otherwise noted)
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
ICOS Corporation and subsidiary (the "Company") is discovering and
developing new pharmaceutical candidates by seeking points of
intervention in the inflammatory process that may lead to more
specific and efficacious drugs. The Company's research and drug
development programs involve both chronic and acute conditions.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, ICOS Development Corporation.
All significant intercompany transactions and balances have been
eliminated in consolidation.
(c) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(d) Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, short-term investments, accounts payable and a note
receivable from a related party. The Company's cash and cash
equivalents and short-term investments are diversified among security
types and issuers, and approximate fair value. The Company's other
financial instruments are short-term and/or have little or no risk and
therefore are considered to have fair value equal to book value. The
Company does not have derivative financial instruments in its
investment portfolio.
(e) Cash and Cash Equivalents
All highly liquid short-term investments purchased with a maturity of
three months or less are considered to be cash equivalents.
Investments in cash and cash equivalents consist primarily of
investments in money market accounts and corporate debt securities.
(f) Investment Securities
The Company's investment securities are classified as available-for-
sale and carried at market value, based on quoted market prices, with
unrealized gains and losses excluded from results of operations and
reported as a component of total comprehensive income (loss) in the
Consolidated Statements of Stockholders' Equity. Gross realized gains
and losses on sales of investment securities are determined on the
specific identification method and included in investment income.
(g) Property and Equipment
Property and equipment are stated at cost. Significant additions and
improvements to property and equipment are capitalized. Maintenance
and repair costs are expensed as incurred. Depreciation of furniture
and equipment is provided on the straight-line method over the
assets' estimated useful lives of three to five years. The Company
owns one building which is being depreciated over its estimated
remaining economic life of ten years. Leasehold improvements are
amortized over the shorter of their useful lives or the term of the
lease. Building improvements are amortized over the shorter of their
useful lives or the remaining economic life of the building.
(h) Investments in Affiliates
Investments in ICOS Clinical Partners, L.P. ("the Partnership"),
Suncos Corporation ("Suncos") and Lilly ICOS LLC ("Lilly ICOS") are
accounted for using the equity method. Accordingly, the investments
are recorded at cost, adjusted for the Company's share of income or
losses of the entities.
8
<PAGE>
(i) Revenue Recognition
All of the Company's revenue to date has been derived from technology
license fees, milestone payments, cost reimbursement revenue from
related parties and services to third parties for performing research
and development on their behalf. Technology license fees have been for
the transfer of technology rights for which the Company received
nonrefundable cash payments and has not been subject to continuing
performance obligations. Milestone payments have been for the
achievement of specified levels of progress related to research and
development under collaborative agreements such as the initiation of a
Phase 3 clinical trial.
Cost reimbursement revenue is recognized based on costs incurred as
services are provided. Revenue for services to third parties is
recognized when the services are provided. Milestone payments are
recognized as revenue upon attainment of a specified event or outcome.
Nonrefundable payments for technology or other licensing fees are
recognized as revenue when payment is received and the Company has no
continuing performance obligations.
For all revenue reported, the revenue is recognized when the work has
been performed, the Company has no continuing performance obligations,
and the contracting party is obligated to pay the Company. If any of
these conditions are not present, revenue is deferred until the
underlying services are performed based on the criteria set forth
above. No revenue is refundable if the related research effort is
unsuccessful.
(j) Research and Development Costs
Research and development costs are charged to expense as incurred.
(k) Income Taxes
Income taxes are accounted for using the asset and liability method
whereby deferred tax assets and liabilities are recognized for the
future tax consequences attributed to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and loss carryforwards and
tax credits. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
(l) Net Income (Loss) Per Common Share
Basic net income (loss) per common share is based on the weighted-
average number of common shares outstanding during the period. Diluted
net income (loss) per common share is based on the potential dilution
that would occur on exercise or conversion of securities into common
stock using the treasury stock method. Common shares that are
considered to be antidilutive are excluded from the computation of
diluted net income (loss) per common share. Securities included in the
Company's calculation of diluted net income (loss) per common share
include outstanding stock options, stock warrants and contingently
issuable stock warrants.
