<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Human Genome Sciences, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HUMAN GENOME SCIENCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
To the Stockholders of Human Genome Sciences, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders
(the "Annual Meeting") of Human Genome Sciences, Inc., a Delaware corporation
(the "Company"), will be held at the University of Maryland System, Shady Grove
Center, 9640 Gudelsky Drive, Rockville, Maryland 20850-3480 on Wednesday, May
20, 1998 at 9:00 a.m., local time, for the following purposes:
1. To elect three directors for a three year term ending in 2001.
2. To approve an increase in the number of shares of common stock
available under the 1994 Stock Option Plan of the Company.
3. To ratify the selection of Ernst & Young LLP as the Company's
independent public accountants.
4. To act upon any other matter which may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors of the Company has fixed the close of business
on April 1, 1998 as the record date for determining stockholders of the Company
entitled to notice of and to vote at the Annual Meeting. A list of the
stockholders as of the record date will be available for inspection by
stockholders at the Company's corporate headquarters during business hours for
a period of ten days prior to the Annual Meeting.
Your attention is directed to the attached Proxy Statement and to the
enclosed Annual Report of the Company for the fiscal year ended December 31,
1997.
By Order of the Board of Directors,
James H. Davis, Secretary
Rockville, Maryland
April 15, 1998
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. IF
YOU ATTEND THE MEETING YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
<PAGE> 3
HUMAN GENOME SCIENCES, INC.
9410 KEY WEST AVENUE
ROCKVILLE, MARYLAND 20850-3338
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is being furnished to stockholders of Human
Genome Sciences, Inc., a Delaware corporation (the "Company"), in connection
with the solicitation by the Board of Directors of proxies for use at the
Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
University of Maryland System, Shady Grove Center, 9640 Gudelsky Drive,
Rockville, Maryland on Wednesday, May 20, 1998 at 9:00 a.m., local time, and at
any adjournments thereof.
SOLICITATION
The solicitation is being made primarily by the use of the mails, but
directors, officers, and employees may also engage in the solicitation of
proxies by telephone. The cost of soliciting proxies will be borne by the
Company, and no compensation will be paid by the Company in connection with the
solicitation of proxies, except that the Company may reimburse the brokers,
custodians, nominees, and other recordholders for their reasonable
out-of-pocket expenses in forwarding proxy materials to the beneficial owners.
This Proxy Statement and the accompanying form of proxy are being sent
to stockholders on or about April 15, 1998.
REVOCATION OF PROXIES
A proxy may be revoked at any time prior to its exercise by the filing
of a written notice of revocation with the Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
additional documentation from your record holder to vote personally at the
Annual Meeting.
VOTING RIGHTS AND OUTSTANDING SHARES
The close of business on April 1, 1998 has been fixed by the Board of
Directors of the Company as the record date (the "Record Date") for determining
the stockholders of the Company entitled to notice of and to vote at the Annual
Meeting. On the Record Date, the Company had outstanding 22,370,639 shares of
common stock, $0.01 par value per share ("Common Stock"). Each share of Common
Stock entitles the holder thereof to one vote on each matter to be voted upon
at the Annual Meeting. There is no cumulative voting for the election of
directors.
The presence, in person or by proxy, of at least a majority of the
total numbers of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event that there are not
sufficient votes for a quorum or to approve any proposal at the Annual Meeting,
the Annual Meeting may be adjourned in order to permit the further solicitation
of proxies.
- 1 -
<PAGE> 4
All outstanding shares of the Company's Common Stock represented by
properly executed and unrevoked proxies received in the accompanying form in
time for the Annual Meeting will be voted. A stockholder may, with respect to
the election of directors (i) vote for the election of the named director
nominees, (ii) withhold authority to vote for all such director nominees, or
(iii) vote for the election of all of such director nominees other than any
nominee with respect to whom the stockholder withholds authority to vote by
striking a line through such nominee's name on the proxy. A stockholder may,
with respect to each other matter specified in the notice of meeting (i) vote
"FOR" the matter, (ii) vote "AGAINST" the matter, or (iii) "ABSTAIN" from
voting on the matter. Shares will be voted as instructed in the accompanying
proxy on each matter submitted to stockholders. If no instructions are given,
the shares will be voted FOR the election of the named director nominees, FOR
the increase in the number of authorized shares of Common Stock available under
the 1994 Stock Option Plan of the Company, and FOR the ratification of Ernst &
Young LLP as the Company's independent public accountants.
A proxy submitted by a stockholder may indicate that all or a portion
of the shares represented by such proxy are not being voted by such stockholder
with respect to a particular matter. This could occur, for example, when a
broker is not permitted to vote Common Stock held in street name on certain
matters in the absence of instructions from the beneficial owner of the Common
Stock. The shares subject to any such proxy that are not being voted with
respect to a particular matter (the "non-voted shares") will be considered
shares not present and entitled to vote on such matter, although such shares
may be considered present and entitled to vote for other purposes and will
count for purposes of determining the presence of a quorum.
The affirmative vote of a plurality of the shares of Common Stock
present in person or by proxy at the Annual Meeting and entitled to vote on the
election of directors is required to elect directors. Accordingly, if a quorum
is present at the annual meeting, the three persons receiving the greatest
number of votes will be elected to serve as directors. Therefore, withholding
authority to vote for a director(s) and non-voted shares with respect to the
election of directors will not affect the outcome of the election of directors.
On all other matters, including approval of the amendment to the Company's 1994
Stock Option Plan and approval of the selection of Ernst & Young LLP as the
Company's independent public accountants, the affirmative vote of a majority
of the shares of Common Stock present in person or by proxy at the Annual
Meeting and entitled to vote on the matter is required to approve such matter.
Therefore, withholding authority to vote on such matters will have the same
effect as voting against such matters. Under Delaware law, abstentions are
generally considered as shares entitled to vote and thus have the same effect
as a vote against such matter.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders the discretionary authority to
vote the shares in accordance with their best judgment on such other business,
if any, that may properly come before the Annual Meeting or any adjournment
thereof. Proxies solicited hereby will be tabulated by inspectors of election
designated by the Board.
- 2 -
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of
Common Stock of the Company as of April 1, 1998, unless otherwise indicated, by
(i) all stockholders known by the Company to beneficially own more than five
percent of the outstanding Common Stock, (ii) each of the directors and
nominees for director, (iii) each executive officer of the Company including
those named in the Summary Compensation Table, and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner(1) Number of Shares Owned Percent Owned
- --------------------------------------- ---------------------- -------------
<S> <C> <C>
Sid R. Bass and Lee M. Bass Group 3,158,766(2) 14.3%
201 Main Street
Fort Worth, Texas 76201-3131
Reliance Financial Services Corporation 1,536,624(3) 6.9%
Park Avenue Plaza
New York, New York 10055
Joshua Ruch 1,220,681(4) 5.5%
c/o Rho Management Company, Inc.
Cedar Ridge Road
Bedminster, New Jersey 07921
Wellington Management Company, LLP 1,614,830(5) 7.2%
75 State Street, 19th Floor
Boston, MA 02109
Directors, Nominees, and Executive Officers
- -------------------------------------------
William A. Haseltine, Ph.D. 1,166,721(6) 5.2%
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Robert A. Armitage None
c/o Vinson & Elkins L.L.P.
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Susan Bateson McKay 4,000(7) *
c/o Human Genome Sciences
9410 Key West Avenue
Rockville, Maryland 20850
Melvin D. Booth 101,400(8) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
</TABLE>
- 3 -
<PAGE> 6
<TABLE>
<S> <C> <C>
James H. Cavanaugh, Ph.D. 306,081(9) 1.4%
c/o HealthCare Investment Corp.
44 Nassau Street
Princeton, New Jersey 08542
James H. Davis, Ph.D., J.D. 18,750(10) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Jurgen Drews, M.D. None(11)
c/o Hoffmann-La Roche
340 Kingsland Street
Nutley, New Jersey 07110
Beverly Sills Greenough 12,000(12) *
211 Central Park West, #4-F
New York, New York 10024
Robert Hormats 6,250(13) *
c/o Goldman Sachs & Co.
