def14a
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 þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Rule 14a-11c or Rule 14a-12
Human Genome Sciences, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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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): |
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Fee paid previously with preliminary materials. |
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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
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Form, Schedule or Registration Statement No.: |
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 11, 2011
The 2011 annual meeting of stockholders of Human Genome
Sciences, Inc. will be held at the Gaithersburg Marriott
Washingtonian Center, 9751 Washingtonian Boulevard,
Gaithersburg, Maryland 20878 on Wednesday, May 11, 2011 at
9:30 a.m., local time.
The meeting is being held for the following purposes, which are
more fully described in the proxy statement that accompanies
this notice.
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To elect eleven directors to serve until the next annual meeting
or until their successors are elected and qualified.
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To ratify the appointment of Ernst & Young LLP as the
companys independent registered public accounting firm for
fiscal year 2011.
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To approve the amendment of the companys stock incentive
plan.
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To conduct an advisory vote on executive compensation.
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To conduct an advisory vote regarding the frequency of
submission to stockholders of an executive compensation advisory
vote.
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To act upon any other matter that may properly come before the
meeting or any adjournment or postponement of the meeting.
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As of the date of this notice, the company has received no
notice of any matters, other than those set forth above, that
may properly be presented at the annual meeting. If any other
matters are properly presented for consideration at the meeting,
the persons named as proxies on the enclosed proxy card, or
their duly constituted substitutes, will be deemed authorized to
vote the shares represented by proxy or otherwise act on those
matters in accordance with their judgment.
The close of business on March 18, 2011 has been
established as the record date for determining stockholders
entitled to vote at the annual meeting.
Your vote is very important. Please read the proxy
statement and then, whether or not you expect to attend the
annual meeting, and no matter how many shares you own, vote your
shares as promptly as possible. You can vote by proxy over the
internet, by telephone or by mail by following the instructions
provided in the proxy statement and on the proxy card.
Submitting your proxy now will help ensure a quorum and avoid
added proxy solicitation costs. If you attend the meeting, you
may vote in person, even if you have previously submitted a
proxy.
You may revoke your proxy at any time before the vote is taken
by delivering to the companys Secretary a written
revocation, submitting a proxy with a later date or by voting
your shares in person at the meeting, in which case your prior
proxy will be disregarded.
By Order of the Board of Directors,
James H. Davis, Secretary
March 30, 2011
Rockville, Maryland
TABLE OF
CONTENTS
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A-1
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HUMAN
GENOME SCIENCES, INC.
14200 Shady Grove Road
Rockville, Maryland 20850
PROXY
STATEMENT
This proxy statement is being furnished to you by the Board of
Directors of Human Genome Sciences, Inc. to solicit your proxy
to vote your shares at our 2011 annual meeting of stockholders,
and at any adjournment or postponement of the meeting. The
meeting will be held at the Gaithersburg Marriott Washingtonian
Center, 9751 Washingtonian Boulevard, Gaithersburg, Maryland
20878 on Wednesday, May 11, 2011 at 9:30 a.m., local
time. This proxy statement and the enclosed proxy card and 2010
annual report are being sent to stockholders on or about
March 30, 2011.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
Why am I
receiving this annual meeting information and proxy?
You are receiving this annual meeting information and proxy from
us because you owned shares of common stock of HGS as of
March 18, 2011, the record date for the 2011 annual
meeting. The HGS Board of Directors has made these materials
available to you in connection with the boards
solicitation of proxies for use at our 2011 annual meeting.
This proxy statement describes issues on which you may vote and
provides you with other important information so that you can
make informed decisions. You are requested to vote on the
proposals described in this proxy statement and are invited to
attend the annual meeting.
What does
it mean to vote by proxy?
It means that you give someone else the right to vote your
shares in accordance with your instructions. In this way, you
ensure that your vote will be counted even if you are unable to
attend the annual meeting. When you submit your proxy by
internet, by telephone or by mail, you appoint each of James H.
Davis, our Executive Vice President, General Counsel and
Secretary, and David P. Southwell, our Executive Vice President
and Chief Financial Officer, or their respective substitutes or
nominees, as your representatives your
proxies at the meeting to vote your
shares in accordance with your instructions. If you give your
proxy but do not include specific instructions on how to vote,
the individuals named as proxies will vote your shares as the
board recommends, as noted below, and as the named proxies may
determine in their discretion with respect to any other matters
properly presented at the meeting.
Who is
entitled to vote at the annual meeting?
Holders of HGS common stock as of the close of business on the
record date, March 18, 2011, may vote at the 2011 annual
meeting, either in person or by proxy. As of the close of
business on March 18, 2011, there were
189,277,848 shares of HGS common stock outstanding and
entitled to vote. The common stock is the only authorized voting
security of the company, and each share of common stock is
entitled to one vote on each matter properly brought before the
2011 annual meeting.
How does
the Board of Directors recommend I vote on each of the
proposals?
The board recommends that you vote your shares in the following
manner:
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FOR the election of each of the 11 director nominees;
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FOR the ratification of the appointment of
Ernst & Young LLP as the companys independent
registered public accounting firm for fiscal year 2011;
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FOR approval of the amendment of the companys stock
incentive plan;
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FOR approval of the advisory vote on executive
compensation; and
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THREE YEARS with respect to the advisory vote on the
frequency of an executive compensation advisory vote.
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What is
the difference between holding shares as a stockholder of record
and as a beneficial owner?
You may own shares of HGS common stock in several different ways:
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Record Ownership. If your stock is represented
by one or more stock certificates registered in your name or if
you have a Direct Registration System account in your name
evidencing shares held in book-entry form, then you have a
stockholder account with our transfer agent, American Stock
Transfer & Trust Company and you are a
stockholder of record.
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Beneficial Ownership. If your shares are held
in a brokerage account or by a bank or other nominee, those
shares are held in street name and you are
considered the beneficial owner of the shares. As
the beneficial owner of those shares, you have the right to
direct your broker, bank or nominee how to vote your shares, and
you will receive separate instructions from your broker, bank or
other holder of record describing how to vote your shares. You
also are invited to attend the annual meeting. However, because
a beneficial owner is not the stockholder of record, you may not
vote these shares in person at the meeting unless you obtain a
legal proxy from the broker, bank or nominee that
holds your shares giving you the right to vote the shares at the
meeting.
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How can I
vote my shares before the annual meeting?
Even if you plan to attend the annual meeting, we recommend that
you vote before the meeting as described below so that your vote
will be counted if you later decide not to attend the meeting.
Voting by internet or by telephone is fast and convenient and
your vote is immediately confirmed and tabulated. Submitting a
proxy by internet, telephone or mail prior to the annual meeting
will not affect your right to attend the annual meeting and vote
in person.
If you hold shares in your own name as a stockholder of
record, regardless of whether you received your annual
meeting materials through the mail or via the internet, you may
vote before the annual meeting:
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By internet, following the instructions on the proxy card;
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By telephone, using the telephone number printed on the proxy
card; or
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By mail (if you received your proxy materials by mail) by
completing, signing and returning your proxy card in the
enclosed postage-paid envelope.
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If you vote by internet or by telephone, please do not mail in
your proxy card (unless you intend for it to revoke your prior
internet or telephone vote). Your internet or telephone vote
will authorize the named proxies to vote your shares in the same
manner as if you completed, signed and returned your proxy card.
If you are a beneficial owner of shares held in street
name, your broker, bank or other nominee will provide you
with materials and instructions for voting your shares. Please
check with your broker, bank or other nominee and follow its
voting procedures to vote your shares. Most brokers and nominees
offer voting procedures by internet, telephone and mail.
2
If I am
the beneficial owner of shares held in street name by my broker,
will my broker automatically vote my shares for me?
If you beneficially hold your shares in street name through a
brokerage account and you do not submit specific voting
instructions to your broker, your broker may generally vote your
shares in its discretion on matters designated as
routine under rules applicable to broker-dealers.
However, a broker cannot vote shares held in street name on
matters designated by these rules as non-routine,
unless the broker receives specific voting instructions from the
beneficial holder.
The proposal to ratify the appointment of the companys
independent registered public accounting firm for 2011 is
considered routine under these rules. All of the
other proposals to be submitted for a vote of stockholders at
the annual meeting are considered non-routine and,
therefore, are matters on which a broker may not exercise its
voting discretion. Accordingly, if you hold your shares in
street name through a brokerage account and you do not instruct
your broker how to vote with respect to these other proposals,
your broker may not vote on those proposals and your shares will
be considered broker non-votes on these proposals
and will not be taken into account in determining the outcome of
the vote on the matter. As a result, we strongly encourage you
to utilize the voting procedures made available to you through
your broker or other nominee and exercise your right to vote as
a stockholder.
What is a
broker non-vote and how would it affect the
vote?
A broker non-vote occurs when a nominee, such as a bank or
broker holding shares on behalf of a beneficial owner, does not
receive voting instructions from the beneficial owner of the
shares and does not have discretionary voting power with respect
to the proposal. Brokers will not have discretionary voting
power to vote your shares without your voting instructions on
any of the items being considered at the 2011 annual meeting,
except for the proposal to ratify the appointment of the
independent registered public accounting firm. Accordingly, if
you fail to provide your bank, broker or other nominee with
voting instructions on the other proposals being considered,
such failure will result in a broker non-vote with respect to
your shares on these proposals.
Because the approval requirement for Proposal 1 (the
election of directors) and Proposal 5 (the advisory vote
regarding the frequency of an advisory vote on executive
compensation) is a plurality of the votes cast (i.e., the
nominees and frequency preference that receive the most votes
will be the nominees elected and the frequency preference chosen
by stockholders), a broker non-vote will not affect the outcome
of these votes. On all of the other proposals, the affirmative
vote of a majority of the votes cast is required for approval of
the proposals. Broker non-votes are not considered votes cast on
the matter and, therefore, will not be taken into account in
determining the outcome of the vote on the matter.
What does
it mean if I receive more than one proxy card from the
company?
It means that you have more than one account for your HGS
shares. Please vote by internet or telephone using each of the
identification numbers, or complete and submit all proxies to
ensure that all of your shares are voted.
Can I
vote in person at the annual meeting?
Yes. If you hold shares in your own name as a stockholder of
record, you may attend the annual meeting and cast your vote at
the meeting by properly completing and submitting a ballot at
the annual meeting. If you are the beneficial owner of shares
held in street name, you must first obtain a legal
proxy from your broker, bank or other nominee and submit
that legal proxy along with a properly completed ballot at the
meeting. Under a legal proxy, the bank, broker or other nominee
confers to you all of its rights as a record holder to grant
proxies or to vote at the meeting.
3
What do I
need to bring to be admitted to the annual meeting?
All stockholders must present a form of personal photo
identification in order to be admitted to the meeting. In
addition, if your shares are held in the name of your broker,
bank or other nominee and you wish to attend the annual meeting,
you must bring an account statement or letter from the broker,
bank or other nominee indicating that you were the owner of the
shares on March 18, 2011.
How can I
change my vote or revoke my proxy?
If you hold shares in your own name as a stockholder of record,
you may change your vote or revoke your proxy at any time before
voting begins by:
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Notifying our Secretary in writing that you are revoking your
proxy;
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Delivering another proxy (either by internet, telephone or mail)
that is dated after the proxy you wish to revoke; or
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Attending the annual meeting and voting in person by properly
completing and submitting a ballot. (Attendance at the meeting,
in and of itself, will not cause your previously granted proxy
to be revoked unless you vote at the meeting.)
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Any written notice of revocation should be delivered to: Human
Genome Sciences, Inc., 14200 Shady Grove Road, Rockville, MD
20850, Attention: James H. Davis, Secretary. Alternatively, you
may hand deliver a written revocation notice, or a later dated
proxy, to the Secretary at the annual meeting before the voting
begins.
If you are the beneficial owner of shares held in street name,
please check with your broker or other nominee and follow the
procedures your broker or nominee provides if you wish to change
your vote with respect to those shares.
What are
the voting requirements to elect directors and approve the other
proposals described in the proxy statement?
The vote required to elect directors and approve each of the
matters scheduled for a vote at the annual meeting is set forth
below:
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Proposal
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Vote Required
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1.
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Election of directors
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Plurality of votes cast
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2.
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Ratification of appointment of
Ernst & Young LLP
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Majority of votes cast
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Amendment of the companys stock incentive plan
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Majority of votes cast
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4.
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Advisory vote on executive compensation
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Majority of votes cast
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5.
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Advisory vote regarding frequency of advisory vote on executive
compensation
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Plurality of votes cast
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A plurality of the votes cast at the meeting means
that the nominees and frequency preference that receive the most
votes will be the nominees elected and the frequency preference
chosen by stockholders.
What is
the quorum for the annual meeting and what happens
if a quorum is not present?
In order to conduct business at the annual meeting, the holders
of at least a majority of the total number of shares of HGS
common stock issued and outstanding and entitled to vote as of
the March 18, 2011 record date, or 94,638,925 shares,
must be present in person or represented by proxy. This
requirement is called a quorum. If you vote by
internet or by telephone, or submit a properly executed proxy
card, your shares will be included for purposes of determining
the existence of a quorum. Proxies marked abstain
and broker non-votes also will be counted in
determining the presence of a quorum. If the shares present in
person or represented by proxy at the annual meeting are not
sufficient to constitute a quorum, the annual meeting may be
adjourned to a different time and place to permit further
solicitations of proxies sufficient to constitute a quorum.
4
What is
an abstention and how would it affect the
vote?
An abstention occurs when a stockholder submits a
proxy with explicit instructions to decline to vote regarding a
particular matter (or to withhold voting authority
in the election of directors). Abstentions are counted as
present for purposes of determining a quorum. An abstention will
have no effect on the outcome of the election of directors and
the advisory vote regarding the frequency of an advisory vote on
executive compensation. However, because an abstention is
considered a vote cast but it is not a vote
for a particular matter, it will have the same
effect as a vote against any of the other proposals.
Does the
company offer an opportunity to receive future proxy materials
electronically?
Yes. If you vote on the internet, simply follow the prompts for
enrolling in electronic proxy delivery service. This will reduce
the companys printing and postage costs, as well as the
number of paper documents you will receive.
If you are a stockholder of record, you may enroll in this
service at the time you vote your proxy or at any time after the
annual meeting and can read additional information about this
option and request electronic delivery by going to
www.proxyvote.com. If you hold shares beneficially,
please contact your broker or other nominee to enroll for
electronic proxy delivery.
If you already receive your proxy materials via the internet,
you will continue to receive them in this manner until you
instruct otherwise through the website referenced above.
Who will
conduct the proxy solicitation and how much will it
cost?
The solicitation is being made primarily through the mail, but
our directors, officers and employees may also engage in the
solicitation of proxies. We have retained the services of
Georgeson Inc. to assist in soliciting proxies. Georgeson will
solicit proxies by personal interview, telephone, facsimile and
mail. It is anticipated that the fee for those services will not
exceed $10,000 plus reimbursement for
out-of-pocket
expenses. The company will pay all the costs of the proxy
solicitation. Other than the compensation of Georgeson, no
compensation will be paid by us in connection with the
solicitation of proxies, except that we may reimburse brokers,
custodians, nominees and other record holders for their
reasonable
out-of-pocket
expenses in forwarding proxy materials to beneficial owners.
Who will
count the votes?
Broadridge Financial Solutions, Inc. will tabulate the votes
cast by internet, telephone and mail. Alan Esenstad, our
Controller, will tabulate any votes cast at the annual meeting
and will act as inspector of election to certify the results.
Where can
I find the voting results of the meeting?
We will publish the voting results in a
Form 8-K
within four business days after the annual meeting. You can read
or print a copy of that report by going to either the
companys website at www.hgsi.com under the section
Investors SEC Filings or the Securities
and Exchange Commissions website at www.sec.gov.
If you
have any questions about voting your shares or attending the
annual meeting, please contact our Investor Relations Department
at
(301) 610-5800.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 11,
2011
The companys proxy statement for the 2011 annual
meeting of stockholders and the companys annual report on
Form 10-K
for the fiscal year ended December 31, 2010 are available
at www.hgsi.com.
5
PROPOSALS TO
BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION
OF DIRECTORS
All of our directors are elected annually by stockholders. Each
of the 11 nominees for director listed below currently serves as
a director of the company and has been nominated for election to
hold office until the next annual meeting or until his or her
successor is elected and qualified. All of the nominees have
agreed to serve if elected. In the event that any nominee is
unable to stand for election, the board may reduce the number of
directors or the persons named in the proxy will vote for a
substitute nominee as they, in their discretion, shall
determine. We do not expect that any nominee will be unable to
stand for election.
Dr. Jürgen Drews will not be standing for re-election
and will be retiring from our Board of Directors effective at
the conclusion of this annual meeting, at which time the size of
the board will be reduced to 11 members. The company is grateful
to Dr. Drews for his years of valuable service to the
company.
Since the date of the companys 2010 annual meeting,
Dr. Colin Goddard, George J. Morrow and Gregory Norden were
appointed to the board upon the recommendation of the Nominating
and Governance Committee. Dr. Goddard and Mr. Norden
were recommended for consideration by the Nominating and
Governance Committee following the identification and
recommendation by a third-party search firm. Mr. Morrow was
recommended for consideration by the Nominating and Governance
Committee by our Chairman of the Board.
Our by-laws provide that directors are to be elected by a
plurality of votes cast, which means that those nominees who
receive the most votes will be elected. 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.
The Board of Directors has determined that all of our current
directors are qualified to serve as directors of the company. In
addition to the specific business experience listed below, each
of our directors has the tangible and intangible skills and
attributes that we believe are required to be an effective
director of the company, including experience at senior levels
in areas of expertise helpful to the company, a willingness and
commitment to assume the responsibilities required of a director
of the company and the character and integrity we expect of our
directors.
6
Set forth below is information regarding each director
nominees principal occupation, business experience,
directorships and qualifications:
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Director
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Principal Occupation, Business Experience,
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Name
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Age
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Since
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Directorships and Qualifications
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Richard J. Danzig
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2001
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Member of our Audit Committee and Finance Committee. Consultant to U.S. government on biological terrorism and Chairman of the Board of Directors of The Center for a New American Security. Mr. Danzig is a Senior Fellow of Yale Universitys Jackson Institute for Global Affairs, and a Senior Advisor to the Center for Strategic and International Studies and the Center for Naval Analyses. He is also a member of the Defense Policy Board, the Presidents Intelligence Advisory Board, and the U.S. Military European Command Advisory Board. He serves on the Boards of Directors of National Semiconductor Corporation, a public company, and several private companies, including Saffron Hill Investors Guernsey and the RAND Corporation. He served as Secretary of the Navy from 1998 to 2001 and as Under Secretary of the Navy from 1993 to 1997. He was a Traveling Fellow of the Center for International Political Economy and an Adjunct Professor at Syracuse Universitys Maxwell School of Citizenship & Public Affairs between 1997 and 1998. He was a partner in the law firm of Latham & Watkins from 1981 to 1993. Mr. Danzig received a B.A. degree from Reed College, a J.D. degree from Yale University, and Bachelor of Philosophy and Doctor of Philosophy degrees from Oxford University.
We believe that Mr. Danzigs qualifications to serve on our Board of Directors include his experience in government, including his prior role as Secretary of the Navy, his prior legal experience and his position as a director of other public companies.
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Colin Goddard, Ph.D.
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51
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2010
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Member of our Board of Directors. Since 2011, Dr. Goddard has served as Executive Chairman of Coferon, Inc., a private biotechnology platform company. From October 1998 until its acquisition by Astellas Pharmaceuticals, Inc. in July 2010, Dr. Goddard served as Chief Executive Officer of OSI Pharmaceuticals, Inc. and member of its Board of Directors. He joined OSI as a scientist in 1989 and held positions that included Director of Drug Discovery, Chief Operating Officer and President. He also chaired the OSI board from 2000-2002. Prior to his employment at OSI, Dr. Goddard was a research fellow at the National Cancer Institute in Bethesda, MD. Dr. Goddard serves on the boards of PanOptica, Inc. and Zelos Therapeutics, Inc., both private biotech companies, and Abilities! Inc., an internationally recognized charity for the disabled. He is a member of the Board of Trustees of Hofstra University. He received his Ph.D. in Cancer Pharmacology from the University of Aston in Birmingham, U.K. and a B.Sc. (Hons) in Biochemistry from the University of York, U.K.
We believe that Dr. Goddards qualifications to serve on our Board of Directors include his previous position as Chief Executive Officer of a public biopharmaceutical company and his extensive drug discovery and research experience both at a biopharmaceutical company and at the National Cancer Institute.
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Director
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Directorships and Qualifications
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Maxine Gowen, Ph.D.
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53
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2008
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Member of our Nominating and Governance Committee. Since 2007,
Dr. Gowen has been the President and Chief Executive
Officer of Trevena, Inc., a privately-held drug discovery
company. Prior to joining Trevena, Dr. Gowen held a variety
of leadership roles at GlaxoSmithKline (GSK) over a period of
fifteen years, most recently as Senior Vice President of
GSKs Center of Excellence for External Drug Discovery. In
that position, Dr. Gowen built and led a new R&D
division with a mission to create a drug discovery portfolio
through business development alliances with innovative
healthcare companies. She joined GSK in 1992 to lead the
Musculoskeletal Diseases Division, where she initiated and led a
number of preclinical and clinical development programs. Before
GSK, Dr. Gowen was Senior Lecturer and Head, Bone Cell
Biology Group, Department of Bone and Joint Medicine, of the
University of Bath, U.K. Dr. Gowen has been honored with a
number of research awards and prizes, has authored more than 125
peer-reviewed publications, reviews and book chapters, and holds
a number of patents. She received her Ph.D. from the University
of Sheffield, U.K., an M.B.A. with academic honors from The
Wharton School of the University of Pennsylvania, and a B.Sc.
with Honors in Biochemistry from the University of Bristol, U.K.
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We believe that Dr. Gowens qualifications to serve on
our Board of Directors include her significant experience in the
drug discovery field, including her position as Chief Executive
Officer of Trevena, Inc. and her prior drug discovery and
development positions at GlaxoSmithKline.
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Tuan Ha-Ngoc
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59
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2005
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Chair of our Audit Committee and member of our Compensation
Committee. Since 2002 Mr. Ha-Ngoc has been President and Chief
Executive Officer of AVEO Pharmaceuticals, Inc., a public
biopharmaceutical company focused on the discovery and
development of novel cancer therapeutics. From 1999 to 2002, he
was co-founder, President and Chief Executive Officer of
deNovis, Inc., an enterprise-scale software development company
for the automation of healthcare administrative functions. From
1998 to 1999,
Mr. Ha-Ngoc
was Corporate Vice President of Strategic Development for Wyeth,
following Wyeths acquisition of Genetics Institute, where
Mr. Ha-Ngoc served as Executive Vice President with
responsibility for corporate development, commercial operations
and European and Japanese operations. Prior to joining Genetics
Institute in 1984, Mr. Ha-Ngoc held various marketing and
business positions at Baxter Healthcare, Inc. He received his
M.B.A. degree from INSEAD and his Masters degree in
pharmacy from the University of Paris, France. Mr. Ha-Ngoc
serves on the Board of Directors of AVEO Pharmaceuticals, Inc.,
and on the boards of directors of a number of academic and
nonprofit organizations, including the Harvard School of Dental
Medicine, the Tufts School of Medicine, the Boston Philharmonic
Orchestra and the International Institute of Boston.
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8
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Director
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Principal Occupation, Business Experience,
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Name
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Directorships and Qualifications
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We believe that Mr. Ha-Ngocs qualifications to serve on
our Board of Directors include his significant experience in the
cancer research field and corporate strategy development,
including his leadership role as Chief Executive Officer at AVEO
Pharmaceuticals, Vice President for Strategic Development at
Wyeth and his experiences in commercializing potential drug
candidates at Genetics Institute and Baxter Healthcare,
including his international commercialization experience in
Europe and Japan.
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A. N. Jerry Karabelas, Ph.D.
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58
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2002
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Chairman of the Board, Chair of our Finance Committee and member of our Compensation Committee. Dr. Karabelas has been a Partner of Care Capital LLC since 2001. He served as Founder and Chairman of Novartis BioVenture Fund from 2000 to 2001, Head of Healthcare and CEO of Worldwide Pharmaceuticals at Novartis, AG from 1998 to 2000, Executive Vice-President, Pharmaceuticals at SmithKline Beecham from 1997 to 1998, President, North American Pharmaceuticals at SmithKline Beecham from 1993 to 1997, and Vice President of U.S. Marketing, SmithKline Beecham, from 1990 to 1993. Dr. Karabelas is a Visiting Committee Member of MIT Health Studies & Technology, a member of the Board of Vanda Pharmaceuticals Inc., a public company, and serves on the boards of several private companies, including Chairman of the Board of Directors of Cyrenaic Pharmaceuticals, Inc. and member of the board of directors of Edusa Pharmaceuticals, Inc., NormOxys, Inc. and Inotek Pharmaceuticals.
We believe that Dr. Karabelass qualifications to serve on our Board of Directors include his substantial experience in business development and clinical development and his prior roles at Novartis and SmithKline Beecham where he was responsible for the marketing and commercialization of new drug candidates.
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9
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Director
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Directorships and Qualifications
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John L. LaMattina, Ph.D.
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61
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2008
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Member of our Compensation Committee and Finance Committee.