(m) Stock Based Compensation
The Company applies the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations in accounting for its employee stock option
grants. Accordingly, the Company does not recognize compensation
expense for fixed options granted to employees with an exercise price
equal to or in excess of the fair value of common shares at the date
of grant. The Company has provided pro forma net income (loss) and pro
forma net income (loss) per share disclosures as if compensation cost
had been determined based on the method defined in Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock
Based Compensation.
(n) Operating Segments
The Company's operations are confined to one operating segment, the
discovery and development of proprietary pharmaceuticals for the
treatment of inflammatory diseases and other serious medical
conditions.
(o) New Accounting Bulletin
The United States Securities and Exchange Commission recently issued
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements, which the Company intends to adopt in its first
fiscal quarter in 2000. The interpretation of SAB No. 101 is currently
uncertain as it relates to biotechnology companies and consequently,
the impact on the Company's financial statements is unknown. The
Company is in the process of determining the potential impact on its
financial statements.
(p) Reclassifications
Certain amounts reported in previous years have been reclassified to
conform to the 1999 presentation.
(2) Financing
The Company anticipates that its existing cash, along with interest income
from cash investments, anticipated payments from Suncos, Lilly ICOS and the
Partnership, and cash flow from other operating activities, will be
sufficient to fund its cash requirements through 2000. However, the amounts
and timing of expenditures will depend on the progress of ongoing research
and development, the rate at which operating losses are incurred, the
execution of development and
9
<PAGE>
licensing agreements with potential corporate partners, the Company's
development of products, the Food and Drug Administration regulatory
process, and other factors, many of which are beyond the Company's control.
The Company's existing capital resources and collaborative arrangements
will not be sufficient to fund the Company's operations through
commercialization of its first product. Accordingly, the Company will need
to raise substantial additional funds for its programs. The Company is
currently evaluating several financing alternatives, some of which may
involve the sale of additional equity, commencement of additional corporate
partnerships and other methods of raising capital from public, private, and
corporate sources. The Company anticipates completion of one or more of
these financing events during 2000.
(3) Investment Securities
The following table summarizes the Company's investment securities at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized
Market value gains losses Amortized cost
------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
December 31, 1999:
Corporate debt securities $47,929 $11 $145 $48,063
U.S. government agency
mortgage-backed
securities 7,420 - 82 7,502
------- --- ---- -------
Total $55,349 $11 $227 $55,565
======= === ==== =======
December 31, 1998:
Corporate debt securities $ 8,090 $ - $ 3 $ 8,093
======= === ==== =======
</TABLE>
Amortized cost and estimated market value of debt securities at December
31, 1999, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Market value Amortized cost
------------ --------------
<S> <C> <C>
Maturing within:
---------------
1 year $44,786 $44,874
2 years $10,563 $10,691
</TABLE>
Actual maturities may be different from the contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Investment income includes interest of $4.3 million, $2.3 million and $2.2
million earned on investments for 1999, 1998 and 1997, respectively, and
capital gains (losses) of $(14), $28 and $4 for 1999, 1998 and 1997,
respectively.
(4) Receivables from Related Parties Under Collaborative Arrangements
<TABLE>
<CAPTION>
December 31,
-------------
1999 1998
<S> <C> <C>
-------------
Due from Suncos $1,894 $3,522
Due from the Partnership 2,215 -
Due from Lilly ICOS 5,649 3,795
Other 22 207
------ ------
$9,780 $7,524
====== ======
</TABLE>
10
<PAGE>
(5) Net Property and Equipment, at Cost
<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
<S> <C> <C>
----------------
Land $ 2,310 $ 2,310
Buildings and improvements 10,057 9,461
Leasehold improvements 9,820 9,805
Furniture and equipment 23,641 18,865
------- -------
45,828 40,441
Less accumulated depreciation and amortization (24,889) (21,135)
------- -------
20,939 19,306
Construction in progress 103 270
------- -------
$21,042 $19,576
======= =======
</TABLE>
(6) Accrued Payroll and Benefits
<TABLE>
<CAPTION>
December 31,
-------------
1999 1998
<S> <C> <C>
-------------
Accrued vacation and other compensation $1,214 $ 901
Accrued payroll taxes 2,014 16
Other 337 88
------ ------
$3,565 $1,005
====== ======
</TABLE>
(7) Leases
The Company leases certain property and equipment under noncancellable
operating leases that expire through 2004. Many of the Company's leases
contain renewal options and clauses for escalations of rent and payment of
real estate taxes, maintenance, insurance and certain other operating
expenses of the properties.
