Form of Nonstatutory Stock Option Agreement



 Exhibit 10.3 
  
 GRANT NO.
                     
  
 ICOS CORPORATION 
 1999 LONG-TERM
INCENTIVE PLAN 
  
 NONSTATUTORY STOCK OPTION AGREEMENT

  
 ICOS Corporation, a Delaware corporation (the
“Company”), hereby grants an Option to purchase shares of its common stock (the “Shares”) to the Optionee named below. The terms and conditions of the Option are set forth in this cover sheet, in the attachment and in the
Company’s 1999 Long-Term Incentive Plan (the “Plan”). 
  
 Date of
Option Grant:                     , [YEAR] 
  
 Name of Optionee:
                                        
                     
  
 Optionee’s Social Security Number:              -
             -              
  
 Number of Shares Covered by Option:
                         
  
 Exercise Price per Share: $            .        

  
 Vesting Start Date:
                    , [YEAR] 
  
 Vesting Schedule: 
  
 Subject to all the terms of the attached Agreement, your right to purchase Shares under this Option incrementally vests as to one-forty-eighth (1/48) of
the total number of Shares covered by this Option, as shown above, on each of the forty-eight monthly anniversaries of the Vesting Start Date. Notwithstanding the previous sentence, in the event that you are also being granted an Incentive Stock
Option on the Date of Option Grant, your right to purchase the aggregate number of Shares under both this Option and the Incentive Stock Option incrementally vests as to one-forty-eighth (1/48) of the total number of Shares covered by both Options
on each of the forty-eight monthly anniversaries of the Vesting Start Date, this Option may vest in unequal amounts by month, and the separate vesting schedule for this Option is available to you upon request of the Company (attention: Manager,
Payroll). The resulting aggregate number of vested Shares will be rounded down to the nearest whole number. In addition, this Option shall become fully vested if, within twenty-four months after a Change in Control, your Service is terminated
(i) without Cause by the Company or (ii) by Optionee for Good Reason. No additional Shares will vest after your Service has terminated for any reason except in the case of your Retirement as described in the attached Agreement. 
  
 By signing this cover sheet, you agree to all of the terms and
conditions described in the attached Agreement and in the Plan, a copy of which is also enclosed. 
  

			
	 Optionee:
	 	  


	 	 	(Signature)
		
	 Company:
	 	  


	 	 	(Signature)
		
	 	 	 Title:                                     
                            

		
	 Attachment
	 	 








 ICOS CORPORATION 
 1999 LONG-TERM INCENTIVE PLAN 
  
 NONSTATUTORY STOCK OPTION AGREEMENT 
  

			
	 The Plan and
 Other
Agreements
	    	 The text of the Plan is incorporated in this Agreement by reference. Certain capitalized terms used in this Agreement are defined in the
Plan.
  
 This Agreement and the Plan constitute the entire understanding between
you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.

		
	Nonstatutory Stock Option	    	This Option is not intended to be an Incentive Stock Option under section 422 of the Internal Revenue Code and will be interpreted accordingly.
		
	Vesting	    	This Option is only exercisable before it expires and then only with respect to the vested portion of the Option. This Option will vest according to the Vesting Schedule on the attached cover
sheet and as provided in the Plan and this Agreement.
		
	Term	    	Your Option will expire in any event at the close of the NASDAQ National Market on the day before the 10th anniversary of the Date of Option Grant, as shown on the cover sheet. Your Option
will expire earlier if your Service terminates, as described below.
		
	Regular Termination	    	If your Service terminates for any reason, other than death, Disability, Cause or Retirement, then your Option will expire at the close of the NASDAQ National Market on the date that is three
months after your termination date.
		
	 Termination for
 Cause
	    	 If your Service is terminated for Cause or if you commit an act(s) of Cause while this Option is outstanding, as determined by the Company in its
sole discretion, then you shall immediately forfeit all rights to your Option and the Option shall immediately expire.
  
 The definition of Cause provided in the Plan shall not restrict in any way the Company’s or any Parent’s, Subsidiary’s or Affiliate’s right to
discharge you for any other reason, nor shall this definition be deemed to be inclusive of all the acts or omissions which constitute “cause” for purposes other than this Agreement.


  

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	Retirement	    	If your Service terminates because of your Retirement, then your Option will expire at the close of the NASDAQ National Market on the date that is thirty-six (36) months after the date of your
Retirement. In addition, the vesting of your Option will be determined as if you had rendered Service for an additional one year after your date of Retirement.
		
	Death	    	If your Service terminates because of your death, then your Option will expire at the close of the NASDAQ National Market on the date that is eighteen (18) months after the date of your death.
During that eighteen (18) month period, your estate or heirs may exercise the vested portion of your Option.
		
	Disability	    	If your Service terminates because of your Disability, then your Option will expire at the close of the NASDAQ National Market on the date that is eighteen (18) months after your termination
date.
		
	Leaves of Absence	    	 For purposes of this Option, your Service does not terminate when you go on a bona fide leave of absence that was approved by the Company in
writing, if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. Your Service terminates in any event when the approved leave ends unless you immediately return to active
work.
  
 The Company determines which leaves count for this purpose, and when your
Service terminates for all purposes under the Plan.

		
	Notice of Exercise	    	 When you wish to exercise this Option, you must notify the Company by filing the proper “Notice of Exercise” form at the address given on
the form or by using a website designated by the Company. Your notice must specify how many Shares you wish to purchase. Your notice must also specify how your Shares should be registered (in your name only or in your and your spouse’s names as
community property or as joint tenants with right of survivorship). The notice will be effective when it is received by the Company.
  