Dr. LaMattina served as Senior Vice President, Pfizer Inc.,
and President, Pfizer Global Research & Development from
2003 to 2007. Dr. LaMattina joined Pfizer Inc. in 1977 and
held positions of increasing responsibility for Pfizer Central
Research, including Vice President of U.S. Discovery Operations
in 1993, Senior Vice President of Worldwide Discovery Operations
in 1998 and Senior Vice President of Worldwide Development in
1999. Dr. LaMattina is a Senior Partner at PureTech
Ventures and a member of the Board of Directors of Ligand
Pharmaceuticals Incorporated, a public company. He also serves
on the Board of Trustees of Boston College, the Board of
Directors of the Terri Brodeur Breast Cancer Foundation and the
Scientific Advisory Board of Trevena, Inc. He holds a number of
U.S. patents and is the author of a number of scientific
publications, including a book entitled: Drug
Truths Dispelling the Myths of Pharma
R&D. He graduated cum laude from Boston College with
a B.S. in Chemistry and received a Ph.D. in Organic Chemistry
from the University of New Hampshire. He previously served on
the Board of Directors of Thermo Electron Corporation from 2004
to 2006 and Neurogen Corporation from 2008 to 2009.
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We believe that Dr. LaMattinas qualifications to
serve on our Board of Directors include his substantial
experience in drug discovery and development, including his
prior positions with Pfizer, Inc.
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Augustine Lawlor
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54
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2004
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Chair of our Compensation Committee and member of our Audit Committee and Finance Committee. Mr. Lawlor has been a managing director of HealthCare Ventures LLC since 2000. Prior to joining HealthCare Ventures, Mr. Lawlor served as Chief Operating Officer of LeukoSite from 1997 to 2000. Before joining LeukoSite, Mr. Lawlor served as Chief Financial Officer and Vice President of Corporate Development of Alpha-Beta Technology. He was previously Chief Financial Officer and Vice President, Business Development, of BioSurface Technology. Mr. Lawlor serves on the Board of Directors of Cardiovascular Systems, Inc., a public company, and a number of private companies, including Catalyst, GlobeImmune, Inc., Synovex, U.S. Genomics, Inc. and VaxInnate, Corp. He received a B.A. degree from the University of New Hampshire, where he was elected to Phi Beta Kappa, and received a masters degree in management from Yale University.
We believe that Mr. Lawlors qualifications to serve on our Board of Directors include his significant experience in venture financing, his financial and operational experience with other public pharmaceutical companies and his experience in new drug development through his portfolio companies and at LeukoSite and Alpha-Beta Technology.
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Director
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Principal Occupation, Business Experience,
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Since
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Directorships and Qualifications
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George J. Morrow
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59
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2011
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Member of our Board of Directors. Mr. Morrow served as Executive Vice President, Global Commercial Operations at Amgen Inc. from 2003 until his retirement in 2011. Prior to that he served as Executive Vice President of Worldwide Sales and Marketing at Amgen from 2001 to 2003. From 1992 to 2001, Mr. Morrow held multiple leadership positions at GlaxoSmithKline Inc. and its subsidiaries, last serving as President and Chief Executive Officer of Glaxo Wellcome Inc. Mr. Morrow serves on the Board of Directors of Align Technology, Inc., a public company, and is a member of the Duke University Fuqua School of Business Advisory Board and Medical Center Board of Visitors. Mr. Morrow holds a B.S. in Chemistry from Southampton College, Long Island University, an M.S. in Biochemistry from Bryn Mawr College and an M.B.A. from Duke University.
We believe that Mr. Morrows qualifications to serve on our Board of Directors include his considerable business experience in the biopharmaceutical industry at Amgen and GlaxoSmithKline, including his particular experience in the marketing and commercialization of new drug candidates.
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Gregory Norden
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53
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2011
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Member of our Board of Directors. From 1989 to 2010, Mr. Norden held various senior positions with Wyeth/American Home Products Corp., most recently as Wyeths Senior Vice President and Chief Financial Officer. Prior to his affiliation with Wyeth, he served as Audit Manager at Arthur Andersen & Company. Mr. Norden also serves on the Board of Directors of WelchAllyn, a leading global provider of medical diagnostic equipment. Mr. Norden received an M.S. in Accounting from Long Island University C.W. Post and a B.S. in Management/Economics from the State University of New York Plattsburgh.
We believe that Mr. Nordens qualifications to serve on the Board of Directors include his extensive financial and accounting expertise and experience at Wyeth and at Arthur Andersen & Company and his significant experience in the biopharmaceutical industry.
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H. Thomas Watkins
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58
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2004
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Serves as our President and Chief Executive Officer and as a
member of our Board of Directors. Mr. Watkins joined us in 2004.
From 1998 to 2004, he served as President of TAP Pharmaceutical
Products, Inc. He was employed by Abbott Laboratories from
September 1985 to August 1998 in various positions in the
Pharmaceutical Products Division, Diagnostics Division and
Health Systems Division. Mr. Watkins serves on the boards of
directors of Vanda Pharmaceuticals, Inc., a public company, the
U.S. Chamber of Commerce, the Biotechnology Industry
Organization (BIO) and the National Symphony Orchestra. Mr.
Watkins is a Trustee of The College of William and Mary
Foundation and a member of the Board of Trustees of The Mason
School of Business of The College of William and Mary. Mr.
Watkins holds an M.B.A. from the University of Chicago Graduate
School of Business and a B.A. in business administration from
the College of William & Mary.
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11
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Director
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Principal Occupation, Business Experience,
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Name
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Age
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Since
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Directorships and Qualifications
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We believe that Mr. Watkinss qualifications to serve on
our Board of Directors include his position as our President and
Chief Executive Officer and his significant experience in the
biopharmaceutical industry.
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Robert C. Young, M.D.
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71
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2005
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Chair of our Nominating and Governance Committee. Since 2009, Dr. Young has been President of RCY Medicine, a health policy consulting firm. He formerly served as Chancellor of Fox Chase Cancer Center in Philadelphia, Pennsylvania from 2007 to 2009, and as President of Fox Chase from 1988 to 2007. From 1974 to 1988, he was employed at the National Cancer Institute as Chief, Medicine Branch. Dr. Young was Chairman of the Board of Scientific Advisors of the National Cancer Institute (NCI) from 2004 to 2009 and formerly served on the National Cancer Policy Board at the Institute of Medicine. He is a past President of the American Society of Clinical Oncology (ASCO), the American Cancer Society and the International Gynecologic Cancer Society. He was awarded ASCOs Distinguished Service Award for Scientific Leadership in 2004 and was co-recipient of the 2002 Bristol-Myers Squibb Award for Distinguished Achievement in Cancer Research for his research in ovarian cancer. He also serves on the boards of directors of West Pharmaceutical Services, Inc. and AVEO Pharmaceuticals, Inc., public companies, and is past Chairman of the Comprehensive Cancer Network. Dr. Young serves as Chairman of the editorial board of Oncology Times. Dr. Young received his B.Sc. degree in zoology in 1960 from Ohio State University and his M.D. in 1965 from Cornell University Medical College. Following his internship at New York Hospital, he completed his residency at NCI and Yale-New Haven Medical Center. He is board-certified in internal medicine, hematology and oncology by the American Board of Internal Medicine.
We believe that Dr. Youngs qualifications to serve on our Board of Directors include his substantial experience in cancer research as head of the Fox Chase Cancer Center and as Chairman of the Board of Scientific Advisors of the National Cancer Institute as well as his prior role with the National Cancer Policy Board at the Institute of Medicine, as well as his accomplished background as a board-certified physician.
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The Board
of Directors recommends that you vote FOR all eleven nominees
under Proposal 1.
CORPORATE
GOVERNANCE
Information
Regarding the Board of Directors
The Board of Directors held eight meetings during 2010. No
director attended fewer than 75% of the total number of meetings
of the Board of Directors and of the committees of which the
director was a member during 2010. We expect each member of our
Board of Directors to attend the annual meeting and all future
meetings of stockholders. All nine members of the Board of
Directors attended the 2010 annual meeting of stockholders. The
Board of Directors has determined that each member of the Board
of Directors, other than Mr. Watkins, is
independent in accordance with the listing standards
of The NASDAQ Stock Market. Non-
12
management directors meet in executive session without
management present each time the Board of Directors holds its
regularly scheduled meetings. Dr. Karabelas, our Chairman
of the Board, has been designated by the Board of Directors to
act as the presiding director for such executive sessions of
non-management directors.
Board
Committees and Charters
The Board of Directors has an Audit Committee, a Compensation
Committee, a Nominating and Governance Committee and a Finance
Committee. The Board of Directors has adopted a written charter
for each of these committees, copies of which are available
under the Investors Corporate Governance
section of our website at www.hgsi.com.
Audit
Committee
The Audit Committee, currently consisting of
Messrs. Ha-Ngoc, Danzig and Lawlor, provides the
opportunity for direct contact between our independent
registered public accounting firm and our Board of Directors.
The Board of Directors has determined that each of the members
of the committee is independent in accordance with
the NASDAQ listing standards and Messrs. Ha-Ngoc and Lawlor
meet the criteria of the Securities and Exchange Commission for
an audit committee financial expert. The Audit
Committee engages the independent registered public accounting
firm, reviews with the independent registered public accounting
firm the plans and results of the audit engagement, reviews the
adequacy of our internal accounting controls and oversees our
financial reporting process. The Audit Committee held five
meetings during 2010. A copy of the Audit Committee Report is
included in this proxy statement on page 20.
Compensation
Committee
The Compensation Committee, currently consisting of
Drs. Karabelas and LaMattina and Messrs. Lawlor and
Ha-Ngoc, determines all compensation paid or awarded to our
executive officers and senior officers (those with the rank of
Vice President or above) and administers our stock incentive
plan and our employee stock purchase plan. The Board of
Directors has determined that each of the members of the
committee is independent in accordance with the
NASDAQ listing standards. The Compensation Committee held seven
meetings during 2010. A copy of the Compensation Committee
Report is included in this proxy statement on page 45.
Nominating
and Governance Committee
The Nominating and Governance Committee, currently consisting of
Drs. Drews, Young and Gowen, is responsible for reviewing
our corporate governance principles, proposing a slate of
directors for election by our stockholders at each annual
meeting and proposing candidates to fill any vacancies on our
Board of Directors. The Board of Directors has determined that
each of the members of the committee is independent
in accordance with the NASDAQ listing standards. The committee
is responsible for considering nominees for board membership
recommended by stockholders. Subject to complying with our
by-laws, any stockholder wishing to propose a nominee may submit
a recommendation in writing to our Secretary, indicating the
nominees qualifications and other relevant biographical
information. The Nominating and Governance Committee held three
meetings during 2010.
Finance
Committee
The Finance Committee, currently consisting of Drs. Karabelas
and LaMattina and Messrs. Danzig and Lawlor, reviews and
monitors our financial plans and programs and capital structure.
The Board of Directors has determined that each of the members
of the committee is independent in accordance with
the NASDAQ listing standards. The Finance Committee held five
meetings during 2010.
Corporate
Governance Guidelines
Our Board of Directors, upon the recommendation of the
Nominating and Governance Committee, adopted a set of corporate
governance guidelines, a copy of which is available under the
Investors
13
Corporate Governance section of our website at
www.hgsi.com. We continue to monitor our corporate
governance guidelines to comply with rules adopted NASDAQ, the
Securities and Exchange Commission and by industry practice.
Code of
Ethics and Business Conduct
Our Board of Directors has adopted a written code of ethics and
business conduct, a copy of which is available under the
Investors Corporate Governance section
of our website at www.hgsi.com. We require all directors,
officers and employees to adhere to this code in addressing the
legal and ethical issues encountered in conducting their work.
The code requires that employees avoid conflicts of interest,
comply with all laws and other legal requirements, conduct
business in an honest and ethical manner and otherwise act with
integrity and in our best interests. Employees are required to
report any conduct that they believe in good faith to be an
actual or apparent violation of the code. NASDAQ listing
standards require companies to have procedures to receive,
retain and treat complaints received regarding accounting,
internal accounting controls or auditing matters and to allow
for the confidential and anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
We currently have such procedures in place.
Board of
Directors Leadership Structure
We separate the roles of Chief Executive Officer and Chairman of
the Board of Directors in recognition of the differences between
the two roles. The CEO is responsible for setting the strategic
direction for the company and the
day-to-day
leadership and performance of the company, while the Chairman of
the Board of Directors provides guidance to the CEO and sets the
agenda for Board of Directors meetings and presides over
meetings of the full Board of Directors and executive sessions
of the Board of Directors. Our CEO serves on our Board of
Directors, which we believe helps the CEO serve as a bridge
between management and the Board of Directors, ensuring that
both groups act with a common purpose. We believe that the
CEOs presence on the Board of Directors enhances his
ability to provide insight and direction on important strategic
initiatives to both management and the independent directors
and, at the same time, ensures that the appropriate level of
independent oversight is applied to all decisions by the Board
of Directors.
The Role
of the Board of Directors in Risk Oversight
The role of the Board of Directors in our risk oversight process
includes receiving regular reports from members of senior
management on areas of material risk, including operational,
financial, legal and regulatory, and strategic and reputational
risks. The Board of Directors (or the appropriate committee)
receives these reports from senior management to enable it to
understand our risk identification, risk management and risk
mitigation strategies. When a committee receives such a report,
the chairman of the relevant committee reports on the discussion
to the full Board of Directors at the next meeting of the Board
of Directors. This enables the Board of Directors and its
committees to coordinate the risk oversight role, particularly
with respect to risk interrelationships. As part of its charter,
the Audit Committee discusses our policies with respect to risk
assessment and risk management.
Nominations
Process
The Nominating and Governance Committee uses a variety of
criteria to evaluate the qualifications and skills necessary for
members of our Board of Directors. Under these criteria, members
of the Board of Directors should have the highest professional
and personal ethics and values, consistent with our longstanding
values and standards. Members of the Board of Directors should
have broad experience at the policy-making level in business,
government, medicine, education, technology or public interest.
They should be committed to enhancing stockholder value and to
provide insight and practical wisdom based on experience. In
identifying candidates for membership on our Board of Directors,
the Nominating and Governance Committee takes into account all
factors it considers appropriate, which may include strength of
character, maturity of judgment, career specialization, relevant
skills, diversity and the extent to which a particular candidate
would fill a present need on the Board of Directors. At a
minimum, director candidates must have unimpeachable character
and integrity, sufficient time to carry out their duties, the
ability to read and understand financial
14
statements, experience at senior levels in areas relevant to our
company and, consistent with the objective of having a diverse
and experienced Board of Directors, the ability and willingness
to exercise sound business judgment, the ability to work well
with others, and the willingness to assume the responsibilities
required of a director of our company. Each member of our Board
of Directors must represent the interests of our stockholders.
The Nominating and Governance Committee also reviews and
determines whether existing members of our Board of Directors
should stand for re-election, taking into consideration matters
relating to the age and number of terms served by individual
directors and changes in the needs of the Board of Directors.
The Nominating and Governance Committee uses a variety of
methods for identifying and evaluating nominees for director.
The Nominating and Governance Committee regularly assesses the
appropriate size of our Board of Directors and whether any
vacancies on the Board of Directors are expected due to
retirement or otherwise. In the event that vacancies are
anticipated, or otherwise arise, the Nominating and Governance
Committee considers various potential candidates for director.
Candidates may come to the attention of the Nominating and
Governance Committee through current members of our Board of
Directors, professional search firms, stockholders or other
persons. These candidates are evaluated at regular or special
meetings of the Nominating and Governance Committee and may be
considered at any point during the year. The Nominating and
Governance Committee considers stockholder recommendations for
candidates for our Board of Directors that are properly
submitted in accordance with our by-laws. In evaluating such
recommendations, the Nominating and Governance Committee uses
the qualifications standards discussed above and seeks to
achieve a balance of knowledge, experience and capability on the
Board of Directors.
Stock
Ownership and Retention Guidelines for Non-Employee
Directors
The Board of Directors believes that non-employee directors
should have a significant personal financial stake in our
performance. Consequently, our corporate governance guidelines
require that each non-employee director shall acquire and hold
shares of our common stock having an initial investment value
equal to two times his or her annual cash retainer. Directors in
office as of December 31, 2008 have an ownership goal of
$50,000. Directors who have and will join the Board of Directors
after such date will have an investment goal of two times the
annual cash retainer in effect on the date they join the Board
of Directors. For purposes of this guideline, unvested shares of
restricted stock and stock units are counted, but unexercised
stock options are not. Directors are expected to achieve this
investment goal within three years after either the boards
adoption of the ownership and retention guidelines on
December 10, 2008, or the directors appointment to
the Board of Directors, whichever is later. Upon meeting the
initial investment goal, that number of shares becomes fixed and
must be maintained until the end of the directors service
on the Board of Directors. A directors ownership
requirement will not change as a result of changes in his or her
retainer fee or fluctuations in our common stock price. Until
the investment goal is achieved, the director is required to
retain net gain shares resulting from the exercise
of stock options or the vesting of restricted stock granted
under our equity compensation plans. Net gain shares are the
shares remaining after the payment of the option exercise price
and taxes owed with respect to the exercise or vesting event
(assuming for this purpose a flat 40 percent tax rate). As
of the date of this proxy statement, all of our non-employee
directors are in compliance with the stock ownership and
retention guidelines.
Stockholder
Communications with the Board of Directors
Any stockholder who wishes to communicate directly with our
Board of Directors should do so in writing, addressed to Human
Genome Sciences, Inc.,
c/o Audit
Committee Chair, 14200 Shady Grove Road, Rockville, Maryland
20850. These communications will not be screened by management
prior to receipt by the Audit Committee Chair.
15
DIRECTOR
COMPENSATION
The following table sets forth information concerning the
compensation paid during the last fiscal year to each individual
who served as a director at any time during the fiscal year:
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Fees
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Paid in
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Stock
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Option
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Name
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Cash ($)
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Awards(1) ($)
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Awards(2) ($)
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Total ($)
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Richard J. Danzig
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62,000
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208,626
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270,626
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Jürgen Drews, M.D.
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21,169
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21,081
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208,626
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250,876
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Colin Goddard, Ph.D(3)
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333,583
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333,583
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Maxine Gowen, Ph.D.
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34,251
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11,249
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|
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208,626
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|
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254,126
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Tuan Ha-Ngoc
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|
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41,169
|
|
|
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24,581
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|
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208,626
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274,376
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A.N. Jerry Karabelas, Ph.D.
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98,500
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208,626
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|
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307,126
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John L. LaMattina, Ph.D.
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54,000
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|
|
|
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208,626
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262,626
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Augustine Lawlor
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10,288
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66,962
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208,626
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285,876
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David P. Southwell(4)
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23,082
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5,981
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29,063
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Robert C. Young, M.D.
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38,264
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5,486
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208,626
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252,376
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(1) |
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Reflects fair market value of shares of common stock as of the
date of grant under the Human Genome Sciences, Inc. Non-Employee
Director Equity Compensation Plan, as described below. |
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(2) |
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Reflects the aggregate grant date fair value of option awards
granted during the last fiscal year calculated in accordance
with FASB ASC Topic 718. For a discussion of valuation
assumptions, see Note H to our audited financial statements
included in our Annual Report on
Form 10-K
for the year ended December 31, 2010. The aggregate number
of option awards outstanding as of December 31, 2010 for
Mr. Danzig was 192,000, Dr. Drews was 79,000,
Dr. Goddard was 25,000, Dr. Gowen was 73,000,
Mr. Ha-Ngoc was 105,000, Dr. Karabelas was 192,000,
Dr. LaMattina was 57,000, Mr. Lawlor was 144,000 and
Dr. Young was 99,170. |
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(3) |
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Dr. Goddard was appointed to the Board of Directors on
December 13, 2010. |
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(4) |
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Mr. Southwell resigned as a member of the Board of
Directors and became our Executive Vice President and Chief
Financial Officer in March 2010. The option awards that
Mr. Southwell was awarded as a director were either
exercised or cancelled during 2010 under the terms of the awards. |
During the first half of 2010, each director who was not an
employee was eligible to receive a directors fee of
$25,000 per year and a fee ranging from $750 to $2,000 for
participation in each meeting of the Board of Directors or
meeting of a committee of the Board of Directors. The Chairman
of the Board was entitled to an additional director fee at a
rate of $25,000 per year. The chairman of the Audit Committee
was entitled to an additional director fee at a rate of $10,000
per year, with each member of the Audit Committee other than the
chair receiving an additional fee of $5,000. The chairmen of the
Nominating and Governance Committee and Compensation Committee
were entitled to an additional director fee of $5,000 per year,
with each member of these committees other than the chairs
receiving an additional fee of $3,000. All members of the
Finance Committee received $1,500 per meeting. All directors
were reimbursed for expenses incurred in connection with
attending meetings of the Board of Directors. Directors who are
also employees received no compensation for their services to us
as directors.
Effective July 1, 2010, each director who is not an
employee is eligible to receive a directors fee of $30,000
per year and a fee ranging from $750 to $2,000 for participation
in each meeting of the Board of Directors or meeting of a
committee of the Board of Directors. The Chairman of the Board
is entitled to an additional director fee at a rate of $60,000
per year. The chairman of the Audit Committee is entitled to an
additional director fee at a rate of $10,000 per year, with each
member of the Audit Committee other than the chair receiving an
additional fee of $5,000. The chairmen of the Nominating and
Governance Committee, Compensation Committee and Finance
Committee are entitled to an additional director fee of $5,000
per year, with each member of these committees other than the
chairs receiving an additional fee of $3,000. All
16
directors are reimbursed for expenses incurred in connection
with attending meetings of the Board of Directors. Directors who
are also employees receive no compensation for their services to
us as directors.
Effective March 1, 2011, the chairman of the Audit
Committee is entitled to an additional director fee at a rate of
$13,000 per year. The chairmen of the Nominating and Governance
Committee, Compensation Committee and Finance Committee are
entitled to an additional director fee of $8,000 per year. All
other fees remain unchanged.
Each non-employee director is entitled to receive an automatic
grant of an option to purchase 25,000 shares of common
stock on the date that such non-employee director is first
elected or appointed. Each non-employee director is entitled to
receive an automatic grant of an option to purchase
16,000 shares of common stock (and, if the Second Amended
and Restated Stock Incentive Plan is approved by stockholders at
the annual meeting, 2,500 restricted stock units) on the day
immediately following the date of each annual meeting of
stockholders.
In January 2007, the Board of Directors adopted the Human Genome
Sciences, Inc. Non-Employee Director Equity Compensation Plan.
The plan enables non-employee directors to elect to receive
shares of our common stock in lieu of cash fees otherwise
payable to such directors for their services on the Board of
Directors. Under the plan, directors may receive fully vested
shares of common stock or elect to have fully vested stock units
credited to an account. Stock units credited to a
directors account will be settled in shares of common
stock when the director ceases to serve on the Board of
Directors. The number of shares of common stock or stock units
will be based on the fair market value of our common stock on
the date the cash fees are otherwise payable to the director.
17
PROPOSAL 2. RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee has selected the firm of Ernst &
Young LLP to serve as our independent registered public
accounting firm for the fiscal year ending December 31,
2011.
Ernst & Young LLP currently serves as our independent
registered public accounting firm. The Audit Committee carefully
considered the firms qualifications as an independent
registered public accounting firm. This included a review of the
qualifications of the engagement team, the quality control
procedures the firm has established, the issues raised by the
most recent quality control review, the coordination of the
firms efforts with our accounting department and its
reputation for integrity and competence in the fields of
accounting and auditing. The Audit Committees review also
included matters required to be considered under the Securities
and Exchange Commissions rules on auditor independence,
including the nature and extent of non-audit services, to ensure
that the provision of those services will not impair the
independence of the auditors. The Audit Committee expressed its
satisfaction with Ernst & Young in all of these
respects.
Under NASDAQ and Securities and Exchange Commission rules, and
the Audit Committee Charter, the Audit Committee is directly
responsible for the selection, appointment, compensation, and
oversight of the companys independent registered public
accounting firm and is not required to submit this appointment
to a vote of the stockholders. The Board of Directors, however,
considers the appointment of the independent registered public
accounting firm to be an important matter of stockholder concern
and is submitting the appointment of Ernst & Young for
ratification by our stockholders as a matter of good corporate
practice. One or more representatives of Ernst & Young
is expected to be present at the annual meeting and will have an
opportunity to make a statement and respond to appropriate
questions from stockholders. In the event that our stockholders
fail to ratify the appointment, it will be considered as a
direction to the Audit Committee to consider the appointment of
a different firm. Even if the appointment is ratified, the Audit
Committee in its discretion may select a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of the company and its stockholders.
Required
Vote and Board Recommendation
Ratification of the appointment of Ernst & Young as
the companys independent registered public accounting firm
requires the affirmative vote of a majority of the votes cast on
the matter. Abstentions are considered votes cast and,
therefore, will have the effect of a vote against the matter.
The Board
of Directors recommends a vote FOR ratification
of the appointment of Ernst & Young LLP.
Audit
Fees
The fees billed or incurred by Ernst & Young LLP for
professional services rendered in connection with the audit of
our annual consolidated financial statements for 2010 and 2009,
the review of the consolidated financial statements included in
our quarterly reports on
Form 10-Q,
the review of SEC filings and issuance of comfort letters in
connection with our equity offerings in 2009 and the review and
consent for our other filings for 2010 and 2009 were
approximately $506,000 and $868,000, respectively.
Audit-Related
Fees
The fees billed by Ernst & Young LLP for professional
services rendered for assurance and related services that are
reasonably related to the audit of our annual consolidated
financial statements for 2010 and 2009, were approximately
$64,000 and $86,000, respectively. These fees were for
accounting consultations and consultation regarding financial
accounting and reporting standards.