85 Broad Street
New York, New York 10128
Donald D. Johnston 77,000(14) *
18 Oyster Shell Lane
Hilton Head, South Carolina 29926
Max Link, Ph.D. 6,500(15) *
Tobelhofstr, 30
8044 Zurich, Switzerland
Arthur M. Mandell 37,250(16) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Steven C. Mayer 36,250(17) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Craig A. Rosen, Ph.D. 205,401(18) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
</TABLE>
- 4 -
<PAGE> 7
<TABLE>
<S> <C> <C>
Alan G. Spoon 2,000(19) *
c/o The Washington Post Company
1150 15th Street
Washington, D.C. 20071
James B. Wyngaarden, M.D. 22,750(20) *
2 Heath Place
Durham, North Carolina 27705
All directors and executive officers as a group 2,002,353(21) 8.8%
(16 persons)
</TABLE>
- -------------------------
* Percentage is less than 1% of the total number of outstanding
shares of the Company's Common Stock.
(1) Except as otherwise indicated, each party has sole voting and
investment power over the shares beneficially owned.
(2) As reported on a Schedule 13D filed by Sid R. Bass and Lee M.
Bass and 27 related and affiliated entities on August 11,
1997. In some cases the entities have sole voting and
investment power over their respective shares of the Company's
Common Stock; in other cases the entities share voting and/or
investment power with other entities in the group.
(3) As chief executive officer and controlling stockholder of
general partner of Rho Management Partners L.P. ("Rho"), the
investment advisor to Rho Management Trust III, Joshua Ruch
may be deemed to share voting and investment control with Rho
over shares registered in the name of Rho Management Trust
III, and therefore be considered a beneficial owner of such
shares. Includes an additional 205,266 shares held directly
or indirectly by Joshua Ruch individually or for the account
of family members, and 2,500 held by a foundation of which
Joshua Ruch serves as a trustee.
(4) As reported on a Schedule 13D filed by Reliance Financial
Services Corporation as of August 7, 1997.
(5) As reported on a Schedule 13G filed by Wellington Management
Co., LLP as of February 9, 1998.
(6) Includes 100,834 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 15,500 shares of Common Stock owned by Dr. Haseltine's
wife, as to which Dr. Haseltine disclaims beneficial
ownership, and 519,166 shares of Common Stock issuable upon
exercise of options held that are not exercisable within 60
days.
(7) Includes 4,000 shares of Common Stock issuable upon exercise
within 60 days. Does not include 32,000 shares of Common
Stock issuable upon exercise of options held that are not
exercisable within 60 days.
- 5 -
<PAGE> 8
(8) Includes 100,000 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 275,000 shares of Common Stock issuable upon exercise
of options that are not exercisable within 60 days.
(9) Includes 198,106 and 58,061, respectively, shares of Common
Stock owned by HealthCare Ventures III L.P., ("HCV III") and
HealthCare Ventures IV L.P., ("HCV IV"), respectively. Dr.
Cavanaugh is general partner of HealthCare Partners III L.P.,
("HCP III") and HealthCare Partners IV L.P., ("HCP IV"), the
general partners of HCV III and HCV IV, respectively.
(10) Includes 18,750 shares of Common Stock issuable upon exercise
of options exercisable within 60 days. Does not include
151,250 shares of Common Stock issuable upon exercise of
options that are not exercisable within 60 days.
(11) Does not include 10,000 shares of Common Stock issuable upon
exercise of options that are not exercisable within 60 days.
(12) Includes 11,000 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 2,250 shares of Common Stock issuable upon exercise of
options that are not exercisable within 60 days.
(13) Includes 4,250 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 9,000 shares of Common Stock issuable upon exercise of
options that are not exercisable within 60 days.
(14) Includes 20,609 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days.
(15) Includes 2,000 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 6,750 shares of Common Stock issuable upon exercise of
options held that are not exercisable within 60 days.
(16) Includes 36,250 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 133,750 shares of Common Stock issuable upon exercise
of options held that are not exercisable within 60 days.
(17) Includes 36,250 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 148,750 shares of Common Stock issuable upon exercise
that are not exercisable within 60 days.
(18) Includes 63,522 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Also includes
36,000 shares of Common Stock held in trust for Dr. Rosen's
minor children, as to which Dr. Rosen disclaims beneficial
ownership. Does not include 155,000 shares of Common Stock
issuable upon exercise of options that are not exercisable
within 60 days.
(19) Does not include 10,000 shares of Common Stock issuable upon
exercise of options that are not exercisable within 60 days.
- 6 -
<PAGE> 9
(20) Includes 22,250 shares of Common Stock issuable upon exercise
of options that are exercisable within 60 days. Does not
include 9,750 shares of Common Stock issuable upon exercise of
options that are not exercisable within 60 days.
(21) Includes 419,715 shares of Common Stock issuable upon exercise
of options and warrants that are exercisable within 60 days.
Does not include 1,462,666 shares issuable upon exercise of
options that are not exercisable within 60 days.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
At the Company's 1997 annual meeting, the stockholders approved an
amendment to the Company's Charter creating a classified Board of Directors
which is divided into three classes, each class consisting, as nearly as
possible, of one-third of the total number of directors, and with each class
having a three-year term (other than the directors elected at the 1997 annual
meeting, which were elected for one, two, and three-year terms, as applicable,
in order to initiate classification of the directors). The Board of Directors
is currently composed of twelve members. On August 12, 1997, pursuant to the
Company's Charter and Bylaws, the Board of Directors increased the number of
authorized directors of the Company to twelve and elected Jurgen Drews, M.D.,
as a director of the Company.
One class of directors, the Class III directors, consisting of Robert A.
Armitage, Dr. Drews, Donald D. Johnston, and James B. Wyngaarden, M.D., has a
term of office expiring at the Annual Meeting, and until their successors shall
be elected and qualified. Mr. Johnston has informed the Board of his desire
not to be elected to the Board for another term. Mr. Armitage, Dr. Drews and
Dr. Wyngaarden have each been nominated for a three-year term expiring at the
annual meeting of stockholders in 2001 and until their successors shall be
elected and qualified.
Joshua Ruch, who was elected as a Class I director to the Board of
Directors at the 1997 annual meeting of stockholders for a term expiring in
2000, resigned as a director of the Company as of February 11, 1998. The
Company's Charter and Bylaws provide that vacancies on the Board of Directors
shall be filled by the affirmative vote of a majority of the remaining
directors then in office. On February 11, 1998, pursuant to the Company's
Charter and Bylaws, the Board of Directors elected Mr. Alan G. Spoon to the
Board to fill the vacancy left by Mr. Ruch. Mr. Spoon's term as a director
will run the same length as Mr. Ruch's, and will therefore expire in 2000 and
at such time as his successor shall be elected and qualified.
The persons named in the enclosed proxy intend to vote properly executed
and returned proxies FOR the election of all nominees proposed by the Board of
Directors unless authority to vote is withheld. In the event that any nominee
is unable or unwilling to serve, the persons named in the proxy will vote for
such substitute nominee or nominees as they, in their discretion, shall
determine. The Board of Directors has no reason to believe that any nominee
named herein will be unable or unwilling to serve.
Set forth below is information concerning the nominees for election and
those directors whose term continues beyond the date of the Annual Meeting.
- 7 -
<PAGE> 10
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM
EXPIRING AT THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
------- --- -------- -------------------------------------
<S> <C> <C> <C>
Robert A. Armitage 49 1995 Partner in the Washington office of Vinson & Elkins
since 1993. Prior to joining Vinson & Elkins, he was
employed by the Upjohn Company in Kalamazoo, Michigan,
where he served as Vice President, Corporate Patents
and Trademarks, from 1983 to 1993. He is a past
chairman of the Patent Committee of the Pharmaceutical
Research and Manufacturers of America, Intellectual
Property Committee of the National Association of
Manufacturers, and the Intellectual Property Law
Section of the State Bar of Michigan; a former member
of the board of directors of Intellectual Property
Owners; and a past president of the American
Intellectual Property Law Association and Association
of Corporate Patent Counsel.
