Company Name: ICOS Corp.
Public Availability Date: February 4, 2004Document Sections:
INQUIRY LETTER
APPENDIX
STAFF REPLY LETTER
STAFF REPLY LETTER [INQUIRY LETTER]
December 23, 2003 VIA OVERNIGHT COURIER
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Stockholder Proposal submitted by the Massachusetts State Carpenters Pension
Fund for inclusion in the 2004 proxy statement of ICOS Corporation
Ladies and Gentlemen: Our client, ICOS Corporation (the "Company" or "ICOS"), has received a
stockholder proposal and accompanying supporting statement (the "Proposal") from
the Massachusetts State Carpenters Pension Fund (the "Fund"), which was
submitted for inclusion in the proxy statement to be distributed to the
Company's stockholders in connection with the 2004 annual meeting of
stockholders (the "2004 Proxy Materials"). We hereby notify the Securities and Exchange Commission (the "Commission") and
the Fund of the Company's intention to exclude the Proposal from its 2004 Proxy
Materials for the procedural and substantive reasons set forth below. We request
that the staff of the Division of Corporation Finance of the Commission (the
"Staff") confirm that it will not recommend any enforcement action to the
Commission if ICOS excludes the Proposal from its 2004 Proxy Materials.
We enclose for filing with the Commission, pursuant to Rule 14a-8(j) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"):
1. The original and five copies of this letter, which includes a statement of
the reasons why the Company believes exclusion of the Proposal from the 2004
Proxy Materials is proper in this case; 2. Six copies of the Proposal and the Fund's supporting statement, dated
November 21, 2003, which is attached hereto as Exhibit A; 3. Six copies of the Company's letter dated December 4, 2003, to the Fund
pursuant to Rule 14a-8(f)(1), which is attached hereto as Exhibit B; and
4. Six copies of a broker letter from State Street Bank on behalf of the Fund
dated December 8, 2003, which is attached hereto as Exhibit C.
THE PROPOSAL The Proposal, if adopted, would request that the Company's board of directors
implement two separate and distinct policies, each with different policy
rationales or justifications: 1. Utilize restricted shares in lieu of stock options in future senior executive
equity compensation; and 2. Implement performance and time-based vesting criteria for all future senior
executive equity compensation, together with a share retention feature and
dividend and voting rights limitations. The full text of the Proposal is attached as Exhibit A.
SUMMARY OF BASES FOR EXCLUSION The Company believes it may properly omit the Proposal from the 2004 Proxy
Materials because: 1. The Proposal violates the "one proposal" rule and may therefore be excluded
under Rules 14a-8(c) and 14a-8(f)(1). 2. The Proposal is vague, indefinite and potentially misleading and may
therefore be excluded on substantive grounds pursuant to Commission Rule
14a-8(i)(3). 1. The Proposal violates the "one proposal" rule and may therefore be excluded
under Rules 14a-8(c) and 14a-8(f)(1). The Proposal should be excluded from the 2004 Proxy Materials because the Fund
submitted more than one proposal to the Company for inclusion in its 2004 Proxy
Materials and, when timely notified of the violation of the Commission's rules,
the Fund failed to amend the Proposal. Rule 14a-8(c) states that "[e]ach
shareholder may submit no more than one proposal to a company for a particular
shareholders' meeting." Rule 14a-8(f)(1) permits a company to exclude a
proponent's proposals if the company notifies the proponent of the proponent's
failure to follow one of the procedural requirements within 14 calendar days of
receiving the proposals and the proponent fails to correct the problem within 14
calendar days of receiving the company's notice. As required by Rule 14a-8(f)(1), the Company informed the Fund in a letter dated
December 4, 2003, of the requirements of Rule 14a-8(c), that the Fund would need
to revise the Proposal to include only one proposal, and that the Fund had 14
days from the date of its receipt of the Company's letter to correct the
deficiency (see Exhibit C). The Fund did not respond to the Company's request.