18
Tax
Fees
The fees billed by Ernst & Young LLP for professional
services rendered for tax compliance, tax advice and tax
planning for 2010 and 2009 were $575,000 and $84,000,
respectively. Fees billed for 2009 include support of an
Internal Revenue Code Section 382 analysis. Fees billed for
2010 include international tax planning.
All Other
Fees
In 2010 and 2009, Ernst & Young LLP did not bill us
for any services other than those described above.
Approval
of Non-Audit Services
The Audit Committee has established a policy governing our use
of Ernst & Young LLP for non-audit services. Under the
policy, management may use Ernst & Young LLP for
non-audit services that are permitted under the rules and
regulations of the Securities and Exchange Commission, provided
that management obtains the Audit Committees approval
before such services are rendered.
19
AUDIT
COMMITTEE REPORT
The Audit Committee of the Board of Directors consists of three
directors, who are each independent as required by The NASDAQ
Stock Market listing standards. The Audit Committee operates
under a written charter adopted by the Board of Directors and is
responsible for overseeing the companys financial
reporting process on behalf of the Board of Directors. The
members of the Audit Committee are Messrs. Ha-Ngoc, Danzig
and Lawlor. Each year, the Audit Committee selects, subject to
stockholder ratification, our independent registered public
accounting firm.
Management is responsible for our financial statements and the
financial reporting process, including internal controls. The
independent registered public accounting firm is responsible for
performing an independent audit of our consolidated financial
statements in accordance with auditing standards generally
accepted in the United States and for issuing a report thereon.
The Audit Committees responsibility is to monitor and
oversee these processes.
In this context, the Audit Committee has met and held
discussions with management and Ernst & Young LLP, our
independent registered public accounting firm. Management
represented to the Audit Committee that our consolidated
financial statements were prepared in accordance with
U.S. generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent
registered public accounting firm. The Audit Committee discussed
with Ernst & Young LLP the matters required to be
discussed by the Statement on Auditing Standards No. 61
(Communication with Audit Committees) as amended and as adopted
by the Public Company Accounting Oversight Board (PCAOB). These
matters included a discussion of Ernst & Youngs
judgments about the quality (not just the acceptability) of our
accounting principles as applied to our financial reporting.
The Audit Committee also discussed with Ernst & Young
LLP its independence from management and the company, and
received Ernst & Youngs written disclosures and
letter pursuant to applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communication with the Audit Committee
concerning independence. The Audit Committee further considered
whether the provision by Ernst & Young LLP of the
non-audit services described above is compatible with
maintaining the registered public accounting firms
independence.
Based upon the Audit Committees discussion with management
and the independent registered public accounting firm and the
Audit Committees review of the representations of
management and the disclosures by the independent registered
public accounting firm to the Audit Committee, the Audit
Committee recommended to the Board of Directors that our audited
consolidated financial statements be included in our Annual
Report on
Form 10-K
for the year ended December 31, 2010, for filing with the
Securities and Exchange Commission. The Audit Committee and our
Board of Directors have also recommended the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for 2011, subject to stockholder ratification.
Audit Committee
Tuan Ha-Ngoc, Chair
Richard J. Danzig
Augustine Lawlor
20
PROPOSAL 3. APPROVAL
OF AMENDMENT OF STOCK INCENTIVE PLAN
Overview
We maintain as a principal element of our compensation program a
broad-based stock incentive plan. Our stock incentive plan was
originally adopted on February 16, 2000, was amended with
stockholder approval in 2004, and was last amended and restated
with stockholder approval at the 2009 annual stockholders
meeting. Our stock incentive plan is scheduled to terminate by
its terms on February 15, 2015, or at an earlier date if
the shares available for issuance under the plan are exhausted.
On March 1, 2011, our Board of Directors approved the
second amendment and restatement of our stock incentive plan,
subject to stockholder approval (the Restated Plan),
to, among other things, increase the number of shares of our
common stock available for issuance under the plan by
5,000,000 shares. If the proposed Restated Plan is not
approved by our stockholders, we currently anticipate that we
will exhaust all of the shares available for issuance under our
stock incentive plan by early 2012.
We use our stock incentive plan to grant stock-based awards
broadly to our employees and to our non-employee directors. This
practice is consistent with our compensation philosophy of
creating incentives to increase stockholder value and ensuring
that our workforce has a meaningful stake in the long-term
success of our business. We believe that stock-based awards help
us recruit, retain, and drive superior performance by our
directors, officers and employees.
Since the plans inception, awards granted under our stock
incentive plan have been in the form of stock options,
restricted stock awards and restricted stock units, or RSUs. As
of March 18, 2011, there were 26,748,526 unexercised stock
options outstanding under the plan for the purchase of shares of
our common stock, 10,361,692 of which remained unvested as of
that date. These outstanding, unexercised stock options have a
weighted average exercise price as of March 18, 2011 of
approximately $15.98 per share, and a weighted average remaining
term on that date of approximately 6.5 years. As of
March 18, 2011, there were 344,625 shares of our
common stock subject to outstanding, unvested restricted stock
awards and RSU awards granted under the stock incentive plan. As
of March 18, 2011, there were 1,557,076 shares of our
common stock available for grant as future awards under our
stock incentive plan, not including any shares that might in the
future be returned to the plan as a result of awards expiring,
being forfeited or otherwise terminated as to any shares, or
shares being withheld or surrendered to us in payment of an
awards exercise price or related tax withholding
obligations. Other than our stock incentive plan and our
employee stock purchase plan, which we administer under the
parameters of Internal Revenue Code section 423, we do not
maintain any other plans that provide for the grant of
stock-based awards to our employees, officers or non-employee
directors.
Key
Features of the Restated Plan Designed to Protect our
Stockholders Interests
While our Board of Directors is aware of and has considered the
potential dilutive effect of additional awards under our stock
incentive plan, it also recognizes the performance and
motivational benefits of stock-based compensation and believes
that the proposed increase in available shares is consistent
with our stated compensation philosophy and the compensatory
practices of other biopharmaceutical companies in our peer
group. Moreover, we have allocated available shares under our
stock incentive plan judiciously, mindful of the dilution
concerns of our stockholders, while maintaining an effective
compensation policy. This judicious allocation of available
shares is demonstrated through our historical burn rate under
our stock incentive plan. Based on methodology developed by
Institutional Shareholder Services, Inc. (ISS), our three-year
average burn rate is approximately 3.1% of our weighted average
number of shares of common stock outstanding, estimated using an
ISS assumption that each restricted stock award and RSU award
granted is the equivalent of a grant of two stock options, which
is approximately four percentage points lower than the 7.16%
allowable burn rate cap assigned by ISS for Russell 3000
pharmaceutical, biotechnology and life sciences companies.
The Restated Plan reflects our commitment to strong corporate
governance and the desire to preserve stockholder value as
demonstrated by the following features of the plan:
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Independent Plan Administration. Plan
administration has been delegated to an independent committee of
our Board of Directors that is comprised solely of non-employee
directors.
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Absence of evergreen and reload features. No
evergreen or reload provisions are included in the Restated
Plan. This means that the maximum number of shares issuable
under the Restated Plan is fixed and cannot be increased without
stockholder approval, the plan expires by its terms upon a
specified date, and no new awards are granted automatically upon
exercise of any outstanding award.
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Repricing prohibited. No repricing,
replacement, or buyout of underwater awards is permitted without
stockholder approval.
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Minimum pricing and maximum terms
specified. No discounted stock options or stock
appreciation rights are permitted. All stock options and stock
appreciation rights must have an exercise or base price not
lower than the closing price of our common stock on the date the
award is granted and may not have a term longer than ten
years duration.
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Reasonable limits on equity awards. The
Restated Plan includes reasonable limits on the share amounts of
various types of awards that may be granted during a calendar
year to any one participant.
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Flexibility in designing equity compensation
programs. A variety of forms of awards are
permitted under the Restated Plan, giving us the ability to
design tailored and innovative stock-based compensation programs
to motivate and support the achievement of critical strategic
objectives.
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Minimum vesting provisions. Minimum vesting
standards apply to full-value stock awards. A minimum three-year
pro-rated restriction period generally will apply to stock
awards granted under the Restated Plan. Exceptions are permitted
for performance-based stock awards, which may have a restriction
period no shorter than one year, and for stock awards granted in
lieu of reasonable cash compensation, which may have no
restriction period.
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Expanded provisions for performance-based
awards. The Restated Plan enables the grant of
performance-based stock awards and cash incentive awards that
are designed to reward performance and ensure deductibility by
us of the compensation that results from these awards. The
performance criteria permitted to be used for such awards are
designed to provide our Compensation Committee maximum
flexibility to tailor incentives targeted toward performance
that it believes will best achieve our corporate objectives and
financial success.
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Non-employee director formula
awards. Non-employee director awards are granted
based on a fixed formula specified in the Restated Plan,
consistent with our director compensation program, as described
above under Director Compensation on page 16.
Non-employee directors are not eligible to receive discretionary
awards under the Restated Plan.
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No liberal change in control definition. The
Restated Plan includes a definition of change in control that is
triggered upon the transactions consummation, not merely
its approval by our Board of Directors or stockholders. This
definition will be used to ensure that any award benefits that
are accelerated in connection with a change in control of the
company do not accelerate prematurely.
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Our Board of Directors recommends that stockholders approve the
Restated Plan. Our Board of Directors believes that the Restated
Plan, while balancing the interests of our stockholders,
preserves our ability to grant stock-based awards, which it
views as critically important in attracting and retaining key
people and creating incentives for those people to improve
stockholder value and contribute to our growth and financial
success.
Summary
Description of the Restated Plan
A copy of our stock incentive plan as last approved by our
stockholders is annexed to the proxy statement for our 2009
annual meeting of stockholders. It is available for review on
the Securities and Exchange Commissions internet website
at www.sec.gov and copies will be provided to you upon request
to the company, directed to the attention of the companys
Secretary, James H. Davis, at 14200 Shady Grove Road, Rockville,
Maryland 20850, tel:
(301) 309-8504.
The following is a summary of the principal features of our
stock incentive plan, as proposed to be amended by the Restated
Plan, but it is qualified in its entirety by the full text of
the Restated Plan, which appears as Annex A to this proxy
statement.
22
Shares Subject
to the Plan
Share Pool. We are proposing an increase in
the available number of shares of our common stock that may be
issued pursuant to awards granted under our stock incentive
plan, which we refer to as the plans share pool, by
5,000,000 shares. These additional shares represent
approximately 2.6% of our outstanding shares of common stock as
of March 18, 2011. If the Restated Plan is approved by our
stockholders, the total number of shares of our common stock
that will be available for new awards under our stock incentive
plan to be granted after the date of our 2011 annual
stockholders meeting will be 6,557,076 shares. This
number is the sum of:
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The 5,000,000 share increase to the share pool requested
under this proposal; plus
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The number of shares remaining available for grant under our
stock incentive plan as of March 18, 2011,
1,557,076 shares, after taking into account the grants made
on March 17, 2011, the grant date for awards pursuant to
our annual employee grant program for 2011.
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This number of shares available for new awards under the
Restated Plan will be decreased by the number of shares, if any,
that we make subject to awards granted after March 18, 2011
and before the date of our 2011 annual stockholders
meeting and may be increased under the adjustment rules
described below. Any other increase to the share pool, however,
would require stockholder approval.
Adjustments to the Share Pool. The share pool
under the Restated Plan adjusts in accordance with the following
rules. Any shares covered by an award (or portion of an award)
granted under our stock incentive plan that expires or is
otherwise forfeited, surrendered or cancelled without exercise,
or that are tendered to the company as full or partial payment
of the exercise price or related tax withholding obligations,
restores to the share pool and will again be available for award
under the Restated Plan. The Restated Plan further provides that
to the extent any shares of our common stock covered by an award
granted under our Restated Plan are not delivered to an award
holder because the award is settled in cash, the undelivered
shares restore to the share pool and are thereafter available
for further awards under the Restated Plan. As of March 18,
2011, there were 27,093,151 shares subject to outstanding
awards which could become available for future award under the
plan, for instance, if the outstanding awards are forfeited,
terminated without exercise, or settled in cash. The Restated
Plan also provides that any shares of our common stock that are
tendered to us or withheld by us as full or partial payment of
the exercise price of an award or to satisfy tax withholding
obligations in connection with an award become available for
grant as future awards under our stock incentive plan.
If our outstanding shares of common stock are increased or
decreased or changed into or exchanged for a different number or
kind of security by reason of any recapitalization,
reclassification, stock split, reverse stock split, combination
of shares, exchange of shares, stock dividend, or other
distribution payable in capital stock, or another similar event
occurs, our Board of Directors will adjust the share pool
proportionately to reflect the transaction or event. Similar
adjustments will be made to the award limitations described
below, to the amounts to be awarded thereafter as non-employee
director options, and to the terms of outstanding awards.
Award
Limitations
The following limitations on awards are imposed under the
Restated Plan. These award limitations have been updated in the
Restated Plan from the limitations that exist in our current
stock incentive plan.
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Full-value Award Limit. No more than
2,000,000 shares of our common stock may be issued in
connection with full-value stock awards (e.g., restricted stock
and RSUs) granted on or after the date of our 2011 annual
stockholders meeting; provided, however, that any
shares of common stock that are forfeited back to us with
respect to any such awards will restore to this limit and be
available for further grant as full-value stock awards.
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ISO Award Limit. No more than
15,000,000 shares of our common stock may be issued in
connection with awards granted after calendar year 2010 that are
intended to qualify as incentive stock options under Internal
Revenue Code section 422.
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Code Section 162(m) Individual Limits:
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Appreciation Awards. The maximum number of
shares that may be subject to stock options or stock
appreciation rights granted under the Restated Plan during a
calendar year to any one person is, in the aggregate,
600,000 shares.
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Stock Awards Other than Performance
Awards. The maximum number of shares that may be
subject to awards granted under the Restated Plan during a
calendar year to any one person in the form of stock awards
other than performance awards is, in the aggregate,
100,000 shares.
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Performance Awards. The maximum number of
shares that may be subject to performance awards granted under
the Restated Plan during a calendar year to any one person is,
in the aggregate, 300,000 shares, and the maximum cash
amount that may be payable in connection with performance awards
granted under the Restated Plan during a calendar year to any
one person is the cash amount equal to the fair market value of
the underlying shares.
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Cash Incentive Awards. The maximum aggregate
cash amount that may be payable in connection with cash
incentive awards granted under the Restated Plan during a
calendar year to any one person is $2,000,000.
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Adjustments to Limits During Initial Year of
Service. Each of the individual limits set forth
above (as required by Code Section 162(m)) are multiplied
by two when applied to awards granted to any individual during
the calendar year in which such individual first commences
service with us.
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Adjustments for Multi-year Performance
Periods. The individual limits set forth above
for performance awards and cash incentive awards are multiplied
by the number of calendar years over which the applicable
performance period spans (in whole or in part), if the
performance period is longer than 12 months duration.
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Administration;
Eligibility
Except with respect to the non-employee director options, the
selection of the participants under the Restated Plan and the
terms of awards granted to each participant will be determined
by the plan administrator. The Compensation Committee of the
Board of Directors is currently the plan administrator. From
time to time, one or more committees as may be appointed by the
Board of Directors may serve as plan administrator. As the
Restated Plan makes explicit, however, the plan administrator
must consist of two or more appointees who are outside
directors under Internal Revenue Code section 162(m)
for purposes of granting performance awards and cash incentive
awards to covered employees. To the extent allowed by applicable
state law, the plan administrator may authorize our officers to
grant stock options, stock-equivalent units, stock appreciation
rights or restricted stock units to employees other than
themselves.
All employees, officers and directors of the company and its
subsidiaries are eligible to be selected to receive awards under
the Restated Plan, as are non-employee service providers. Under
the Restated Plan, the plan administrator may also grant awards
to individuals in connection with hiring, retention or
otherwise, prior to the date the individual first performs
services for us, provided that such awards do not become vested
or exercisable, and no shares are issued to such individual,
prior to the date the individual first commences performance of
such services. Non-employee directors of the company, however,
are eligible to receive only the non-employee director options
and restricted stock units discussed below. As of March 18,
2011, 11 non-employee directors and approximately
1,120 employees at present would be eligible to receive
awards under the Restated Plan.
Adjustments
upon Corporate Transactions
Upon the dissolution or liquidation of the company, or upon a
reorganization, merger or consolidation of the company as a
result of which the securities then subject to the awards are
changed into or exchanged for cash, property
and/or
securities not of the companys issue, or upon a sale of
substantially all the property of the company to, or the
acquisition of shares of common stock representing more than 80%
of the voting power
24
of the outstanding shares by, another corporation or person, the
outstanding awards will terminate, unless provision is made in
connection with the transaction for the awards to be assumed or
substituted with equivalent awards covering securities of a
successor employer corporation or its affiliate with appropriate
adjustments, as determined by the plan administrator, as to the
number and kind of shares of stock and prices. If an award would
terminate as described above, the award holder will have the
right to exercise the award, whether or not the award is vested,
for a designated period prior to the transaction that will cause
the termination.
Types of
Awards
The company may grant stock options, stock appreciation rights,
restricted or unrestricted stock awards, restricted stock units,
performance awards and cash incentive awards under the Restated
Plan. The addition of cash incentive awards to this list is new
under the Restated Plan. We do not have the ability to grant
cash incentive awards under our current stock incentive plan. A
cash incentive award recipient may be permitted or required to
defer receipt of cash that would otherwise be due to such
recipient in connection with the award, in accordance with rules
and procedures consistent with the applicable requirements of
Internal Revenue Code section 409A. Awards may be granted
individually or in tandem with other awards. The Compensation
Committee will determine the terms and conditions of all awards
other than the stock option grants to non-employee directors.
Under the Restated Plan, the company no longer may make or
guarantee loans to participants to assist them in exercising
awards and satisfying their tax withholding obligations, as is
permitted under our current stock incentive plan. Even though
loans are permitted under our current stock incentive plan, the
company has not made or guaranteed any such loans.
Stock
Options
The Restated Plan allows the Compensation Committee to grant
awards of incentive stock options, as that term is defined in
Internal Revenue Code section 422, nonqualified stock
options, or stock options that qualify for favorable tax
treatment in jurisdictions outside the United States. Under
applicable law, however, incentive stock options are available
only for employees of the company or any of its subsidiaries.
All options must have an exercise price per share that is not
less than 100% of the fair market value of a share of our common
stock on the date of grant. Under the Restated Plan, fair
market value means the official closing price per share of
our common stock on an applicable date as quoted on The NASDAQ
Stock Market (trading that occurs after the close of regular
market hours is disregarded for this purpose). As of
March 18, 2011, the fair market value of a share of our
common stock was $27.01.
No stock option granted under the Restated Plan may have a term
longer than ten years duration. The option exercise price
may be paid in cash, by tender of shares of our common stock, by
a combination of cash and shares or by any other means the
Compensation Committee approves.
Non-Employee
Director Grants
Under the Restated Plan, a director of the company who is not
also an employee (referred to as a non-employee
director) receives the following awards:
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Each non-employee director will receive, on the date that such
person is first elected or appointed as a director, an automatic
grant of a nonqualified stock option to purchase
25,000 shares of our common stock (an Initial
Director Grant).
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Each non-employee director also will receive, on the day
immediately following the date of each annual meeting of
stockholders, an automatic grant of a nonqualified stock option
to purchase 16,000 shares of our common stock and 2,500
restricted stock units (collectively, the Annual Director
Grant). An Annual Director Grant will not be granted with
respect to an annual meeting of stockholders that gives rise to
a non-employee directors Initial Director Grant.
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All of the option grants to non-employee directors will have the
same terms. These options will:
25
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have an exercise price per share equal to the fair market value
of our common stock on the grant date;
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become vested and exercisable in equal monthly installments over
the 36-month
period that commences on the grant date, so long as the
optionholder remains a director on the applicable vesting dates;
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become fully vested and exercisable in the event that more than
50% of the outstanding common stock of the company is acquired
by a person or group of persons or, for Initial Director Grants
and Annual Director Grants granted on or after the effective
date of the Restated Plan, immediately before, but contingent
upon, the occurrence of a change in control of the company;
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terminate, to the extent not vested and exercisable and after
giving effect to the acceleration of vesting and exercisability
in connection with certain corporate transactions described
above, upon termination of service as a director;
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remain exercisable, to the extent vested, for a period of three
months following termination of service as a director or, if
such termination is due to death or permanent and total
disability, for a one-year period following termination of
service, and shall terminate upon the expiration of such
three-month or one-year period, as applicable; and
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provide for payment of the exercise price via cash, check,
tender of shares of our common stock, or any combination thereof.
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Similarly, all of the restricted stock units will have the same
terms. The restricted stock units will:
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become vested and nonforfeitable as to one-third of the
restricted stock units on May 1st of the first, second
and third calendar years after the year in which the units are
granted, so long as the award recipient is a director on the
applicable vesting date or was serving as a director at any time
within the sixty day period immediately preceding the applicable
vesting date;
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become fully vested and nonforfeitable immediately before, but
contingent upon, the occurrence of a change in control of the
company; and
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terminate upon termination of service as a director to the
extent not then vested, after giving effect to any acceleration
of vesting in connection with a change in control of the
company, or scheduled to vest within the next sixty days
following such termination of service.
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Stock
Appreciation Rights
The Restated Plan allows the Compensation Committee to grant
awards in the form of stock appreciation rights. A stock
appreciation right entitles the holder to receive a payment in
cash, in shares of our common stock or in a combination of both,
as determined by the Compensation Committee and specified in the
applicable award agreement, equal in value to the appreciation
inherent in the underlying shares on the date of exercise. The
amount payable upon exercise is equal to the product of
(1) the excess of (a) the fair market value on the
exercise date of one share of our common stock over (b) the
base price per share specified in the grant agreement, times
(2) the number of shares with respect to which the stock
appreciation right is exercised. The Restated Plan specifies
that the base price per share of a stock appreciation right must
be no less than the lower of the fair market value of our common
stock on the grant date or the exercise price of any tandem
stock option award to which the stock appreciation right
relates. In addition, the Restated Plan limits the term of a
stock appreciation right to a ten-year duration.
Stock
Awards
The Restated Plan allows the Compensation Committee to grant
awards in the form of full-value stock awards. A full-value
stock award may be denominated in shares of our common stock or
other securities, stock-equivalent units or restricted stock
units, or any combination of the foregoing, and may be paid in
shares of our common stock or other securities, in cash, or in a
combination of the foregoing, all as determined in the sole
discretion of the Compensation Committee and specified in the
applicable award agreement. Generally, full-value stock awards
granted under the stock incentive plan will have a minimum
three-year pro-
26
rated restriction period and will be subject to forfeiture if
the recipient terminates his or her employment or other service
relationship with the company during that restriction period.
If, however, the vesting of a full-value stock award is based on
the achievement of specified performance objectives, then the
restriction period may be as short as one year. Also, if a
full-value stock award is granted in lieu of salary or cash
bonus and is reasonable in amount, as determined in the sole
discretion of the Compensation Committee, then it may be
unrestricted upon grant.
Performance
Awards and Cash Incentive Awards
In order to enable the company to avail itself of the tax
deductibility of qualified performance-based
compensation, within the meaning of Internal Revenue Code
section 162(m), paid to certain executive officers, the
Restated Plan provides that the Compensation Committee may
determine that the granting, vesting, lapse of restrictions on
or settlement of a stock award (referred to as a
performance award) or cash incentive award is
contingent upon the attainment of one or more preestablished,
objective performance goals based on any, or any combination, of
specified business criteria.
Under the Restated Plan, the criteria may apply to an
individual, one or more business units, divisions, or
subsidiaries, or on a company-wide basis, and in absolute terms,
relative to a base period, or relative to performance of one or
more comparable companies, peer groups or an index covering
multiple companies. For this purpose, the specified business
criteria are limited to the following:
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Earnings or Profitability Metrics: including, but
not limited to, earnings/loss (gross, operating, net, or
adjusted); earnings/loss before interest and taxes
(EBIT); earnings/loss before interest, taxes,
depreciation and amortization (EBITDA); profit
margins; expense levels or ratios; in each case adjusted to
eliminate the effect of any one or more of the following:
interest expense, asset impairments, early extinguishment of
debt, stock-based compensation expense, changes in GAAP or
critical accounting policies, or other extraordinary or
non-recurring items, as specified by the plan administrator when
establishing the performance goals;
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Return Metrics: including, but not limited to,
return on investment, assets, equity or capital (total or
invested);
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Cash Flow Metrics: including, but not limited to,
operating cash flow; cash flow sufficient to achieve financial
ratios or a specified cash balance; free cash flow; cash flow
return on capital; net cash provided by operating activities;
cash flow per share; working capital;
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Liquidity Metrics: including, but not limited to,
capital raising; debt reduction; extension of maturity dates of
outstanding debt; debt leverage
(debt-to-capital,
net
debt-to-capital,
debt-to-EBITDA
or other liquidity ratios) or access to capital; debt ratings;
total or net debt; other similar measures approved by the plan
administrator;
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Stock Price and Equity Metrics: including, but not
limited to, return on stockholders equity; total
stockholder return; revenue (gross, operating or net); revenue
growth; stock price; stock price appreciation; market
capitalization; earnings/loss per share (basic or diluted)
(before or after taxes);
price-to-earnings
ratio;
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Strategic Metrics: including, but not limited to,
product research and development; clinical trials; regulatory
filings or approvals; patent application or issuance;
manufacturing or process development; sales or net sales; market
share; market penetration; inventory control; growth in assets;
key hires; business expansion; acquisitions, divestitures,
collaborations, licensing or joint ventures; financing;
resolution of significant litigation; legal compliance or risk
reduction.