Jurgen Drews, M.D. 64 1998 Member of the Executive Committee of the Company.
Member of the Executive Committee of the Roche Group,
Hoffmann-La Roche, Inc., from 1986 until his
retirement in 1998. Dr. Drews also served as
President, Global Research for the Roche Group from
1996 until 1998. He was President, International
Research and Development at the Roche Group from 1991
until 1996. Before joining Roche in 1985, Dr. Drews
was Head of International Pharmaceutical Research and
Development of Sandoz, LTD., in Basel, Switzerland.
Dr. Drews' board memberships include Protein Design
Labs, Inc., of Mountain View, CA and MorphoSys GmbH as
well as Genomics Pharmaceutical Company, both in
Munich, Germany.
James B. Wyngaarden, M.D. 73 1993 Professor of Medicine and Sr. Associate Dean,
International Programs, University of Pennsylvania
Medical Center, 1995-1997. Foreign Secretary,
National Academy of Sciences and Institute of Medicine
and Associate Vice Chancellor for Health Affairs at
Duke University, 1990 to 1994. Served as Director of
the National Institutes of Health from 1982 to 1989
and as Associate Director for Life Sciences, Office of
Science and Technology Policy, Executive Office of the
President from 1989 to 1990. From 1990 to 1991,
served as Director of Human Genome Organization.
Serves as Director of Hybridon Inc. and Magainin
Pharmaceuticals, Inc. Author of approximately 250
scientific publications.
</TABLE>
- 8 -
<PAGE> 11
DIRECTORS CONTINUING IN OFFICE.
DIRECTORS WHOSE TERM WILL EXPIRE AT THE 1999 ANNUAL MEETING:
<TABLE>
<S> <C> <C> <C>
James H. Cavanaugh, Ph.D. 61 1992 President of HealthCare Investment Corp. since 1989
and a general partner of HCP III, the general partner
of HCV III, and HCP IV, the general partner of HCV IV,
and a general partner of HealthCare Partners I, L.P.
("HCP I") and HealthCare Partners II, L.P. ("HCP II"),
the general partners of HealthCare Ventures I, L.P.
("HCV I") and HealthCare Ventures II, L.P. ("HCV II"),
respectively. Served as President of SmithKline &
French Laboratories - U.S. from March 1985 to February
1989 and as President of SmithKline Clinical
Laboratories from 1981 to 1985. Serves as a director
of several healthcare and biotechnology companies,
including MedImmune, Inc., and Shire Pharmaceuticals
Group, PLC. Served as a director of the
Pharmaceutical Manufacturers Association, Unihealth
America and the Proprietary Association.
Max Link, Ph.D. 57 1995 Member of the Executive Committee of the Company. Dr.
Link has held a number of executive positions with
pharmaceutical and healthcare companies. Most
recently, he served as Chief Executive Officer of
Corange Limited, from May 1993 until June 1994. Prior
to joining Corange Limited, Dr. Link served in a
number of positions within Sandoz Pharma Ltd.,
including Chief Executive Officer from 1987 until
April 1992, and Chairman from April 1992 until May
1993. Dr. Link currently serves on the board of
directors of Access Pharmaceuticals, Alexion
Pharmaceuticals, Cell Therapeutics, CyrRx Corporation,
Discovery Labs, Procept, Inc. and Protein Design Labs,
Inc. Dr. Link received his doctorate in Economics
from the University of St. Gallen.
Craig A. Rosen, Ph.D. 40 1992 Senior Vice President of Research and Development and
Director of the Company. Employed by the Roche
Institute of Molecular Biology from 1987 to December
1992, serving as Chairman of the Department of Gene
Regulation from 1991 to December 1992 and in varying
positions in the Department of Molecular Oncology and
Virology from 1987 to 1991. Member of the board and
chairman of the scientific advisory council for the
American Foundation for Aids Research from 1990 to
1995. Dr. Rosen currently serves on the board of
Vascular Genetics Inc. Author of approximately 100
publications and an editorial board member of several
scientific publications.
</TABLE>
- 9 -
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Beverly Sills Greenough 68 1993 Member of the Audit Committee. Chairman of the Lincoln
Center for the Performing Arts since 1994. Managing
Director of the Metropolitan Opera in New York, a
position held since 1991. President of the New York
City Opera Board from 1989 to 1990. Served as General
Director of the New York City Opera Company from 1979
to 1989. Serves on the Boards of Directors of
American Express Company, Inc. and Time Warner, Inc.
</TABLE>
DIRECTORS WHOSE TERM WILL EXPIRE AT THE 2000 ANNUAL MEETING:
<TABLE>
<S> <C> <C> <C>
William A. Haseltine, Ph.D. 53 1993 Chairman of the Board, Chief Executive Officer, and
member of the Executive Committee of the Company.
Consultant to the Company from December 1992 until May
1993. Member of the faculty of Harvard Medical School
and the Dana Farber Cancer Institute from 1976 to May
1993. Member of the faculty of the Harvard School of
Public Health from 1977 to May 1993 and Chief of Human
Retrovirology at the Dana Farber Cancer Institute from
1988 to May 1993. A founder of several biotechnology
companies. A Scientific Advisor to HealthCare
Investment Corporation, LLP ("HIC") since 1987.
Author of approximately 250 scientific publications.
Melvin D. Booth 53 1995 President, Chief Operating Officer, and member of the
Executive Committee of the Company. He has been
President, Chief Operating Officer and director of the
Company since July 1995. Prior to this time, Mr.
Booth was with Syntex Corporation and its subsidiaries
from 1975 to 1995. Mr. Booth was the President of
Syntex Laboratories, Inc. from 1993 to 1995 and served
as a Vice President of Syntex Corporation from 1992 to
1995. From 1992 to 1993 he served as the President of
Syntex Pharmaceuticals Pacific. From 1991 to 1992 he
served as an area Vice President of Syntex, Inc. From
1986 to 1991 he served as the President of Syntex,
Inc., Canada. He has been active in U.S.
pharmaceutical industry organization and is also a
past Chairman of the Pharmaceutical Manufacturers
Association of Canada. Mr. Booth currently serves on
the board of Neoprobe Corporation. Mr. Booth holds a
Certified Public Accountant Certificate.
</TABLE>
- 10 -
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
Robert D. Hormats 55 1996 Vice Chairman of Goldman Sachs (International) since
1987. Served in various capacities with Goldman Sachs
(International) since 1982. Served as a Senior Staff
Member for International Economic Affairs on the
National Security Council from 1974 to 1977. Served
as Senior Deputy Assistant Secretary for Economic and
Business Affairs at the Department of State from 1977
to 1979, Ambassador and Deputy U.S. Trade
representative from 1979 to 1981 and Assistant
Secretary of State for Economic and Business Affairs
from 1981 to 1982. Appointed by President Clinton in
1993 to the Board of the Russian-American Enterprise
Fund (now the U.S. Russia Investment Fund).
Alan G. Spoon 46 1998 Member of the Executive Committee of the Company.
President of The Washington Post Company since
September 1993. Served as Chief Operating Officer and
Director of The Washington Post Company since May
1991. Held several positions at The Washington Post
Company since 1982, including President of Newsweek
from September 1989 to May 1991. From 1987 to 1989,
he was Chief Financial Officer of the Washington Post
Company. From 1984 to 1987 he was responsible for
marketing and finance at The Washington Post
newspaper. Prior to joining The Washington Post
Company, Mr. Spoon was a partner with The Boston
Consulting Group. His other board memberships
include: American Management Systems Inc., The
International Herald Tribune and the Smithsonian's
National Museum of Natural History.
