<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 19, 1999
To the Stockholders of Human Genome Sciences, Inc.:
NOTICE IS HEREBY GIVEN that the 1999 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, 9630 Gudelsky Drive, Rockville, Maryland 20850-3480 on Wednesday, May
19, 1999 at 9:00 a.m., local time, for the following purposes:
1. To elect three directors for a three year term ending in 2002.
2. To ratify the selection of Ernst & Young LLP as the Company's
independent public accountants.
3. 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
March 31, 1999 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,
1998.
By Order of the Board of Directors,
James H. Davis, Secretary
Rockville, Maryland
April 16, 1999
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, 9630 Gudelsky Drive, Rockville, Maryland on
Wednesday, May 19, 1999 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 16, 1999.
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.
QUORUM AND VOTING REQUIREMENTS
The close of business on March 31, 1999 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, there were 22,875,434 shares of the Company's
common stock, $0.01 par value per share (the "Common Stock"), outstanding. The
presence at the Annual Meeting, in person or by a proxy relating to any matter
to be acted upon at the meeting, of a majority of the outstanding shares or
11,437,718 shares, is necessary to constitute a quorum for the Annual Meeting.
Each outstanding share is entitled to one vote on all matters, except as noted
below. For purposes of the quorum and the discussion below regarding the vote
necessary to take stockholder action, stockholders of record who are present at
the meeting in person or by proxy and who abstain, including brokers holding
customers' shares of record who cause abstentions to be recorded at the Annual
Meeting, are considered stockholders who are present and entitled to vote and
they count toward the quorum. In the event that there are not sufficient votes
for a quorum or to approve any proposal at the
<PAGE> 4
annual Meeting, the Annual Meeting may be adjourned in order to permit the
further solicitation of proxies.
Brokers holding shares of record for customers generally are not entitled
to vote on certain matters unless they receive voting instructions from their
customers. "Broker non-votes" means the votes that could have been cast on the
matter in question if the brokers had received their customers' instructions,
and as to which the broker has notified the Company on a proxy form in
accordance with industry practice or has otherwise advised the Company that it
lacks voting authority.
Directors are elected by a plurality and the three nominees who receive
the most votes will be elected. Abstentions and broker non-votes will not be
taken into account in determining the outcome of the election. On all other
matters, including the approval of the selection of Ernst & Young LLP as the
Company's independent public accountants, the affirmative vote of the majority
of the shares present in person or by proxy at the meeting and entitled to vote
on the matter is required to approve such matter. Broker non-votes are not
considered shares entitled to vote on the matter and therefore will not be
taken into account in determining the outcome of the vote on the matter.
Abstentions are considered shares entitled to vote on the matter and therefore
will have the effect of a vote against the matter.
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, and
FOR the ratification of Ernst & Young LLP as the Company's independent public
accountants.
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 March 31, 1999, 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 3,495,865(2) 15.3%
201 Main Street
Fort Worth, Texas 76201-3131
Merrill Lynch Asset Management Group 1,502,549(3) 6.6%
800 Scudders Mill Road
Plainsboro, New Jersey 08536
J.P. Morgan & Co., Inc. 1,144,100(4) 5.0%
60 Wall Street
New York, New York 10260
Wellington Management Company, LLP 2,348,170(5) 10.3%
75 State Street, 19th Floor
Boston, MA 02109
Directors, Nominees, and Executive Officers
- -------------------------------------------
William A. Haseltine, Ph.D. 1,260,887(6) 5.5%
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 14,700(7) *
c/o Human Genome Sciences
9410 Key West Avenue
Rockville, Maryland 20850
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
Melvin D. Booth 1,400(8) *
c/o MedImmune, Inc.
35 West Watkins Mill Road
Gaithersburg, Maryland 20878
James H. Cavanaugh, Ph.D. 306,081(9) 1.3%
c/o HealthCare Investment Corp.
44 Nassau Street
Princeton, New Jersey 08558
James H. Davis, Ph.D., J.D. 57,231(10) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Jurgen Drews, M.D. 4,000(11) *
Firnhaberstrasse 14
D-82340 Feldafing
Germany
Beverly Sills Greenough 16,250(12) *
211 Central Park West, #4-F
New York, New York 10024
Robert Hormats 10,500(13) *
c/o Goldman Sachs & Co.