The Staff has consistently permitted the exclusion of a proposal where the
proponent submits more than one proposal and fails to reduce the number of
proposals to one at the issuer's request. See, e.g., Ford Motor Company (April
4, 2003); BostonFed Bancorp, Inc. (March 5, 2001); and Fotoball, Inc. (May 6,
1997). In Fotoball, the Staff permitted the exclusion of a proposal relating to
a minimum share ownership of directors, form of director compensation, and
business relationships between issuer and its non-employee directors as
constituting multiple proposals. In certain limited circumstances, the Staff has taken the position that multiple
proposals will be deemed to constitute one proposal if they are related to a
single, well-defined unifying concept. See Securities Exchange Act Release No.
12999 (Nov. 22, 1976). For example, in Computer Horizons Corp. (Apr. 1, 1993), a
stockholder submitted a proposal recommending that the board modify or terminate
each plan, contract or arrangement that would significantly disadvantage
potential buyers of the company, including certain plans and contracts specified
in the proposal. Since the elements of this proposal all related to the single
concept of eliminating anti-takeover defenses, they were deemed to constitute
one proposal. Unlike the proposal at issue in Computer Horizons, the Proposal here is not
related to a single, well-defined unifying concept. Instead, as in Fotoball, the
Proposal relates to multiple separate and distinct concepts, notwithstanding the
fact that the Fund has framed its request in terms of one stockholder
resolution. 1. The Fund's first proposal is that the Company's board of directors utilize
restricted shares in lieu of stock options in future senior executive equity
compensation. In light of the fact that the Fund offers no statement in support
of its proposal to require use of restricted shares in lieu of stock options,
the Company believes that the most likely explanation for the Fund's request is
that it is motivated by accounting considerations, namely requiring the Company
to recognize compensation expense based on the fair value of restricted share
grants on the grant date under Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation." As the Staff is aware, expensing
equity based compensation has been a hot topic in the arena of stockholder
proposals over the past twelve months. Use of restricted shares is one way to
require expensing of equity compensation and could well be the basis of a
substantively permissible stockholder proposal. Indeed, the Company offered the
Fund the opportunity to revise the Proposal to focus on the accounting issue.
The Company's accounting policies are, however, separate and distinct as a
policy matter from the management performance goals addressed in the second
component of the Proposal discussed below. 2. The Fund's second proposal, that the Company's board of directors implement
performance and time-based vesting criteria for all future senior executive
equity compensation, together with a share retention feature and dividend and
voting rights limitations, is aimed at creating a sense of urgency around
business performance among the Company's senior executives as well as
encouraging long-term value creation. These performance objectives are separate
and distinct from the accounting considerations discussed above. The fact that
performance and time based vesting requirements can be imposed upon any number
of instruments frequently used in employee equity compensation such as incentive
or nonstatutory stock options, indexed stock options, performance shares,
restricted shares, stock bonuses, or SARs, underscores that the first component
of the Fund's Proposal (restricted shares versus stock options) must be viewed
separately from these performance vesting criteria. Taken together, the
performance objectives and accounting policy matters do not relate to a single,
well-defined unifying concept. The Fund's request contains multiple proposals contrary to Rule 14a-8(c), the
Company provided timely notice of this deficiency as required Rule 14a-8(f)(1)
and the Fund failed to correct the deficiency. Accordingly, it is our view that
the Company may exclude the Proposal from the 2004 Proxy Materials.