Total rent expense was $3.4 million, $1.6 million and $1.6 million for
1999, 1998 and 1997, respectively.
Future minimum lease payments under noncancellable operating leases,
excluding provision for annual increases tied to the consumer price index,
are as follows:
<TABLE>
<S> <C>
2000 $ 3,095
2001 3,154
2002 2,822
2003 2,265
2004 189
-------
Total minimum lease payments $11,525
=======
</TABLE>
During 1999, the Company began subleasing certain property to others under
short-term operating leases expiring in 2001 and 2002, with options to
extend the leases through 2003 and 2004. Total rent expense presented above
has not been reduced by sublease income totaling $682 in 1999. Similarly,
minimum lease payments indicated above do not reflect minimum rentals of
$1,348 due in the future under noncancellable subleases.
11
<PAGE>
(8) Federal Income Taxes
Income tax expense (benefit) on income (loss) before income taxes differs
from the amount of income tax expense (benefit) as computed by applying the
U.S. federal income tax rate to pre-tax income (loss) as a result of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Estimated federal income tax expense
(benefit) $(11,286) $10,866 $(4,085)
Value of warrants issued to the Partnership 1,445 1,139 1,345
Research and experimentation tax credit
carryforwards (843) (1,271) (710)
Change in valuation allowance excluding
intraperiod items 10,646 (10,182) 3,297
Other 38 96 153
-------- ------- -------
$ - $ 648 $ -
======== ======= =======
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
<S> <C> <C>
------------------
Depreciation $ 4,272 $ 3,488
Net operating loss carryforwards 42,262 26,888
Research and experimentation tax credit carryforwards 6,364 5,194
Alternative minimum tax credit carryforward 612 648
Other 185 1,142
-------- --------
Gross deferred tax assets 53,695 37,360
Valuation allowance (52,589) (37,360)
-------- --------
Net deferred tax assets 1,106 -
Deferred tax liability - Investment in Lilly ICOS (1,106) -
-------- --------
$ - $ -
======== ========
</TABLE>
The (decrease) and increases in the valuation allowance for deferred tax
assets of $15.2 million, $(9.2) million and $4.2 million, in 1999, 1998 and
1997, respectively, are attributable primarily to the ability or inability
to utilize net operating loss carryforwards.
At December 31, 1999, the Company has net operating loss carryforwards
available to offset future taxable income as follows:
<TABLE>
<CAPTION>
Year of
Expiration
----------
<S> <C>
2009 $ 5,060
2010 21,507
2011 21,039
2012 26,774
2013 7,688
2018 359
2019 41,873
--------
$124,300
========
</TABLE>
Approximately $21.7 million of the net operating loss carryforwards as of
December 31, 1999, results from stock option deductions, the realization of
which would result in a credit to stockholders' equity. At December 31,
1999, the Company also had available approximately $6.4 million of research
and experimentation tax credit carryforwards to offset future tax
liabilities. These credits expire from 2009 to 2019.
Under provisions of the Internal Revenue Code of 1986, as amended,
utilization of the Company's net operating loss carryforwards may be
subject to limitation if it should be determined that a greater than 50%
ownership change were to occur in the future.
12
<PAGE>
(9) Preferred Stock
The Company has the authority to issue up to 2.0 million shares of
preferred stock in one or more series. The Company's Board of Directors has
the authority to fix the powers, designations, preferences, and relative
participating, optional, or other rights thereof, including dividend
rights, conversion rights, voting rights, redemption terms, liquidation
preferences, and the number of shares constituting any series, without any
further vote or action by the Company's stockholders. The issuance of
preferred stock in certain circumstances may have the effect of delaying or
preventing a change in control of the Company. Such issuance with voting
and conversion rights may adversely affect the voting power of the common
stock holders. The Company has no shares of preferred stock outstanding. In
the future, the Company may issue preferred stock as part of its overall
financing strategy.
(10) Common Stock Transactions
(a) Stock Option Plan
Effective May 6, 1999 (the "Effective Date"), the Company adopted the 1999
Stock Option Plan (the "Plan"), under which 5.0 million shares of common
stock have been reserved for grant to various executive, scientific, and
administrative personnel of the Company as well as nonemployee directors.