85 Broad Street
New York, New York 10128
Max Link, Ph.D. 10,750(14) *
Tobelhofstr, 30
8044 Zurich, Switzerland
Arthur M. Mandell 73,724(15) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Steven C. Mayer 86,653(16) *
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
Craig A. Rosen, Ph.D. 266,329(17) 1.2%
c/o Human Genome Sciences, Inc.
9410 Key West Avenue
Rockville, Maryland 20850
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C> <C>
Alan G. Spoon 6,000(18) *
c/o The Washington Post Company
1150 15th Street
Washington, D.C. 20071
Laura D'Andrea Tyson None(19)
2015 Los Angeles Avenue
Berkely, California 24707
James B. Wyngaarden, M.D. 30,750(20) *
3504 Stoneybrook Drive
Durham, North Carolina 27705
All directors and executive officers as a group 2,140,855(21) 9.1%
(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 13G filed by Sid R. Bass and Lee M. Bass
and 19 related and affiliated entities on February 5, 1999. 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 reported on a Schedule 13G filed by Merrill Lynch Asset Management
Group as of February 8, 1999.
(4) As reported on a Schedule 13G filed by J.P. Morgan & Co., Inc.
February 23, 1999.
(5) As reported on a Schedule 13G filed by Wellington Management Co., LLP
as of February 9, 1999.
(6) Includes 195,000 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 545,000 shares of
Common Stock issuable upon exercise of options held that are not
exercisable within 60 days.
(7) Includes 14,700 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 31,300
shares of Common Stock issuable upon exercise of options held that
are not exercisable within 60 days.
(8) Mr. Booth resigned as President, Chief Operating Officer and Director
as of November 13, 1998.
5
<PAGE> 8
(9) Includes 198,106 and 58,061, 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 57,231 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 137,769
shares of Common Stock issuable upon exercise of options that are not
exercisable within 60 days.
(11) Includes 4,000 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 8,000
shares of Common Stock issuable upon exercise of options that are not
exercisable within 60 days
(12) Includes 15,250 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days.
(13) Includes 8,500 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 that are not
exercisable within 60 days.
(14) Includes 4,000 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 4,500
shares of Common Stock issuable upon exercise of options held that
are not exercisable within 60 days.
(15) Includes 72,724 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 122,276
shares of Common Stock issuable upon exercise of options held that
are not exercisable within 60 days.
(16) Includes 86,653 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 123,347
shares of Common Stock issuable upon exercise of options that are not
exercisable within 60 days.
(17) Includes 117,450 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 172,072 shares of Common Stock issuable upon exercise of
options that are not exercisable within 60 days.
(18) Includes 4,000 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 8,000
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
that are not exercisable within 60 days
(20) Includes 30,250 shares of Common Stock issuable upon exercise of
options that are exercisable within 60 days. Does not include 3,750
shares of Common Stock issuable upon exercise of options that are not
exercisable within 60 days.
6
<PAGE> 9
(21) Includes 605,758 shares of Common Stock issuable upon exercise of
options and warrants that are exercisable within 60 days. Does not
include 1,172,764 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
One class of directors, the Class II directors, consisting of Drs.
Cavanaugh, Link, Rosen, and Mrs. Greenough, has a term of office expiring at
the Annual Meeting, and at such time as their successors shall be elected and
qualified. Dr. Cavanaugh has informed the Board of his desire not to be elected
to the Board for another term. Drs. Link and Rosen, and Mrs. Greenough have
each been nominated for a three-year term expiring at the annual meeting of
stockholders in 2002 and until their successors shall be elected and qualified.
Melvin Booth, 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 November 13,1998. 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. Effective November 13,1998 and pursuant to the
Company's Charter and Bylaws, the Board of Directors elected Dr. Laura D'Andrea
Tyson to the Board to fill the vacancy left by Mr. Booth. Dr. Tyson's term as a
director will run the same length as Mr. Booth's, and will therefore expire in
2000 and at such time as her 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 2002 ANNUAL MEETING.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION AND BUSINESS
NOMINEE AGE SINCE EXPERIENCE DURING THE PAST FIVE YEARS
--------- ----- ------- ---------------------------------------
<S> <C> <C> <C>
Max Link, Ph.D. 59 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 Alexion Pharmaceuticals, Cell
Therapeutics, CytRx Corporation, Discovery Labs, Osiris
Therapeutics, Inc., Procept, Protein Design Labs and
Sulzer Medica. Dr. Link received his doctorate in
Economics from the University of St. Gallen.