</TABLE>
Robert A. Armitage is serving as the director of the Company
designated by SmithKline Beecham Corporation ("SmithKline Beecham") pursuant
to the terms of the Series B Convertible Preferred Stock Purchase Agreement
(the "SB Stock Purchase Agreement"). SmithKline Beecham's right to designate a
nominee for director continues until the termination for certain specified
reasons as defined in that certain Collaboration Agreement between the Company
and SmithKline Beecham (the "SB Collaboration Agreements," and, together with
the SB Stock Purchase Agreement, the "SB Collaboration Agreements") or the
later of (i) expiration of the initial research term under the SB Collaboration
Agreement or (ii) the date on which SmithKline Beecham beneficially owns less
than 5% of the Company's Common Stock (on a fully diluted basis). For a
description of the SB Collaboration Agreement, see "EXECUTIVE COMPENSATION AND
OTHER MATTERS--Certain Relationships and Related Transactions."
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors met 4 times during 1997. No director has
attended fewer than 75% of the total number of meetings of the Board and of the
Committees of which he was a member during 1997. The Board of Directors has an
Executive Committee, an Audit Committee, a Compensation Committee, and a
Nominating Committee.
The Executive Committee, currently consisting of Drs. Haseltine, Link,
and Drews and Messrs. Booth and Spoon, has the authority to act on most matters
during the intervals between Board meetings. The Executive Committee held five
regular and two telephonic meetings during 1997.
- 11 -
<PAGE> 14
The Audit Committee, currently consisting of Ms. Sills Greenough and
Messrs. Hormats and Johnston, provides the opportunity for direct contact
between the Company's independent public accountants and the Board of
Directors. The Audit Committee makes recommendations concerning the engagement
of independent public accountants, reviews with the independent public
accountants the plans and results of the audit engagement, and reviews the
adequacy of the Company's internal accounting controls. The Audit Committee
held 1 meeting during 1997.
The Compensation Committee, currently consisting of Dr. Link and
Messrs. Hormats and Spoon, determines all compensation paid or awarded to the
Company's executive officers and senior officers (those with the rank of vice
president or above) and administers the Company's 1993 Incentive and
Non-Qualified Stock Option Plan and the 1994 Stock Option Plan, for which all
employees and certain non-employees are eligible. The Compensation Committee
held 12 meetings during 1997.
The Nominating Committee, currently consisting of Drs. Haseltine and
Cavanaugh and Mr. Johnston, is responsible for proposing a slate of directors
for election by the stockholders at each annual meeting and proposing
candidates to fill any vacancies on the Board. The committee will consider
nominees for Board membership recommended by stockholders. Any stockholder
wishing to propose a nominee may submit a recommendation in writing to the
Company's Secretary, indicating the nominee's qualifications and other relevant
biographical information. The Nominating Committee held 1 meeting during 1997.
IDENTIFICATION OF EXECUTIVE OFFICERS
Set forth below is certain information regarding the positions and
business experience of each executive officer of the Company who is not also a
director of the Company.
<TABLE>
<CAPTION>
Executive officer Age Positions
- ----------------- --- --------
<S> <C> <C>
Susan Bateson McKay 43 Susan Bateson McKay has served as Vice President, Human Resources
and Safety, of the Company since January 1997. Prior to joining
the Company, Ms. Bateson McKay served as Director of Human
Resources and Administration at Finnegan, Henderson, Farabow,
Garrett & Dunner, L.L.P., from May 1994 to December 1996. From
1983 to 1994, Ms. Bateson McKay was employed by J.P. Morgan &
Co., Incorporated and was appointed Vice President, Human
Resources in 1985. Ms. Bateson McKay holds a masters degree in
Business Administration from New York University.
James H. Davis, Ph.D., J.D. 47 James H. Davis has served as Senior Vice President, General
Counsel and Secretary of the Company since May 1997. From 1995 to
1997, Dr. Davis was of counsel to the Washington D.C. law firm of
Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. Prior to
this time, Dr. Davis served in a number of capacities with the
agricultural biotechnology company, Crop Genetics International,
including General Counsel from 1988 to 1995, Vice President of
Research and Development from 1990 to 1995, Secretary from 1990
to 1995, and a member of the Board of Directors from 1992 to
1995. Prior to joining Crop Genetics, Dr. Davis was a partner in
the
</TABLE>
- 12 -
<PAGE> 15
<TABLE>
<S> <C> <C>
Washington, D.C. office of Weil, Gotshal & Manges. Dr. Davis
holds a doctorate degree in Organic and Theoretical Chemistry
from the California Institute of Technology and a law degree
from the University of Virginia.
Arthur M. Mandell 45 Arthur Mandell has served as Senior Vice President, Business
Development of the Company since March 1997. Mr. Mandell was
most recently a Principal of the consulting firm, ZS Associates,
and General Manager of the West Coast office located in Menlo
Park, California. Prior to joining ZS Associates in 1995, Mr.
Mandell spent over 13 years at Syntex Corporation where he held a
number of senior management positions in strategic planning,
business development, new product planning, product marketing,
and financial management, including Regional Vice President
overseeing Business Development and Market Planning for the
Pacific Rim, Mexico, and Canada. Prior to joining the
pharmaceutical industry, Mr. Mandell was at Intel Corporation in
Silicon Valley where he developed budgeting processes, material
planning systems, and decision support modes for finance and
engineering.
Steven C. Mayer 44 Steven C. Mayer has served as Senior Vice President and Chief
Financial Officer since September 1996. Prior to joining the
Company, Mr. Mayer was Vice President and Chief Financial Officer
of GenVec, Inc., an early-stage gene therapy company from 1995 to
1996. From 1991 to 1995, he served as Vice President
(subsequently Senior Vice President) and Chief Financial Officer
of TheraTech, Inc. Mr. Mayer holds a masters degree in Business
Administration from Stanford University.
</TABLE>
PROPOSAL 2 - APPROVAL OF AMENDMENTS TO THE 1994 STOCK OPTION PLAN
On February 11, 1998, the Board of Directors approved an amendment
(the "Amendment") to the 1994 Stock Option Plan of Human Genome Sciences,
Inc., as amended, (the "1994 Plan"), contingent upon approval by the
stockholders at the Annual Meeting. The amendment increases the number of
shares of Common Stock available for issuance under the 1994 Plan from
3,450,000 to 5,950,000. As of February 28, 1998, 3,053,368 shares of Common
Stock are subject to outstanding options issued and 45,334 options are
available for grant (before the increase pursuant to the Amendment). In
addition, the Company maintains a 1993 Stock Option Plan, under which 153,889
shares of Common Stock are subject to outstanding options issued and 83,150
options are available for grant. The purpose of the 1994 Plan, as amended, is
to enable the Company to attract, retain, and motivate the best available
individuals to serve as officers and employees of the Company and as members of
its Board of Directors.
The 1994 Plan, as amended, provides for the issuance of options covering
up to 5,950,000 shares of Common Stock, subject to appropriate adjustments in
the event of stock splits, stock dividends, and similar dilutive events.
Options may be granted under the 1994 Plan to all employees, non-employee
directors, independent contractors, and consultants of the Company in the
discretion of the Compensation Committee. As of February 28, 1998, there were
approximately 353 employees of the Company and 6 others eligible for such
grants.
- 13 -
<PAGE> 16
Options granted may be either "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code (the "Code")) or nonqualified stock
options. The exercise price of each option is determined by the Compensation
Committee at the time of the grant, provided that the exercise price of options
may not be less than the fair market value of the Company's Common Stock on the
date of the grant.
The term of each option and the increments in which it is exercisable
are determined by the Compensation Committee, provided that no option may be
exercised (i) more than ten years after the date of the grant, (ii) more than
three months after termination of an optionee's employment or other
relationship with the Company, or (iii) more than 12 months after an optionee's
death or disability. In addition, if an optionee owns more than Ten Percent
(10%) of the total voting power of all classes of the Company's stock at the
time the individual is granted an incentive stock option, the exercise price
per share cannot be less than One Hundred Ten Percent (110%) of the fair market
value on the date of the grant, and the term of the incentive stock option
cannot exceed five years from the date of the grant. The Compensation
Committee may provide that certain options will become exercisable in
increments based primarily or exclusively on the attainment of certain
performance goals. No option may be granted under the 1994 Plan more than ten
years after the date of the adoption of the 1994 Plan. The options are
non-transferable during the life of the option holder.