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Performance goals may include minimum, maximum, intermediate and
target levels of performance. The size of the performance award
or cash incentive award or the lapse of restrictions with
respect to the award generally will be based on the level of
performance attained. A performance goal may be stated as an
absolute value or as a value determined relative to prior
performance, one or more indices, budget, one or more peer group
companies, any other standard selected by our Compensation
Committee, or any combination thereof.
27
This gives our Compensation Committee flexibility to tailor
incentives targeted toward performance that it believes will
best achieve our corporate objectives and success. The
Compensation Committee is not authorized to waive or accelerate
the lapse of restrictions on a performance award or cash
incentive award granted to an executive officer of the company
who is a covered employee under Internal Revenue
Code section 162(m), except upon death, disability or a
change of ownership or control of the company.
Amendments
Our Board of Directors may alter, amend, suspend or discontinue
the Restated Plan or any portion of the plan at any time as
permitted within the parameters of applicable law or the rules
of the principal securities exchange upon which shares of our
common stock are listed for trading. Under the rules of Nasdaq,
on which our shares of common stock trade, stockholder approval
will be required for any material amendment to the Revised Plan,
such as an increase in the number of shares that may be issued
(other than any proportional increase to reflect a stock split
or the like), a material increase in benefits provided under the
Revised Plan, or an expansion of the classes of people who may
participate in the Revised Plan.
Our Compensation Committee may alter or amend awards under the
Restated Plan, but no such action may be taken without the
consent of the participant if it would materially adversely
affect an outstanding award granted to him or her, and no such
action may be taken without prior stockholder approval if it
would result in repricing a stock option to a lower exercise
price other than to reflect a capital adjustment of the company
such as a stock split. Our Compensation Committee may accelerate
or otherwise change the time in which an award may be exercised
or becomes payable and to waive or accelerate the lapse, in
whole or in part, of any restriction or condition with respect
to such award in connection with a change in control of the
company or other extraordinary transaction affecting the company
or its capitalization, or the termination of any grantees
employment or other relationship with us, including any such
termination that results from death or disability.
Term of
the Plan
If approved by stockholders, the Restated Plan will expire with
respect to future grants on February 28, 2021, or at an
earlier date if the shares available for issuance are exhausted
or the Board of Directors terminates the plan. This 2021
expiration date is an extension of the term of our current stock
incentive plan which otherwise will expire upon the earlier of
February 15, 2015 or the exhaustion of the share pool.
Federal
Income Tax Consequences
The following summary is intended only as a general guide to the
United States federal income tax consequences under current law
with respect to incentive stock options and nonqualified stock
options, which are authorized for grant under the Restated Plan.
It does not attempt to describe all possible federal or other
tax consequences of participation in the stock incentive plan or
tax consequences based on particular circumstances. The tax
consequences may vary if options are granted outside the United
States.
Incentive
Stock Options
An optionholder recognizes no taxable income for regular income
tax purposes as a result of the grant or exercise of an
incentive stock option qualifying under Internal Revenue Code
section 422. Optionholders who neither dispose of their
shares within two years following the date the option was
granted nor within one year following the exercise of the option
will normally recognize a capital gain or loss upon a sale of
the shares equal to the difference, if any, between the sale
price and the purchase price of the shares. The company will not
be entitled to any deduction for federal income tax purposes
with respect to such capital gain or loss. If an optionholder
disposes of shares within two years after the date of grant or
within one year after the date of exercise (a
disqualifying disposition), the difference between
the fair market value of the shares on the exercise date and the
option exercise price (not to exceed the gain realized on the
sale if the disposition is a transaction with respect to which a
loss, if sustained, would be recognized) will be taxed as
ordinary income at the time of disposition. Any gain in excess
of that amount will be a capital gain. If a loss is recognized,
28
there will be no ordinary income, and such loss will be a
capital loss. Any ordinary income recognized by the optionholder
upon the disqualifying disposition of the shares generally will
result in a deduction by the company for federal income tax
purposes.
Nonqualified
Stock Options
Options not designated or qualifying as incentive stock options
will be nonqualified stock options having no special tax status.
An optionee generally recognizes no taxable income as the result
of the grant of such an option. Upon exercise of a nonqualified
stock option, the optionee normally recognizes ordinary income
in the amount of the difference between the option exercise
price and the fair market value of the shares on the exercise
date. If the optionee is an employee, such ordinary income
generally is subject to withholding of income and employment
taxes. Upon the sale of stock acquired by the exercise of a
nonqualified stock option, any gain or loss, based on the
difference between the sale price and the fair market value on
the exercise date, will be taxed as a capital gain or loss. No
tax deduction is available to the company with respect to the
grant of a nonqualified stock option or the sale of the stock
acquired pursuant to such grant. The company generally should be
entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of a
nonqualified stock option.
Other
Considerations
The Internal Revenue Code allows publicly-held corporations to
deduct compensation in excess of $1 million paid to the
corporations chief executive officer and its three other
most highly compensated executive officers (other than the chief
executive officer and the chief financial officer) if the
compensation is payable solely based on the attainment of one or
more performance goals and certain statutory requirements are
satisfied. The company intends for compensation arising from
grants of stock options and stock appreciation rights under the
Restated Plan to be deductible by the company as
performance-based compensation not subject to the
$1 million limitation on deductibility. The company may
also choose to grant performance awards and cash incentive
awards under the Restated Plan that satisfy the requirements for
deductibility of compensation.
The Restated Plan and all awards granted under the plan are
intended to comply with, or otherwise be exempt from, Internal
Revenue Code section 409A (which governs nonqualified
deferred compensation). Consequently, the company intends to
administer, interpret, and construe the Restated Plan and all
awards granted under the plan in a manner consistent with
Internal Revenue Code section 409A to the extent necessary
to avoid the imposition of additional taxes under that section.
The following New Plan Benefits Table contains the number of
awards that will be made under the Restated Plan to the
individuals and groups listed below during the period commencing
on the date of the 2011 Annual Meeting and ending on the
plans scheduled termination date of February 28,
2021. The footnotes to the New Plan Benefits Table indicate the
number of awards that these individuals and groups have received
since our stock incentive plans inception on
February 16, 2000.
29
New Plan
Benefits Table
Plan Name: Second Amended and Restated Stock Incentive
Plan
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Number of
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Number of
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Future
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Future
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Restricted
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Name and Position
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Options
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Stock Units
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H. Thomas Watkins(1)
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*
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*
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President and Chief Executive Officer
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David P. Southwell(2)
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*
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*
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Executive Vice President and Chief Financial Officer
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Timothy C. Barabe(3)
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Former Senior Vice President and Chief Financial Officer
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James H. Davis, Ph.D., J.D.(4)
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*
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*
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Executive Vice President, General Counsel and Secretary
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Barry A. Labinger(5)
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*
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*
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Executive Vice President and Chief Commercial Officer
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David C. Stump, M.D.(6)
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*
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*
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Executive Vice President, Research and Development
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All current executive officers as a group (7 persons)(7)
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*
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*
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All current directors who are not executive officers, as a group
(10 persons)(8)
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1,600,000(8
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)
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250,000(8
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)
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All employees, including all current officers who are not
executive officers, as a group (1,113 persons)(9)
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*
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*
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* |
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Future awards are subject to discretion and, therefore, are not
currently determinable. |
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(1) |
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Has received 3,825,000 stock options since the stock incentive
plans inception through March 18, 2011. |
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(2) |
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Has received 436,000 stock options since the stock incentive
plans inception through March 18, 2011. |
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(3) |
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Has received 595,000 stock options since the stock incentive
plans inception through March 3, 2010, the date of
his resignation from the company. |
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(4) |
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Has received 1,574,030 stock options and 5,000 shares of
restricted stock since the stock incentive plans inception
through March 18, 2011. |
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(5) |
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Has received 1,080,000 stock options and 50,000 shares of
restricted stock since the stock incentive plans inception
through March 18, 2011. |
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(6) |
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Has received 1,584,030 stock options and 15,000 shares of
restricted stock since the stock incentive plans inception
through March 18, 2011. |
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(7) |
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Has received 10,376,760 stock options, 86,224 restricted stock
units, and 70,000 shares of restricted stock since the
stock incentive plans inception through March 18,
2011. |
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(8) |
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This group has received options to purchase an aggregate of
1,118,000 shares since the stock incentive plans
inception through March 18, 2011. Assumes that all current
non-employee directors as a group continue as directors until
the Restated Plans scheduled termination date, other than
Dr. Jürgen Drews who is retiring from our Board of
Directors effective at the conclusion of this annual meeting. |
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(9) |
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This group has received options to purchase an aggregate of
24,962,704 shares and received an aggregate of 532,411
restricted stock units and 10,000 shares of restricted
stock since the stock incentive plans inception through
March 18, 2011. |
Required
Vote and Board Recommendation
In order to be adopted at the annual meeting, Proposal 3
must be approved by the affirmative vote of a majority of the
votes cast on the matter. Abstentions are considered votes cast
and, therefore, will have the effect of a vote against the
matter. If you own shares through a bank, broker or other holder
of record, you must instruct your bank, broker or other holder
of record how to vote on this proposal for your shares to be
counted on this proposal.
The Board
of Directors recommends a vote FOR approval of the
amendment of our stock incentive plan.
30
PROPOSAL NO. 4
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Introduction
The Dodd-Frank Wall Street Reform and Consumer Protection Act,
enacted in July 2010, requires that we provide our stockholders
with the opportunity to vote to approve, on a nonbinding,
advisory basis, the compensation of our named executive officers
as disclosed in this proxy statement in accordance with the
compensation disclosure rules of the Securities and Exchange
Commission.
As described in detail under the heading Compensation
Discussion and Analysis, the companys goal with
respect to executive compensation is to provide a comprehensive
package that is sufficient to attract, motivate and retain
executives of outstanding ability, performance and potential.
The Compensation Committee seeks to establish and maintain an
appropriate relationship between executive compensation and the
creation of stockholder value. The Committee believes that the
most effective compensation program is one that provides
competitive base pay, rewards the achievement of established
annual and long-term goals and objectives, and provides
incentives for retention. The Committee seeks a compensation
program that is internally consistent and believes that pay
differences among jobs should be commensurate with differences
in the levels of responsibility between the Chief Executive
Officer and the other named executive officers.
The Committee determined that overall 2010 performance for
executive officers should be rewarded at a level between 95.5%
and 102.0% of their cash incentive award targets. In making
these determinations, the Committee took into account the
performance of our executive officers against the goals set
forth in the Compensation Discussion and Analysis
section, including the BLA and MAA filings for
Benlysta®,
the successful Advisory Committee meeting on Benlysta, and the
generation of Raxibacumab and CMO revenue. The Committee also
recognized the preparations made by the company for its first
major product launch, including the hiring and onboarding of a
sales force, and the development and implementation of
commercial operations support systems. In determining the stock
incentive awards, the Committee considered company performance,
competitive data, and the individuals scope of
responsibility, continuing performance and ongoing value to the
company.
We urge you to read the Compensation Discussion and
Analysis section, the Summary Compensation Table and the
related compensation tables and narrative in this proxy
statement for additional details on our executive compensation,
including our compensation philosophy and objectives and the
2010 compensation of our named executive officers.
The vote on this resolution is not intended to address any
specific element of compensation; rather the vote relates to the
compensation of our named executive officers, as described in
this proxy statement in accordance with the compensation
disclosure rules of the Securities and Exchange Commission.
Accordingly, we are asking you to vote on the adoption of the
following resolution:
BE IT RESOLVED by the stockholders of Human Genome
Sciences, Inc., that the stockholders approve, on an advisory
basis, the compensation of the companys named executive
officers as set forth in the Compensation Discussion and
Analysis, the Summary Compensation Table and the related
compensation tables and narrative as disclosed in this proxy
statement in accordance with the compensation disclosure rules
of the Securities and Exchange Commission.
As an advisory vote, this proposal is non-binding. Although the
vote is non-binding, the Board of Directors and the Compensation
Committee value the opinions of our stockholders, and will
consider the outcome of the vote when making future compensation
decisions for our named executive officers.
Vote
Required and Board Recommendation
Approval of Proposal 4 requires the affirmative vote of a
majority of the votes cast on the proposal. Abstentions are
considered votes cast and, therefore, will have the effect of a
vote against the matter. If you own shares through a bank,
broker or other holder of record, you must instruct your bank,
broker or other holder of record how to vote on this proposal
for your shares to be counted on this proposal.
The Board
of Directors recommends a vote FOR approval of the executive
compensation of our named executive officers, as disclosed in
this proxy statement.
31
PROPOSAL NO. 5
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON
EXECUTIVE COMPENSATION
As described in Proposal No. 4 above, the
companys stockholders are being provided the opportunity
to cast an advisory vote on the compensation of the
companys named executive officers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act
also provides that stockholders must be given the opportunity to
vote, on a non-binding, advisory basis, for their preference as
to how frequently we should seek future advisory votes on the
compensation of our named executive officers. In other words,
how often a proposal similar to this years
Proposal No. 4 will be included in the matters to be
voted on at each annual meeting. The choices available under the
rules are every year, every other year, or every third year.
Stockholders also may, if they wish, abstain from casting a vote
on this proposal.
Our Board of Directors believes that stockholders should have
the opportunity to vote on the compensation of the named
executive officers every three years, consistent with the
companys long-term approach to executive compensation.
While the Board and Compensation Committee regularly review
compensation, with an in-depth review on an annual basis, the
companys programs and policies are designed to enhance
long-term growth and performance and incentivize our employees
on a long-term basis. As discussed in the Compensation
Discussion and Analysis section of this proxy statement, a
majority of the total compensation for executives is in the form
of awards, which consist of stock options and cash incentives
tied to specific performance goals. The Board believes that a
vote every three years will foster a more long-term view of
compensation. It would also give the company sufficient time to
engage with stockholders to better understand their views about
the companys compensation programs and respond in a more
effective manner.
Stockholders can already provide input to the Board on an annual
or more frequent basis using other mechanisms such as by
communicating directly with the Board or individual directors by
sending letters or by speaking with them at the annual meeting
of stockholders. While an annual vote on executive compensation
would indicate whether stockholders have concerns about the
companys compensation programs and policies, it would not
provide specific information about stockholder views. An
advisory vote occurring once every three years would permit our
stockholders to observe and evaluate the impact of any changes
to our executive compensation policies and practices that have
occurred since the last advisory vote on executive compensation,
including changes made in response to the outcome of a prior
advisory vote on executive compensation.
The frequency option chosen by our stockholders for conducting
future advisory votes on executive compensation is not a binding
determination. However, the opinions expressed by stockholders
in their vote on this proposal will be given due consideration
by the Board and the Compensation Committee in making a
determination as to the frequency of future advisory votes on
executive compensation.
Vote
Required and Board Recommendation
The proxy card provides stockholders with the opportunity to
choose among four options (holding the vote every one, two or
three years, or abstaining) and, therefore, stockholders will
not be voting to approve or disapprove the recommendation of the
Board of Directors. Please mark your proxy card to indicate your
preference on this proposal or your abstention if you wish to
abstain.
A plurality of the votes cast on Proposal 5 will determine
the frequency option preferred by our stockholders. The Board of
Directors recommends that you choose THREE YEARS as the desired
frequency for a stockholder vote on executive compensation. If
you submit your proxy but fail to indicate your preference, your
shares will be treated as though you chose a frequency of three
years on this proposal. If you own shares through a bank, broker
or other holder of record, you must instruct your bank, broker
or other holder of record how to vote in order for them to vote
your shares so that your vote can be counted on this proposal.
The Board
of Directors recommends a vote for the option of once every
THREE YEARS as the frequency with which stockholders are
provided an advisory vote on executive compensation.
32
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth information regarding the
ownership of our common stock as of March 18, 2011, unless
otherwise indicated, by (1) all stockholders known by us to
beneficially own more than 5% of our outstanding common stock,
(2) each of the directors and nominees for director,
(3) each named executive officer listed in the Summary
Compensation Table and (4) all of our directors and current
executive officers as a group.
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Number of
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Name and Address of Beneficial Owner(1)
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Shares Owned
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Percent Owned
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5% or Greater Holders
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FMR LLC
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28,311,059
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(2)
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15.0
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%(2)
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82 Devonshire Street
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Boston, Massachusetts 02109
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T. Rowe Price Associates, Inc.
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19,713,123
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(3)
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10.4
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%(3)
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100 E. Pratt Street
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Baltimore, Maryland 21202
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BlackRock, Inc.
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11,033,065
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(4)
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5.8
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%(4)
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40 East 52nd Street
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New York, New York 10022
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Non-Employee Directors and Nominees
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Richard J. Danzig
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182,067
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(5)
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*
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Jürgen Drews, M.D.
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73,500
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(6)
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*
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Colin Goddard, Ph.D.
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3,475
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(7)
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*
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Maxine Gowen, Ph.D.
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74,980
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(8)
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*
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Tuan Ha-Ngoc
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91,855
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(9)
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*
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A. N. Jerry Karabelas, Ph.D.
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188,067
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(10)
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*
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John L. LaMattina, Ph.D.
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70,567
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(11)
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*
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Augustine Lawlor
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158,687
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(12)
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*
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George J. Morrow
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1,390
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(13)
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*
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Gregory Norden
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4,585
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(14)
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*
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Robert C. Young, M.D.
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95,737
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(15)
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*
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Named Executive Officers
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H. Thomas Watkins
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2,954,958
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(16)
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1.5
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%(16)
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David P. Southwell
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170,313
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(17)
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*
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Timothy C. Barabe
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128,769
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(18)
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*
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James H. Davis, Ph.D., J.D.
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955,234
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(19)
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*
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Barry A. Labinger
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643,168
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(20)
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*
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David C. Stump, M.D.
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958,750
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(21)
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*
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All directors and current executive officers as a group
(18 persons)
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7,352,362
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(22)
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3.8
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%(22)
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* |
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Percentage is less than 1% of the total number of outstanding
shares of our common stock. |
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(1) |
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Except as otherwise indicated, each party has sole voting and
investment power over the shares beneficially owned. |
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(2) |
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As reported on Schedule 13G/A filed on February 14,
2011 by FMR LLC and Edward C. Johnson 3d, Chairman and principal
shareholder of FMR, the shares are beneficially owned by
Fidelity Management & Research Company as an
investment adviser to various investment companies and Fidelity
Growth Company Fund, with Mr. Johnson, FMR and the various
investment companies each having the sole power to dispose of
such shares and the various investment companies boards of
trustees having the sole power to |
33
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vote or direct the vote of such shares. Fidelity
Management & Research Company and Fidelity Growth
Company Fund are wholly-owned subsidiaries of FMR. |
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(3) |
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As reported on Schedule 13G/A filed on February 10,
2011 by T. Rowe Price Associates, Inc. These securities are
owned by various individual and institutional investors
including T. Rowe Price International and T. Rowe Price Mutual
Funds, which T. Rowe Price Associates serves as investment
adviser with power to direct investments and/or sole power to
vote the securities. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, T. Rowe Price Associates
is deemed to be a beneficial owner of such securities, however,
T. Rowe Price Associates expressly disclaims that it is the
beneficial owner of such securities. |
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(4) |
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As reported on Schedule 13G/A filed on February 4,
2011 by BlackRock, Inc. The securities reported above are
beneficially owned by funds and accounts managed by BlackRock
and its subsidiaries. |
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(5) |
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Includes 175,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(6) |
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Includes 62,665 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(7) |
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Includes 3,475 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 21,525 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(8) |
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Includes 56,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. Does not include 13,177 shares of common
stock issuable pursuant to deferred stock units if the director
ceases to serve as a member of the Board of Directors. |
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(9) |
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Includes 88,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares issuable upon exercise of
options that are not exercisable within 60 days. |
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(10) |
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Includes 175,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(11) |
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Includes 40,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(12) |
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Includes 127,567 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(13) |
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Includes 1,390 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 23,610 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(14) |
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Includes 2,085 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 22,915 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(15) |
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Includes 82,737 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 16,433 shares issuable upon exercise of
options that are not exercisable within 60 days. Does not
include 18,852 shares of common stock issuable pursuant to
deferred stock units if the director ceases to serve as a member
of the Board of Directors. |
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(16) |
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Includes 2,788,883 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Also includes 40,000 shares held jointly by
Mr. Watkins and his wife, as to which Mr. Watkins
shares investment and voting power, and 66,000 shares of
common stock held by Mr. Watkinss children, |
34
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as to which Mr. Watkins disclaims beneficial ownership.
Does not include 1,036,117 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. |
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(17) |
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Mr. Southwell resigned as a member of the Board of
Directors and became our Executive Vice President and Chief
Financial Officer on March 22, 2010. Includes
79,478 shares of common stock issuable upon exercise of
options that are exercisable within 60 days. Does not
include 315,522 shares of common stock issuable upon
exercise of options that are not exercisable within 60 days. |
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(18) |
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Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. Includes
128,769 shares of common stock issuable upon exercise of
options that expire on March 31, 2011 under the terms of
his separation agreement. |
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(19) |
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Includes 866,495 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 310,836 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. Dr. Davis shares voting and investment power
with respect to 88,739 shares of common stock with his wife. |
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(20) |
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Includes 643,168 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 310,836 shares issuable upon exercise of
options that are not exercisable within 60 days. |
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(21) |
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Includes 939,174 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 310,836 shares of common stock issuable
upon exercise of options that are not exercisable within
60 days. Dr. Stump shares voting and investment power
with respect to 19,576 shares of common stock with his wife
as trustees of the Stump Family Trust. |
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(22) |
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Includes 6,784,422 shares of common stock issuable upon
exercise of options that are exercisable within 60 days.
Does not include 2,945,887 shares issuable upon exercise of
options that are not exercisable within 60 days. Does not
include 36,501 shares issuable upon vesting of restricted
stock units that are not issuable within 60 days. Does not
include 32,029 shares of common stock issuable pursuant to
deferred stock units if participating directors cease to serve
as members of the Board of Directors. |
35
IDENTIFICATION
OF EXECUTIVE OFFICERS
Set forth below is information regarding the positions and
business experience of each of our executive officers, other
than Mr. Watkins whose information appears above under
director nominees.
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Executive Officer
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Age
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Positions
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Susan D. Bateson
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56
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Ms. Bateson serves as our Senior Vice President, Human
Resources, a position she has held since December 2000. She
joined the company as Vice President, Human Resources in January
1997. Prior to joining us, Ms. Bateson served as Director
of Human Resources and Administration at the law firm of
Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P., in
Washington, D.C., from May 1994 to December 1996. From 1983
to 1994, Ms. Bateson was employed by J.P. Morgan
& Co. Incorporated where she served in various leadership
roles within Human Resources in J.P. Morgans
New York, Delaware, and London offices. Earlier in her
career, Ms. Bateson held various human resources positions
with Citicorp and was a financial analyst at Bankers Trust.
Ms. Bateson earned her M.B.A. in International Management
from New York Universitys Stern School of Business and her
B.A., cum laude, in Economics from Mount Holyoke College.
Ms. Bateson currently serves on the Board of Trustees of
Mount Holyoke College, where she chairs the Trustees Conference
Committee, and on the Board of Advisors of The Universities at
Shady Grove, where she chairs the STEM and Sustainability
Committee.
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James H. Davis, Ph.D., J.D.
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59
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Dr. Davis is our Executive Vice President, General Counsel
and Secretary, a position he has held since December 2003. He
joined the company in May 1997 as Senior Vice President, General
Counsel and Secretary. From 1995 to 1997, Dr. Davis was Of
Counsel to the law firm of Finnegan, Henderson, Farabow, Garrett
& Dunner, L.L.P. Prior to this time, Dr. Davis served
in a number of capacities with an 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 LLP.
Dr. Davis received his Ph.D. in Organic and Theoretical
Chemistry from the California Institute of Technology, his J.D.
from the University of Virginia and his B.S. and M.S. in
Chemistry from Yale University. Dr. Davis serves on the
Board of Directors of the Leukemia and Lymphoma Society.
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Barry A. Labinger
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47
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Mr. Labinger serves as our Executive Vice President and Chief
Commercial Officer, and has served with us in this capacity
since August of 2005. He has also served as our Chief Financial
Officer on an interim basis in March 2010 and from December 2005
to July 2006. From 2002 to 2005, he led the global
pharmaceutical business at 3M Company as Division Vice
President. From 2000 to 2002 at Immunex Corporation,
Mr. Labinger was Senior Vice President and General Manager,
Commercial Operations and Vice President of Marketing. He held
commercial leadership positions at Bristol-Myers Squibb from
1997 to 2000, including Senior Director, Diabetes Marketing.
From 1990 to 1997, he served in various sales and marketing
positions at Abbott Laboratories. Mr. Labinger holds a B.A. in
Economics from Northwestern University and an M.B.A. from the
Kellogg Graduate School of Management at Northwestern
University.