2. The Proposal is vague, indefinite and potentially misleading and may
therefore be excluded on substantive grounds pursuant to Commission Rule
14a-8(i)(3). Rule 14a-8(i)(3) permits a registrant to exclude a stockholder proposal, its
accompanying supporting statement, or any portion thereof, to the extent that it
is contrary to any of the Commission's proxy rules. Registrants are prohibited
under Rule 14a-9 from including any materially false or misleading statements in
their proxy materials. The Staff has held in certain cases that a stockholder
proposal or a portion thereof meets the definition of false and misleading where
the language of the proposal is so vague and indefinite that "neither the
shareholders voting on the proposal, nor the company in implementing the
proposal (if adopted) would be able to determine with any reasonable certainty
exactly what actions or measures the proposal requires." Philadelphia Electric
Co. (July 30, 1992); see also Revlon, Inc. (March 13, 2001) and Wal-Mart Stores,
Inc. (April 2, 2001). The Staff has historically permitted the exclusion of a proposal under Rule
14a-8(i)(3) (and its predecessor provision) on the basis that the proposal
purports to impose standards on the corporation or its board of directors, where
"the standards under the proposal may be subject to differing interpretations."
Hershey Foods Corp. (Dec. 27, 1988); Jos. Schlitz Brewing Co. (March 21, 1977).
Restricted share grants under the Proposal would be subject to the following
vague and indefinite requirements: operational performance measures utilizing
"justifiable operational performance criteria" combined with "challenging
performance benchmarks" (emphasis added). What constitutes "justifiable"
criteria or "challenging" benchmarks is vague and uncertain and, as such, is
misleading. The Staff confronted the issue of a stockholder proposal that imposed highly
subjective criteria on the registrant in its Schlitz Brewing no-action letter.
As noted in that letter, determinations made pursuant to these types of
subjective criteria must be made "without guidance from the proposal and,
consequently, in possible contravention of the intentions of the shareholders
who voted on the proposal." In other words, a proposal is excludable to the
extent that it is "so inherently vague and indefinite that the shareholders
voting on the proposal would not be able to determine with any reasonable
certainty exactly what conditions or measures the company would take in the
event the proposal were implemented." Such is the case with the Fund's Proposal.
In addition to being vague and indefinite, the Proposal contains a potentially
false or misleading statement when the Fund states that "[it] support[s]" equity
compensation that strikes a balance between "challenging performance objectives"
and "motivat[ing] executives to achieve long-term corporate value creation
goals." In particular, the "share retention" aspect contained in numbered
paragraph (4) of the Proposal could have the real and immediate effect of
encouraging senior executives of the Company to resign upon vesting. The vesting
in a restricted share grant would be a taxable event to the executive.
Typically, individuals who receive restricted share grants dispose of stock in
the public markets in order to satisfy their tax obligations (calculated at the
executive's marginal tax rate based upon the fair market value of the stock on
the date of vesting). The Proposal would deny the Company's senior executives
their liquidity avenue for satisfying their tax obligations. Furthermore, the
Fund's proposal of an absolute prohibition on sales of vested restricted shares
held by senior executives could motivate an executive to terminate his or her
employment solely to realize some of the value locked-up in stock he or she has
already earned. The Company strongly believes that the fact that the Fund has
not disclosed in its Proposal the possibility that the Proposal could encourage
senior executives to leave the Company renders the Proposal potentially false
and misleading. In its December 4, 2003 letter to the Fund, the Company suggested that the Fund
remove the words "justifiable" and "challenging" from its Proposal. The Company
also asked the Fund to consider deleting or revising the share retention
requirement contained in numbered paragraph (4) of the Proposal. The Fund did
not respond to the Company's requests. Because the Company would not be able to
determine with any measurable certainty what is required by the above-mentioned
portions of the Proposal and because the Proposal contains misleading statement
and material omissions in violation of Rule 14a-9, neither of which the Fund has
addressed, we have advised the Company that the Proposal may be excluded from
the 2004 Proxy Materials pursuant to Rule 14a-8(i)(3). CONCLUSION
For the reasons set forth above, the Company intends to omit the Proposal from
its 2004 Proxy Materials. The Company respectfully requests that the Staff
confirm that it will not recommend any enforcement action to the Commission if
the Company excludes the Proposal from its 2004 Proxy Materials. The Company
currently intends to file its definitive proxy materials with the Commission on
or about March 12, 2004. If you have any questions about this matter or would like any additional
information, do not hesitate to call me at (206) 839-4320. Additionally, should
you disagree with the conclusions set forth in this letter, we respectfully
request the opportunity to confer with you prior to the issuance of the Staff's
final determination. I would appreciate receiving a copy of the Staff's response
to this request by fax at (206) 839-4301 when it is available.