The Plan replaces the Company's 1989 Stock Option Plan and its 1991 Stock
Option Plan for Nonemployee Directors (the "Prior Plans"). Any options
that are authorized but not issued or outstanding on the Effective Date
under the Prior Plans, and any options that are outstanding on the
Effective Date under the Prior Plans that are later cancelled or
forfeited, will no longer be available for issuance under the Prior Plans.
However, such options will become available for issuance under the Plan up
to an aggregate of 7,412,048 additional shares.
All incentive stock options are granted with an exercise price not less
than 100% of the fair market value of the common stock on the grant date.
Nonqualified stock options are generally granted with an exercise price
equal to 100% of the fair market value of the common stock on the grant
date; however, in no case are they granted with an exercise price of less
than 85% of the fair market value of the common stock on the grant date.
The options generally vest over a four-year period commencing on the grant
date and have a term of ten years from the grant date.
For nonemployee directors, the Plan provides for an initial grant and
automatic annual grants thereafter to each nonemployee director of a
number of nonqualified stock options determined by dividing $170,000 by
the market price of the common stock on the grant date. The exercise
price of the options will be the closing market price of the common stock
on the grant date. Initial options granted to nonemployee directors under
the Plan become exercisable 50% after the director has served for one
year from the date of initial election to the Board and 100% after two
years. Automatic annual grants are fully vested on the grant date. The
options have a term of ten years but cannot be exercised later than two
years after termination of service as a director.
A summary of stock options under the Plan is presented below (shares stated in
thousands). Plan activities prior to the Effective Date include the activities
of Prior Plans.
<TABLE>
<CAPTION>
Stock options
outstanding
------------------------
Weighted-
average
Number of exercise price
shares per share
--------- --------------
<S> <C> <C>
Balance at December 31, 1996 4,689 $ 6.63
Options granted 1,331 9.06
Cancellations (156) 8.23
Options exercised (418) 5.78
----- ------
Balance at December 31, 1997 5,446 7.25
Options granted 1,377 17.19
Cancellations (81) 12.77
Options exercised (292) 6.58
----- ------
Balance at December 31, 1998 6,450 9.33
Options granted 2,514 37.60
Cancellations (90) 19.50
Options exercised (861) 8.07
----- ------
Balance at December 31, 1999 8,013 $18.22
===== ======
</TABLE>
13
<PAGE>
At December 31, 1999, 3.5 million shares remained reserved and available for
grant under the Plan.
The following table summarizes information about stock options outstanding
under the Plan at December 31, 1999 (shares stated in thousands):
<TABLE>
<CAPTION>
Options outstanding Options exercisable
------------------- --------------------------
Weighted-average Weighted- Weighted-
Range of remaining average average
exercise Number contractual life exercise price Number exercise price
prices outstanding (in years) per share exercisable per share
-------- ----------- ------------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.00 - $ 5.00 843 4.68 $ 4.27 843 $ 4.27
5.13 - 6.00 821 3.92 5.82 821 5.82
6.13 - 8.25 1,542 5.60 7.56 1,410 7.54
8.38 - 13.94 1,075 6.22 10.14 800 10.09
14.25 - 19.00 1,123 7.81 16.83 594 16.61
19.25 - 40.75 1,116 9.15 28.78 316 28.77
42.88 - 44.50 1,493 9.46 42.88 149 42.88
-------------------------------------------------------------------------------------------
$ 3.00 - $44.50 8,013 6.94 $18.22 4,933 $10.62
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its plans
resulting in no compensation cost being recognized related to its stock
options. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123, the
Company's net income (loss) would have been adjusted to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- --------
<S> <C> <C> <C>
Net income (loss)
As reported $(33,195) $31,310 $(12,015)
Pro forma (47,705) 24,735 (15,305)
Net income (loss) per share - basic
As reported $ (0.76) $ 0.78 $ (0.30)
Pro forma (1.10) 0.62 (0.39)
Net income (loss) per share - diluted
As reported $ (0.76) $ 0.67 $ (0.30)
Pro forma (1.10) 0.53 (0.39)
</TABLE>
The per share weighted-average fair value of stock options granted
during 1999, 1998 and 1997, was $22.29, $10.23 and $4.52, respectively,
on the grant date using the Black-Scholes option pricing model with the
following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield 0.0% 0.0% 0.0%
Risk-free interest rate 5.8% 5.4% 6.3%
Expected volatility 66.0% 70.5% 42.0%
Expected life in years 6.5 4.4 6.0
</TABLE>
(b) Other Stock Options
Outside of the Plan, the Company granted stock options to one investor
in June 1990 to purchase 50,000 shares of common stock at $3.00 per
share. During 1997, all of these options were exercised.