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36
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Executive Officer
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Age
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Positions
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Curran M. Simpson
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49
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Mr. Simpson serves as our Senior Vice President, Operations, a
position he has held since December 2005. He joined the company
as Vice President, Manufacturing Operations in March 2003. Prior
to joining us, Mr. Simpson was Director, Manufacturing
Sciences at Biogen, Inc. from 2001 to 2003. He served as
Director, Engineering at Covance Biotechnology Services, Inc.
from 1999 to 2001. He served as Recovery Technology Coordinator,
Worldwide and Pilot Plant Manager, North America Division at
Novo-Nordisk Biochem, Inc. from 1997 to 1999 and as a Staff
Scientist from 1995 to 1997. Mr. Simpson served as Senior
Research Engineer at Genentech, Inc. from 1992 to 1995. He
served as Senior Scientist, Development at Genencor, Inc.
(former subsidiary of Genentech) from 1987 to 1992 and served as
Senior Chemist at Nalco Chemical Co. from 1985 to 1987.
Mr. Simpson earned his M.S. in Surface and Colloid Science
(Physical Chemistry) from Clarkson University, and his B.S. in
Chemical Engineering/Chemistry from the Clarkson College of
Technology.
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David P. Southwell
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50
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Mr. Southwell serves as our Executive Vice President and Chief
Financial Officer and has served with us in this capacity since
March 2010. Previously, Mr. Southwell was a member of our Board
of Directors from July 2008 until March 2010. Mr. Southwell
served as Executive Vice President and Chief Financial Officer
at Sepracor Inc. from 1995 to 2008. Mr. Southwell served as
Senior Vice President and Chief Financial Officer at Sepracor
from 1994 to 1995. Prior to his employment with Sepracor,
Mr. Southwell was employed by Lehman Brothers Inc., in
various positions within the investment bank division, most
recently in the position of Vice President. Mr. Southwell
serves as a director of PTC Therapeutics, Inc. and THL Credit,
Inc., both of which are private companies. He received a B.A.
from Rice University and an M.B.A. at the Tuck School of
Business at Dartmouth College. Mr. Southwell currently
serves as the head of the M&A Advisory Board at the Tuck
School of Business at Dartmouth College.
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David C. Stump, M.D.
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61
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Dr. Stump serves as our Executive Vice President, Research
and Development, a position he has held since December 2003. He
joined the company in October 1999 as Senior Vice President,
Drug Development. From October 1995 to October 1999, he served
as Vice President, Clinical Research and Genentech Fellow at
Genentech, Inc. Dr. Stump first joined Genentech in 1989 as
Director, Clinical Research and leader of its thrombolytic
therapy drug development program. Prior to joining Genentech, he
was Associate Professor of Medicine and Biochemistry at the
University of Vermont. He received his A.B. in Chemistry from
Earlham College, his M.D. from Indiana University and his
postgraduate training at the University of Iowa as well as the
University of Leuven, Belgium. He is board certified in Internal
Medicine, Hematology and Medical Oncology and is a Fellow of the
American College of Physicians and the Council on
Arteriosclerosis, Thrombosis and Vascular Biology of the
American Heart Association. He is the author of approximately 60
scientific publications, a Trustee of Adventist Health Care and
Earlham College and a member of the Board of Directors of
Sunesis Pharmaceuticals, Inc. and Dendreon Corporation.
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37
EXECUTIVE
COMPENSATION
Compensation
Committee
The Compensation Committee of the Board of Directors consists of
four non-employee directors. The charter of the Compensation
Committee may be viewed under the Investors
Corporate Governance section of our website at
www.hgsi.com by clicking on Compensation
Committee. A written copy of the Compensation
Committees charter may be requested by any stockholder.
The Compensation Committee is responsible for setting the
policies that govern annual executive compensation. The
responsibilities of the Compensation Committee include the
following:
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review and approve corporate goals and objectives relevant to
the compensation of the Chief Executive Officer; evaluate the
performance of the Chief Executive Officer annually; and set the
compensation of the Chief Executive Officer;
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determine the base and incentive compensation of all executive
officers at or above the rank of Vice President;
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recommend equity-based compensation plans to the Board of
Directors;
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administer stock option, stock incentive and other stock
compensation plans (including, among others, the stock incentive
plan and employee stock purchase plan);
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prepare the Compensation Committees report and other
compensation information required to be included in the proxy
statement for the annual meeting of stockholders; and
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make regular reports and recommendations to the Board of
Directors related to employee and director compensation at the
company.
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The Compensation Committee makes compensation decisions
regarding the Management Committee, which includes the Chief
Executive Officer, the Chief Financial Officer and the other
executive officers. The Compensation Committee is also
responsible for making compensation recommendations regarding
our non-employee directors. The Compensation Committee currently
retains Towers Watson, an independent consulting firm, to
provide industry-specific information and advice about executive
compensation, compensation program design and competitive
compensation levels. In addition, the Human Resources Department
provides support to the Compensation Committee in carrying out
its responsibilities. Employee attendees at Compensation
Committee meetings generally include the Senior Vice President,
Human Resources; the Senior Director, Compensation, Benefits,
and HRIS; and the Chief Executive Officer.
In 2010, the Compensation Committee met a total of seven times,
five times in person and twice via teleconference. The agenda
for meetings of the Compensation Committee is determined by its
Chairman, with the assistance of the Senior Vice President,
Human Resources. Topics covered by the Compensation Committee in
2010 included the following:
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company performance and annual performance bonus pool to be made
available for distribution;
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pool of equity available to grant to employees;
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compensation guidelines for broad-base employees and executives
below the Management Committee;
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competitive assessments of compensation for executive officers
and directors;
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performance and compensation of executive officers;
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recommendations regarding Board Directors compensation for
consideration by full Board of Directors;
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transition of our Chief Financial Officer;
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executive perquisites;
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severance guidelines;
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38
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employee benefits programs, including our 401(k) plan and
employee stock purchase plan; and
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structure, recruitment, and compensation of the companys
first sales force.
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In making recommendations regarding the Management
Committees compensation, the Compensation Committee relies
on Towers Watson for competitive data and recommendations on
competitive compensation, and relies on the Chief Executive
Officer for performance data regarding individual members of the
Management Committee (other than the Chief Executive Officer).
Company performance data are agreed upon by the Chief Executive
Officer and the Board of Directors.
Compensation
Committee Interlocks and Insider Participation
All members of the Compensation Committee during 2010 were
independent directors and no member is a current or former
officer or employee of our company. During 2010, none of our
executive officers served on the compensation committee (or its
equivalent) or board of directors of another entity whose
executive officer served on our Compensation Committee or Board
of Directors.
COMPENSATION
DISCUSSION AND ANALYSIS
The Compensation Committee of the Board of Directors is
responsible for the determination of fair, reasonable, and
competitive compensation for the companys executive
officers. The individuals who served as our Chief Executive
Officer and Chief Financial Officer during fiscal 2010, as well
as the other individuals included in the Summary Compensation
Table, are referred to throughout this proxy statement as the
named executive officers and together with the other
executives of the Management Committee as the executive
officers.
Executive
Summary
The companys goal with respect to executive compensation
is to provide a comprehensive package that is sufficient to
attract, motivate and retain executives of outstanding ability,
performance and potential. The Compensation Committee seeks to
establish and maintain an appropriate relationship between
executive compensation and the creation of stockholder value.
The Committee believes that the most effective compensation
program is one that provides competitive base pay, rewards the
achievement of established annual and long-term goals and
objectives, and provides incentives for retention. The
Compensation Committee seeks a compensation program that is
internally consistent and believes that pay differences among
jobs should be commensurate with differences in the levels of
responsibility between the Chief Executive Officer and the other
named executive officers.
The Compensation Committee determined that overall 2010
performance for executive officers should be rewarded at a level
between 95.5% and 102.0% of their cash incentive award targets.
In making these determinations, the Committee took into account
the performance of our executive officers against the goals set
forth in this Compensation Discussion and Analysis section,
including the BLA and MAA filings for
Benlysta®,
the successful Advisory Committee meeting on Benlysta, and the
generation of Raxibacumab and CMO revenue. The Committee also
recognized the preparations made by the company for its first
major product launch, including the hiring and onboarding of a
sales force, and the development and implementation of
commercial operations support systems. In determining the stock
incentive awards, the Committee considered company performance,
competitive data, and the individuals scope of
responsibility, continuing performance and ongoing value to the
company.
Program
Components
The three tools used for executive officer compensation in 2010
were base salary, cash incentive awards and equity awards. The
Compensation Committee believes that these components of
compensation enable the company to retain and motivate its
employees.
39
Base
Salary
The Compensation Committees philosophy is to maintain
executive base salary at a competitive level sufficient to
recruit and retain individuals possessing the skills and
capabilities necessary to achieve our goals over the long term.
An employees base salary is determined by the Compensation
Committee after considering a variety of factors that include
value to us, knowledge, experience, accomplishments,
responsibilities of the employee and market compensation levels
for individuals with similar credentials in similar companies.
The Compensation Committee may, considering the advice of our
management, change the salary of an individual on the basis of
its judgment for any reason, including our companys
performance or that of the individual, changes in responsibility
and changes in the market for executives with similar
credentials.
Cash
Incentive Awards
The purpose of the cash incentive award program for named
executive officers is to motivate and reward the achievement of
specific preset corporate goals, agreed to in advance by the
Board of Directors, along with the achievement of individual
performance goals. Achievement of established corporate goals at
the end of the measurement period is presented to and discussed
with the Board of Directors by the Chief Executive Officer;
based on this discussion, the Compensation Committee then
determines the percent completion of the goals. Target cash
incentive awards for named executive officers are set based upon
analysis of competitive data (see Setting Executive
Compensation below).
Stock
Incentive Awards
Stock incentive awards are a fundamental element in our
executive compensation program because they emphasize our
long-term performance and better align stockholder and
management interests. In addition, stock incentives are an
effective retention tool and an important part of a competitive
compensation program.
Setting
Executive Compensation
The process of determining compensation in 2010 for the named
executive officers began with a presentation of the competitive
data to the Compensation Committee in January 2010. Towers
Watson provided the Compensation Committee with relevant market
data and alternatives to consider when making compensation
decisions.
In consultation with Towers Watson and company management, the
Compensation Committee chose fifteen peer biopharmaceutical
companies for 2010. The peer company group was based on
industry, stage of development, business strategy, competition
for talent and size (revenue and market capitalization). The
peer group companies were divided into two subsets: (1) 11
Baseline companies, and (2) 4
Aspirational companies. The Baseline companies,
listed below, were judged to be most like our company, using
market capitalization, current clinical trials and company size
as points of reference. All primary analyses used this Baseline
peer group.
The companies comprising our Baseline peer group were:
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Abraxis BioScience, Inc.
|
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Biomarin Pharmaceutical Inc.
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|
Regeneron Pharmaceuticals Inc.
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Alexion Pharmaceuticals Inc.
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|
Cubist Pharmaceuticals Inc.
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|
Sepracor, Inc.
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Alkermes, Inc.
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|
Endo Pharmaceutical Holdings, Inc.
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Vertex Pharmaceuticals Inc.
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Amylin Pharmaceuticals Inc.
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Medarex Inc.
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|
In addition to using the Baseline companies as the primary
analytical database, the Committee also used a group of 4
Aspirational Companies (Biogen Idec, Inc., Celegene Corporation,
Cephalon, Inc. and Gilead Sciences, Inc.) to compare proposed
compensation policies and practices against companies that were
industry matches, but with significant differences in revenue or
market capitalization. The data from the Aspirational Group was
solely for reference purposes, since we often compete with these
companies for executive-level talent.
40
Towers Watsons analyses included the following data
collected from the proxy statements of the peer group companies:
(1) base salary, target and actual bonus; (2) total
cash compensation made up of base salary plus actual bonus; and
(3) total direct compensation consisting of base salary,
target bonus and expected value of long-term incentives, which
included the Black-Scholes value of stock options.
As further validation for the market competitiveness of our
compensation programs and to supplement insufficient proxy data
for two named executive officer positions, we also review
annually the executive pay practices of other similarly situated
companies as reported in industry surveys and reports from
compensation consulting firms. These surveys are specific to the
biopharmaceutical and biotech sector, and we request select (or
custom) data cuts of these surveys so that the compensation
information reflects the practices of companies that are similar
to us.
In the competitive data presented to the Compensation Committee
by Towers Watson, each compensation element for the named
executive officers was shown as a percentage of the market
median, relative to the proxy data from peer companies and the
survey data. In general, the Compensation Committee targets the
40th 60th percentile on total direct
compensation. For certain named executive officers, the
Compensation Committee may deem it appropriate that their
compensation exceed the 40th 60th percentile of
the competitive data due to, among other factors, their
extensive experience, the individuals scope of
responsibility, accountability and impact on our operations, and
the impact their departure might have on our performance.
The Compensation Committee reviewed the analysis from Towers
Watson, and held a meeting with the Chief Executive Officer and
the Senior Vice President, Human Resources in February 2010, at
which the performance of each named executive officer was
discussed. Based upon the analysis provided by Towers Watson in
combination with these individual performance assessments, the
Compensation Committee determined each named executive
officers new base salary, cash incentive award for the
prior years performance and equity award.
Compensation
Elements
The named executive officers compensation structure
consists of base salary, cash incentive awards and stock
incentive grants. A significant percentage of total direct
compensation is allocated to stock incentive grants as a result
of the philosophy discussed above. There is no pre-established
policy or target for the allocation between cash and incentive
compensation. Rather, the Compensation Committee reviews
information provided by Towers Watson to determine the
appropriate level and mix of incentive compensation.
Base
Salary
The Compensation Committee reviews salary levels annually as
part of the companys performance review process. The
committee also reviews salary upon promotion or other change in
an employees job responsibility. The Compensation
Committee reviews competitive and performance data in order to
make compensation decisions that will maintain a competitive
standing for each executive officer, but not place them outside
a reasonable range of compensation paid to peers in the
industry. The Compensation Committee establishes salaries based
on a review of the competitive data, consideration of individual
performance, compensation relative to other named executive
officers and the importance to stockholders of that
persons continued service.
Cash
Incentive Awards
Cash incentive awards are determined by the Compensation
Committee, with advice from the Chief Executive Officer, based
upon the Compensation Committees assessment of the
achievement of our corporate goals for the prior year and the
weighting attributed to each corporate goal. In determining cash
incentive
41
awards for 2010 performance, the Compensation Committee
considered each individuals performance on individual
goals, and the executive teams achievement of the
following preset corporate goals:
|
|
|
|
|
Corporate Goal
|
|
2010 Performance
|
|
Benlysta®
(40%):
|
|
|
|
|
File BLA and MAA by June
|
|
Achieved
|
|
|
Successful Advisory Committee meeting
and pre-approval inspection
|
|
Achieved
|
|
|
Obtain BLA approval
|
|
Ongoing (Subsequently Achieved)
|
|
|
Begin work on other indications
|
|
Ongoing
|
ZALBINtm
(10%):
|
|
|
|
|
Successful Advisory Committee meeting
and pre-approval inspection
|
|
Program terminated based on
feedback from regulatory
agencies
|
|
|
Expand product (Q4 week, triple
combination)
|
Raxibacumab and CMO Revenue (10%):
|
|
|
|
|
Complete delivery of 15,000 doses to SNS
|
|
Achieved
|
|
|
Generate specified target CMO revenue
|
|
Achieved
|
Pipeline (10%):
|
|
|
|
|
Advance mid-stage product development
and expand early stage pipeline
|
|
Ongoing
|
|
|
Intensify search for and evaluation of
new opportunities
|
|
Ongoing
|
Complete transition to a commercial company (15%):
|
|
|
|
|
Achieve 2010 hiring plan to ensure
successful launches and commercial product build
|
|
Achieved
|
|
|
Ensure commercial systems in place ahead
of product launches
|
|
Achieved
|
|
|
Enhance HGS culture and
attractiveness as an employer
|
|
Achieved
|
Maintain strong financial position (15%):
|
|
|
|
|
Meet budgeted cash burn and year-end cash
|
|
Achieved
|
|
|
Seek opportunities to further strengthen
balance sheet
|
|
Ongoing
|
Based upon our 2010 performance in relation to these goals, the
Compensation Committee determined that overall 2010 performance
for the named executive officers should be rewarded at a level
between 95.5% and 102% of their cash incentive award targets.
The cash incentive awards made to the named executive officers
are reported in the Summary Compensation Table on page 46.
42
Stock
Incentive Awards
Stock incentive awards may include stock options, stock
appreciation rights, restricted or unrestricted stock awards,
stock-equivalent units and any other stock-based performance
awards under Section 162(m) of the Internal Revenue Code,
and are intended to provide the most meaningful component of
executive compensation. They provide compensation in a manner
that is related to long-term stockholder value because they are
linked to the value of our common stock. Historically, we have
relied solely on stock options as a means of providing equity
incentives for our executives. However, our stock incentive plan
enables the grant of all of the forms of equity-based
compensation referred to above. More recently, we have also
awarded restricted stock to our named executive officers.
In determining the size of a stock incentive award to an
executive officer, the Compensation Committee considers company
performance, competitive data, and the individuals scope
of responsibility and continuing performance. Most importantly,
since the stock incentive award is meant to be a retention tool,
the Compensation Committee considers the importance to
stockholders of that persons continued service.
In 2010, we continued to give our employees a choice between
100% stock options or a mix of 50% stock options and 50%
restricted stock units for their stock award. There is an
exchange ratio between stock options and restricted stock units,
which is determined based on the Black-Scholes valuation method
and is revisited on an annual basis. In 2010, the ratio was 3
stock options to 1 restricted stock unit. This program was
available to all employees, including named executive officers.
All options are granted with an exercise price equal to the
closing price of our common stock on the date of grant, and vest
over the first four years of the ten-year option term. The
restricted stock units also vest over a four year period. When
each restricted stock unit vests, one share of our common stock
is issued to the unit holder.
Key
Executive Severance Plan
The Chief Executive Officer, as well as other named executive
officers identified by the Compensation Committee, are eligible
for the Key Executive Severance Plan (the Plan). In
the event of a change of control which results in the
termination of a Plan participant, or in the event of the
resignation by the participant for good reason, we will provide
the participant with the following payments and benefits:
1. A lump sum cash payment equal to 1.5 (2.0 for the Chief
Executive Officer) multiplied by the sum of the
participants annual salary and the average of the
participants cash incentive payments for the last three
years.
2. Continuation of the participants participation in
our group medical, dental, life, and disability plans for
18 months (24 months for the Chief Executive Officer)
after the date of termination.
3. Full vesting of all stock options and restricted stock.
The above is a general description of the Plan. Detailed
provisions and limitations are outlined in the Plan document.
Risk
Management
In determining the structure of our executive officer
compensation program and the appropriate levels of incentive
opportunities, the Compensation Committee considers whether the
program rewards reasonable risk-taking and whether the incentive
opportunities achieve the proper balance between the need to
reward employees and the need to protect stockholder returns.
While the design of our executive compensation program is
primarily performance-based, we do not believe that it
encourages excessive risk-taking. The Compensation Committee
believes an approach of ongoing and active discussion with
management regarding progress on short- and long-term goals
enables informed decisions while avoiding the risks sometimes
associated with managing short-term results to achieve
pre-determined formulaic outcomes. We believe that our
compensation program provides officers with appropriate
incentives to create long-term value for stockholders while
taking thoughtful and prudent risks to grow the value of the
company. Furthermore, the Compensation Committee has the
authority to pay executive officers less than the maximum annual
cash
43
incentive award amount after assessing the overall contribution
and performance of the executive officers, thereby facilitating
an appropriate balance between risk and compensation.
Timing of
Annual Awards
In order to assess the performance of a full calendar year,
annual awards are distributed in March of the following year. In
2007, the Compensation Committee began issuing all annual
stock-based awards with an effective date on
March 10th of each year, or, if
March 10th is not a day on which our common stock is
traded, on the next preceding day on which our common stock is
traded. For annual stock-based awards granted in 2011, the
Compensation Committee determined to defer the grant date to
March 17, 2011. This decision was made to disassociate the
annual grant date from the March 10, 2011 target date for
Food and Drug Administration approval of
BENLYSTA®.
Salary increases for 2010 were effective on February 15,
2010. Stock-based awards were approved by the Compensation
Committee on February 25, 2010, with an effective date of
March 10, 2010. Cash incentive awards for 2010 performance
were approved by the Compensation Committee on February 23,
2011 and were paid on March 11, 2011.
Compensation
for Newly Hired Executive Officers
When determining compensation for a new executive officer,
factors taken into consideration are the individuals
skills, background, and experience, the individuals
potential impact on our short-and long-term success, and
competitive data from both the list of peer companies and
industry-specific published surveys, and data collected from
executive search consultants and prospective candidates during
the recruitment process.
In addition, we make a grant of stock options when an executive
officer joins the company and may, at the Compensation
Committees discretion, also grant restricted stock or
restricted stock units upon hire. Options are granted at no less
than 100% of the fair market value on the date of grant. In
2010, we hired David P. Southwell as our new Executive Vice
President and Chief Financial Officer and granted him 275,000
stock options on his date of hire.
Chief
Executive Officers Compensation
Mr. Watkins base salary was set at $720,000 per year
for 2010, and he received a grant of 450,000 stock options. His
cash incentive award for 2010 performance was $550,000. The
Compensation Committee determined Mr. Watkins
compensation awards after considering a variety of factors,
including Mr. Watkins performance against preset
goals, his level of responsibility within the company, industry
surveys and the counsel provided by Towers Watson based on the
competitive data discussed earlier.
For 2011, Mr. Watkins will receive an increase in base pay
of 2.78%, bringing his annual base salary to $740,000. The
decision was based on Mr. Watkinss compensation
relative to the market median and 2010 performance.
Perquisites
and Other Personal Benefits
We provide certain named executive officers with perquisites and
other personal benefits that the Compensation Committee believes
are reasonable and consistent with our overall compensation
program. The Compensation Committee periodically reviews the
levels of perquisites and other personal benefits provided to
our named executive officers.
In 2010, Mr. Watkins received a car allowance and payment
of insurance premiums to cover the supplemental disability
insurance policy provided to all of our officers.
Messrs. Watkins and Southwell received reimbursement of
relocation expenses plus related tax reimbursements in 2010.
The remaining named executive officers are eligible for an
executive salary continuation plan that is offered to all of our
officers and provides an individual disability income policy to
cover the loss above the
44
group benefit potential. The individual policy is paid for by
the company. Since it is an individual policy, each executive
must apply and qualify on an individual basis. This individual
policy belongs to the officer and would transfer with the
officer should he or she leave the company.
Tax
Implications
Section 162(m) of the Internal Revenue Code generally
disallows a federal income tax deduction to public corporations
for compensation greater than $1 million paid for any
fiscal year to the corporations Chief Executive Officer
and to the three most highly compensated executive officers
other than the Chief Executive Officer or Chief Financial
Officer. However, certain forms of performance-based
compensation are excluded from the $1 million deduction
limit if specific requirements are met. It is the policy of the
Compensation Committee to periodically evaluate the
qualification of compensation for exclusion from the
$1 million deduction limit under Section 162(m) of the
Code, as well as other sections of the Code, while maintaining
flexibility to take actions with respect to compensation that it
deems to be in the interest of the company and its stockholders
which may not qualify for tax deductibility.
So that the Compensation Committee may retain maximum
flexibility to structure performance targets based on corporate
and individual metrics designed to achieve our various corporate
goals, our annual cash incentive compensation award program does
not conform to the requirements of Section 162(m). Under
the proposed amendments to the Amended and Restated Stock
Incentive Plan, cash incentive awards may be granted that are
intended to qualify as performance-based compensation eligible
for exclusion from the $1 million deduction limitation of
Section 162(m). All stock option awards granted to our
named executive officers have been structured so that the
compensation realized when the stock options are exercised
should be treated as performance-based compensation exempt from
the deduction limitation of Section 162(m). In contrast,
the compensation the named executive officers will realize when
any restricted stock or restricted stock units they have
received to date vest will not be treated as performance-based
and its deductibility by the company for federal income tax
purposes may be limited depending upon the value of our common
stock on the vesting date and the amount of other
nonperformance-based compensation that the named executive
officer receives in that same fiscal year. The Compensation
Committee believes that all of the nonperformance based
compensation paid to our named executive officers in 2010 should
be deductible by the company for federal income tax purposes,
except for the amount of nonperformance-based compensation paid
to Mr. Watkins in excess of $1 million.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
Compensation Committee
Augustine Lawlor, Chair
Argeris N. Karabelas, Ph.D.
Tuan Ha-Ngoc
John L. LaMattina, Ph.D.