Please confirm this filing by returning a receipt-stamped copy of this letter.
An extra copy of this letter and a pre-addressed postage paid envelope are
enclosed. Thank you for your attention to this matter.
Very truly yours, /s/
Stephen M. Graham cc: John B. Kliewer, ICOS Corporation
Thomas J. Harrington, Massachusetts State Carpenters Pension Fund
Edward J. Durkin, United Brotherhood of Carpenters [APPENDIX]
EXHIBIT A PERFORMANCE AND TIME-BASED RESTRICTED SHARES PROPOSAL
Resolved, that the shareholders of ICOS Corporation ("Company") hereby request
that the Board of Directors' Compensation Committee, in developing future senior
executive equity compensation plans, utilize performance and time-based
restricted share programs in lieu of stock options. Restricted shares issued by
the Company should include the following features: (1) Operational Performance Measures - The restricted share program should
utilize justifiable operational performance criteria combined with challenging
performance benchmarks for each criteria utilized. The performance criteria and
associated performance benchmarks selected by the Compensation Committee, should
be clearly disclosed to shareholders. (2) Time-Based Vesting - A time-based vesting requirement of at least three
years should also be a feature of the restricted shares program. That is, in
addition to the operational performance criteria, no restricted shares should
vest in less than three years from the date of grant. (3) Dividend Limitation - No dividend or proxy voting rights should be granted
or exercised prior to the vesting of the restricted shares.
(4) Share Retention - In order to link shareholder and management interests, a
retention feature should also be included; that is, all shares granted pursuant
to the restricted share program should be retained by the senior executives for
the duration of their tenure with the Company. The Board and Compensation Committee should implement this restricted share
program in a manner that does not violate any existing employment agreement or
equity compensation plan. Supporting Statement: As long-term shareholders of the Company, we support
executive compensation policies and practices that provide challenging
performance objectives and serve to motivate executives to achieve long-term
corporate value creation goals. The Company's executive compensation program
should include a long-term equity compensation component with clearly defined
operational performance criteria and challenging performance benchmarks.
We believe that performance and time-based restricted shares are a preferred
mechanism for providing senior executives long-term equity compensation. We
believe that stock option plans, as generally constituted, all too often provide
extraordinary pay for ordinary performance. In our opinion, performance and
time-based restricted shares provide a better means to tie the levels of equity
compensation to meaningful financial performance beyond stock price performance
and to condition equity compensation on performance above that of peer
companies. Our proposal recognizes that the Compensation Committee is in the best position
to determine the appropriate performance measures and benchmarks. It is
requested that detailed disclosure of the criteria be made so that shareholders
may assess whether, in their opinion, the equity compensation system provides
challenging targets for senior executives to meet. In addition, the restricted
share program prohibits the receipt of dividends and the exercise of voting
rights until shares vest. We believe that a performance and time-based restricted share program with the
features described above offers senior executives the opportunity to acquire
significant levels of equity commensurate with their long-term contributions. We
believe such a system best advances the long-term interests of our Company, its
shareholders, employees and other important constituents. We urge shareholders
to support this reform.
[STAFF REPLY LETTER]
January 27, 2004 Office of Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549 Re: Response to ICOS Corporation's Request for No-Action Advice Concerning the
Massachusetts State Carpenters Pension Fund's Shareholder Proposal
Dear Sir or Madam: The Massachusetts State Carpenters Pension Fund (the "Fund") hereby submits this
letter in reply to ICOS Corporation's ("ICOS" or "the Company") Request for
No-Action Advice concerning the shareholder proposal ("Proposal") and supporting
statement our Fund submitted to the Company for inclusion in its 2004 proxy
materials. Pursuant to Rule 14a-8(k), six paper copies of the Fund's response
are hereby included and a copy has been provided to the Company.