(c) Warrants Outstanding
In connection with the Partnership's sale of limited partnership units,
the Company issued, on June 5, 1997, and August 15, 1997, Series A
warrants to purchase an aggregate of 5.6 million and 2.0 million shares,
respectively, of the Company's common stock at exercise prices of $9.13
and $10.35 per share, respectively. The Series A warrants are exercisable
from October 1, 1998 through May 31, 2002. The Company also issued, on
June 30, 1999, Series B warrants to purchase an aggregate of 7.6 million
shares of the Company's common stock at an exercise price of $52.49 per
share. The Series B warrants are exercisable from July 31, 1999 through
June 30, 2004.
The warrants were issued in conjunction with a research and development
agreement between the Company and the Partnership. Accordingly, under
generally accepted accounting principles, amounts to be received from the
Partnership are allocated between the estimated fair value of the warrants
and the research and development funding to be received. The amount
attributable to the value of the warrants is recorded as additional paid-
in capital as payments are received with the remainder recorded as
collaborative research and development revenue from related parties.
The warrants were valued using the Black-Scholes option pricing model,
with the following assumptions:
. Expected dividend yield: 0.0%
. Risk-free interest rate: 6.095% to 6.470%
. Expected volatility: 45%
. Expected life in years: 4.8 to 7.1 years
The resulting valuation under Black-Scholes was discounted by 50% to 60%
to take into account severe restrictions on the marketability of the
warrants, including the lack of an existing market for the warrants,
nontransferability of the warrants without the Company's written consent,
and certain limitations on the aggregate number of warrants that can be
transferred in a single year.
During 1999, warrants to purchase 2.4 million shares were exercised at a
weighted-average exercise price of $9.51 per share. At December 31, 1999,
warrants to purchase 11.4 million shares were outstanding at a weighted-
average
14
<PAGE>
exercise price of $38.00 per share. During 1998, warrants to purchase
1.3 million shares were exercised at a weighted-average exercise price
of $9.41 per share. At December 31, 1998, warrants to purchase 6.2
million shares were outstanding at a weighted-average exercise price of
$9.46 per share.
(11) Net Income (Loss) per Common Share
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------
1999 1998 1997
<S> <C> <C> <C>
--------------------------
Basic net income (loss) per share
computations:
Numerator:
Net income (loss) $(33,195) $31,310 $(12,015)
Denominator:
Weighted-average common shares 43,449 40,139 39,595
-------- ------- --------
Basic net income (loss) per share $ (0.76) $ 0.78 $ (0.30)
======== ======= ========
Diluted net income (loss) per share
computations:
Numerator:
Net income (loss) $(33,195) $31,310 $(12,015)
Denominator:
Weighted-average common shares 43,449 40,139 39,595
Effect of dilutive securities:
Stock options - 3,285 -
Stock warrants - 3,425 -
-------- ------- --------
Denominator for dilutive net income (loss)
per share 43,449 46,849 39,595
-------- ------- --------
Diluted net income (loss) per share $ (0.76) $ 0.67 $ (0.30)
======== ======= ========
</TABLE>
For the year ended December 31, 1999, options to purchase 8.0 million
shares of common stock and stock warrants to acquire 11.4 million shares of
common stock have been excluded from the computation of diluted net loss
per common share as their impact would be antidilutive.
For the year ended December 31, 1998, options to acquire 40,000 shares of
common stock with a weighted-average exercise price of $21.72 per share and
contingently issuable stock warrants to acquire 7.6 million shares of
common stock have been excluded from the computation of diluted net income
per common share as their exercise prices were greater than the average
market price of common shares and their impact would be antidilutive.