45
SUMMARY
COMPENSATION TABLE
The following table sets forth information concerning the
compensation earned during the fiscal years ended
December 31, 2010, 2009 and 2008 by our Chief Executive
Officer, those persons who have served as our Chief Financial
Officer, and our three other most highly-compensated executive
officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
Salary ($)
|
|
Bonus ($)
|
|
Stock Awards ($)
|
|
Awards ($)
|
|
Compensation ($)
|
|
All Other
|
|
|
Name and Principal Position
|
|
Year
|
|
(1)
|
|
(2)
|
|
(3)
|
|
(4)
|
|
(5)
|
|
Compensation ($)
|
|
Total ($)
|
|
H. Thomas Watkins
|
|
|
2010
|
|
|
|
716,923
|
|
|
|
|
|
|
|
|
|
|
|
8,438,175
|
|
|
|
550,000
|
|
|
|
150,225
|
(8)
|
|
|
9,855,323
|
|
President and Chief Executive
|
|
|
2009
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
|
131,100
|
|
|
|
1,050,000
|
|
|
|
30,501
|
(8)
|
|
|
1,911,601
|
|
Officer
|
|
|
2008
|
|
|
|
696,154
|
|
|
|
|
|
|
|
|
|
|
|
1,017,650
|
|
|
|
450,000
|
|
|
|
34,582
|
(8)
|
|
|
2,198,386
|
|
David P. Southwell(6)
|
|
|
2010
|
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
|
4,934,958
|
|
|
|
200,000
|
|
|
|
163,876
|
(9)
|
|
|
5,628,834
|
|
Executive Vice President and
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy C. Barabe(7)
|
|
|
2010
|
|
|
|
102,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
356,607
|
(10)
|
|
|
458,807
|
|
Former Senior Vice President and
|
|
|
2009
|
|
|
|
369,991
|
|
|
|
|
|
|
|
|
|
|
|
28,842
|
|
|
|
300,000
|
|
|
|
8,147
|
(10)
|
|
|
706,980
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
361,846
|
|
|
|
|
|
|
|
|
|
|
|
254,413
|
|
|
|
130,000
|
|
|
|
8,545
|
(10)
|
|
|
754,804
|
|
James H. Davis, Ph.D., J.D
|
|
|
2010
|
|
|
|
452,692
|
|
|
|
|
|
|
|
|
|
|
|
2,531,453
|
|
|
|
225,000
|
|
|
|
14,230
|
(11)
|
|
|
3,223,375
|
|
Executive Vice President,
|
|
|
2009
|
|
|
|
440,000
|
|
|
|
|
|
|
|
|
|
|
|
39,330
|
|
|
|
450,000
|
|
|
|
14,230
|
(11)
|
|
|
943,560
|
|
General Counsel and Secretary
|
|
|
2008
|
|
|
|
433,846
|
|
|
|
|
|
|
|
|
|
|
|
305,295
|
|
|
|
175,000
|
|
|
|
15,230
|
(11)
|
|
|
929,371
|
|
Barry A. Labinger
|
|
|
2010
|
|
|
|
488,046
|
|
|
|
|
|
|
|
|
|
|
|
2,531,453
|
|
|
|
250,000
|
|
|
|
9,822
|
(12)
|
|
|
3,279,321
|
|
Executive Vice President and
|
|
|
2009
|
|
|
|
477,300
|
|
|
|
|
|
|
|
|
|
|
|
39,330
|
|
|
|
430,000
|
|
|
|
9,822
|
(12)
|
|
|
956,452
|
|
Chief Commercial Officer
|
|
|
2008
|
|
|
|
474,638
|
|
|
|
|
|
|
|
|
|
|
|
305,295
|
|
|
|
190,000
|
|
|
|
9,572
|
(12)
|
|
|
979,505
|
|
David C. Stump, M.D
|
|
|
2010
|
|
|
|
492,692
|
|
|
|
|
|
|
|
|
|
|
|
2,531,453
|
|
|
|
245,000
|
|
|
|
11,809
|
(13)
|
|
|
3,280,954
|
|
Executive Vice President,
|
|
|
2009
|
|
|
|
479,231
|
|
|
|
110,000
|
|
|
|
|
|
|
|
39,330
|
|
|
|
540,000
|
|
|
|
11,809
|
(13)
|
|
|
1,180,370
|
|
Research and Development
|
|
|
2008
|
|
|
|
472,692
|
|
|
|
|
|
|
|
|
|
|
|
305,295
|
|
|
|
195,000
|
|
|
|
12,809
|
(13)
|
|
|
985,796
|
|
|
|
|
(1) |
|
Includes amounts earned but deferred at the election of the
named executive officer, such as salary deferrals under our
401(k) plan established under Section 401(k) of the
Internal Revenue Code. |
|
(2) |
|
Performance-based bonuses are generally paid under our cash
bonus program and reported as Non-Equity Incentive Plan
Compensation. Except as otherwise noted, amounts reported as
Bonus represent discretionary bonuses awarded by the
Compensation Committee in addition to any amounts earned under
the cash bonus program. |
|
(3) |
|
Reflects the aggregate grant date fair value of stock awards
granted during a year calculated in accordance with FASB ASC
Topic 718. For a discussion of valuation assumptions, see
Note H to our audited financial statements included in our
Annual Report on
Form 10-K
for the year ended December 31, 2010. |
|
(4) |
|
Reflects the aggregate grant date fair value of stock options
granted during a year calculated in accordance with FASB ASC
Topic 718. For a discussion of valuation assumptions, see
Note H to our audited financial statements included in our
Annual Report on
Form 10-K
for the year ended December 31, 2010. |
|
(5) |
|
Represents bonus amounts earned under our cash bonus program. |
|
(6) |
|
Mr. Southwell joined the company as Executive Vice
President and Chief Financial Officer on March 22, 2010. |
|
(7) |
|
Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. |
|
(8) |
|
Includes a car allowance of $12,000 and payment of insurance
premiums of $9,294 for each year presented. Includes company
contributions to a 401(k) plan account for the executive of
$5,125, $4,125 and 4,125 for 2008, 2009 and 2010, respectively,
and reimbursement of commuting expenses of $8,163 and $5,082 for
travel to and from Chicago, Illinois for 2008 and 2009,
respectively. Includes reimbursement of relocation expenses of
$80,000 plus related tax reimbursements of $44,805 in 2010 when
Mr. Watkins permanently relocated near the companys
headquarters in Rockville, Maryland. |
|
(9) |
|
Includes payment of insurance premiums of $1,765 and company
contributions to a 401(k) plan account for the executive of
$4,062. Includes reimbursement of relocation expenses of
$100,421 plus related tax reimbursements of $57,629. |
46
|
|
|
(10) |
|
Includes $351,141 paid to Mr. Barabe in 2010 pursuant to
the terms of his separation agreement. Includes payment of
insurance premiums of $4,022, $4,022 and $1,341 in 2008, 2009
and 2010, respectively, and company contributions to a 401(k)
plan account for the executive of $4,523, $4,125 and $4,125 in
2008, 2009 and 2010, respectively. |
|
(11) |
|
Includes payment of insurance premiums of $10,105 for each year
presented and company contributions to a 401(k) plan account for
the executive of $5,125, $4,125 and $4,125 for 2008, 2009 and
2010, respectively. |
|
(12) |
|
Includes payment of insurance premiums of $5,697 for each year
presented and company contributions to a 401(k) plan account for
the executive of $3,875, $4,125 and $4,125 for 2008, 2009 and
2010, respectively. |
|
(13) |
|
Includes payment of insurance premiums of $7,684 for each year
presented and company contributions to a 401(k) plan account for
the executive of $5,125, $4,125 and $4,125 for 2008, 2009 and
2010, respectively. |
GRANTS OF
PLAN-BASED AWARDS
The following table sets forth certain information with respect
to option awards and other plan-based awards granted during the
fiscal year ended December 31, 2010 to our named executive
officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
Grant Date
|
|
|
|
|
Estimated Future Payouts Under
|
|
Number of
|
|
Exercise or
|
|
Fair Value of
|
|
|
|
|
Non-Equity
|
|
Securities
|
|
Base Price of
|
|
Stock and
|
|
|
|
|
Incentive Plan Awards(1)
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards(2)
|
|
Awards(3)
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
($)
|
|
($)
|
|
H. Thomas Watkins
|
|
|
N/A
|
|
|
|
420,000
|
|
|
|
560,000
|
|
|
|
1,400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
450,000
|
|
|
|
32.56
|
|
|
|
8,438,175
|
|
David P. Southwell(4)
|
|
|
N/A
|
|
|
|
165,000
|
|
|
|
220,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
31.16
|
|
|
|
4,934,958
|
|
Timothy C. Barabe(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Davis, Ph.D., J.D.
|
|
|
N/A
|
|
|
|
165,000
|
|
|
|
220,000
|
|
|
|
550,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
32.56
|
|
|
|
2,531,453
|
|
Barry A. Labinger
|
|
|
N/A
|
|
|
|
178,988
|
|
|
|
238,650
|
|
|
|
596,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
32.56
|
|
|
|
2,531,453
|
|
David C. Stump, M.D
|
|
|
N/A
|
|
|
|
180,000
|
|
|
|
240,000
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/10/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,000
|
|
|
|
32.56
|
|
|
|
2,531,453
|
|
|
|
|
(1) |
|
The amounts reflect the minimum payment level under the cash
bonus program which is 75% of the target amount. The maximum
amount is 250% of the target amount. The target amount is based
on the individuals current salary and represents 80% of
Mr. Watkins base salary and 50% of the base salary
for Messrs. Southwell and Labinger and Drs. Davis and
Stump. |
|
(2) |
|
Options granted under our stock incentive plan have an exercise
price equal to the closing price on The NASDAQ Stock Market on
the date of grant. |
|
(3) |
|
Reflects the aggregate grant date fair value of stock awards
granted during the last fiscal year calculated in accordance
with FASB ASC Topic 718. For a discussion of valuation
assumptions, see Note H to our audited financial statements
included in our Annual Report on
Form 10-K
for the year ended December 31, 2010. |
|
(4) |
|
Mr. Southwell joined the company as Executive Vice
President and Chief Financial Officer on March 22, 2010. |
|
(5) |
|
Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. |
47
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth certain information with respect
to the value of all unexercised options awarded to our named
executive officers as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
|
Options (#)
|
|
Options(2) (#)
|
|
Exercise
|
|
Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Price ($)
|
|
Date
|
|
H. Thomas Watkins
|
|
|
1,250,000
|
|
|
|
|
|
|
|
10.47
|
|
|
|
11/21/2014
|
|
|
|
|
325,000
|
|
|
|
|
|
|
|
10.89
|
|
|
|
3/14/2016
|
|
|
|
|
374,400
|
|
|
|
25,600
|
|
|
|
10.62
|
|
|
|
3/10/2017
|
|
|
|
|
343,200
|
|
|
|
156,800
|
|
|
|
4.92
|
|
|
|
3/10/2018
|
|
|
|
|
218,715
|
|
|
|
281,285
|
|
|
|
0.52
|
|
|
|
3/10/2019
|
|
|
|
|
84,361
|
|
|
|
365,639
|
|
|
|
32.56
|
|
|
|
3/10/2020
|
|
David P. Southwell
|
|
|
|
|
|
|
275,000
|
|
|
|
31.16
|
|
|
|
3/22/2020
|
|
Timothy C. Barabe(3)
|
|
|
178,769
|
(4)
|
|
|
|
(4)
|
|
|
10.11
|
|
|
|
3/31/2011
|
|
|
|
|
19,987
|
|
|
|
|
|
|
|
10.62
|
|
|
|
3/31/2011
|
|
|
|
|
5,200
|
|
|
|
|
|
|
|
4.92
|
|
|
|
3/31/2011
|
|
|
|
|
4,582
|
|
|
|
|
|
|
|
0.52
|
|
|
|
3/31/2011
|
|
James H. Davis, Ph.D., J.D.
|
|
|
140,000
|
|
|
|
|
|
|
|
38.63
|
|
|
|
12/5/2011
|
|
|
|
|
52,301
|
|
|
|
|
|
|
|
9.35
|
|
|
|
12/11/2012
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
12.38
|
|
|
|
12/10/2013
|
|
|
|
|
100,030
|
|
|
|
|
|
|
|
12.56
|
|
|
|
1/17/2015
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
10.89
|
|
|
|
3/14/2016
|
|
|
|
|
121,680
|
|
|
|
8,320
|
|
|
|
10.62
|
|
|
|
3/10/2017
|
|
|
|
|
102,960
|
|
|
|
47,040
|
|
|
|
4.92
|
|
|
|
3/10/2018
|
|
|
|
|
65,614
|
|
|
|
84,386
|
|
|
|
0.52
|
|
|
|
3/10/2019
|
|
|
|
|
25,308
|
|
|
|
109,692
|
|
|
|
32.56
|
|
|
|
3/10/2020
|
|
Barry A. Labinger
|
|
|
300,000
|
|
|
|
|
|
|
|
13.43
|
|
|
|
8/15/2015
|
|
|
|
|
37,500
|
|
|
|
|
|
|
|
10.89
|
|
|
|
3/14/2016
|
|
|
|
|
62,500
|
|
|
|
|
|
|
|
10.11
|
|
|
|
7/10/2016
|
|
|
|
|
117,000
|
|
|
|
8,000
|
|
|
|
10.62
|
|
|
|
3/10/2017
|
|
|
|
|
23,831
|
|
|
|
47,040
|
|
|
|
4.92
|
|
|
|
3/10/2018
|
|
|
|
|
18,747
|
|
|
|
84,386
|
|
|
|
0.52
|
|
|
|
3/10/2019
|
|
|
|
|
25,308
|
|
|
|
109,692
|
|
|
|
32.56
|
|
|
|
3/10/2020
|
|
David C. Stump, M.D.
|
|
|
140,000
|
|
|
|
|
|
|
|
38.63
|
|
|
|
12/5/2011
|
|
|
|
|
115,000
|
|
|
|
|
|
|
|
9.35
|
|
|
|
12/11/2012
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
12.38
|
|
|
|
12/10/2013
|
|
|
|
|
115,010
|
|
|
|
|
|
|
|
12.56
|
|
|
|
1/17/2015
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
10.89
|
|
|
|
3/14/2016
|
|
|
|
|
117,000
|
|
|
|
8,000
|
|
|
|
10.62
|
|
|
|
3/10/2017
|
|
|
|
|
102,960
|
|
|
|
47,040
|
|
|
|
4.92
|
|
|
|
3/10/2018
|
|
|
|
|
65,614
|
|
|
|
84,386
|
|
|
|
0.52
|
|
|
|
3/10/2019
|
|
|
|
|
25,308
|
|
|
|
109,692
|
|
|
|
32.56
|
|
|
|
3/10/2020
|
|
|
|
|
(1) |
|
There were no outstanding restricted stock awards as of
December 31, 2010 as all previously granted restricted
stock awards had vested or been cancelled. |
|
(2) |
|
Except as otherwise noted, each option has a
10-year
term, vests at the rate of one-eighth of the underlying shares
on the six-month anniversary of the date of grant and the
remaining shares vest monthly on a ratable basis for the next
42 months. |
|
(3) |
|
Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. Mr. Barabes
options ceased vesting on March 31, 2010. As a result of
his resignation, Mr. Barabes options expire on
March 31, 2011. |
48
|
|
|
(4) |
|
One-fourth of the underlying shares vested on July 10,
2007, the one-year anniversary of the date of grant. The
remaining shares were scheduled to vest monthly on a ratable
basis for the next 36 months. |
OPTION
EXERCISES AND STOCK VESTED
The following table sets forth certain information concerning
option exercises by our named executive officers and vesting of
our common stock held by them during the fiscal year ended
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
Name
|
|
Acquired on Exercise (#)
|
|
|
Exercise ($)(1)
|
|
|
Acquired on Vesting (#)
|
|
|
Vesting ($)(2)
|
|
|
H. Thomas Watkins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David P. Southwell(3)
|
|
|
17,653
|
|
|
|
335,357
|
|
|
|
|
|
|
|
|
|
Timothy C. Barabe(4)
|
|
|
164,897
|
|
|
|
3,895,007
|
|
|
|
|
|
|
|
|
|
James H. Davis, Ph.D., J.D.
|
|
|
196,699
|
|
|
|
3,243,828
|
|
|
|
|
|
|
|
|
|
Barry A. Labinger
|
|
|
101,000
|
|
|
|
2,522,268
|
|
|
|
|
|
|
|
|
|
David C. Stump, M.D.
|
|
|
134,000
|
|
|
|
2,135,057
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on the difference between the market price of our common
stock on the date of exercise and the exercise price. |
|
(2) |
|
Based on the market price for our common stock on the vesting
date. |
|
(3) |
|
Subsequent to his resignation from the Board of Directors,
Mr. Southwell exercised options awarded while he was a
director. |
|
(4) |
|
Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. |
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Termination
without a Change in Control
In November 2004, we entered into an employment agreement with
Mr. Watkins in which Mr. Watkins agreed to serve as
our Chief Executive Officer. Under that agreement, as amended in
December 2007 and December 2008, if we terminate
Mr. Watkinss employment without cause or choose not
to renew the employment agreement, or Mr. Watkins
terminates his employment for good reason, Mr. Watkins will
be entitled to receive the following payments and benefits
provided that he enters into a release of claims in favor of the
company in connection with his termination of employment:
(1) payment of all accrued but unpaid base salary, any
earned but unpaid bonuses for any prior period, all earned or
vested incentive compensation or benefits, all accrued but
unpaid reimbursable business expenses and all accrued but unused
paid-time-off days; (2) base salary continuation payments
for a period of 24 months; (3) a pro rata bonus
payment based on the bonus earned for the prior fiscal year;
(4) continued participation in our group health plan for a
period of 24 months at our expense, provided that
Mr. Watkins is not then eligible to participate in a group
health plan of another entity; and (5) an
18-month
period, measured from the date of Mr. Watkinss
termination of employment, within which to exercise all vested
stock options outstanding upon the date of termination, but in
no event may such exercise occur beyond the term stated in the
applicable award agreement. Upon termination,
Mr. Watkinss stock options will immediately vest for
those shares that were otherwise scheduled to vest over the
12-month
period following the date of termination.
In March 2010, we entered into an executive agreement with
Mr. Southwell, which provides that if we terminate
Mr. Southwells employment without cause or
Mr. Southwell terminates his employment for good reason,
Mr. Southwell will be entitled to receive the following
payments and benefits provided that he enters into a release of
claims in favor of the company in connection with his
termination of employment: (1) payment of all accrued but
unpaid base salary, any earned but unpaid bonuses for any prior
period, all earned or vested incentive compensation or benefits,
all accrued but unpaid reimbursable business expenses and all
accrued but unused paid-time-off days; (2) base salary
continuation payments for a period of 12 months;
49
(3) a pro rata bonus payment based on the bonus earned for
the prior fiscal year; (4) continued participation in our
group health plan for a period of 12 months at our expense,
provided that Mr. Southwell is not then eligible to
participate in a group health plan of another entity; and
(5) a
12-month
period, measured from the date of Mr. Southwells
termination of employment, within which to exercise all vested
stock options outstanding upon the date of termination, but in
no event may such exercise occur beyond the term stated in the
applicable award agreement.
On March 3, 2010, Mr. Barabe resigned as our Senior
Vice President and Chief Financial Officer. In connection with
Mr. Barabes resignation, we entered into a separation
agreement with Mr. Barabe, effective March 2, 2010.
The separation agreement provided that Mr. Barabe be paid
his base salary of $364,000, with half of this amount being paid
on October 1, 2010 and the balance paid in equal
installments over the following six months. In addition, on
October 1, 2010, under the terms of the separation
agreement, Mr. Barabe received a lump sum bonus amount of
$75,000 for 2010, which was a pro-rata bonus payment measured by
his period of employment during 2010 and the amount of bonus
earned for 2009. Mr. Barabes right to exercise any of
his outstanding stock options, to the extent vested as of
March 31, 2010, was continued until the earlier of the
original expiration date of the applicable option agreement or
March 31, 2011. The separation agreement also contains
mutual releases and confidentiality provisions.
In June 2005, we entered into a letter agreement with
Mr. Labinger in which Mr. Labinger agreed to serve as
our Executive Vice President and Chief Commercial Officer. As a
result of the execution of a new executive agreement by
Mr. Labinger in December 2007, as amended in December 2008,
the existing severance arrangements for Mr. Labinger were
amended to provide that if we terminate Mr. Labingers
employment without cause or Mr. Labinger terminates his
employment for good reason, Mr. Labinger will be entitled
to receive the following payments and benefits provided that he
enters into a release of claims in favor of the company in
connection with his termination of employment: (1) payment
of all accrued but unpaid base salary, any earned but unpaid
bonuses for any prior period, all earned or vested incentive
compensation or benefits, all accrued but unpaid reimbursable
business expenses and all accrued but unused paid-time-off days;
(2) base salary continuation payments for a period of
12 months; (3) a pro rata bonus payment based on the
bonus earned for the prior fiscal year; (4) continued
participation in our group health plan for a period of
12 months at our expense, provided that Mr. Labinger
is not then eligible to participate in a group health plan of
another entity; and (5) a
12-month
period, measured from the date of Mr. Labingers
termination of employment, within which to exercise all vested
stock options outstanding upon the date of termination, but in
no event may such exercise occur beyond the term stated in the
applicable award agreement.
In December 2004, we entered into an executive agreement with
Dr. Stump, as amended in December 2007 and December
2008, which provides that if we terminate Dr. Stumps
employment without cause or Dr. Stump terminates his
employment for good reason, Dr. Stump will be entitled to
receive the following payments and benefits provided that he
enters into a release of claims in favor of the company in
connection with his termination of employment: (1) payment
of all accrued but unpaid base salary, any earned but unpaid
bonuses for any prior period, all earned or vested incentive
compensation or benefits, all accrued but unpaid reimbursable
business expenses and all accrued but unused paid-time-off days;
(2) base salary continuation payments for a period of
12 months; (3) a pro rata bonus payment based on the
bonus earned for the prior fiscal year; (4) continued
participation in our group health plan for a period of
12 months at our expense, provided that Dr. Stump is
not then eligible to participate in a group health plan of
another entity; and (5) a
12-month
period, measured from the date of Dr. Stumps
termination of employment, within which to exercise all vested
stock options outstanding upon the date of termination, but in
no event may such exercise occur beyond the term stated in the
applicable award agreement.
In December 2004, we entered into an executive agreement with
Dr. Davis, as amended in December 2007 and December 2008,
which provides that if we terminate Dr. Daviss
employment without cause or Dr. Davis terminates his
employment for good reason, Dr. Davis will be entitled to
receive the following payments and benefits provided that he
enters into a release of claims in favor of the company in
connection with his termination of employment: (1) payment
of all accrued but unpaid base salary, any earned but unpaid
bonuses for any prior period, all earned or vested incentive
compensation or benefits, all accrued but unpaid reimbursable
business expenses and all accrued but unused paid-time-off days;
(2) base salary continuation
50
payments for a period of 12 months; (3) a pro rata
bonus payment based on the bonus earned for the prior fiscal
year; (4) continued participation in our group health plan
for a period of 12 months at our expense, provided that
Dr. Davis is not then eligible to participate in a group
health plan of another entity; and (5) a
12-month
period, measured from the date of Dr. Daviss
termination of employment, within which to exercise all vested
stock options outstanding upon the date of termination, but in
no event may such exercise occur beyond the term stated in the
applicable award agreement.
Termination
Upon a Change in Control
In July 1998, we established a Key Executive Severance Plan for
our Chief Executive Officer and other key employees, and
pursuant to that plan, as amended and restated in December 2008,
we entered into agreements with the executive officers. The
agreements provide that in the event the executives
employment is terminated by us or by a successor without cause
or by the executive for good reason, in either case within
18 months after a Change in Control (as defined in the Key
Executive Severance Plan), we will make a cash payment to the
executive equal to 1.5 times the sum of the executives
annual salary plus average annual bonus (2.0 times in the case
of the Chief Executive Officer) and the executive will be
entitled to continue to participate in our group medical,
dental, life and disability programs for a period of
18 months (24 months in the case of the Chief
Executive Officer) at the same rates applicable to the executive
during the executives employment. In addition, the Key
Executive Severance Plan provides that upon a Change in Control,
all option grants 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
executives employment is terminated without cause or the
executive resigns for good reason, in either case within
18 months after the Change in Control. Each executive also
agreed to certain confidentiality and non-solicitation
provisions as a condition to participation in the Key Executive
Severance Plan.
The following table sets forth information with respect to
compensation to our named executive officers upon a Change in
Control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Equity
|
|
|
Benefits and
|
|
|
|
Payment(1)
|
|
|
Acceleration(2)
|
|
|
Perquisites(3)
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
H. Thomas Watkins
|
|
|
2,766,667
|
|
|
|
9,887,838
|
|
|
|
70,081
|
|
David P. Southwell(4)
|
|
|
960,000
|
|
|
|
|
|
|
|
32,613
|
|
Timothy C. Barabe(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Davis, Ph.D., J.D.
|
|
|
1,085,000
|
|
|
|
2,974,856
|
|
|
|
55,832
|
|
Barry A. Labinger
|
|
|
1,150,950
|
|
|
|
2,970,610
|
|
|
|
45,624
|
|
David C. Stump, M.D.
|
|
|
1,265,000
|
|
|
|
2,970,610
|
|
|
|
46,101
|
|
|
|
|
(1) |
|
Cash payment equals the executives annual salary as of
December 31, 2010 plus their calculated bonus multiplied by
the amount indicated in the discussion above. Calculated bonus
equals the average of the three prior years annual bonuses. |
|
(2) |
|
Aggregate intrinsic value of unvested stock options and stock
awards as of December 31, 2010. For stock options,
aggregate intrinsic value represents only the value for those
options in which the exercise price of the option is less than
the market value of our stock on December 31, 2010. |
|
(3) |
|
Reflects the present value of premiums for 18 months
(24 months for Mr. Watkins) for group medical, dental,
life and disability programs. Amounts are based on the premiums
in effect at December 31, 2010 and include tax
reimbursement at a marginal tax rate of 40%. |
|
(4) |
|
Mr. Southwell joined the company as Executive Vice
President and Chief Financial Officer on March 22, 2010. |
|
(5) |
|
Mr. Barabe resigned as our Senior Vice President and Chief
Financial Officer on March 3, 2010. |
51
EQUITY
COMPENSATION PLAN INFORMATION
The following table sets forth information regarding our equity
compensation plans as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities to
|
|
|
Weighted-Average
|
|
|
Future Issuance Under Equity
|
|
|
|
be Issued Upon Exercise
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
of Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights(1)
|
|
|
Warrants and Rights
|
|
|
Reflected in First Column)(1)
|
|
|
Equity compensation plans approved by security holders
|
|
|
24,028,688
|
|
|
$
|
14.55
|
|
|
|
4,706,605
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
24,028,688
|
|
|
|
|
|
|
|
4,706,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents shares of our common stock issuable in connection
with such equity compensation plans. |
TRANSACTIONS
WITH RELATED PERSONS
It is the responsibility of our Audit Committee to review all
transactions or arrangements between our company and any of our
directors, officers, principal shareholders or any of their
respective affiliates, associates or related parties.