Upon the occurrence of certain events, including the acquisition by
another corporation or person of shares of Common Stock representing more than
Eighty Percent (80%) of the voting power of the Common Stock or a sale of
substantially all the property of the Company, the options granted under the
1994 Plan will become fully exercisable for a period of time determined by the
Company and will terminate if not exercised within that period of time, unless
separate provision is made by the successor for their continuance. The
Company's Compensation Committee is currently reviewing this provision and may
recommend changes which would provide for accelerated vesting of options under
certain other circumstances, including the acquisition by a person or a group
of "control" of the Company, and which would not result in the termination of
the exercise period.
The Company intends that the 1994 Plan qualify as a plan described in
Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934 (the "Exchange
Act"). Grants of options under the 1994 Plan will therefore be exempt from the
short-swing profit rules of Section 16(b) of the Exchange Act. The 1994 Plan
may be amended by the Board of Directors, consistent with Rule 16b-3, and the
1994 Plan specifically authorizes the Board of Directors to make any amendment
deemed necessary or advisable to ensure that incentive stock options and
nonqualified stock options continue to be treated as such, respectively, under
all applicable laws.
Unless marked to the contrary, the shares represented by the enclosed
proxy, if properly executed and returned, will be voted FOR approval of the
Amendment to the 1994 Plan.
PROPOSAL 3 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Ernst & Young LLP to
serve as independent public accountants for the fiscal year ending December 31,
1998, subject to the ratification of such appointment by the stockholders. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and is expected to make a statement and to be available to respond to
appropriate questions from stockholders. Ernst & Young LLP currently serves as
the Company's independent public accountants.
- 14 -
<PAGE> 17
Unless marked to the contrary, the shares represented by the enclosed
proxy, if properly executed and returned, will be voted FOR the ratification of
the appointment of Ernst & Young, LLP as the independent public accountants of
the Company for the fiscal year ending December 31, 1998.
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION OF DIRECTORS
In 1997, each director who was not an employee of the Company, a
consultant to the Company, or associated with a collaborator of the Company,
was eligible to receive a director's fee of $25,000 per year. Other directors
received no compensation for their services to the Company as directors. Each
non-employee director is also entitled to receive (i) an automatic grant of
options to purchase 10,000 shares of Common Stock on the date that each
non-employee director is first elected or appointed as a director and (ii) an
annual automatic grant of an option to purchase 2,000 shares of Common Stock.
All directors are reimbursed for expenses incurred in connection with attending
meetings of the Board of Directors.
EXECUTIVE COMPENSATION
The employees named in the following table were the Company's Chief
Executive Officer and the four highest-paid executive officers during 1997 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------- -----------------------------------------
Awards
-------------------------
Restricted
Other Annual Stock All Other
Salary(1) Bonus Compensation(2) Awards(3) Options(4) Compensation
Name and Principal Position Year ($) ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William A. Haseltine, Ph.D. 1997 349,503 150,000 69,486(5) 500,000
Chief Executive Officer 1996 330,000 150,000 68,637(5)
1995 300,000 120,000 75,040(5)
Melvin D. Booth 1997 324,327 125,000 34,119(6) 75,000
President and 1996 300,000 125,000
Chief Operating Officer 1995 132,692 60,000 506,913(6) 300,000
Craig A. Rosen, Ph.D. 1997 274,443 120,000 75,000
Sr. Vice President 1996 252,600 100,000 45,000
1995 235,000 70,000 50,000
Arthur M. Mandell(7) 1997 150,000 66,620 173,562 170,000
Sr. Vice President
Steven C. Mayer(8) 1997 195,000 65,000 25,000
Sr. Vice President 1996 48,750 20,000 150,000
</TABLE>
- 15 -
<PAGE> 18
- -----------------
(1) Includes amounts earned but deferred at the election of the executive,
such as salary deferrals under the Company's 401(k) Plan established under
Section 401(k) of the Internal Revenue Code.
(2) As permitted by rules promulgated by the Securities and Exchange
Commission, no amounts are shown with respect to certain perquisites (such
as car and housing allowances), where such amounts do not exceed the
lesser of (i) 10% of the sum of the salary and bonus of the Executive
Officer, or (ii) $50,000.
(3) No dividends were paid on stock or restricted stock for the fiscal years
ended December 31, 1995, 1996 and 1997.
(4) The Company has awarded no Stock Appreciation Rights.
(5) These amounts include $52,134, $51,285 and $58,650 in imputed interest for
1997, 1996 and 1995 respectively, on an interest-free loan to Dr.
Haseltine. See --Loans to Executive Officers.
(6) On July 17, 1995, Mr. Booth joined the Company as President and Chief
Operating Officer. As an incentive for him to take the position, he was
given a $60,000 sign-on payment. Additionally, the Company paid $423,725
related to relocation costs. The 1997 Other Compensation is for car
allowances.
(7) Joined the Company on March 17, 1997. Other Annual Compensation includes
$173,562 for relocation costs and other compensation related to his
joining the Company.
(8) Joined the Company on September 23, 1996.
The following table sets forth information concerning grants to the
Named Executive Officers of options to purchase shares of the Company's Common
Stock.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1997
Individual Grants
--------------------------------------------------------
Percent of Exercise
total options price Potential realizable
granted to all per value at assumed annual
Options employees in share Expiration rates of stock price
Name (#) fiscal year ($) date appreciation for option
term(1)
5%($) 10%($)
- --------------------------- -------- -------------- --------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Haseltine, Ph.D. 150,000 9% 41.00 1/21/2002 1,699,132 3,754,637
150,000 9% 70.00 1/21/2004 -0- 1,484,610
200,000 12% 100.00 1/21/2007 -0- 1,268,688
Melvin D. Booth 75,000 5% 39.50 12/16/2007 1,863,100 4,721,462
Craig A. Rosen, Ph.D. 75,000 5% 39.50 12/16/2007 1,863,100 4,721,462
Arthur M. Mandell 150,000 9% 36.75 3/17/2007 3,466,782 8,785,505
20,000 1% 39.50 12/16/2007 496,827 1,259,057
Steven C. Mayer 25,000 2% 39.50 12/16/2007 621,033 1,573,821
</TABLE>
- -----------------
(1) The assumed annual rates of stock price appreciation of 5% and 10% are
required by the Securities and Exchange Commission to be used for
illustration purposes and are not intended to forecast possible future
appreciation, if any, of the Company's stock.
- 16 -
<PAGE> 19
The following table sets forth information with respect to option
exercises by and year-end values during 1997 for the Named Executive Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT END OF FISCAL YEAR
Number of unexercised Value of unexercised
Shares options in-the-money options
acquired at fiscal year-end at fiscal year-end
on Value (Exercisable/ (Exercisable/
Name exercise Realized unexercisable) unexercisable)(1)
# ($) (#) ($)
- --------------------------- --------- -------- --------------------- ---------------------
<S> <C> <C> <C> <C>
William A. Haseltine, Ph.D. None None None/500,000 None/None
Melvin D. Booth None None 100,000/275,000 1,525,000/3,068,750
Craig A. Rosen, Ph.D. 3,000 119,588 63,522/155,000 1,260,545/ 751,750
Arthur M. Mandell None None 20,000/150,000 60,000/ 395,000
Steven C. Mayer None None 36,250/138,750 72,500/ 233,750
</TABLE>
- ------------------
(1) Value is based on the difference between the stock option exercise price
and the closing price of the Company's Common Stock on the Nasdaq National
Market on December 31, 1997 of $39.75 per share.