Craig A. Rosen, Ph.D. 41 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 as a Director on the board of Vascular Genetics
Inc. Author of approximately 100 publications and an
editorial board member of several scientific publications.
Beverly Sills Greenough 69 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>
8
<PAGE> 11
DIRECTORS CONTINUING IN OFFICE.
DIRECTORS WHOSE TERM WILL EXPIRE AT THE 2000 ANNUAL MEETING:
<TABLE>
<S> <C> <C> <C>
William A. Haseltine, Ph.D. 54 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 since 1987. Author of approximately 250
scientific publications.
Laura D'Andrea Tyson, Ph.D. 52 1998 Dean of the Walter A. Haas School of Business at the
University of California, Berkley since 1998. Served as
the President's National Economic Advisor from 1995 to
1996 and as Chairman of the White House Council of
Economic Advisors from 1993 to 1995. Dr. Tyson was a
member of the National Bipartisan Commission on the
Future of Medicare and is a principal of the Law &
Economics Consulting Group. Dr. Tyson is a member of the
Boards of Directors of Ameritech Corporation, the
Council on Foreign Relations, Eastman Kodak Company,
Healtheon Corporation, the Institute for International
Economics, and Morgan Stanley, Dean Witter, Discover &
Co. She is a member of The Trilateral Commission; she
serves on the Board of Trustees of The Asia Foundation;
the Advisory Boards of E.M. Warburg, Pincus & Co., LLP,
Shorenstein Company, LP, the G7 Group, Inc. and The
Journal of Economic Perspectives; and the Boards of
Editors of The American Prospect and California
Management Review. She is an Economic Viewpoint
columnist for Business Week magazine and a commentator
for "Nightly Business Report."
Robert D. Hormats 56 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).
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Alan G. Spoon 47 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, Ticketmaster Citisearch
and the Smithsonian's National Museum of Natural History.
</TABLE>
DIRECTORS WHOSE TERM WILL EXPIRE AT THE 2001 ANNUAL MEETING:
<TABLE>
<S> <C> <C> <C>
Robert A. Armitage 50 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. 65 1998 Member of the Executive Committee of the Company.
Chairman and partner of the newly founded International
Biomedicine Management Partners, Basel, Switzerland.
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.
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
James B. Wyngaarden, M.D. 74 1993 Professor of Medicine, Duke University, Emeritus,
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>
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 held five regular and two telephonic meetings
during 1998. Mrs. Greenough, and Drs. Drews and Tyson attended fewer than 75%
of the total number of meetings of the Board and of the Committees of which
they were a member during 1998. 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 Mr. Spoon, has the authority to act on most matters during the
intervals between Board meetings. The Executive Committee held four regular
meetings and one telephonic meeting during 1998.
The Audit Committee, currently consisting of Mrs. Greenough , Mr.
Hormats, and Dr. Cavanaugh 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 one meeting during 1998.
11
<PAGE> 14
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 11 regular and one
telephonic meeting during 1998.
The Nominating Committee, currently consisting of Drs. Haseltine, Link,
and Drews, 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 one meeting during 1998.
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 44 Susan Bateson McKay has served as Vice President, Human
Resources 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. 48 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
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.
</TABLE>
12
<PAGE> 15
<TABLE>
<S> <C> <C>
Arthur M. Mandell 46 Arthur Mandell has served as Senior Vice President,
Corporate 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 models for
finance and engineering. Mr. Mandell also serves as a
Director of Vascular Genetics, Inc.
Steven C. Mayer 45 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. Prior to joining TheraTech, Inc., Mr.
Mayer was involved in the formation of Myriad Genetics
and was Vice President and Chief Financial Officer of
NPI, and agricultural biotechnology company. Mr. Mayer
holds a masters degree in Business Administration from
Stanford University.
</TABLE>
PROPOSAL 2 - 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, 1999,
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.
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, 1999.
13
<PAGE> 16
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION OF DIRECTORS
In 1998, 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 $25,000 per year. Other directors
received no compensation for their services to the Company as directors. Each
non-employee director is also entitled to receive (i) an automatic grant of
options to purchase 10,000 shares of Common Stock on the date that each
non-employee director is first elected or appointed as a director and (ii) an
annual automatic grant of an option to purchase 2,000 shares of Common Stock.
All directors are reimbursed for expenses incurred in connection with attending
meetings of the Board of Directors.