The Proposal submitted by the Fund requests that the Board of Directors'
Compensation Committee, in developing future senior executive equity
compensation plans, utilize performance and time-based restricted share programs
in lieu of stock options. The Company argues that the Proposal may be omitted
under Rule 14a-8(c) and 14a-8(f)(1) for it constitutes multiple proposals and
under Rule 14a-8(i)(3) for being vague, indefinite, and, therefore, misleading.
We respectfully submit that the Company has failed to satisfy its burden of
persuasion under either of the bases submitted and should be ordered to include
the Proposal in its 2004 proxy statement. The Proposal Does Not Violate the "One Proposal" Rule and May Not Be Excluded.
The Company first contends that the Fund submitted more than one proposal and,
when notified by the Company of this alleged defect, failed to cure it. The
Company argues: [T]he Proposal relates to multiple separate and distinct concepts,
notwithstanding the fact that the Fund has framed its request in terms of one
stockholder resolution: 1. The Fund's first proposal is that the Company's board of directors utilize
restricted shares in lieu of stock options in future senior executive equity
compensation. In light of the fact that the Fund offers no statement in support
of its proposal to require use of restricted shares in lieu of stock options,
the Company believes that the most likely explanation for the Fund's request is
that it is motivated by accounting considerations, namely requiring the Company
to recognize compensation expense based on the fair value of restricted share
grants on the grant date under Statement of Financial Accounting Standards No.
123, `Accounting for Stock Based Compensation.".... 2. The Fund's second proposal, that the Company's board of directors implement
performance and time-based vesting criteria for all future senior executive
equity compensation, together with a share retention feature and dividend and
voting rights limitation, is aimed at creating a sense of urgency around
business performance among the Company's senior executives as well as
encouraging long-term value creation. These performance objectives are separate
and distinct from the accounting considerations discussed above.
Contrary to the Company's conjecture and assertions, the Proposal does not
constitute multiple proposals. Rather, it relates to a single, well-defined
unifying concept. The Proposal, which is precatory, requests that the Board of
Directors' Compensation Committee, in developing future senior executive equity
compensation plans, use restricted shares rather than stock options.
The Company's argument rests on a speculative and erroneous assertion that the
Fund's straightforward request is actually a stealth proposal to seek the
expensing of stock options. The Company incorrectly states that the Fund offered
no statement in support of our request to use restricted shares rather than
stock options. However, the language of the Supporting Statement demonstrates
otherwise. It provides in pertinent part: We believe that performance and time-based restricted shares are a preferred
mechanism for providing senior executives long-term equity compensation. We
believe that stock option plans, as generally constituted, all too often provide
extraordinary pay for ordinary performance. In our opinion, performance and
time-based restricted shares provide a better means to tie the levels of equity
compensation to meaningful financial performance beyond stock price performance
and to condition equity compensation on performance above that of peer
companies. Simply put, the Fund believes, as stated in the Proposal, that restricted shares
are a better means than stock options of providing senior executives long-term
equity compensation. If we had desired to request that the Company expense stock
options, we certainly could have done so simply by filing a proposal requesting
that the Company expense its options.1 The Company relies on several no-action precedents that may be readily
distinguished. In Ford Motor Co. (April 4, 2003) the cover letter from the
proponent stated: "I am submitting a total of 18 proposals which are detailed on
13 pages." Thus, Ford offers little guidance for the instant case. In BostonFed
Bancorp, Inc. (Mar. 5, 2001), the proponent submitted a proposal asking the
board of directors to "remove the restrictions on the rights of the shareholders
presently contained in the Company's Certificate of Incorporation and Bylaws,"
including provisions relating to calling a special meeting, acting by written
consent, classification of the board of directors, simple majority vote for
director elections, and restrictions on voting rights. Again, this proposal is a
far cry from our Fund's request that the Board's Compensation Committee use