We have entered into an indemnification agreement with each of
our directors and executive officers. This form of
indemnification agreement, and our certificate of incorporation
and by-laws, require us to indemnify and advance expenses to
these persons to the full extent permitted by Delaware law. We
also intend to enter into an indemnification agreement with each
of our future directors and executive officers.
ADDITIONAL
INFORMATION
Compliance
with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires that our
executive officers and directors, and persons who own more than
ten percent of a registered class of our equity securities, file
reports of ownership and changes in ownership with the SEC and
provide us with copies of such reports. We have reviewed such
reports received by us and written representations from our
directors and executive officers. Based solely on such review,
we believe that all ownership reports were timely filed during
2010.
Other
Matters
Our Board of Directors knows of no other business that will be
presented for consideration at the annual meeting. Return of a
valid proxy, however, confers on the designated proxy holders
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 or
postponement thereof.
We will provide without charge a copy of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, including
financial statements and schedules, to each of our stockholders
of record on March 18, 2011, and to each beneficial owner
of common stock on that date, upon receipt of a written request
for the
Form 10-K
mailed to our offices, 14200 Shady Grove Road, Rockville,
Maryland 20850, Attention: Investor Relations. In the event that
exhibits to the
Form 10-K
are requested, a fee will be charged for reproduction of the
exhibits. Requests from beneficial owners of common stock must
set forth a good faith representation as to such ownership. Our
filings with the SEC are available without charge on our website
at www.hgsi.com as soon as reasonably practicable after
they are filed.
52
Proposals
for the 2012 Annual Meeting
Any stockholder who intends to present a proposal at the
companys annual meeting to be held in 2012, and who wishes
to have the proposal included in the companys proxy
statement for that meeting, must deliver the proposal to the
companys Secretary no later than December 1, 2011.
Any proposal received after this date will be considered
untimely and may be excluded from the proxy statement. A
proposal must satisfy the rules and regulations of the
Securities and Exchange Commission to be eligible for inclusion
in the proxy statement for that meeting.
A stockholder may present a proposal that is a proper subject
for consideration at an annual meeting, even if the proposal is
not submitted by the deadline for inclusion in the proxy
statement. To do so, the stockholder must comply with the
procedures set forth in the companys by-laws. The by-laws
require that a stockholder who intends to present a proposal at
an annual meeting of stockholders submit the proposal to the
Secretary not fewer than 60 and not more than 90 days
before the anniversary of the date that the proxy statement was
released to stockholders for the previous years annual
meeting. To be eligible for consideration at the 2012 annual
meeting, such a proposal and any nominations for director must
be received by the Secretary between December 31, 2011 and
January 30, 2012. This advance notice period is intended to
allow stockholders an opportunity to consider all business and
nominees expected to be considered at the meeting. Any such
proposal received after this date may be considered untimely and
may be excluded.
All submissions to, or requests from, the Secretary should be
made to Human Genome Sciences, Inc., 14200 Shady Grove Road,
Rockville, MD 20850.
By Order of the Board of Directors,
James H. Davis, Secretary
March 30, 2011
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
PROMPTLY VOTE OVER THE INTERNET OR BY TELEPHONE OR COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. THE BOARD
OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING.
53
ANNEX A
HUMAN
GENOME SCIENCES, INC.
SECOND AMENDED AND RESTATED STOCK INCENTIVE PLAN
|
|
1.
|
ESTABLISHMENT,
PURPOSE AND TYPES OF AWARDS
|
Human Genome Sciences, Inc., a Delaware corporation (the
Company), maintains the Human Genome
Sciences, Inc. Amended and Restated Stock Incentive Plan, as
approved by the stockholders of the Company on May 6, 2009,
which plan is further amended and restated herein and shall
hereafter be known as the Human Genome Sciences, Inc. Second
Amended and Restated Stock Incentive Plan (the
Plan). The Plan is a continuation and
extension of the Companys 2000 Stock Incentive Plan,
initially adopted on February 16, 2000, as amended from
time to time and amended and restated herein.
The purpose of the Plan is to promote the long-term growth and
profitability of the Company by (i) providing key people
with incentives to improve stockholder value and to contribute
to the growth and financial success of the Company through their
future services, and (ii) enabling the Company to attract,
retain and reward the best-available personnel.
The Plan permits the granting of stock options (including
incentive stock options qualifying under Code section 422
and nonqualified stock options), stock appreciation rights,
restricted or unrestricted stock awards, restricted stock units,
performance stock awards, and cash incentive awards, or any
combination of the foregoing.
Under this Plan, except where the context otherwise indicates,
the following definitions apply:
(a) Administrator shall mean the Board
or the committee(s) or officer(s) appointed by the Board that
have authority to administer the Plan as provided in
Section 3 hereof.
(b) Affiliate shall mean any entity,
whether now or hereafter existing, which controls, is controlled
by, or is under common control with, the Company (including, but
not limited to, joint ventures, limited liability companies and
partnerships). For this purpose, control shall mean
ownership of 50% or more of the total combined voting power or
value of all classes of stock or interests of the entity, or the
power to direct the management and policies of the entity, by
contract or otherwise.
(c) Annual Director Grant shall mean the
stock option and restricted stock units issuable pursuant to
Section 6(b)(ii) of the Plan.
(e) Award shall mean any stock option,
stock appreciation right, restricted or unrestricted stock
award, stock-equivalent or restricted stock unit, performance
award, or cash incentive award granted under the Plan or any
predecessor version of the Plan, through and including the 2000
Stock Incentive Plan.
(e) Board shall mean the Board of
Directors of the Company.
(f) Cash Incentive Award means an
incentive award granted under the Plan that provides to the
participant a conditional right to receive an amount,
denominated in dollars, as determined by the Administrator,
based on performance measured over a specified performance
period.
(g) Change in Control means, except as
may otherwise be provided on the applicable Grant Agreement, the
earliest to occur of any of the following events, construed in
accordance with Code Section 409A:
(i) Any one person or more than one person acting as a
group acquires, or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person
or group, beneficial ownership of more than 50% of the total
voting power of the Companys then outstanding voting
securities;
A-1
(ii) A majority of the members of the Board is replaced
during any 12 month period by directors whose appointment
or election is not endorsed or approved by a majority of the
members of the Board who were members of the Board prior to the
initiation of the replacement; or
(iii) Any one person or more than one person acting as a
group acquires, or has acquired during the 12 month period
ending on the date of the most recent acquisition by such person
or group, assets of the Company that have a total gross fair
market value of 50% or more of the total gross fair market value
of all of the assets of the Company immediately prior to the
initiation of the acquisition.
(h) Code shall mean the Internal Revenue
Code of 1986, as amended, and the regulations promulgated
thereunder.
(i) Common Stock shall mean shares of
common stock of the Company, par value of one cent ($.01) per
share.
(j) Company shall mean Human Genome
Sciences, Inc., a Delaware corporation.
(k) Covered Employee shall mean a person
who is a covered employee within the meaning of Code
section 162(m).
(l) Current Share Pool shall mean the
sum of 5,000,000 shares of Common Stock plus the number of
Carryover Shares, as defined in Section 4(a), as of
March 18, 2011.
(m) Director shall mean a member of the
Board.
(n) Effective Date shall mean the date
upon which the Plan, as amended and restated herein, is approved
by the stockholders of the Company.
(o) Fair Market Value shall mean, with
respect to the Common Stock, as of any date:
(i) if the principal market for the Common Stock (as
determined by the Administrator if the Common Stock is listed or
admitted to trading on more than one exchange or market) is a
national securities exchange or an established securities
market, the official closing price per share of Common Stock for
the regular market session on that date on the principal
exchange or market on which the Common Stock is then listed or
admitted to trading or, if no sale is reported for that date, on
the last preceding day on which a sale was reported;
(ii) if the principal market for the Common Stock is not a
national securities exchange or an established securities
market, the average of the highest bid and lowest asked prices
for the Common Stock on that date as reported on a national
quotation system or, if no prices are reported for that date, on
the last preceding day on which prices were reported; or
(iii) if the Common Stock is neither listed or admitted to
trading on a national securities exchange or an established
securities market, nor quoted by a national quotation system,
the value determined by the Administrator in good faith.
(p) Grant Agreement shall mean a written
document, including an electronic writing acceptable to the
Administrator, memorializing the terms and conditions of an
Award granted pursuant to the Plan and shall incorporate the
terms of the Plan.
(q) Inception Date shall mean
February 16, 2000.
(r) Initial Director Grant shall mean
the stock option issuable pursuant to Section 6(b)(i) of
the Plan.
(s) Non-Employee Director shall mean a
Director who is not an employee of the Company or any of its
Affiliates.
A-2
(t) Performance Award shall mean a Stock
Award, the grant, vesting, lapse of restrictions or settlement
of which is conditioned upon the achievement of performance
objectives over a specified performance period. .
(u) Performance Measures shall mean
criteria established by the Administrator relating to any of the
following, as it may apply to an individual, one or more
business units, divisions or subsidiaries, or on a Company-wide
basis, and in absolute terms, relative to a base period, or
relative to the performance of one or more comparable companies,
peer groups or an index covering multiple companies:
(i) Earnings or Profitability
Metrics: including, but not limited to,
earnings/loss (gross, operating, net, or adjusted);
earnings/loss before interest and taxes (EBIT);
earnings/loss before interest, taxes, depreciation and
amortization (EBITDA); profit margins; expense
levels or ratios; in each case adjusted to eliminate the effect
of any one or more of the following: interest expense, asset
impairments, early extinguishment of debt, stock-based
compensation expense, changes in GAAP or critical accounting
policies, or other extraordinary or non-recurring items, as
specified by the plan administrator when establishing the
performance goals;
(ii) Return Metrics: including, but not
limited to, return on investment, assets, equity or capital
(total or invested);
(iii) Cash Flow Metrics: including, but
not limited to, operating cash flow; cash flow sufficient to
achieve financial ratios or a specified cash balance; free cash
flow; cash flow return on capital; net cash provided by
operating activities; cash flow per share; working capital;
(iv) Liquidity Metrics: including, but
not limited to, capital raising; debt reduction; extension of
maturity dates of outstanding debt; debt leverage
(debt-to-capital, net
debt-to-capital,
debt-to-EBITDA
or other liquidity ratios) or access to capital; debt ratings;
total or net debt; other similar measures approved by the plan
administrator;
(v) Stock Price and Equity
Metrics: including, but not limited to, return on
stockholders equity; total stockholder return; revenue
(gross, operating or net); revenue growth; stock price; stock
price appreciation; market capitalization; earnings/loss per
share (basic or diluted) (before or after taxes);
price-to-earnings
ratio;
(vi) Strategic Metrics: including, but
not limited to, product research and development; clinical
trials; regulatory filings or approvals; patent application or
issuance; manufacturing or process development; sales or net
sales; market share; market penetration; inventory control;
growth in assets; key hires; business expansion; acquisitions,
divestitures, collaborations, licensing or joint ventures;
financing; resolution of significant litigation; legal
compliance or risk reduction.
(v) Plan shall mean the Human Genome
Sciences, Inc. Second Amended and Restated Stock Incentive Plan,
as set forth herein and as amended from time to time;
provided, however, that the term Plan shall
also include each predecessor version of the Plan, through and
including the Companys 2000 Stock Incentive Plan, where
the context requires.
(w) SAR shall mean a stock appreciation
right.
(x) Stock Award shall mean an Award,
other than a stock option or stock appreciation right, that is
denominated in Common Stock or other securities,
stock-equivalent units or restricted stock units, or any
combination of the foregoing.
(a) Administration of the Plan. The Plan
shall be administered by the Board or by such committee or
committees as may be appointed by the Board from time to time.
With respect to grants of Performance Awards and Cash Incentive
Awards, the Administrator shall consist of two or more persons
appointed by the Board, all of whom shall be outside
directors as defined under Code section 162(m). To
the extent allowed by applicable state law, the Administrator by
resolution may authorize an officer or officers to grant Awards
A-3
(other than Stock Awards) to other officers and employees of the
Company and its Affiliates, and, to the extent of such
authorization, such officer or officers shall be the
Administrator.
(b) Powers of the Administrator.
(i) The Administrator shall have all the powers vested in
it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the
Plan, prescribe Grant Agreements evidencing such Awards and
establish programs for granting Awards; provided,
however, that the Administrator shall not have the
discretion to grant options to non-employee directors except as
provided in Section 6(b) of the Plan.
(ii) The Administrator shall have full power and authority
to take all other actions necessary to carry out the purpose and
intent of the Plan, including, but not limited to, the authority
to: (A) determine the eligible persons to whom, and the
time or times at which Awards shall be granted;
(B) determine the types of Awards to be granted;
(C) determine the number of shares to be covered by or used
for reference purposes for each Award; (D) impose such
terms, limitations, restrictions and conditions upon any Award
as the Administrator shall deem appropriate; (E) modify,
amend, extend or renew outstanding Awards, or accept the
surrender of outstanding Awards and substitute new Awards
(provided however, that, except as provided in
Section 7(c) of the Plan, any modification that would
materially adversely affect any outstanding Award shall not be
made without the consent of the holder and no such modification,
amendment or substitution that results in repricing the Award,
within the meaning of Nasdaq Marketplace Rule 5635(c) and
IM-5635-1, or any successor provision, shall be made without
prior stockholder approval); (F) accelerate or otherwise
change the time in which an Award may be exercised or becomes
payable and to waive or accelerate the lapse, in whole or in
part, of any restriction or condition with respect to such Award
in connection with a change in control of the Company or other
extraordinary transaction affecting the Company or its
capitalization, or the termination of any grantees
employment or other relationship with the Company, including any
such termination that results from death or disability;
provided, however, that no such waiver or
acceleration of lapse restrictions shall be made with respect to
a Performance Award or Cash Incentive Award held by a
covered employee, within the meaning of Code
section 162(m) if such waiver or acceleration is
inconsistent with Code section 162(m) and such Performance
Award or Cash Incentive Award was intended to constitute
qualified performance based compensation within the
meaning of Code section 162(m); (G) establish
objectives and conditions, if any, for earning Awards and
determining whether Awards will be paid with respect to a
performance period; and (H) for any purpose, including but
not limited to, qualifying for preferred tax treatment under
foreign tax laws or otherwise complying with the regulatory
requirements of local or foreign jurisdictions, to establish,
amend, modify, administer or terminate
sub-plans,
and prescribe, amend and rescind rules and regulations relating
to such
sub-plans.
(iii) Notwithstanding anything herein to the contrary,
except in connection with a corporate transaction involving the
Company (including, without limitation, any stock dividend,
stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation,
split-up,
spin-off, combination, or exchange of shares), the terms of
outstanding Awards may not be amended to reduce the exercise
price of outstanding stock options or SARs or cancel outstanding
stock options or SARs in exchange for cash, other Awards or
stock options or SARs with an exercise price that is less than
the exercise price of the original stock options or SARs without
stockholder approval.
(iv) The Administrator shall have full power and authority,
in its sole and absolute discretion, to administer and interpret
the Plan and to adopt and interpret such rules, regulations,
agreements, guidelines and instruments for the administration of
the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.
(c) Non-Uniform Determinations. The
Administrators determinations under the Plan (including,
without limitation, determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms
and provisions of such Awards and the Grant Agreements
evidencing such Awards) need not be uniform and may be made by
the Administrator selectively among persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated.
A-4
(d) Limited Liability. To the maximum
extent permitted by law, no member of the Administrator shall be
liable for any action taken or decision made in good faith
relating to the Plan or any Award.
(e) Indemnification. To the maximum
extent permitted by law and by the Companys charter and
by-laws, the members of the Administrator shall be indemnified
by the Company in respect of all their activities under the Plan.
(f) Effect of Administrators
Decision. All actions taken and decisions and
determinations made by the Administrator on all matters relating
to the Plan pursuant to the powers vested in it hereunder shall
be in the Administrators sole and absolute discretion and
shall be conclusive and binding on all parties concerned,
including the Company, its stockholders, any participants in the
Plan and any other employee, consultant, or director of the
Company, and their respective successors in interest.
|
|
4.
|
SHARES AVAILABLE
FOR THE PLAN; MAXIMUM AWARDS
|
(a) Share Pool. Shares of Common Stock
issued or transferred under the Plan may be authorized but
unissued shares of Common Stock or reacquired shares of Common
Stock, including shares purchased by the Company on the open
market for purposes of the Plan. Subject to adjustments as
provided in Section 4(b) or Section 7(c) of the Plan,
the number of shares of Common Stock available for Awards to be
granted during the Companys 2011 fiscal year on or after
the Effective Date shall be equal to
(i) 5,000,000 shares, plus (ii) the Carryover
Shares minus (iii) the number of shares of Common Stock
made subject to Awards granted after March 18, 2011 and
before the Effective Date, and the number of shares of Common
Stock available for Awards to be granted during any fiscal year
of the Company after 2011 shall be equal to the Carryover Shares
for such fiscal year. For fiscal year 2011, Carryover
Shares means 1,557,076 shares of Common Stock
representing the excess of (x) the aggregate number of
shares of Common Stock that were available for issuance under
the Plan from its Inception Date through December 31, 2010,
over (y) the sum of (1) the aggregate number of shares
of Common Stock that were issued under the Plan prior to
March 18, 2011, as measured from the Inception Date, and
which were not subject to forfeiture as of March 18, 2011,
plus (2) the aggregate number of shares of Common Stock
subject to Awards outstanding as of March 18, 2011. For
each fiscal year after 2011, Carryover Shares
means the shares of Common Stock that were available for Awards,
and which were not subject to any Awards, as of the last day of
the preceding fiscal year. Notwithstanding the foregoing, in no
event shall more than an aggregate of 15,000,000 shares of
Common Stock be issued pursuant to Awards granted after 2010
that are intended to qualify as incentive stock options under
Code section 422. The Company shall reserve a sufficient
number of shares of Common Stock to satisfy outstanding Awards.
(b) Adjustments to Share Pool. If any
Award, or portion of an Award, under the Plan expires or
terminates unexercised, becomes unexercisable or is forfeited or
otherwise terminated, surrendered or canceled as to any shares,
or if any shares of Common Stock are surrendered to the Company
in connection with any Award (whether or not such surrendered
shares were acquired pursuant to any Award), or if any shares
are withheld by the Company, the shares subject to such Award
and the surrendered and withheld shares shall thereafter be
available for further Awards under the Plan; provided, however,
that any such shares that are surrendered to or withheld by the
Company in connection with any Award or that are otherwise
forfeited after issuance shall not be available for purchase
pursuant to incentive stock options intended to qualify under
Code section 422. To the extent that any shares of Common
Stock covered by an Award are not delivered to an Award holder
because the Award is settled in cash, such shares shall not be
deemed to have been issued for purposes of determining the
maximum number of shares of Common Stock available for issuance
under the Plan.
(c) Full-value Award Limit. Subject to
adjustment in the event of a stock dividend of, or stock split
or reverse stock split affecting, the Common Stock, the maximum
number of shares of Common Stock that may be issued from the
Current Share Pool in conjunction with Stock Awards granted on
or after the Effective Date is 2,000,000 shares;
provided, however, that any shares of Common Stock that
are forfeited back to the Company with respect to any such
Awards granted from the Current Share Pool shall restore to this
limit and be available for further grant as Stock Awards.
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(d) Code Section 162(m) Individual
Limits. Subject to adjustment as provided in
Section 7(c) of the Plan:
(i) the maximum number of shares of Common Stock that may
be subject to Awards granted under the Plan during a calendar
year to any one person in the form of stock options or stock
appreciation rights is, in the aggregate, 600,000 shares;
(ii) the maximum number of shares of Common Stock that may
be subject to Awards granted under the Plan during a calendar
year to any one person in the form of Stock Awards other than
Performance Awards is, in the aggregate, 100,000 shares;
(iii) the maximum number of shares of Common Stock that may
be subject to Awards granted under the Plan during a calendar
year to any one person in the form of Performance Awards is, in
the aggregate, 300,000 shares, and the maximum cash amount
that may be payable in connection with Awards granted under the
Plan during a calendar year to any one person in the form of
Performance Awards is the cash amount equal to the fair market
value of the underlying shares; and
(iv) the maximum aggregate cash amount that may be payable
in connection with Cash Incentive Awards granted under the Plan
during a calendar year to any one person is $2,000,000;
provided, however, that each of the limitations set forth
above in this Section 4(d) shall be multiplied by two when
applied to Awards grant to any individual during the calendar
year in which such individual first commences service with the
Company or an Affiliate; and provided, further, that the
limitations set forth above in this Section 4(d) shall be
multiplied by the number of calendar years over which the
applicable performance period spans (in whole or in part), if
the performance period is longer than 12 months
duration, when applied to Performance Awards and Cash Incentive
Awards. The limitations set forth above in this
Section 4(d) shall not be adjusted to effect a restoration
of shares of Common Stock with respect to which the related
Award is terminated, surrendered or canceled.
Participation in the Plan shall be open to all employees,
officers and directors of, and other individuals providing bona
fide services to or for, the Company, or of any Affiliate of the
Company, as may be selected by the Administrator from time to
time. Non-employee directors of the Company shall be eligible to
participate in the Plan only as provided in Section 6(b).
The Administrator, in its sole discretion, establishes the terms
of all Awards granted under the Plan. Awards may be granted
individually or in tandem with other types of Awards. All Awards
are subject to the terms and conditions provided in the Grant
Agreement.
(a) Stock Options. The Administrator may
from time to time grant to eligible participants, other than
non-employee directors of the Company, Awards of incentive stock
options as that term is defined in Code section 422,
nonqualified stock options or stock options that qualify for
favorable tax treatment in jurisdictions outside the United
States; provided, however, that Awards of incentive stock
options shall be limited to employees of the Company or of any
current or hereafter existing parent corporation or
subsidiary corporation, as defined in Code
sections 424(e) and (f), respectively, of the Company. All
stock options granted under the Plan must have an exercise price
at least equal to Fair Market Value as of the date of grant and
no stock option granted under the Plan shall have a maximum term
in excess of ten years duration. No stock option shall be
an incentive stock option unless so designated by the
Administrator at the time of grant or in the Grant Agreement
evidencing such stock option.
(b) Non-Employee Director Grants.
(i) Each Non-Employee Director will receive, on the date
that such person is first elected or appointed as a Director, an
automatic grant of a nonqualified stock option to purchase
25,000 shares of Common Stock (Initial Director
Grant).
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(ii) Each Non-Employee Director also will receive, on the
day immediately following the date of each annual meeting of
stockholders, an automatic grant of a nonqualified stock option
to purchase 16,000 shares of Common Stock and 2,500
restricted stock units (collectively, the Annual
Director Grant); provided that the Director is
a member of the Board on the grant date.
(iii) Notwithstanding the provisions of
Section 6(b)(ii) above, an Annual Director Grant will not
be granted to a Non-Employee Director with respect to an annual
meeting of stockholders that gives rise to the Directors
Initial Director Grant.
(iv) Each Initial Director Grant and the portion of each
Annual Director Grant that is in the form of a nonqualified
stock option shall (A) have a ten-year term; (B) have
an exercise price for each share subject thereto equal to the
Fair Market Value of the Common Stock on the grant date;
(C) become vested and exercisable in equal monthly
installments over the
36-month
period that commences on the grant date provided that the
option holder is a Director on the respective vesting date;
(D) become fully vested and exercisable in the event that
more than 50% of the outstanding Common Stock is acquired by a
person or group of persons or, for Initial Director Grants and
Annual Director Grants granted on or after the Effective Date,
immediately before, but contingent upon, the occurrence of a
Change in Control; (E) terminate, to the extent not vested
and exercisable and after giving effect to the foregoing clause
(D), upon termination of service as a Director; (F) remain
exercisable, to the extent vested, for a period of three months
following termination of service as a Director or, if such
termination is due to death or permanent and total disability,
for a one-year period following termination of service, and
shall terminate upon the expiration of such three-month or
one-year period, as applicable; and (G) provide for payment
of the exercise price via cash, check, tender of shares of
Common Stock, or any combination thereof.
(v) The portion of each Annual Director Grant that is in
the form of restricted stock units shall (A) become vested
and nonforfeitable as to one-third of the restricted stock units
on May 1st of the first, second and third calendar
years after the year in which the units are granted, provided
that the Award recipient is a Director on the respective vesting
date or has been a Director at any time within the
60-day
period immediately preceding the respective vesting date;
(B) to the extent not earlier vested or terminated, become
fully vested and nonforfeitable immediately before, but
contingent upon, the occurrence of a Change in Control; and
(C) terminate upon termination of service as a Director to
the extent not then vested, after giving effect to the foregoing
clause (B), or scheduled to vest within the following
60-day
period pursuant to the foregoing clause (A).