For the year ended December 31, 1997, options to purchase 5.4 million
shares of common stock, warrants to acquire 7.6 million shares of common
stock and contingently issuable stock warrants to acquire 7.6 million
shares of common stock have been excluded from the computation of diluted
net loss per common share as their impact would be antidilutive.
(12) Related Party Transactions
In June 1996, the Company entered into an agreement with Charybdis
Corporation, a start-up biotechnology company now known as Ceptyr, Inc.
("Ceptyr"). Under the agreement, the Company licensed and released to
Ceptyr certain technology that the Company had independently determined
would not be part of the Company's development programs, agreed to provide
incubation services to Ceptyr, including laboratory space and certain
small-molecule screening services and know-how, and received stock of
Ceptyr. This agreement was extended and expanded in March 1997 to provide
the Company with an option to acquire rights to certain technologies
developed by Ceptyr or to convert the value of the Company's services
provided to Ceptyr into additional stock of Ceptyr. In December 1998, the
Company exercised the option to become a co-owner of the two compounds
being developed by Ceptyr.
In 1999, the Company and Ceptyr entered into a new services agreement (in
addition to the agreement outlined above) in which the Company agreed to
provide certain administrative, research and support services to Ceptyr
associated with Ceptyr conducting its business and a sublease for certain
portions of ICOS properties. The Company recognized income
15
<PAGE>
of approximately $278 under the agreements in 1999. At December 31, 1999
and 1998, the Company had a receivable from Ceptyr for expenses incurred
but not yet paid of $22 and $207, respectively.
For a cash investment in June 1996, Ceptyr issued stock to Falcon
Technology Partners II, L.P., a venture capital limited partnership, all of
whose interests (general partner and limited partner interests) are
directly or indirectly held by the five adult children of the Company's
former Chairman, Dr. George B. Rathmann. The Company does not have a
controlling interest in Ceptyr. However, in accordance with the rights of
the Company to designate a director to the Ceptyr board of directors, Dr.
Wilcox, the Company's Executive Vice President, Operations, became a
director of Ceptyr.
During 1999, the Company chartered an airplane from AMI Jet Charter, Inc.
d.b.a. TAG Aviation ("TAG") and recognized approximately $282 in expenses
for services rendered. The aircraft subject to the charter arrangement was
under the control of Peregrine Aviation, LLC ("Peregrine"), a company
wholly owned by George B. Rathmann, who concurrently served as the
Company's Chairman of the Board of Directors. Peregrine subleased the plane
to TAG, who used it as part of its charter fleet. Management believes that
the rates charged by TAG were below the standard rates for commercial
charter services.
(13) Scientific Collaboration Agreements
Abbott Laboratories
In April 1995, the Company entered into a collaborative agreement with
Abbott Laboratories ("Abbott"), a worldwide manufacturer of health care
products. The collaboration focused on the development of small molecules
that modulate, by an intracellular interaction, the activity of certain
cell adhesion molecules. The research program under which ICOS received
research funding from Abbott ended April 1, 1999. Under the terms of the
agreement, each company will have exclusive rights to drugs against
specific molecular targets with royalties and milestone obligations to the
other party. Each party will be responsible for the development,
registration and commercialization of its own products. In addition, the
collaboration provided the Company with a library of chemical compounds for
use in its own discovery programs.
Suncos
In February 1997, the Company and Suntory Limited of Japan ("Suntory")
formed Suncos, a corporate joint venture company, for the purpose of
developing and commercializing Pafase(TM). In forming Suncos, the Company
granted a license for the Pafase(TM) technology to Suncos, and Suntory made
an initial capital contribution of $30.0 million. Both parties committed to
jointly fund all development activities and expenses of Suncos once the
initial capital contribution of $30.0 million from Suntory was used. Suncos
is managed jointly by Suntory and the Company. The Company has rights to
market Pafase(TM) in the United States and Suntory has market rights in
Japan. Each company will pay royalties to Suncos for its territorial
marketing rights. Suncos will retain all rights to market the potential
product in territories outside the United States and Japan.
The Company recognized research and development revenue of $25.1 million,
$14.9 million and $11.2 million from Suncos in 1999, 1998 and 1997,
respectively, of which $1.9 million, $3.5 million, and $1.2 million was
receivable at December 31, 1999, 1998 and 1997, respectively.