EMPLOYMENT AGREEMENTS
In February 1997, the Company entered in an employment agreement with
Dr. Haseltine that superseded his May 1993 employment agreement. The
employment agreement is for an initial term expiring in February 2000 and will
automatically extend for additional one-year periods unless terminated by
either party four months prior to the end of the applicable term. The
employment agreement provides that Dr. Haseltine is entitled to an annual base
salary of $350,000 ($365,000 as of January 1, 1998), and an annual bonus as
determined by the Board of Directors and an annual car allowance. The Company
may terminate the employment agreement without cause, and upon such
termination, Dr. Haseltine will be entitled to severance equal to his base
salary for a period of 24 months. The Company sold to Dr. Haseltine 661,160
shares of restricted Common Stock on May 18, 1993 at a purchase price of $.20
per share. The shares of Common Stock sold to Dr. Haseltine vested in equal
annual installments over a four-year period that commenced on May 11, 1993.
All of the shares are subject to rights of first refusal by the Company on sale
(at a price per share equal to $1.13 less than the price of the proposed sale).
In June 1995, the Company entered into an employment agreement with
Mr. Booth in which he agreed to serve as President and Chief Operating Officer
of the Company. The Company may terminate the agreement at any time and upon
termination without cause, Mr. Booth will be entitled to receive base salary
until the earlier of (i) eighteen months after termination of employment, or
(ii) until Mr. Booth commences other regular, full-time employment. The
agreement provides that Mr. Booth is entitled to an annual base salary, as
determined by the Board of Directors ($340,000 as of January 1, 1998), an
annual bonus of up to 35% of base salary, and an annual car allowance. The
Company paid Mr. Booth a sign-on payment of $60,000. The Company paid Mr.
Booth relocation costs of $423,725 in connection with his relocation to
Maryland.
In October 1992, the Company entered into an employment agreement with
Dr. Rosen in which Dr. Rosen agreed to serve as Senior Vice President, Research
and Development of the Company. The employment agreement was for an initial
term that ended in October 1995 and has been and will be
- 17 -
<PAGE> 20
automatically extended for additional one-year periods unless terminated by
either party prior to the end of the applicable term. Dr. Rosen is entitled to
an annual base salary, as determined by the Board of Directors ($287,000 as of
January 1, 1998), an annual bonus of between 10% and 20% of his base salary,
and an annual car allowance. The Company may terminate the employment
agreement without cause, and upon such termination, Dr. Rosen will be entitled
to receive three months' base salary. In April 1993, pursuant to the
agreement, the Company sold to Dr. Rosen 140,977 shares of restricted Common
Stock at a purchase price of $.01 per share. All of the shares are subject to
rights of first refusal by the Company on sale (at a price per share equal to
$.19 less than the price of the proposed sale).
In January 1997, the Company entered into an employment agreement with
Mr. Mandell in which Mr. Mandell agreed to serve as Senior Vice President,
Business Development of the Company. Mr. Mandell is entitled to an annual base
salary, as determined by the Board of Directors ($204,000 as of January 1,
1998) and an annual bonus of up to 30% of base salary. Upon termination
without cause or upon a constructive termination, Mr. Mandell will be entitled
to receive base salary until the earlier of (i) 12 months after termination of
employment, or (ii) commencement of other regular full-time employment. The
Company paid Mr. Mandell relocation costs and other compensation of $173,562 in
connection with his relocation to Maryland.
In August 1996, the Company entered into an employment agreement with
Mr. Mayer in which Mr. Mayer agreed to serve as Senior Vice President and Chief
Financial Officer of the Company. Mr. Mayer is entitled to an annual base
salary, as determined by the Board of Directors ($209,000 as of January 1,
1998) and an annual bonus of up to 30% of base salary. Upon termination
without cause or upon a constructive termination, Mr. Mayer will be entitled to
receive base salary until the earlier of (i) 12 months after termination of
employment, or (ii) commencement of other regular full-time employment.
In April 1997, the Company entered into an employment agreement with
Dr. Davis in which Dr. Davis agreed to serve as Senior Vice President, General
Counsel and Secretary of the Company. Dr. Davis is entitled to an annual base
salary, as determined by the Board of Directors ($214,000 as of January 1,
1998) and an annual bonus of up to 30% of base salary. Upon termination
without cause, Dr. Davis will be entitled to receive base salary until the
earlier of (i) 12 months after termination of employment or (ii) commencement
of other regular full-time employment.
On February 13, 1997, the Company entered into a retirement agreement
(the "Retirement Agreement") with Bradley Lorimier, a former director and
senior vice president of the Company. Pursuant to the Retirement Agreement,
Mr. Lorimier: (i) resigned as a director or the Company; (ii) retired as an
employee of the Company as of June 30, 1997; (iii) received a performance based
bonus of $25,000 for the period beginning January 1, 1997 and ending June 30,
1997; and (iv) was engaged by the Company as a part-time consultant for a one
year period expiring June 30, 1998 for compensation of $50,000. In addition,
the Retirement Agreement accelerated the vesting of options to acquire 40,000
shares of the Company's Common Stock previously granted to Mr. Lorimier and
extended the period of time during which Mr. Lorimier can exercise the options
to ninety days following the expiration of Mr. Lorimier's consulting period
with the Company. Prior to the commencement of the Retirement Agreement, the
Company and Mr. Lorimier had been parties to an employment agreement entered
into in March 1994 for a term ending March 1997. This employment agreement
provided Mr. Lorimier with an annual base salary to be determined by the Board
of Directors ($250,000 as of January 1, 1997) and an annual performance-based
bonus of between $50,000 and $100,000. Mr. Lorimier received a salary of
$130,635 for his 1997 employment with the Company as an executive officer under
this employment agreement.
- 18 -
<PAGE> 21
LOANS TO EXECUTIVE OFFICERS
In November 1993, the Board of Directors authorized the extension of
an interest-free loan (the "Loan") to Dr. Haseltine, in an amount up to
$1,000,000, to enable Dr. Haseltine to pay certain tax liabilities relating to
his purchase of Common Stock in May 1993. The Loan was made on December 29,
1993 and was evidenced by a promissory note dated March 4, 1994 in the original
amount of $872,845, replacing a promissory note dated December 29, 1993 (as
replaced, the "Note"). The principal amount of the Loan was increased to
$891,488 on December 16, 1994. The Loan was secured initially by 114,472
shares of issued and outstanding Common Stock of the Company, with a market
value at that time equal to 200% of the principal sum of the loan (the
"Collateral") and is now secured by 64,252 shares of Common Stock. The Loan is
repayable in full on the earliest to occur of (i) twenty business days after
demand for repayment has been made by the Company, (ii) twenty business days
after Dr. Haseltine's employment has been terminated, (iii) on the date Dr.
Haseltine defaults on the Note, and (iv) December 29, 2003. Dr. Haseltine is
required to prepay the Loan in full, or in some instances, in part, if he sells
any of the Collateral.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1, 1997 until July 16, 1997, the Compensation Committee
consisted of James Cavanaugh, Joshua Ruch and Donald D. Johnston as Chairman.
After the Board of Directors made new committee assignments, from July 16, 1997
through the end of 1997, the Compensation Committee consisted of Robert
Hormats, Joshua Ruch and Max Link as Chairman. Alan G. Spoon replaced Mr. Ruch
on February 11, 1998, when Mr. Ruch retired from the Board of Directors. None
of the members of the Compensation Committee is a current or former officer or
employee of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
consists entirely of non-employee directors. The Committee determines all
compensation paid or awarded to the Company's executive officers and approves
the Company's overall compensation policies.
The Committee's goals are to attract and retain an executive
management team that is capable of taking full advantage of the Company's
opportunities, and to provide incentives for outstanding performance. In
arriving at an initial compensation offer to an individual, the Committee
considers determinants of the individual's market value, including experience,
education, accomplishments and reputation, as well as the level of
responsibility to be assumed, in relation to the market value of such
qualifications and industry standards. When determining subsequent adjustments
to an individual's compensation package, the Committee also evaluates the
importance to stockholders of that person's continued service. This is a
judgment process, exercised by the Committee with the advice of Company
management and a compensation consultant.