EXECUTIVE COMPENSATION
The employees named in the following table were the Company's Chief
Executive Officer and the four highest-paid executive officers during 1998 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------- --------------------------------------
Awards
---------------------
Restricted
Other Annual Stock All Other
Salary(1) Bonus Compensation(2) Awards(3) Options(4) Compensation
Name and Principal Position Year ($) ($) ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William A. Haseltine, Ph.D. 1998 364,539 160,000 66,287(5) 110,000
Chief Executive Officer 1997 349,503 150,000 69,486(5) 500,000
1996 330,000 150,000 68,637(5)
Melvin D. Booth(6) 1998 336,771 - 943,815(6)
President and 1997 324,327 125,000 34,119(6) 75,000
Chief Operating Officer 1996 300,000 125,000
Craig A. Rosen, Ph.D. 1998 286,631 130,000 75,000
Sr. Vice President 1997 274,443 120,000 75,000
1996 252,600 100,000 45,000
James H. Davis, Ph.D., J.D.(7) 1998 213,723 75,000 25,000
Sr. Vice President 1997 126,154 70,000 170,000
Arthur M. Mandell(8) 1998 203,723 75,000 25,000
Sr. Vice President 1997 150,000 66,620 173,562(8) 170,000
</TABLE>
- ----------
(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, 1998, 1997 and 1996.
14
<PAGE> 17
(4) The Company has awarded no Stock Appreciation Rights.
(5) These amounts include $47,436, $52,134, and $51,285 in imputed interest
for 1998, 1997 and 1996 respectively, on an interest-free loan to Dr.
Haseltine. See --Loans to Executive Officers.
(6) On November 13, 1998, Mr. Booth resigned from the Company as President and
Chief Operating Officer. The 1998 Other Compensation includes $926,167 in
profits on the exercise and sale of stock options. The 1997 Other
Compensation is for car allowances.
(7) Joined the Company on May 14, 1997.
(8) Joined the Company on March 17, 1997. Other Annual Compensation includes
$173,562 for relocation costs and other compensation related to his
joining the Company
The following table sets forth information concerning grants to the Named
Executive Officers of options to purchase shares of the Company's Common Stock.
OPTIONS GRANTED IN 1998
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------
Percent of
total options Exercise Potential realizable value
granted to all price at assumed annual rates of
Options employees in per share Expiration stock price appreciation
Name (#) fiscal year ($) date for option term(1)
5%($) 10%($)
- -------------------------- ---------- ---------------- ---------- ------------ -----------------------------
<S> <C> <C> <C> <C> <C> <C>
William A. Haseltine, Ph.D. 80,000 6% 33.88 12/2/2008 1,590,282 4,137,480
30,000 2% 40.00 12/2/2008 412,606 1,367,805
Melvin D. Booth(2) None
Craig A. Rosen, Ph.D. 50,000 4% 33.88 12/2/2008 993,926 2,585,925
25,000 2% 40.00 12/2/2008 343,838 1,139,838
James H. Davis 25,000 2% 33.88 12/2/2008 496,963 1,292,963
Arthur M. Mandell 25,000 2% 33.88 12/2/2008 496,963 1,292,963
</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.
(2) On November 13, 1998, Mr. Booth resigned from the Company as President and
Chief Operating Officer.
15
<PAGE> 18
The following table sets forth information with respect to option
exercises by and year-end values during 1998 for the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT END OF FISCAL YEAR
<TABLE>
<CAPTION>
Value of unexercised
Number of unexercised options in-the-money options
Shares at fiscal year-end at fiscal year-end
acquired on Value (Exercisable/ (Exercisable/
exercise Realized unexercisable) unexercisable)(1)
Name # ($) (#) ($)
- -------------------------- ----------- ---------------- ------------------------------ -----------------------
<S> <C> <C> <C> <C>
William A. Haseltine, Ph.D. None None 67,500/662,500 274,238/1,835,313
Melvin D. Booth(2) None None 74,405/None 823,143/None
Craig A. Rosen, Ph.D. 4,000 118,700 100,364/189,158 1,359,087/1,079,955
James H. Davis, Ph.D., J.D. None None 41,891/153,109 343,004/1,091,156
Arthur M. Mandell None None 59,208/135,792 484,795/949,365
</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, 1998 of $35.56 per share.
(2) On November 13, 1998, Mr. Booth resigned from the Company as President and
Chief Operating Officer.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
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 as determined by the Board of Directors ($400,000 as of January 1,
1999), 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 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 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 ($310,000 as of January 1, 1999), 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
16
<PAGE> 19
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 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 ($240,000 as of January 1,
1999) 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.