The technology contributed to Suncos by the Company had a zero basis for
financial reporting purposes and, accordingly, the Company recorded its
initial investment in Suncos as zero. The Company did not begin to report
its share of Suncos' losses until such time that Suncos' accumulated losses
were equal to Suntory's investment and the Company made capital
contributions to Suncos. During 1999, the Company and Suntory each made
equity investments in Suncos of $15.0 million. Accordingly, the Company
recognized $11.8 million of expense in 1999, equal to its share of Suncos'
net loss subsequent to the Company's initial 1999 equity investment.
16
<PAGE>
Summarized unaudited financial information for Suncos is as follows:
<TABLE>
<CAPTION>
Financial position -- December 31, 1999 1998
---------------------------------- ---- ----
<S> <C> <C> <C>
Total assets - all current $ 8,364 $ 5,828
======== ========
Total liabilities - all current, payable to
related parties $ 1,930 $ 3,781
Stockholders' equity 6,434 2,047
-------- --------
$ 8,364 $ 5,828
======== ========
<CAPTION>
Operating results -- For the year ended
December 31, 1999 1998 1997
--------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Operating expenses, related parties $(26,044) $(16,594) $(13,290)
Interest income 430 699 1,233
-------- -------- --------
Net loss $(25,614) $(15,895) $(12,057)
======== ======== ========
</TABLE>
ICOS Clinical Partners, L.P.
On August 15, 1997, the Partnership completed the sale to private investors
of limited partnership interests in the Partnership. Net proceeds from the
sale are being used by the Partnership to fund continued development of
product candidates by the Company pursuant to the terms of the Product
Development Agreement based on three compounds: LeukArrest(TM), Pafase(TM)
and ICM3.
The sale will result in net proceeds to the Partnership of approximately
$79.8 million. Approximately $25.9 million, before payment of offering
costs, was paid to the Partnership at closing of the sale of the
Partnership units. The Partnership received $21.9 million in both 1998 and
1999 with the balance of approximately $10.1 million to be received on May
31, 2000.
The Company recognized revenue of $19.1 million and $15.1 million from the
Partnership in 1999 and 1998, respectively. In 1997, the Company recognized
revenue of $18.4 million from the Partnership, including a one-time payment
for an exclusive license to certain technology. At December 31, 1999, the
Company had a receivable from the Partnership for development expenses
incurred but not paid of $2.2 million.
The Company loaned the Partnership an aggregate of $7.3 million to fund
certain initial expenditures of the Partnership that consisted primarily of
organizational expenses, selling commissions, financial advisory fees and
other fees. The loan is full recourse to the Partnership, bears interest at
the prime rate plus 0.25% which is paid annually on June 1 and matures on
June 1, 2000. At December 31, 1999, 1998 and 1997, interest income on the
loan was $0.6 million, $0.6 million and $0.3 million, respectively.
Interest accrued on the loan at December 31, 1999 and 1998 was $0.4
million.
The Company has a 1% interest in the Partnership and is the only general
partner of the Partnership. The Company accounts for its interest in the
Partnership using the equity method since it exercises significant influence
over, but does not control, the Partnership. Under the terms of the
partnership agreement, the limited partners have the ability to replace the
Company as the general partner, to approve the sale or refinancing of all of
the assets of the Partnership and to terminate the Partnership.
The Company's share of losses of the Partnership was $0.2 million for each
of the years ended December 31, 1999, 1998 and 1997 and is included in
equity in losses of affiliates. The investment balance of $43 and $64 at
December 31, 1999 and 1998, respectively, is included in investment in
affiliates, at equity.