(c) Stock Appreciation Rights. The
Administrator may from time to time grant to eligible
participants Awards of stock appreciation rights
(SAR). An SAR entitles the grantee to
receive, subject to the provisions of the Plan and the Grant
Agreement, a payment having an aggregate value equal to the
product of (i) the excess of (A) the Fair Market Value
on the exercise date of one share of Common Stock over
(B) the base price per share specified in the Grant
Agreement, times (ii) the number of shares specified by the
SAR, or portion thereof, which is exercised. The base price per
share specified in the Grant Agreement shall not be less than
the lower of the Fair Market Value on the grant date or the
exercise price of any tandem stock option Award to which the SAR
is related. No SAR shall have a term longer than ten years
duration. Payment by the Company of the amount receivable upon
any exercise of an SAR may be made by the delivery of Common
Stock or cash, or any combination of Common Stock and cash, as
determined in the sole discretion of the Administrator and
specified in the applicable Grant Agreement. If upon settlement
of the exercise of an SAR a grantee is to receive a portion of
such payment in shares of Common Stock, the number of shares
shall be determined by dividing such portion by the Fair Market
Value of a share of Common Stock on the exercise date. No
fractional shares shall be used for such payment and the
Administrator shall determine whether cash shall be given in
lieu of such fractional shares or whether such fractional shares
shall be eliminated.
(d) Stock Awards. The Administrator may
from time to time grant Stock Awards to eligible participants in
such amounts, on such terms and conditions, and for such
consideration, including no consideration or such minimum
consideration as may be required by law, as it shall determine.
A Stock Award may be denominated in Common Stock or other
securities, stock-equivalent units or restricted stock units, or
any combination of the foregoing and may be paid in Common Stock
or other securities, in cash, or in a combination of Common
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Stock or other securities and cash, all as determined in the
sole discretion of the Administrator and specified in the
applicable Grant Agreement. Stock Awards shall have a minimum
three year pro-rated restriction period; provided, however,
that a Stock Award may have a restriction period of less
than three years, but no less than one year, if the vesting of
such Stock Award is performance based, and provided, further,
that a Stock Award may be unrestricted if it is granted in
lieu of salary or cash bonus and is reasonable in amount as
determined in the sole discretion of the Administrator. A Stock
Award granted in the form of a stock-equivalent unit or
restricted stock unit shall be credited to a bookkeeping reserve
account solely for recordkeeping purposes, shall not require a
segregation of any of the Companys assets, and, except as
otherwise provided in the applicable Grant Agreement, shall not
convey upon the grantee any rights of a stockholder with respect
to any shares of Common Stock represented by such unit solely as
a result of the grant of the Award.
(e) Performance Awards.
(i) Grant of Performance Awards. For
purposes of ensuring that compensation arising from Stock Awards
granted under the Plan to certain officers and key employees of
the Company is deductible by the Company or its Affiliate under
Code section 162(m), the Administrator may provide that the
grant, vesting, lapse of restrictions or settlement of such
Stock Awards shall be based upon one or more Performance
Measures and performance goals to be attained relative to those
Performance Measures, all as determined by the Administrator.
Awards granted in this manner shall constitute Performance
Awards. When granting Performance Awards, the Administrator
shall establish in writing (A) the performance goals that
must be met, (B) the performance period during which the
performance will be measured, (C) the target and, if
applicable threshold
and/or
maximum, compensation payable (in the form of cash or shares of
Common Stock) if the performance goals are met, and (D) any
other conditions that the Administrator deems appropriate.
(ii) Establishment of Goals. The
Administrator shall establish the performance goals in writing
either before the beginning of the performance period or during
a period ending no later than the earlier of
(i) 90 days after the beginning of the performance
period or (ii) the date on which 25% of the performance
period has been completed, or such other date as may be required
or permitted under applicable regulations under Code
section 162(m). If the Administrator intends for the
Performance Awards to constitute qualified
performance-based compensation within the meaning of Code
section 162(m) payable to a Covered Employee, the
performance goals shall satisfy the requirements of Code section
162(m) including the requirement that the achievement of the
goals be substantially uncertain at the time they are
established and that the goals be objective and established in
such a way that a third party with knowledge of the relevant
facts could determine whether and to what extent the performance
goals have been met. The Administrator shall set performance
goals based on one or more Performance Measures. Performance
goals may include minimum, maximum, intermediate and target
levels of performance, with the size of the Performance Award to
be granted or paid or the lapse of restrictions with respect
thereto based on the level attained. A performance goal or
target may be stated as an absolute value or as a value
determined relative to prior performance, one or more indices,
budget, one or more peer group companies, any other standard
selected by the Administrator, or any combination thereof.
(iii) Discretionary Adjustment of Performance
Awards. The Administrator shall not have
discretion to increase, but may decrease, the amount of
compensation that is payable upon achievement of the designated
performance goals with respect to any Performance Award that is
intended to constitute qualified performance based
compensation within the meaning of Code
section 162(m) payable to a Covered Employee. Positive or
negative adjustments may be made by the Administrator, in its
discretion, to any Performance Award that is granted to a person
who at the time of grant and at the time that the Performance
Award gives rise to taxable income is not a Covered Employee, or
to any Performance Award that is not intended to constitute
qualified performance based compensation within the
meaning of Code section 162(m).
(iv) Certification of Results. The
Administrator shall certify and announce the results for each
performance period to each affected holder of a Performance
Award after the completion of the
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performance period. If and to the extent that the Administrator
does not certify that the performance goals have been met, the
grants of Performance Awards for the performance period that
were considered to be qualified performance-based
compensation within the meaning of Code
section 162(m) shall be forfeited or shall not be made, as
applicable.
(v) Death, Disability or Other
Circumstances. The Administrator may provide that
Performance Awards shall be payable or restrictions on such
Performance Awards shall lapse, in whole or in part, in the
event of the Award recipients death or disability during
the performance period, upon a change of ownership or control of
the Company, or under other circumstances consistent with the
Treasury regulations and rulings under Code section 162(m).
(f) Cash Incentive Awards.
(i) Grant of Cash Incentive Awards. The
Administrator may grant Cash Incentive Awards that the
Administrator intends to constitute as qualified
performance-based compensation within the meaning of Code
section 162(m) payable to one or more Covered Employees.
Such Cash Incentive Awards shall subject to such terms and
conditions as the Administrator deems appropriate and may be
granted to any employee or officer who is a Covered Employee on
the date of grant or who the Administrator reasonably determines
may become a Covered Employee before the time the Cash Incentive
Award gives rise to taxable income.
(ii) Target Cash Incentive Awards and Performance
Goals. When the Administrator decides to make
Cash Incentive Awards under this Section 6(f), the
Administrator shall select the employees and officers who will
be eligible for Cash Incentive Awards, specify the performance
period, and establish target Cash Incentive Awards and
performance goals for the performance period. The performance
period shall be the Companys fiscal year or such other
period as the Administrator determines. The Administrator shall
determine each Participants target Cash Incentive Award
based on the Participants responsibility level, position
or such other criteria as the Administrator shall determine. A
Participants target Cash Incentive Award may provide for
differing amounts to be paid based on differing thresholds of
performance. The Administrator shall establish in writing
(i) the objective performance goals that must be met in
order for the Cash Incentive Awards to be paid for the
performance period, (ii) the maximum amounts that may be
paid if the performance goals are met, (iii) any threshold
levels of performance that must be met in order for Cash
Incentive Awards to be paid, and (iv) any other conditions
that the Administrator deems appropriate and consistent with the
requirements of Code section 162(m) for qualified
performance-based compensation. The performance goals
shall satisfy the requirements of Code section 162(m),
including the requirement that the achievement of the goals be
substantially uncertain at the time they are established and
that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine
whether and to what extent the performance goals have been met.
(iii) Criteria Used for Objective Performance
Goals. The Administrator shall establish
objectively determinable performance goals based on one or more
Performance Measures. A performance goal or target may be stated
as an absolute value or as a value determined relative to prior
performance, one or more indices, budget, one or more peer group
companies, any other standard selected by the Administrator, or
any combination thereof. Performance goals need not be uniform
among Cash Incentive Award recipients.
(iv) Timing of Establishment of Target Cash Incentive
Awards and Goals. The Administrator shall
establish each recipients target Cash Incentive Award and
performance goals in writing either before the beginning of the
performance period or during a period ending no later than the
earlier of (i) 90 days after the beginning of the
performance period or (ii) the date on which 25% of the
performance period has been completed, or such other date as may
be required or permitted under applicable regulations under Code
section 162(m).
(v) Section 162(m) Requirements. A
Cash Incentive Award may not be awarded as an alternative to any
other award that is not designated as qualified
performance-based compensation, but instead must
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be separate and apart from all other awards made. Positive or
negative adjustments may be made by the Administrator, in its
discretion, to the amount payable under any Cash Incentive Award
that is granted to a person who neither at the time of grant nor
at the time that the Cash Incentive Award gives rise to taxable
income is a Covered Employee. The Administrator shall not have
discretion to increase the amount of compensation that is
payable under any Cash Incentive Award that is granted to a
person who at the time of grant or at the time that the Cash
Incentive Award gives rise to taxable income is a Covered
Employee, but the Administrator may reduce the amount of
compensation that is payable to such person based upon the
Administrators assessment of personal performance or other
factors. Any reduction of a recipients Cash Incentive
Award shall not result in an increase in any other
recipients Cash Incentive Award.
(vi) Certification of Results. The
Administrator shall certify the performance results for the
performance period after the performance period ends. The
Administrator shall determine the amount, if any, to be paid
pursuant to each Cash Incentive Award based on the achievement
of the performance goals, the Administrators exercise of
its discretion to reduce Cash Incentive Awards and the
satisfaction of all other terms of the Cash Incentive Awards.
Subject to the provisions of Section 6(f)(x), payment of
the Cash Incentive Awards certified by the Administrator shall
be made in a single lump sum cash payment on or after the close
of the performance period, but not later than two and one-half
months after the close of the calendar year in which the
performance period ends.
(vii) Limitations on Rights to Payment of Cash Incentive
Awards. No individual shall have any right to
receive payment of a Cash Incentive Award under the Plan for a
performance period unless the individual remains in the employ
of the Company or an Affiliate through the last day of the
performance period; provided, however, that the Administrator
may determine that if an individuals employment with the
Company terminates prior to the end of the performance period,
the individual may be eligible to receive all or a prorated
portion of any Cash Incentive Award that would otherwise have
been earned for the performance period, under such circumstances
as the Administrator deems appropriate and consistent with Code
section 162(m).
(viii) Change of Control. If a change in
the ownership or control of the Company occurs prior to the end
of a performance period, the Administrator may determine that
each employee who was awarded a target Cash Incentive Award for
the performance period in which such change in the ownership or
control of the Company occurs may receive a Cash Incentive Award
for the performance period, in such amount and at such time as
the Administrator determines; provided however that, to
the extent such Cash Incentive Award constitutes deferred
compensation under Code section 409A, any such payment with
respect to the Cash Incentive Award shall be made in compliance
with Code section 409A.
(ix) Discretionary and Other Bonuses. In
addition to Cash Incentive Awards that are designated
qualified performance-based compensation under Code
section 162(m), as described above, the Administrator may
grant to executive employees such other bonuses as the
Administrator deems appropriate, which may be based on
individual performance, Company performance or such other
criteria as the Administrator determines. Decisions with respect
to such bonuses shall be made separate and apart from the Cash
Incentive Awards described in this Section 6(f).
(x) Deferrals. The Administrator may
permit or require a Cash Incentive Award recipient to defer
receipt of the payment of cash that would otherwise be due to
such individual in connection with the Cash Incentive Award. If
any such deferral election is permitted or required, the
Administrator shall establish rules and procedures for such
deferrals and may provide for interest or other earnings to be
paid on such deferrals. The rules and procedures for any such
deferrals shall be consistent with applicable requirements of
Code section 409A.
(a) Withholding of Taxes. Grantees and
holders of Awards shall pay to the Company or its Affiliate, or
make provision satisfactory to the Administrator for payment of,
any taxes required to be withheld in respect of Awards under the
Plan no later than the date of the event creating the tax
liability. The Company or its
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Affiliate may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to
the Company or its Affiliate of such tax obligations is made in
shares of Common Stock, such shares shall be valued at Fair
Market Value on the applicable date for such purposes and shall
not exceed in amount the minimum statutory tax withholding
obligation.
(b) Transferability. Except as otherwise
determined by the Administrator, and in any event in the case of
an incentive stock option or a stock appreciation right granted
with respect to an incentive stock option, no Award granted
under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless
otherwise determined by the Administrator in accord with the
provisions of the immediately preceding sentence, an Award may
be exercised during the lifetime of the grantee, only by the
grantee or, during the period the grantee is under a legal
disability, by the grantees guardian or legal
representative.
(c) Adjustments; Business Combinations.
(i) Subject to any required action by the Company (which
shall be promptly taken) or its stockholders, and subject to the
provisions of the Delaware General Corporation Law, if the
outstanding Common Stock are increased or decreased or changed
into or exchanged for a different number or kind of security by
reason of any recapitalization, reclassification, stock split,
reverse stock split, combination of shares, exchange of shares,
stock dividend, or other distribution payable in capital stock,
or other increase or decrease in such Common Stock is effected
without receipt of consideration by the Company occurring after
the date of grant of an Award, a proportionate and appropriate
adjustment shall be made in the number of shares of Common Stock
underlying the Award and the exercise price, if any, so that the
proportionate interest of the Award holder immediately following
such event shall, to the extent practicable, be the same as
immediately before such event. A commensurate change will be
made to (A) the maximum number of shares reserved for
issuance or with respect to which Awards may be granted under
the Plan, (B) all other grant limits specified in Section 4
of the Plan, and (C) the number of shares covered by
Initial Director Grants and Annual Director Grants, as provided
in Section 6(b) of the Plan, to be granted after such event.
(ii) In addition to the adjustments covered under
Section 7(c)(i) above, any Award may contain provisions to
the effect that upon the occurrence of certain events, including
a change in control of the Company (as defined by the
Administrator in the Grant Agreement), any outstanding Awards
not theretofore exercisable or free from restrictions, as the
case may be, shall either immediately, or upon a further
determination made by the Administrator at the time of the
event, become fully exercisable or free from restrictions.
(iii) The Administrator will make the adjustments and
determinations under Sections 7(c)(i) and 7(c)(ii), and its
determination will be final, binding and conclusive.
(iv) Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger, or consolidation of the Company
as a result of which the outstanding securities of the class of
securities then subject to the Awards are changed into or
exchanged for cash or property or securities not of the
Companys issue, or any combination thereof, or upon a sale
of substantially all the property of the Company to, or the
acquisition of shares of Common Stock representing more than
eighty percent (80%) of the voting power of the shares of Common
Stock then outstanding by, another corporation or person, the
Awards shall terminate, unless provision be made in writing in
connection with such transaction for the assumption of the
Awards theretofore granted, or the substitution for such Awards
of any awards covering the stock or securities of a successor
employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments, as determined by the Administrator, as
to the number and kind of shares of stock and prices, in which
event the Awards shall continue in the manner and under the
terms so provided. If an Award would otherwise terminate
pursuant to the foregoing sentence, the holder of such Award
shall have the right, at such time before the consummation of
the transaction causing such termination as the Company shall
reasonably designate, to exercise the unexercised portions of
the Awards, including the portions thereof that would, but for
this subsection, not yet be exercisable.
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(d) Substitution of Awards in Mergers and
Acquisitions. Awards may be granted under the
Plan from time to time in substitution for awards held by
employees, officers, consultants or directors of entities who
become or are about to become employees, officers, consultants
or directors of the Company or an Affiliate solely as the result
of a merger or consolidation of the employing entity with the
Company or an Affiliate, or the acquisition by the Company or an
Affiliate of the assets or stock of the employing entity. The
terms and conditions of any substitute Awards so granted may
vary from the terms and conditions set forth herein to the
extent that the Administrator deems appropriate at the time of
grant to conform the substitute Awards to the provisions of the
awards for which they are substituted.
(e) Termination, Amendment and Modification of the
Plan. The Board may terminate, amend or modify
the Plan or any portion thereof at any time without shareholder
approval to the fullest extent permitted by the Exchange Act and
the rules and regulations thereunder and the rules of the
principal securities exchange upon which the shares of Common
Stock are listed for trade; provided, however, that no
termination, amendment, or modification of the Plan may
materially adversely affect any Award previously granted
hereunder, unless the written consent of the holder of such
Award is obtained. Except as otherwise determined by the Board,
termination of the Plan shall not affect the
Administrators ability to exercise the powers granted to
it hereunder with respect to Awards granted under the Plan prior
to the date of such termination.
(f) Non-Guarantee of Employment or
Service. Nothing in the Plan or in any Grant
Agreement thereunder shall confer any right on an individual to
continue in the service of the Company or shall interfere in any
way with the right of the Company to terminate such service at
any time with or without cause or notice and whether or not such
termination results in (i) the failure of any Award to
vest; (ii) the forfeiture of any unvested or vested portion
of any Award;
and/or
(iii) any other adverse effect on the individuals
interests under the Plan.
(g) Compliance with Laws. If at any time
the Administrator determines that the delivery of Common Stock
under the Plan is or may be unlawful under the laws of any
applicable jurisdiction, or Federal, state or foreign securities
laws, the right to exercise an Award or receive shares of Common
Stock pursuant to an Award shall be suspended until the
Administrator determines that such delivery is lawful. If at any
time the Administrator determines that the delivery of Common
Stock under the Plan is or may violate the rules of the national
exchange on which the shares are then listed for trade, the
right to exercise an Award or receive shares of Common Stock
pursuant to an Award shall be suspended until the Administrator
determines that such delivery would not violate such rules. The
Company shall have no obligation to effect any registration or
qualification of the Common Stock under Federal, state or
foreign laws.
(h) No Trust or
Fund Created. Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company and
a grantee or any other person. To the extent that any grantee or
other person acquires a right to receive payments from the
Company pursuant to an Award, such right shall be no greater
than the right of any unsecured general creditor of the Company.
(i) Governing Law. The validity,
construction and effect of the Plan, of Grant Agreements entered
into pursuant to the Plan, and of any rules, regulations,
determinations or decisions made by the Administrator relating
to the Plan or such Grant Agreements, and the rights of any and
all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with
applicable federal laws and the laws of the State of Delaware,
without regard to its conflict of laws principles.
(j) 409A Savings Clause. The Plan and all
Awards granted hereunder are intended to comply with, or
otherwise be exempt from, Code section 409A. The Plan and
all Awards granted under the Plan shall be administered,
interpreted, and construed in a manner consistent with Code
section 409A to the extent necessary to avoid the
imposition of additional taxes under Code
section 409A(a)(1)(B) or any successor provision. Should
any provision of the Plan, any Award Agreement, or any other
agreement or arrangement contemplated by the Plan be found not
to comply with, or otherwise be exempt from, the provisions of
Code section 409A, such provision shall be modified and
given effect (retroactively if necessary), in the sole
discretion of the Administrator, and without the consent of the
holder of the Award, in such manner as the Administrator
determines to be necessary or appropriate to comply with, or to
effectuate an exemption from,
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Code section 409A. To the extent required under Code
section 409A, payments or distributions to a participant
who is a specified employee (within the meaning of
such term under Code section 409A) upon his or her
separation from service that are scheduled to be paid within six
months after such separation from service shall be postponed and
subject to a six-month delay and shall be paid within
15 days after the end of the
six-month
period following separation from service or, if the participant
dies during the postponement period prior to the payment of the
postponed amount, the amounts postponed on account of Code
section 409A shall be paid to the personal representative
of the participants estate within 60 days after the
date of the participants death. Notwithstanding anything
in the Plan to the contrary, in no event shall the Administrator
exercise its discretion to accelerate the payment or settlement
of an Award where such payment or settlement constitutes
deferred compensation within the meaning of Code
section 409A unless, and solely to the extent, that such
accelerated payment or settlement is permissible under Treasury
Regulation
section 1.409A-3(j)(4)
or any successor provision.
(k) Effective Date; Termination Date. The
Plan initially became effective February 16, 2000, and has
been amended, and amended and restated, from time to time
subsequently. The Plan, as amended and restated herein, is
effective as of the date on which it is approved by the
stockholders of the Company. No Award shall be granted under the
Plan after the close of business on February 28, 2021.
Subject to other applicable provisions of the Plan, all Awards
made under the Plan prior to termination of the Plan shall
remain in effect until such Awards have been satisfied or
terminated in accordance with the Plan and the terms of such
Awards.
A-13
Annual Meeting of Stockholders
HUMAN GENOME SCIENCES, INC.
May 11, 2011
Please submit your proxy by internet or telephone
or date, sign and mail your proxy card back as soon as possible.
If you submit your proxy by internet or telephone, do not return your proxy card.
* * *
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
Human Genome Sciences, Inc.s Proxy Statement, and 2010 Annual Report are available
electronically. As an alternative to receiving printed copies of these materials in future
years, you may decide to receive or access them electronically. By signing up for
electronic delivery, you can receive stockholder communications as soon as they are
available without waiting for them to arrive in the mail. You also can reduce the number of
bulky documents in your personal files, eliminate duplicate mailings, conserve natural
resources and help reduce our printing and mailing costs.
To sign up for electronic delivery, please vote using the internet at
www.proxyvote.com, and when prompted, indicate that you agree to receive or
access stockholder communications electronically in future years and provide your
email address. If you have any questions about electronic delivery, please contact
Human Genome Sciences, Inc.s Investor Relations Department at (301) 610-5800 or
at Investor_Relations@hgsi.com.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and 2010 Annual Report are available at www.proxyvote.com.
M31856-P08197
HUMAN
GENOME SCIENCES, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 11, 2011
The undersigned hereby appoints JAMES H. DAVIS, Ph.D., J.D., and DAVID P. SOUTHWELL,
and each of them, with full power of substitution to each, as attorneys and proxies of the
undersigned, to vote all shares that the undersigned is entitled to vote at the Annual Meeting
of Stockholders of Human Genome Sciences, Inc. (the Company) to be held
at the Gaithersburg Marriott Washingtonian Center, 9751 Washingtonian Boulevard,
Gaithersburg, Maryland 20878 on Wednesday, May 11, 2011 at 9:30 a.m., local time, and at any
adjournment or postponement thereof, upon and in respect of the matters listed on the reverse
side, and in accordance with the instructions indicated on the reverse side, with discretionary
authority as to any and all other matters that may properly come before the meeting.
The undersigned hereby acknowledges receipt of a copy of the Companys 2010 Annual Report and
Notice of 2011 Annual Meeting of Stockholders and Proxy Statement relating to such Annual Meeting.
The undersigned revokes all prior proxies given for said Annual Meeting and any adjournment or
postponement thereof.
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, FOR
PROPOSALS 2, 3 AND 4 AND 3 YEARS ON PROPOSAL 5.
Continued and to be signed on reverse side
C/O AMERICAN STOCK TRANSFER
& TRUST COMPANY
59 MAIDEN LANE
NEW YORK, NY 10038
VOTE
BY INTERNET - www.proxyvote.com
Use the internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern
Time on May 10, 2011. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company
in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports
electronically via e-mail or the internet. To sign up for
electronic delivery, please follow the instructions above to
vote using the internet and, when prompted, indicate that you
agree to receive or access proxy materials electronically in
future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time on May 10, 2011.
Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M31855-P08197
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KEEP THIS PORTION FOR YOUR RECORDS |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH AND RETURN THIS PORTION ONLY |
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HUMAN GENOME SCIENCES, INC. |
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For
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Withhold
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For All
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The Board of Directors recommends a vote FOR the
nominees for director listed below, FOR proposals 2, 3
and 4 and 3 YEARS on proposal 5. |
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All
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All
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Except
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O |
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Vote on Directors |
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1. |
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Election of Directors |
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Nominees: |
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01) Richard J. Danzig
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07) Augustine Lawlor |
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02) Colin Goddard, Ph.D.
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08) George J. Morrow |
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03) Maxine Gowen, Ph.D.
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09) Gregory Norden |
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04) Tuan Ha-Ngoc
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10) H. Thomas Watkins |
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05) Jerry Karabelas, Ph.D.
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11) Robert C. Young, M.D. |
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06) John L. LaMattina, Ph.D. |
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Vote on Proposals |
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For
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Against
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Abstain
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2. |
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To ratify the appointment of Ernst & Young LLP as the
Companys independent registered public accounting
firm for the fiscal year ending December 31, 2011. |
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O |
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O |
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3. |
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To approve the amendment of the Companys stock
incentive plan. |
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4. |
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To approve, on an advisory basis, the compensation
of the named executive officers. |
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Please indicate if you plan to attend this meeting. |
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Yes
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No
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Signature [PLEASE SIGN WITHIN BOX]
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To withhold authority to vote for any individual
nominee(s), mark For All Except and write the
number(s) of the nominee(s) on the line below.
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1 Year
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2 Years
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3 Years
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Abstain |
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To advise on the frequency of the advisory
vote on executive compensation. |
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6. |
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To act upon such other matters that may properly come before the 2011
Annual Meeting of Stockholders or any adjournment or postponement
thereof. |
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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,
FOR proposals 2, 3 and 4 and 3 YEARS on proposal 5. |
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Please sign, date and promptly return this proxy in the
enclosed envelope. No postage is required if mailed within the
United States. (If you submit your proxy by telephone or
internet, do not return your proxy card.) |
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Note: Please sign exactly as your name appears hereon. If the
shares are 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. |
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Signature (Joint Owners)
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Date |