 If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do
so.

		
	Form of Payment	    	 When you submit your notice of exercise, you must include full payment of the Exercise Price for the Shares you are purchasing. Payment may be made
in one (or a combination) of the following forms:
  
 •      Cash, your personal check, a cashier’s check or a money order.


  

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	 	    	 •      Shares which have already been owned by you for more than six (6)
months and which are surrendered to the Company. The Fair Market Value of the Shares, determined as of the last date of trading on the NASDAQ National Market preceding the effective date of the Option exercise, will be applied to the Exercise
Price.
  
 •      To the extent a public market for the Shares exists as determined by the Company, by delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares
and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price.

		
	Withholding Taxes	    	You (or a Permitted Transferee as defined below) will not be allowed to exercise this Option unless you make acceptable arrangements to pay any withholding or other taxes that may be due as a
result of the Option exercise or sale of Shares acquired under this Option.
		
	Restrictions on Exercise and Resale	    	 By signing this Agreement, you agree not to exercise this Option or sell any Shares acquired under this Option at a time when applicable laws,
regulations or Company or underwriter trading policies prohibit exercise, sale or issuance of Shares. The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation. The Company
shall have the right to designate one or more periods of time, each of which shall not exceed one hundred eighty (180) days in length, during which this Option shall not be exercisable if the Company determines (in its sole discretion) that such
limitation on exercise could in any way facilitate a lessening of any restriction on transfer pursuant to the Securities Act or any state securities laws with respect to any issuance of securities by the Company, facilitate the registration or
qualification of any securities by the Company under the Securities Act or any state securities laws, or facilitate the perfection of any exemption from the registration or qualification requirements of the Securities Act or any applicable state
securities laws for the issuance or transfer of any securities. Such limitation on exercise shall not alter the vesting schedule set forth in this Agreement other than to limit the periods during which this Option shall be exercisable.
  
 If the sale of Shares under the Plan is not registered under the Securities Act, but an
exemption is available which requires an


  

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	 	    	 investment or other representation, you shall represent and agree at the time of exercise that the Shares being acquired upon exercise of this
Option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.
  
 You may also be required, as a condition of exercise of this Option, to enter into any
Company shareholders agreement or other agreements that are applicable to shareholders.

		
	Transfer of Option	    	 You shall not assign, alienate, pledge, attach, sell, transfer or encumber this option. If you attempt to do any of these things, this Option will
immediately become invalid and will then expire without consideration. You may, however, dispose of this Option in your will or it may be transferred by the laws of descent and distribution.
  
 Notwithstanding the preceding paragraph, if the Company consents, you may transfer this
Option, by gift, to a family member. For purposes of this section, “Family Member” is defined to include any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing your household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the
beneficial interest, a foundation in which these persons (or you) control the management of assets, and any other entity in which these persons (or you) own more than fifty percent of the voting interests. A Family Member transferee is hereafter
referred to as a “Permitted Transferee.” Before any such transfer of this option is effectuated, however, the Company must be notified in advance in writing of the terms and conditions of the proposed transfer and the Company must
determine that the proposed transfer complies with applicable law and the requirements of the Plan and this Option. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance that does not qualify hereunder shall be void
and unenforceable against the Company.
  
 The terms of this Option (including the
post-termination of Service exercise periods) shall apply to your beneficiaries, executors, administrators and Permitted Transferees (including the beneficiaries, executors and administrators of the Permitted Transferees), including the right to
agree to any amendment of this option, except that Permitted Transferees shall not transfer


  

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	 	    	 this Option other than by will or by the laws of descent and distribution. The Company is under no obligation to provide notice to a Permitted
Transferee of your termination of Service.
  
 This Option shall be exercised only
by you (including, in the case of a transferred Option, by a Permitted Transferee), or, in the case of your death, by your executor or administrator (including, in the case of a transferred Option, by the executor or administrator of the Permitted
Transferee). Before a Permitted Transferee will be allowed to exercise this Option, you must make acceptable arrangements to pay any withholding or other taxes that may be due as a result of exercising this Option.
  
 Regardless of any marital property settlement agreement, the Company is not obligated to
honor a notice of exercise from your spouse, nor is the Company obligated to recognize your spouse’s interest in your Option in any other way.

		
	Retention Rights	    	Your Option or this Agreement does not give you the right to be retained by the Company (or any Parent or any Subsidiaries or Affiliates) in any capacity. The Company (or any Parent and any
Subsidiaries or Affiliates) reserves the right to terminate your Service at any time and for any reason.
		
	Shareholder Rights	    	You, or your estate or heirs, have no rights as a shareholder of the Company until a certificate for your Option’s Shares has been issued. No adjustments are made for dividends or other
rights if the applicable record date occurs before your stock certificate is issued, except as described in the Plan.
		
	Adjustments	    	In the event of a stock split, a stock dividend or a similar change in the Company stock, the number of Shares covered by this Option and the exercise price per Share may be adjusted (and
rounded down to the nearest whole number) pursuant to the Plan. Your Option shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity.
		
	Legends	    	All certificates representing the Shares issued upon exercise of this Option may, where applicable, have endorsed thereon the following legends:
		
	 	    	 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT
BETWEEN


  

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	 	    	 THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”

		
	 	    	 “THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

		
	Applicable Law	    	This Agreement will be interpreted and enforced under the laws of the State of Washington.

  
 By signing the
cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 
  

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