Summarized unaudited financial information for the Partnership is as
follows:
<TABLE>
<CAPTION>
Financial position -- December 31, 1999 1998
---------------------------------- ---- ----
<S> <C> <C> <C>
Total assets - all current $ 6,574 $ 6,350
======== ========
Current liabilities payable to ICOS
Corporation $ 9,915 $ 364
Note payable to ICOS Corporation - 7,341
Partners' deficit (3,341) (1,355)
-------- --------
$ 6,574 $ 6,350
======== ========
<CAPTION>
Operating results -- For the year ended
December 31, 1999 1998 1997
--------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Investment income $ 324 $ 328 $ 291
Research and development expenses, related
party (23,292) (18,520) (22,448)
Interest expense, related party (604) (624) (345)
General and administrative expenses (283) (309) (71)
-------- -------- --------
Net loss $(23,855) $(19,125) $(22,573)
======== ======== ========
</TABLE>
17
<PAGE>
Lilly ICOS LLC
In October 1998, the Company and Eli Lilly and Company ("Lilly") formed
Lilly ICOS, a 50/50 owned limited liability company, to jointly develop and
globally commercialize phosphodiesterase type 5 inhibitors (PDE5) as oral
therapeutic agents for the treatment of both male and female sexual
dysfunction. Under the terms of the joint venture agreement, the Company
received a license fee payment of $75.0 million upon formation of the joint
venture and could receive future license fees based on the progression of
IC351 through development. The joint venture is being capitalized by Lilly
through cash infusions and the contribution by the Company of intellectual
property associated with IC351 and its research platform. The joint venture
will market products resulting from this collaborative effort in North
America and Europe. For countries outside North America and Europe,
products will be licensed exclusively to Lilly for commercialization with a
royalty paid to the joint venture.
In 1999, the Company recognized revenue of $34.9 million from Lilly ICOS
including $15.0 million in licensing fees as a result of the initiation of
a global Phase 3 clinical trial. In 1998, the Company recognized revenue of
$78.8 million from Lilly ICOS including a license fee of $75.0 million. At
December 31, 1999 and 1998, the Company had a receivable from Lilly ICOS of
$5.6 million and $3.8 million, respectively, for reimbursement of certain
development expenses.
The technology contributed to Lilly ICOS by the Company had a zero basis
for financial reporting purposes and, accordingly, the Company has recorded
its investment in Lilly ICOS as zero at the date of contribution through
December 31, 1999. The Company will not report its share of Lilly ICOS'
results of operations until such time that the Company makes capital
contributions to Lilly ICOS, if ever.
Summarized unaudited financial information for Lilly ICOS is as follows:
<TABLE>
<CAPTION>
Financial position -- December 31, 1999 1998
---------------------------------- ---- ----
<S> <C> <C>
Total assets - all current $ 18,226 $ 25,317
========= =========
Total liabilities - all current, payable to related
parties $ 17,992 $ 6,822
Members' equity 234 18,495
--------- ---------
$ 18,226 $ 25,317
========= =========
<CAPTION>
Operating results -- For the year ended December
31, 1999 1998
------------------------------------------------ ---- ----
<S> <C> <C>
Research and development expenses, related parties $ (59,073) $ (6,538)
Contribution of technology, related party (70,000) (175,000)
Administrative expense (104) (284)
Interest income 926 318
--------- ---------
Net loss $(128,251) $(181,504)
========= =========
</TABLE>
Other Collaborative Arrangements
The Company has also entered into other collaborative arrangements under
which the Company may be obligated to pay royalties or milestone payments
if product development is successful. It is not anticipated that the
aggregate of any royalty or milestone obligations under these arrangements
will be material to the Company's operations.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Bothell,
State of Washington, on the 6th day of December, 2000.
ICOS CORPORATION
(Registrant)
/s/ PAUL N. CLARK
By: _____________________________________
Paul N. Clark
Chairman of the Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PAUL N. CLARK Chairman of the Board of December 6, 2000
______________________________________ Directors, Chief Executive
Paul N. Clark Officer and President
(Principal Executive
Officer)
/s/ GARY L. WILCOX Director and Executive December 6, 2000
______________________________________ Vice President, Operations
Gary L. Wilcox
* THOMAS N. SWALLOW Corporate Controller December 6, 2000
______________________________________ (Principal Accounting
Thomas N. Swallow Officer)
* FRANK T. CARY Director December 6, 2000
______________________________________
Frank T. Cary
* ROBERT W. PANGIA Director December 6, 2000
______________________________________
Robert W. Pangia
* ALEXANDER B. TROWBRIDGE Director December 6, 2000
______________________________________
Alexander B. Trowbridge
* WALTER B. WRISTON Director December 6, 2000
______________________________________
Walter B. Wriston
* By: /s/ GARY L. WILCOX December 6, 2000
________________________________
Gary L. Wilcox
Attorney-in-Fact
</TABLE>
19