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 ($240,000 as of January 1, 1999) 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 July 1998, the Company established a Key Executive Severance Plan for
the Chief Executive Officer, the President and other key employees of the
Corporation, and pursuant to that plan, the Company entered into agreements
with the Named Executive Officers. The agreements provide that in the event the
executive's employment is terminated by the Company without cause or by the
Executive for good reason, in either case within 18 months of a Change in
Control of the Company (as defined in the Plan), the Company shall make a cash
payment to the executive equal to 1.5 times the sum of the executive annual
salary plus bonus (2.0 times in the case of the CEO) and the executive will be
entitled to continue to participate in the Company's group medical, dental,
life and disability programs for a period of eighteen months (twenty-four
months in the case of the CEO). In addition, the Key Executive Severance Plan
provides that upon a Change in Control, all option plans will vest unless the
options are assumed or replaced in connection with the Change in Control and
the assumed or replacement options will vest in the event the executive's
employment is terminated without cause or the executive resigns for good
reason, in either case within 18 months of the Change in Control. Each
executive also agreed to certain confidentiality and non-solicitation
provisions as a condition to participation in the Plan.
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.
17
<PAGE> 20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1, 1998 until February 11, 1998, 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.
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. Salaries for 1998 were set based on the above factors
and after review of industry comparables and discussion with a leading
compensation consultant.
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, 1998, the Committee considered in addition
to the individualized goals, the Company's significant progress in conducting
clinical trials of new drug candidates and success in defining possible new
therapeutic proteins for internal development or out-licensing, progress in the
construction of a process development and manufacturing facility, continued
progress within collaborations previously established and establishment of new
collaborations, and further additions to the Company's intellectual property
and to its capability to convert this to product development programs.
18
<PAGE> 21
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 170,000
shares in 1998.
In September 1998, the Committee reviewed all outstanding stock options
that had been awarded to employees, including the named executive officers. The
Committee considered the recent market conditions that resulted in a
significant reduction in the market price of the Company's common stock, such
that over 65% of all outstanding Company stock options had an exercise price
above the market price. The Committee believed that the reduction in the market
price was due primarily to market conditions relating to the stock market and
the biotechnology industry, in general, and not to any specific matter
associated with the Company or its performance. Because of the highly
competitive job market in the biotechnology industry and the need to retain and
provide incentives to key employees, the Committee concluded that it was in the
Company's best interests to reprice options effective September 16, 1998, for
all employees, including all named executive officers, other than Dr.
Haseltine. A decision on Dr. Haseltine was deferred until additional
information on his options could be assembled and analyzed. After such review
and in light of the Committee's previous decision with respect to all other
employees, the Committee decided on October 7, 1998 to reprice options for
150,000 shares previously granted to Dr. Haseltine on January 21, 1997 and
120,000 shares previously granted to Dr. Haseltine on January 2, 1998. All
repriced options have an exercise price equal to the market price of the
underlying stock at the time of repricing. The repricing did not change the
vesting term or other conditions of the options.
<TABLE>
<CAPTION>
10-YEAR OPTION REPRICINGS
------------------------------------- Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at New Remaining
Options Time of Time of Exercise at Date of
Name Date Repriced Repricing Repricing Price Repricing
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William A Haseltine Ph.D. 07-Oct-98 150,000 $ 28.25 $ 41.00 $ 28.25 8.3
Chief Executive Officer 07-Oct-98 120,000 $ 28.25 $ 40.63 $ 28.25 9.2
Melvin D. Booth(1) - - - - - -
Craig A. Rosen Ph.D 16-Sep-98 45,000 $ 27.38 $ 38.25 $ 27.38 8.3
Sr. Vice President 16-Sep-98 75,000 $ 27.38 $ 39.50 $ 27.38 9.3
James H. Davis Ph.D., J.D. 16-Sep-98 150,000 $ 27.38 $ 36.75 $ 27.38 8.7
Sr. Vice President 16-Sep-98 20,000 $ 27.38 $ 39.50 $ 27.38 9.3
Arthur M. Mandell 16-Sep-98 150,000 $ 27.38 $ 36.75 $ 27.38 8.5
Sr. Vice President 16-Sep-98 20,000 $ 27.38 $ 39.50 $ 27.38 9.3
</TABLE>
(1) On November 13, 1998, Mr. Booth resigned as the Company's President and
Chief Operating Officer. No options held by Mr. Booth were repriced.