The executive officers' compensation structure consists of: (i) base
salary, (ii) cash bonus and (iii) stock options.
- 19 -
<PAGE> 22
Base Salary. Each individual's base salary is determined by the
Committee after considering a variety of factors that make up market value and
prospective value to the Company, including the knowledge, experience and
accomplishments of the individual, the individual's level of responsibility,
and the typical compensation levels for individuals with similar credentials.
The Committee may change the salary of an individual on the basis of its
judgment for any reason, including the performance of the individual or the
Company, changes in responsibility, and changes in the market for executives
with similar credentials.
Cash Bonus. Bonuses are awarded for accomplishments during the past
year. Bonuses are determined by the Committee with advice from Company
Management, based upon the Committee's assessment of the individual's
contributions during the year, compared to, but not limited to, a list of
individualized goals previously approved by Management and the Committee. In
determining bonuses for the fiscal year ended December 31, 1997, the Committee
considered in addition to the individualized goals, the successful completion
of the Company's March 1997 public offering, preparation of plans and financing
for a process development and manufacturing facility, continued progress within
collaborations previously established and establishment of new collaborations,
progress in defining possible therapeutic proteins for internal development or
out-licensing, preparation of investigational new drug applications for two
therapeutic proteins and further additions to the Company's intellectual
property and to its capability to convert this to product development programs.
Stock Options. Stock options are prospective incentives, aimed at
keeping and motivating key people by letting them share in the value they
create for stockholders. They are awarded at times deemed appropriate by the
Committee in amounts calculated to secure the full attention and best efforts
of executives on whose future performance the Company's success will depend.
Executive officers other than the C.E.O. (discussed below) received options on
551,000 shares in 1997, including initial awards to certain of these executive
officers.
Chief Executive Officer's Compensation. The Committee awarded Dr.
Haseltine a bonus of $150,000 for the fiscal year ended December 31, 1997. In
addition, effective January 1, 1998, Dr. Haseltine's base salary was increased
from $350,000 per year to $365,000 per year. The bonus and increase in salary
are based on the Committee's assessments of Dr. Haseltine's role in the
Company's performance in 1997, and on the continuing growth in his
responsibilities. Under Dr. Haseltine's leadership, the Company's capabilities
and opportunities were significantly enhanced by initiating collaborations
which multiply the potential for converting the Company's discoveries into
products on a timely basis. At the same time, the Company has negotiated
rights to internal development of selected products, and has made considerable
progress in evaluating their potential. Organizational development is keeping
pace with the expanding opportunities.
The final installment of Dr. Haseltine's 1,162,887 shares of founder's
stock vested during the first half of 1997. In view of Dr. Haseltine's
importance to the Company's accomplishments thus far and his demonstrated
ability to provide the scientific and business leadership the Company needs for
the future, the Committee decided to develop a stock option program for Dr.
Haseltine which would offer him the potential for substantial equity growth, as
attractive as that which he has earned in the Company's early years, if the
stock price increases enough to reward stockholders even more. With the advice
of a leading compensation consultant, the Committee estimated the option awards
Dr. Haseltine would receive over the next 5 years under a program typical of
the Company's peers, assuming continued top performance, and aggregated them
into a single grant on January 21, 1997, of options on 500,000 shares of
Company common stock. The terms are as follows:
- 20 -
<PAGE> 23
150,000 shares at market price ($41 as of January 21, 1997)
for 5 years, vesting at the rate of 25% per
year.
150,000 shares at $70 per share (71% over market price as of
January 21, 1997) for 7 years, vesting at the
rate of 20% per year.
200,000 shares at $100 per share (144% over market value as
of January 21, 1997) for 10 years, vesting at
the rate of 16 2/3% per year.
In December 1997, the Committee again reviewed Dr. Haseltine's stock
options in light of the Company's successful completion of a third public
offering which raised an additional $112 million to support the Company's
ongoing research and development efforts and in light of the considerable
progress the Company had achieved in development of its therapeutic protein
product candidates. Because of these achievements, and based on the advice of
a leading compensation consultant, the Committee decided to grant, effective
January 2, 1998, additional options for 120,000 shares at fair market value as
of January 2, 1998. The grant was made effective as of January 1998 to insure
the deductibility of executive compensation.
Compensation Deduction Limit. The Committee has considered the $1
million limit on deductible executive compensation that is not performance
based, and believes all executive compensation expenses will be deductible by
the Company for the foreseeable future.
Compensation Committee
Max Link, Chairman
Robert D. Hormats
Alan G. Spoon
PERFORMANCE GRAPH
As part of the proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a
comparison of the cumulative total stockholder return on its Common Stock with
that of a broad equity market index and either a published industry index or a
company-constructed peer group index. The following graph compares the
performance of the Company's Common Stock for the periods indicated with the
performance of the Nasdaq U.S. Stock Market Total Return Index (the "TRI") and
the Nasdaq Pharmaceutical Index (the "NPI"). The comparison assumes $100 was
invested on December 2, 1993 in the Company's Common Stock and in each of the
foregoing indices and assumes the reinvestment of dividends. In its 1997 Proxy
Statement, the Company used an index composed of peer issuers selected by the
Company (the "Peer Index") instead of the NPI and the Company used the Standard
& Poor's Composite Index of 500 Stocks (the "S&P 500") instead of the TRI. The
Company has elected to use the NPI and TRI this year because it believes that
these indices are a more relevant measure of cumulative performance. In
accordance with the rules and
- 21 -
<PAGE> 24
regulations of the Commission, however, both the Peer Index and the S&P 500 are
included in the following performance graph for 1997.(1) In future years, the
Peer Index and the S&P 500 will no longer be included.
TOTAL RETURN INDEX PERFORMANCE GRAPH
PRICES INDEXED TO 100
<TABLE>
<CAPTION>
HGS S&P 500 Indust Nasdaq Nasdaq
Close Close Index US Pharma
<S> <C> <C> <C> <C> <C> <C>
12/02/93 12.00 100.00 100.00 100.00 100.00 100.00
93 17.75 147.92 101.21 101.24 102.79 101.80
94 14.75 122.92 102.55 91.25 100.48 76.62
95 38.25 318.75 141.09 168.35 142.10 140.17
96 40.75 339.58 173.48 169.40 174.77 140.58
97 39.75 331.25 231.36 183.33 214.47 145.27
</TABLE>
- ----------------
(1) The current composition of the Peer Index is: Advanced Tissue Science,
Alfacell Corp., AMBI Inc., American Biogenetic SCI, Amgen Inc., Anergen
Inc., Anika Therapeutics Inc., Aphton Corp., Ariad Pharmaceuticals,
AutoImmune Inc., Avax Technologies Inc., Aviron, Biocryst Pharmaceuticals,
Biogen Inc., Biomatrix Inc., Biomira Inc., Biotime Inc., Cel-Sci Corp.,
Cerus Corporation, Chrysalis Internat. Corp., Corxa Corp., Creative
Biomolecules, Cryolife Inc., Cypress Biosciences Inc., Cytotherapeutics
Inc., Cytrx Corporation, Diacrin Inc., Discovery Labs I, Embrex Inc., Enzon
Inc., Galagen Inc., GeneMedicine Inc., Genta Incorporated, Genzyme Corp.,
Genzyme Tissue Repair, Genzyme Transgenics Corp., Gilead Sciences Inc.,
Gliatech Inc., Heska Corp., IDEC Pharmaceuticals CP, IGI Inc., Imclone
Systems Inc., Immunex Corp., Immune Response Corp., Integra Lifesciences
CP, Interferon Sciences Inc., La Jolla Pharmaceutical, Lifecore Biomedical
Inc., LXR Biotechnology Inc., Magainin Pharmaceuticals, Martek Biosciences
Corp., Medarex Inc., MedImmune Inc., NABI Inc., Neurex Corp. CL A, North
Amer. Vaccine, Northfield Laboratories, Novavax Inc., NPS Pharmaceuticals
Inc., Nyer Medical Group, ONYX Pharmaceuticals Inc., Oravax Inc., Oxigene
Inc., Procept Inc., Progen Industries Ltd., Progenitor, Inc., Protein
Design Labs Inc., Qiagen NV, Repligen Corp., RIBI Immunochem Res Inc.,
Sangstat Medical Corp., Senetek PLC ADR, Serologicals Corp., Somatogen
Inc., Sparta Pharmaceuticals, Sugen Inc., Symbollon CP CL A, Tageted
Genetics CP, Techne Corp., Texas Biotechnology Corp., Titan Pharmaceutical
Inc., Transend Therapeutics, Transkaryotic Therapies, Trega Biosciences,
Inc., Vical Inc., Vion Pharmaceuticals Inc., Viragen (Europe) LTD, Viragen
Inc., Virus Research Institute, Zonagen Inc.