restricted shares rather than stock options. Fotoball, Inc. (May 6, 1997) can
also be distinguished for in that case the proposal had three parts: (1) a
recommendation that all directors own at least 10,000 shares of company stock
excluding shares received for service as a director; (2) a recommendation that
all directors be paid in the form of common stock or options; and (3) a
recommendation that non-employee directors should perform no other services for
the Company for compensation. As the company successfully argued in Fotoball,
the proposal actually represented proposals dealing with a stock ownership
qualification to serve as director, non-employee director compensation, and
limitations upon the performance of services for the company by non-employee
directors. Thus, none of these cases support the Company's request for no-action
relief. In NaPro BioTherapeutics, Inc. (April 17, 2003) the Staff rejected the company's
contention that a shareholder proposal urging the board of directors to reduce
salaries by 30%, eliminate bonuses, and eliminate stock options for the
company's CEO and four other most highly paid executive officers constituted
multiple proposals under Rule 14a-8(c). In ExxonMobil Corporation (March 10,
2003), the company unsuccessfully argued that a proposal requesting that the
board of directors limit non-employee director compensation, present for
shareholder approval proposals to increase non-employee director compensation,
and specify stock-based compensation of non-employee directors in terms of
dollar value, rather than number of shares, could be omitted under Rule
14a-8(c). Our Fund's Proposal, like those in NaPro and ExxonMobil, represent a
single proposal relating to a single, well-defined unifying concept. For these
reasons, the Company's argument that the Proposal constitutes multiple proposals
should be rejected. The Company Has Not Demonstrated the Proposal is False and Misleading So It Is
Not Entitled to Exclude the Proposal Under Rule 14a-8(i)(3).
The Company next argues that the Proposal may be excluded under Rule 14a-8(i)(3)
as false and misleading because its language is so vague and indefinite.
Specifically, the Company states: The Staff has historically permitted the exclusion of a proposal under Rule
14a-8(i)(3) (and its predecessor provision) on the basis that the proposal
purports to impose standards on the corporation or its board of directors, where
`the standards under the proposal may be subject to differing intrepretations.'
Hershey Foods Corp. (Dec. 27, 1988); Jos. Schlitz Brewing Co. (March 21, 1977).
Restricted share grants under the Proposal would be subject to the following
vague and indefinite requirements: operational performance measures utilizing
`justifiable operational performance criteria' combined with `challenging
performance benchmarks (emphasis added). What constitutes `justifiable' criteria
or `challenging' benchmarks is vague and uncertain and, as such, is misleading.
Hershey, however, addressed a profoundly different circumstance than the instant
case and epitomized a proposal that could be subject to "differing
interpretations," as the following quote from the no-action decision
demonstrates: The proposal relates to establishing a policy that the Company will advertise
solely in television programming which does not discuss sexual issues, does not
contain profanity, cannot be construed as pornographic, and is not sexually
suggestive. There appears to be some basis for your view that the proposal may be entirely
excluded from the Company's proxy materials under rule 14a-8(c)(3) as vague,
indefinite and therefore, potentially misleading. In arriving at this position,
we have particularly noted that the standards under the proposal may be subject
to differing interpretations. Accordingly, neither the shareholders voting on
the proposal, nor the Company, would be able to determine with any reasonable
certainty what measures the Company would take in the event the proposal was
approved. In this regard, we note that the Company has indicated that it
currently has a policy restricting advertising which is quite similar to the one
requested by the proponent, but the proponent apparently still feels that
advertisements are appearing on inappropriate programs. This difference in views
demonstrates the difficulties that would be faced by shareholders and the
Company management in determining what steps would be required by the proposal.
Under the circumstances, this Division will not recommend any enforcement action
to the Commission if the Company omits the subject proposal from its proxy
material. The Staff also permitted the company to omit the proposal in Schlitz, stating:
There appears to be some basis for your opinion that the proposal may be omitted
from the Company's proxy material on the grounds that it is vague and ambiguous.