Chief Executive Officer's Compensation. The Committee awarded Dr. Haseltine a
bonus of $160,000 for the fiscal year ended December 31, 1998. In addition,
effective January 1, 1999, Dr. Haseltine's base salary was increased from
$365,000 per year to $400,000 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 1998, 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
19
<PAGE> 22
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 significant progress in
developing new drug candidates. Organizational development is keeping pace with
the expanding opportunities.
In December 1998, the Committee reviewed Dr. Haseltine's stock options in
light of the progress the Company had made in the clinical development of
therapeutic proteins and in the identification of new preclinical drug
candidates. Because of these achievements, and based on the advice of a leading
compensation consultant, the Committee decided to grant additional options for
110,000 shares, effective December 2, 1998, on the following terms:
<TABLE>
<S> <C>
80,000 shares at market price ($33.875 as of December 2, 1998)
vesting over five years.
30,000 shares at $40 per share (15% over market price as of
December 2, 1998) vesting over five years.
</TABLE>
The Committee also granted additional options for 10,000 shares at
$40.00 or the fair market value, whichever was higher, as of January 5, 1999.
The grant was made effective as of January 1999 to insure the deductibility of
executive compensation.
Compensation Deduction Limit. The Committee has considered the $1
million limit for federal income tax purposes 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
20
<PAGE> 23
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 31, 1993 in the Company's Common Stock and in each of the
foregoing indices and assumes the reinvestment of dividends.
[PERFORMANCE GRAPH CHART]
<TABLE>
<CAPTION>
Nasdaq Nasdaq
US Pharma HGS
<S> <C> <C> <C>
93 100.00 100.00 100.00
94 97.75 75.26 83.10
95 138.24 137.69 215.49
96 170.03 138.09 229.58
97 208.65 142.69 223.94
98 292.80 183.10 200.35
</TABLE>
21
<PAGE> 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SmithKline Beecham was a 5% beneficial stockholder of the Company in 1998.
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.
SmithKline Beecham previously was entitled to a right of first refusal to
purchase new shares of common stock in any issuance of equity securities by the
Company. SmithKline Beecham has now permanently waived all rights of first
refusal.
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
Collaboration Agreements are 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.
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, Mr. Mandell filed a Form 4 late.
22
<PAGE> 25
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, 1998, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES, TO EACH OF THE COMPANY'S STOCKHOLDERS OF
RECORD ON MARCH 31, 1999, 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 2000 ANNUAL MEETING
The deadline for submission of stockholder proposals to be considered for
inclusion in the proxy statement and form of proxy relating to the 2000 Annual
Meeting of Stockholders is December 18, 1999. Any such proposal received by the
Corporation's principal executive offices in Rockville, Maryland after such
date will be considered untimely and may be excluded from the proxy statement
and form of proxy.
The deadline for submission of stockholder proposals to be presented at
the 2000 Annual Meeting of Stockholders, but which will not be included in the
proxy statement and form of proxy relating to such meeting, is March 2, 2000.
Any such proposal received by the Corporation's principal executive offices in
Rockville, Maryland after such date will be considered untimely and the persons
named in the proxy for such meeting may exercise their discretionary voting
power with respect to such proposal.
By Order of the Board of Directors,
JAMES H. DAVIS, Secretary
April 16, 1999
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.
23
<PAGE> 26
HUMAN GENOME SCIENCES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1999
The undersigned hereby appoints WILLIAM A. HASELTINE, Ph.D. and
JAMES H. DAVIS, Ph.D., 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 19, 1999 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 PROPOSAL.
(CONTINUED ON THE OTHER SIDE)
<PAGE> 27
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HUMAN GENOME SCIENCES, INC.
MAY 19, 1999
\/ PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED \/
A [X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE
FOR all nominees WITHOLD
listed to the right AUTHORITY
(except as written to to vote for all nominees
the contrary below) listed to the right
1. To elect [ ] [ ]
3 directors.
To withhold authority to vote for any nominee(s),
write the name(s) of the nominee(s) below:
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
- -------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW
NOMINEES: Max Link, Ph.D.
Craig Rosen, Ph.D.
Beverly Sills Greenough
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young, LLP as the [ ] [ ] [ ]
Company's independent public accountants for the fiscal
year ending December 31, 1999.
3. 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 PROPOSAL.
The undersigned hereby acknowledges receipt of a copy of the Company's 1998
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.