- 22 -
<PAGE> 25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SmithKline Beecham was a 5% beneficial stockholder of the Company in
1997. In addition, SmithKline Beecham has a right to designate a nominee to
the Board of Directors of the Company under the SB Stock Purchase Agreement.
See PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING - ELECTION OF DIRECTORS.
The Company has agreed to use its best efforts to elect SmithKline Beecham's
nominee for director as a Director of the Company. This year, SmithKline
Beecham's nominee, Mr. Armitage, is standing for reelection to the Board. In
addition, SmithKline Beecham is also entitled to a right of first refusal to
purchase new shares of Common Stock in any issuance of equity securities by the
Company, other than issuances of certain excluded securities (all as defined in
the SB Stock Purchase Agreement), in amounts which would not enable it to
exceed its percent ownership of the Company as of the execution date of the SB
Collaboration Agreement. SmithKline Beecham waived this right of first refusal
in connection with the Company's public offerings. These rights continue until
the expiration of the initial research term (as defined in the SB Stock
Purchase Agreement) or termination of the Collaboration Agreements between the
Company and SmithKline Beecham for certain reasons.
In May 1993, the Company entered into the SB Collaboration Agreements
pursuant to which SmithKline Beecham was granted certain exclusive rights to
develop and commercialize therapeutic and diagnostic products within certain
designated fields based on human genes discovered by the Company. The SB
Collaboration Agreements were amended in 1996. Pursuant to the SB
Collaboration Agreements, as amended, SmithKline Beecham has paid to the
Company an aggregate of $125 million, including $55.1 million which was
allocated to the purchase of an aggregate of 1,351,738 shares of Common Stock
of the Company.
The SB Collaboration Agreements provide that SmithKline Beecham and
the Company will share equally in any license fees paid under agreements with
third-party pharmaceutical companies, and that the Company will receive all
royalties and research support payments under such agreements and provide
certain other royalty and marketing arrangements.
In July 1997, the SB Collaboration Agreements were further amended
with respect to the field of human diagnostic products (the "SB Diagnostic
Amendment"). The SB Diagnostic Amendment streamlined the procedures for
outlicense by SmithKline Beecham of diagnostic products based on the Company's
technology and specified a royalty on diagnostic products sold by SmithKline
Beecham or its licensees. The SB Diagnostic Amendment also permits the Company
to develop and market diagnostic tests that support its own therapeutic
products, if SmithKline Beecham is not already developing and marketing such a
diagnostic test, and provides for an initial research term that continues
through June 2001, and may be extended by SmithKline Beecham for up to five
additional years by making certain payments and provided that the SB Diagnostic
Amendment is also extended for a commensurate period of time.
The Company believes that the transactions referred to above have
been, and will in the future continue to be, on terms no less favorable to the
Company than could be obtained from unaffiliated parties.
- 23 -
<PAGE> 26
ADDITIONAL INFORMATION
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC and to provide the Company with
copies of such reports. The Company has reviewed such reports received by it
and written representations from its directors and executive officers. Based
solely on such review, the Company believes that during fiscal year 1997 all
filing requirements were complied with.
OTHER MATTERS
The Board of Directors of the Company knows of no other business which
will be presented for consideration at the Annual Meeting. Execution of a
proxy, however, confers on the designated proxyholders discretionary authority
to vote the shares in accordance with their best judgment on such other
business, if any, that may properly come before the Annual Meeting or any
adjournments thereof.
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, TO EACH OF THE COMPANY'S STOCKHOLDERS OF
RECORD ON APRIL 1, 1998, AND TO EACH BENEFICIAL OWNER OF STOCK ON THAT DATE,
UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S OFFICES,
9410 KEY WEST AVENUE, ROCKVILLE, MARYLAND 20850-3338, ATTENTION INVESTOR
RELATIONS OFFICE. IN THE EVENT THAT EXHIBITS TO SUCH FORM 10-K ARE REQUESTED,
A FEE WILL BE CHARGED FOR REPRODUCTION OF SUCH EXHIBITS. REQUESTS FROM
BENEFICIAL OWNERS OF COMMON STOCK MUST SET FORTH A GOOD FAITH REPRESENTATION AS
TO SUCH OWNERSHIP.
PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Rockville, Maryland not later than December 19, 1998 for inclusion in the
proxy statement for that meeting.
By Order of the Board of Directors,
JAMES H. DAVIS, Secretary
April 15, 1998
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE
MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
- 24 -
<PAGE> 27
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HUMAN GENOME SCIENCES, INC.
MAY 20, 1998
<TABLE>
<S> <C>
/\ PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED /\
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD MANAGEMENT RECOMMENDS A VOTE FOR THE
listed to the right AUTHORITY NOMINEES FOR DIRECTOR LISTED BELOW
(except as written to TO VOTE FOR ALL NOMINEES
the contrary below) LISTED TO THE RIGHT
1. To elect [ ] [ ] NOMINEES: Robert A. Armitage
3 directors. James B. Wyngaarden, M.D.
Jurgen Drews, M.D.
To withhold authority to vote for any nominee(s), write
the name(s) of the nominee(s) below:
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
FOR AGAINST ABSTAIN
2. To approve an amendment to the Company's 1994 Stock Option Plan. [ ] [ ] [ ]
3. To ratify the selection of Ernst & Young, LLP as the Company's [ ] [ ] [ ]
independent public accountants for the fiscal year ending
December 31, 1998.
4. To act upon such other matters which may properly come before the Annual
Meeting or any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES INDICATED AND FOR THE OTHER PROPOSALS.
The undersigned hereby acknowledges receipt of a copy of the Company's 1997
Annual Report and Notice of Annual Meeting and Proxy Statement relating to such
Annual Meeting. The undersigned revokes all proxies heretfore given for said
Annual Meeting or any adjournment(s) thereof.
Please sign, date and promptly return this proxy in the enclosed envelope. No
postage is required if mailed within the United States.
SIGNATURE(S) DATE
-------------------------------------- -----------------------------
NOTE: Please sign exactly as your name appears hereon. If the shares are registered
in the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorneys-in-fact should give their full titles. If a
signatory is a corporation, please give the full corporate name and have a
duly authorized officer sign, stating his or her title. If a signatory is a
partnership, please sign in partnership name by an authorized person.
</TABLE>
<PAGE> 28
HUMAN GENOME SCIENCES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 1998
The undersigned hereby appoints WILLIAM A. HASELTINE, Ph.D. and JAMES H.
DAVIS, PhD., J.D. and each of them, with full power of substitution to each, as
attorneys and proxies of the undersigned, to vote all shares which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of Human
Genome Sciences, Inc. (the "Company") to be held at the University of Maryland
System, Shady Grove Center, 9640 Gudelsky Drive, Rockville, Maryland 20850-3480,
on May 20, 1998 at 9:00 a.m., local time, and at any adjournments thereof, upon
and in respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE BY SENDING WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY, BY DELIVERING TO THE COMPANY A DULY EXECUTED PROXY
BEARING A LATER DATE, OR BY ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE PERSON(S)
SIGNING IT. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION
OF THE NOMINEES INDICATED AND FOR THE OTHER PROPOSALS.
(CONTINUED ON OTHER SIDE)