Rule 14a-8(c) (3) allows for the omission of a proposal that is contrary to any
of the Commission's proxy rules and regulations, including Rule 14a-9, which
prohibits false or misleading statements in proxy materials. In this regard, we
note that the proposal, if implemented, would require the Company to cease
advertising on programs containing "excessive and gratuitous violence," and, as
you point out in your letter, "the determination of what constitutes "excessive
and gratuitous violence" is a highly subjective matter." It is the Division's
view that such a determination, and any resultant action by the Company, would
have to be made without guidance from the proposal and, consequently, in
possible contravention of the intentions of the shareholders who voted on the
proposal. Contrast the Proposal our Fund submitted, which requests that the Company
utilize justifiable operational performance criteria combined with challenging
performance benchmarks. First, note that the Proposal makes clear the
Compensation Committee mayand shoulddetermine what the appropriate performance
criteria and benchmarks should be. The supporting statement provides in
pertinent part: Our proposal recognizes that the Compensation Committee is in the best position
to determine the appropriate performance measures and benchmarks. It is
requested that detailed disclosure of the criteria be made so that shareholders
may assess whether, in their opinion, the equity compensation system provides
challenging targets for senior executives to meet. The Proposal appropriately defers to the Compensation Committee to decide the
best system for the Company. Once the Compensation Committee has made its
determination, we request that it disclose by what measures senior executives
are being judged so that shareholders may assess whether they believe the equity
compensation system provides challenging targets for senior executives or not.
The Fund believes that the Compensation Committee is in the best position to
make such determinations, but that shareholders are entitled in the process of
monitoring the directors they elect as well as the Company's executive
compensation system, to detailed reporting on the choices being made.
Finally, the Company argues the Proposal is false and misleading because we
failed to disclose that the Proposal's share retention provision could force
senior executives to resign in order to be able to dispose of their stock to
satisfy their tax obligations. The Fund does not believe it is under an
obligation to disclose highly-speculative actions that might be taken by
individual senior executives in response to the Proposal. (Indeed, we never
contemplated that extremely well-paid individuals would resign their positions
to satisfy their tax obligations and doubt whether that would actually take
place.) In any event, we believe the Company fails to satisfy its burden of
persuasion that the Proposal is false and misleading for failing to disclose a
purely hypothetical potential response that might result if the Proposal
received a majority vote and the Company's Board chose to implement the Proposal
in its entirety without making provision for such a situation.
For these reasons, we respectfully submit the Company has failed to satisfy its
burden of persuasion under either argument and should be directed to include the
Proposal in its upcoming proxy materials. Sincerely,
/s/ Edward Durkin
Corporate Governance Advisor Cc: Thomas J. Harrington
John B. Kliewer -----FOOTNOTES-----
1 We note that this Fund, as well as affiliated funds, have submitted numerous
stock option expensing proposals in the last two years. Indeed, it was a
Carpenters' fund that requested that the Division of Corporation Finance submit
for Commission review the Division's position that expensing proposals could be
omitted as ordinary business under Rule 14a-8(i)(7), which led to the Commission
directing the Division to reconsider its position and begin allowing expensing
proposals to be included in proxy statements. See National Semiconductor
Corporation (Dec. 6, 2002).
[STAFF REPLY LETTER]
February 4, 2004 Response of the Office of Chief Counsel Division of Corporation Finance
Re: ICOS Corporation Incoming letter dated December 23, 2003
The proposal requests that the board of directors' compensation committee, in
developing future senior executive equity compensation plans, utilize
performance and time-based restricted share programs in lieu of stock options.
We are unable to concur in your view that ICOS may exclude the proposal under
rule 14a-8(c). Accordingly, we do not believe that ICOS may exclude the proposal
from its proxy materials in reliance on rule 14a-8(c). We are unable to concur in your view that ICOS may exclude the proposal under
rule 14a-8(i)(3). Accordingly, we do not believe that ICOS may omit the proposal
from its proxy materials in reliance on rule 14a-8(i)(3). Sincerely,
/s/ John J. Mahon
Attorney-Advisor
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